Australia is a country in which to do business is a goos option, as it has a solid economic structure, given the policies and actions that its government applies, anticipating to future scenarios and guaranteeing a sustainable growth. In this post we will revise some macroeconomic data, prospects and main structural actions and indicators that will give us a global vision of the country.
SOME MACROECONOMIC DATA AND PROSPECTS FOR AUSTRALIA
Australian economy makes a difference if we compare it to other developed economies, as its GDP is growing twice as quickly as other countries, with an average of 3.25% growth since 1998. GDP per capita is one of the highest globally, reaching 61,000 USD in 2014. It boasts a very good tax position, as its net debt is 15% of GDP. Just as a comparison, its G20 peers the average debt is around 79%. This growth is due to the global boom in resource demand, as at the beginning of 2000, the rapid and unprecedented growth in China reverberated also in Australia, especially in terms of trade and investment in resources.
Nevertheless, the real economy is slightly slowing down, and faces a long transition with a 2-year growth below the trend, reaching 2.5% GDP in the first quarter of 2015.
Unemployment has been high for the last decade, around 6% (now above similar developed economies such as UK and USA). Although there are more jobs than expected, the salaries have not risen significantly.
There are signs of maturity in the financial cycle, as there is an average credit boom of 5.9%. However, regarding the housing sector, the invertors loans dynamism has generated a regulatory action by APRA (the Australian regulatory authority), limiting its growth to 10% per annum.
It is becoming evident, if we have a look at the Australian economic figures, that there has been a stable and moderate economic growth, despite the decrease in commodity prices. Iron producers still aim at increasing the exports volume through the competitive advantage, even by selling at lower prices. However, the country has not been affected due to its macroeconomic solid structure, stimulated by the rise of exports competition. Investment is another key factor and has been growing, showing positive prospects for 2015 and 2016. These two factors are the reasons why Australia has a positive GDP growth of around 2.5%.
MAIN STRUCTURAL ACTIONS AND INDICATORS IN AUSTRALIA
Australia is in a good position, and keeps most risks under control due to having very efficient procedures in place, flexible monetary policies and a tax space that allows debt financing. The low public debt is a very important regulator that helps keep the AAA rating of the country.
A mix of factors provoked the deceleration of productivity growth, but a coordination of fiscal and political reforms of the Commonwealth of Australia helped increase substantially the growth of macroeconomic variables, as well as obtain good results in GDP, consumption, income, among others.
On the other hand, the revitalization of growth policies in Australia should consist of promoting resilience in its economy. The financial system has an obvious vulnerability, as the four most important banks share systematic risks. They are all very powerful, have market concentration, are interconnected and have global repercussions, which involves that in case of economic hardship they will know how to adapt to or recover from those issues, what we call resilience. Otherwise, they would cause immense damage to domestic economy and international financial environment. These banks gather large bank reserves such as cushioning the effects of the crisis. Some of the weaknesses of the Australian banks are the concentration of their loans on the housing market and a potential international funding.
As a result of the policies that the Australian Government applies in its economy, the next Structural Indicators are showing the positioning and rating that Australia receives compared to other economies.
Chart 1: STRUCTURAL INDICATORS
|Global ConnectednessIndex – DHL||According to the report issued by the company DHL,between 2013 and 2014 Australia held the 32th (out of 140 countries) position. The country got a significantly good position, where they highlighted their degree of economy diversification and theirpillars of information and capital. The main destinations of their exports in 2013 were: China(37%),Japan(18%)and South Korea (8%). As for their main raw materials, we can find iron, coal, gold, etc.|
|Doing Business – World Bank||According to this indicator, Australia holds the 13th position (out of 189 economies). They highlight the contract fulfillment, the loan concession and the construction license management.It is remarkable that in 2013 Australia reached position 10, but due to certain administration processes policies, especially when starting businesses, obtaining electricity, registering properties) they have gone down 3 positions.|
|CPI (CorruptionPerceptionsIndex)||Australia’s score wentdownfrom 87 in 2010 to 80 in 2014, mainlybecausecitizens’perceivethattheGovernment has not done enough, has notimplementedlegislationortakenmeasuresagainstcorruption at thehighestlevel.|
|GCI (Global competitiveness index)||Out of 142 countries assessed by the Macroeconomic Stabilization Fund (MSF), Australia has a good position in the competitiveness ranking, as it holds position number 21 with 5,15 points.It has improvedcomparedto previousyears.|
|Social Progress Index (SPI)||The Social Progress index translates into more access opportunities and a higher economic growth. In this sense, Australia is considered a country with good quality of life. It has held the best scores as far as access to knowledge and respect to personal rights is concerned. In 2013, it was number 7, and in 2014 and 2015 it was number 10, probably due to the current economic situation and to the weakness of the weakening of the external demand for minerals.|
|HDI (Human DevelopmentIndex)||Until the 90s, Australia held the 1st position. From the beginning of the XXI century, it’s been number 2, after Norway. Its life expectancy average and number of schooling years are very high.Its current index is 0,935, the highest among men and the second highest among women.Its weak point is fighting against climate change, as they really have to improve in this matter.|
You would check the International Monetary Fund for more information.