1 Introduct|on

AusLralla referred Lo as Lhe 'land down under' ls slLuaLed ln Lhe souLhern hemlsphere lL
encompasses Lhe malnland of Lhe AusLrallan conLlnenL 1asmanla and oLher smaller lslands WlLh a
LoLal area of over 76 mllllon Sq km lL ls Lhe slxLh largesL counLry ln Lhe world and Lhe largesL
conLlnenL 1he naLlves belng Lhe Aborlglnes and 1orres SLralL lslander people AusLralla was laLer
colonlsed by Lhe Luropeans ln Lhe 18
Lh
cenLury ln 1901 Lhe CommonwealLh of AusLralla was formed
under a slngle consLlLuLlon wlLh Lhe amalgamaLlon of slx sLaLes Lhe caplLal belng Canberra 1hls ls
Lhe only conLlnenL Lo be under a slngle consLlLuLlon (AusLrallan CovernmenL 2008)
Comprlslng of a culLurally dlverse socleLy AusLralla ls ranked Lhlrd ln Lhe2011 Lconomlc lreedom
lndex offerlng an ldylllc envlronmenL for buslness 1he economy of AusLralla can be segregaLed lnLo
an easL wesL dlvlde wlLh Lhe LasLern reglon comprlslng mosLly of flnanclal and servlce secLor and
Lhe wesLern reglon conLalnlng of AusLralla's naLural resources namely lron ore naLural gas and gold
1hls dlsparlLy ofLen ls Lhe reason for varlaLlon among Lhe growLh plans wlLhln Lhe governmenL
(Lconomy WaLch 2010)
Carbon 1ax has been of ma[or concern ln Lhe pollLlcal debaLe of AusLralla slnce lL has been one of
Lhe maln emlLLer of carbon 1hls ls parLly slnce AusLralla generaLes elecLrlclLy Lhrough coal leadlng Lo
excess greenhouse gas emlsslon resulLlng ln global warmlng (Crubel 2011)
1he carbon Lax law passed ln Lhe parllamenL has been a recenL developmenL lL wlll Lake effecL from
!uly 2012 lmposlng a Lax on Lhe blg lndusLrles conLrlbuLlng Lo huge carbon emlsslon resulLlng ln
cllmaLe change 1he governmenL belleves LhaL Lhe lmplemenLaLlon of Lhls law rule would conLrlbuLe
Lo a rlse ln Lhe employmenL secLor slnce lL would provlde a markeL for Lhe green lndusLry Lhrough a
rlse ln energy soluLlon markeL (Pumphreys 2009)
2 Macroeconom|c Study
Macroeconomlcs ls Lhe sLudy of Lhe aggregaLes of Lhe economy comprlslng of unemploymenL
lnflaLlon Lhe lnLeresL raLe producLlvlLy Lhe governmenL budgeL deflclL and Lhe balance of paymenL
1hese aggregaLes provlde Lowards susLalnablllLy of economlc growLh whlch ls always flucLuaLlng due
Lo Lhe volaLlllLy ln buslness cycles
21 1he macro econom|c |nd|cators
1he governmenL manages Lhls macroeconomlcs Lhrough manlpulaLlng Lhe demand le anLlclpaLlng
low lnflaLlon and low unemploymenL and hence provldlng for growLh lor Lhls Lhe governmenL
ad[usLs Lhe supply slde by employlng flscal and moneLary pollcles AusLralla ls a key reglonal flnanclal
cenLre and also an lmporLanL elemenL of Lhe flnanclal sysLem globally As per Lhe World 8ank Lhe
Cu of AusLralla ls 149 of Lhe world's economy Lven Lhough Lhe servlce secLor domlnaLes Lhe
economy of AusLralla ma[or porLlon of lLs economlc success ls due Lo Lhe abundance of mlneral and
agrlculLural resources (1radlng economlcs 2011)
a)kea| Gross Domest|c roduct (GD)
8eal Cu refers Lo Lhe naLlon's LoLal ouLpuL of goods and servlces afLer provldlng for Lhe prlce
changes le lnflaLlon or deflaLlon 1he Cu of AusLralla for 2011 approxlmaLely 123 Lrllllon
(esLlmaLed) 68% of the GDP relates to the service area, 10 % to agriculture and mining and the
rest on the exports (ABS, 2011). As stated earlier, although the service and financial sector
dominates the Australian GDP, this sector is being struggling past few years. Moreover, the
industries relating to resources and commodities are enjoying a period of boom (Lconomy WaLch
2010). From fig.1, it can be seen that the GDP of Australia has an upward trend but a decline in
2010, due to the global financial crisis. There is an increase in the GDP of 2011 as compared to
2010.

