AUSTRALIAN ECONOMY: SINCE 1991, CONTINUED GROWTH (ENCYCLOPEDIA)

Abstract 

Australia is a federal constitutional monarchy as well as the independent state of the Commonwealth, rich in natural resources and characterized by a high economic dynamism. From twenty-three, in fact, the country growth rates above the average of OECD countries. The soundness of its economy, the twelfth in the world, has been confirmed by the limited effects of the global financial crisis, because, unlike the leading advanced economies, Australia has maintained a positive growth rate during the period of the crisis. In addition to the economic, the country has also achieved several successes in the social and geopolitical areas that have consistently increased its international appeal over the last fifteen years. According to the Human Development Index (HDI) of the United Nations, Australia is also the country with the highest quality of life together with Norway.

Since 1991, continued growth: Strengths of the Australian economy

Latest data on Australian GDP confirmed a positive trend that continues since 1991. Unlike to which occurred in the leading advanced countries, Australia, thanks to the increasing integration with the emerging Asian economies (see also BRICS), maintained a rate of economic growth to be positive during and after the global crisis without entering in recession. Recent data provided by the Australian Bureau of Statistics (ABS) on the overall health of the Australian economy show that the average growth in recent years was 3% (as shown in Table 1).

Tab. 1: Key Economic Indicators

Source: Australian Bureau of Statistics, Economist Intelligence Unit

 

Overall, the fundamental strengths of Australia, can be considered as the rich supply of natural resources, a financial and banking system robust and competitive (the banking system is dominated by four major commercial banks, called "big four") and an efficient public administration. To confirm what has just been described, according to a recent report by the World Bank and the International Finance Cortporation (IFC), the "Doing Business 2015", Australia is among the best countries to do business in the world, ranking for two consecutive years in 10th place on 189 economies, for ease of access to credit, for the time of company registration, for customs procedures and disputes solutions (as shown in Table 2).

Tab. 2: Top 10 Economies “Doing Business” 2015/2014

Source: World Bank Group

 

The growth in investment, confirms the data of the report "Doing Business 2015" and the consolidation of Australia's reputation as an important destination for doing business. The reasons that improve this reputation are a flexible and skilled workforce, which, together with a good administrative system, its proximity to Asian markets (Australia is at the center of the Asia-Pacific region, the area with the most high rates of economic growth in the world) have made Australia a perfect destination for the headquarters of many companies and corporations. Finally, according to the UNCTAD World Investment Report 2014, Australia was confirmed in 2013, for the third consecutive year among the top 10 destinations for foreign direct investment (FDI).

In conclusion, the factors that characterize the good health of the Australian economy can be summarized as follows:
- Steady GDP growth;
- Rich natural resources (world leader in the mining industry, Australia holds the world's largest resources of lead, nickel, uranium and zinc, as well as leading exporter of carbon and iron materials);
- Favourable geo-economic and geo-political location (Australia is one of the leading players in the Asia-Pacific region, an area of greater economic growth in the medium to long-term and growing political and strategic importance);
- International trade and free trade agreements (Ancerta,
ASEAN, Trans Pacific Partnership, WTO);
- Labour productivity;
- Good level of household consumption;
- Efficient public administration;
- Solid financial and banking system (according to Global Finance, in 2012 the four major Australian banks were part of the 50 safest banks in the world)

Weakness of Australian System

Not only strengths, the Australian economy is also characterized by a number of risks that can slow down the performance of the country. The main issues concern the excessive cost of labor, the high private debt, the dependence on exports of minerals and gas and the potential bubble in the housing market.

Australia is the leading supplier of minerals needed for the growth of Asian countries and its economy is closely linked to the performance of economies such as China, Japan, Indonesia and India. One of their slowdown, together with a decrease in international prices of Australian raw materials could cause an increase in the trade deficit and a slowdown in economic growth.

From the recent analysis of the OECD and the International Monetary Fund (IMF) also show that the excessive cost of the work is likely to be a potential issue for an economy such as Australia. According to the two institutions, high labor costs are a burden for businesses and can be sustainable only in the case of a “booming” economy and relatively closed to strong foreign competition.

 

References

FIANO A. (2012) World’s 50 safest banks 2012, Global Finance (http://www.gfmag.com/awards-rankings/best-banks-and-financial-rankings/worlds-50-safest-banks-april-2012#axzz1ou8MG8s2) 

INFOMERCATIESTERI.IT, http://www.infomercatiesteri.it/public/rapporti/r_119_australia.pdf

JERICHO G. (2014) Six facts that show the health of Australia’s economy, The Guardian, June (http://www.theguardian.com/business/grogonomics/2014/jun/05/six-facts-that-show-the-health-of-australias-economy)

MINISTERO DEGLI AFFARI ESTERI, Australia, Rapporto congiunto Ambasciate/Consolati/ENIT 2015

OECD (2014), Australia Economic forecast summary, OECD Report (http://www.oecd.org/eco/outlook/australiaeconomicforecastsummary.htm)

UNDP, Human development index 2014, UNDP Report (http://hdr.undp.org/sites/default/files/hdr14-report-en-1.pdf)

WORLD BANK GROUP, Australia Doing Business 2015, World Group Flagship Report (http://www.doingbusiness.org/~/media/giawb/doing%20business/documents/profiles/country/AUS.pdf)


Editor: Giovanni AVERSA