Fig.1: Australia GDP (Billions of US dollars)

Source1radlng economlcs2011
b) Real GDP growth rate
The flooding and cyclones in Australia effected the productivity of a major coal mining region
during the first quarter of 2011, which in turn led to a decline in the mining exports which
forms an integral part of the economy's export revenue. But for the following quarter ending
June 2011, the economy "bounced back with a rise of 1.2%. This can be seen in fig.2 which
depicts a fall of 0.9% in the first quarter and a rise to 1.2% in the second. The Analysts
believe with the rise in demand for the resources, the economy shall continue to prosper.
(BBC, 2011).

Fig.2: Australia GDP growth rate (GDP growth adjusted by inIlation)

Source: Trading economics, 2011.



c) UnempIoyment rate
The labour force is made up of the number of people employed with an addition of the
unemployed but looking for work. Before the financial crisis hit, Australia enjoyed the lowest
unemployment rate of 4 percent in 2008. As per the statistics of October 2011, the
unemployment rate is 5.2% as seen in figure 3, which is lower as compared to the start of
the year, making Australian economy as one among the 'developed world's best performing
labour markets'(Currain, 2011). These good figures suggests that the Reserve Bank of
Australia is not pressured to further ease their monetary policies after the interest cut
(1radlng economlcs 2011)
Fig 3:Australia Unemployment Rate (Percentage of the labour force)

Source: Trading economics,2011.


d) Current Account baIance (in the baIance of payments)
The current account deals with the flow of goods and services in a nation. t is based on
certain indicators which is discussed below. The government has the power to adjust the
current account balance to a favourable outcome, through its fiscal and monetary policies.

2.2) FiscaI Indicators: The Government prepares a budget for the year, and has the power
to adjust the spending in the economy, thus altering the intensity of economic activities
resulting in a fiscal deficit or surplus. The government relies on certain fiscal indicators
stated below, to keep a track of the growth of the economy (Trading economics,2011)

a) Ratio of gross fiscaI deficit to nominaI GDP:
Government budget refers to the accounting of all the inflow (tax and fees) and outflow
(transfer payments and purchases) of the government. For the year 209-2010 Australia
stated a fiscal deficit of 4.3 percent of the GDP, indicating that for that year the government
spent more than what it received. Fig. 4 shows a an upward trend of budget surplus till 2008,
and after that due to the GFC a there begins the downward slope to deficit.
Fig. 4:Australian Government Budget (percentage of GDP)

Source: Trading economics:2011.

(b) LeveIs of government expenditures and their ratio to nominaI GDP
Expenditure as a percentage of GDP measures the extent of direct involvement of the
government in the economic activity. The government expenditure has been increasing over
the past 5 years of nearly a percent every year. For the year 2010 the ratio of expenditure

4
4
4
0
20
40
60
80
100
120
2003 2006 2007 2008 2009
Growth kate of Money Supp|y
Money as of Cu
was 37.157 percent of the nominal GDP. t is forecasted to be reduced by half a percent for
the coming years (Economy Watch, 2010).

c) LeveIs of revenue and their ratio to nominaI GDP
Revenue includes taxes, grants, social donations and other revenues. The revenue as a
percent of GDP for the year 2010 was 32.513% which indicates that the government has a
good networth since its percentage is above the world's average by 0.10 percent. This ratio
is expected to increase in the next year to 33.24% (Economy Watch, 2010).

2.3) Monetary Indicators:
Monetary indicators are the tools used by the Reserve Bank in order to manipulate the
availability of credit and money in the economy. t basically deals with the interest rate and
short term money market.
(a) rate of growth of money suppIy: refers to the currency in circulation in the
economy. ts growth pattern comparative to GDP designates inflation or deflation.
Money includes the currency in circulation along with current deposits with the private
non bank sector.

Fig.5
















Source: ndex Mundi, 2011

Fig 5 shows the increase in increase in money supply in the economy from 2005 to 2009.

(b) rate of infIation.
nflation rate relates to general price rise against the purchasing power level. The inflation
rate measures on the consumer price index is 3.5 percent for Australia for the mid-year of
2011.
Fig 4: Australian nflation rate (annual change on consumer price index)
11
16
614
1
22
2800
2900
3000
3100
3200
3300
3400
3300
3600
3700
2006 2007 2008 2009 2010
peness Index
Cpeness
Source: Trading economics, 2011.



2.4) InternationaI indicators
This relates to the exports and imports for a given country as a percentage of the GDP. The
diverse natural resources of Australia draw huge foreign investments which contribute
towards it major exports.
(a) openness index; calculates the ration of total trade (Exports + mports) to the total
output of the country (GDP). t measures the importance of total trade in an economy. ts
shows the attitude of an economy towards foreign trade. t is wide accepted that the
economy of Australia is very open. However, the ratio of openness is relatively lower
than other industrial and developed economies. This is due to its remote location and
large land mass.

lollowlng are Lhe flgures of AusLralla's openness ln Lhe prevlous 3 years
llg6

(b) IeveIs of exports and rate of growth of exports

The exports of Australia were valued at $27235 million mid 2011. Major exports being
agricultural products, especially wheat and wool, it also exports minerals such as gold and
iron ore. Coal and natural gas are also its exports in the energy sector. Most of the exports
are to the Asian countries of Japan, China, South Korea and also to the US and European
union. Figure 5 shows the exports being at its peak at the start of 2009, and with the GFC
the exports reduced, due to lower demand. Exports picked up again in 2010 and due to the
natural calamities, the production was hampered and resulted in lower exports during the
start of 2011.
Fig.6:Australian Exports (Million AUD)

Source: Trading economics, 2011.

(c) LeveIs of imports and rate of growth of imports
Australia mainly imports technological equipment such as computers, machinery, transport
equipment, etc.. The imports were valued at $24761 million mid 2011. The main trade
partner being China, Australia also imports from countries such as Japan, US, EU, and
Singapore. Due to a decline in the economy the imports dropped in the year 2009, with
fewer consumers spending which can be seen in figure 6. The imports have been increasing
ever since.

Fig.8:Australian mports (Million AUD


Source: Trading economics, 2011.

(iv) IeveI of foreign exchange reserves.





3. GIobaI FinanciaI Crisis and AustraIia
For 17 years there was an upward movement in the economy of Australia until the global
financial crisis. n order to inject money into the economy and to promote the spending
among people the government introduced the Fiscal Stimulus package priced over $ 50
billion that provided a payment to seniors, carers and families. This was done to balance the
effect of the slowdown in world economy. n addition to this the RBA cut down the interest
rates. These measures along with demand for cheap products from China assisted in the
bounce back of the Australian economy in a quarter's time. (BBC, 2011)

The Australian economy still suffers from the consequences of offshore issues, due to the
increase in soverign debt and slow economic progress in US and Europe, leading to a fall in
the Australian dollar and also significant decline in the domestic share markets. This in turn
lowers the confidence of the consumers and the business's to invest. They just have to wait
and watch what would come their way. But, recovery can be seen in the economy with
people investing in the housing sector due to lower effective interest rates and also an
increase in the retail spending with rise in sales of motor vehicles in 2011.lf Lhe spendlng ln
Lhe houslng secLor lncreases Lhe money ln Lhe economy would be uLlllzed Lowards mlnlng
lnvesLmenL whlch seems Lo be boomlng (AusLrallan CovernmenL 2011)

4. Business in AustraIian after GFC
The has been a rise in the investment into business sector in the second quarter of which is
an indicator of a growth in the economy. Capital expenditure had an increase of 4.8 percent
as compared to the previous year i.e., $33.6 billion. But the floods and cyclones hampered
the expansion of business for a certion time period (BBC, 2011).

5. Effect of increasing oiI prices in AustraIia
GFC lead to rise in the oil prices, and Australia being an importer of oil from South East Asia
had to face its consequences. Rise in oil led to reduction in retail sales which included
vehicle sales and home investment. t also added to consumer price inflation through rise in
the transportation cost as well as food production cost (Janda & Morgan, 2011).




6. Future Prospects
The current situation of the country's economy to the current global turmoil looks good & well
regulated, although a lot depends on the challenges to be faced by the country in the coming
6 months. Further analysis and study indicate the Australian economy to have fairly
consistent growth in the coming years
O The economy is heading towards growth & is showing signs of recovery from damages
caused by the recent floods & cyclones.
O Retail sale in the country has seen an increase for the first time in the year, where the sales
have increased by 0.5% in July 2011. Clearly indicating slight growth in purchasing power
among residents.
O Firms in Australia have spent US $ 33 billion towards expansion in the 2
nd
quarter of 2011.
This figure is 4.8% higher than the pervious year. njection of capital for business expansion
will lead to higher employment opportunities and increase Gross Domestic Product.
O As per information from Australian Bureau of Statistics the Australian firms are forecasted
to invest up to Australian $ 149 billion by 2
nd
quarter of 2012. Regular injection of capital in
by firms will help overcome the credit crunch suffered by many firms. This indicates the
economy is expected to grow.
O Economic analysts speculate constant increase in the consumer confidence in the coming 5
years. This will lead to quicker GDP growth.
O The 2011 budget forecasted a fiscal deficit for the next two years to assist the economy
come out of the natural clalamities and the GFC. The economy is expeted to have a surplus
after twp years.( kellner 2011)
O Due to the global trends and its impact on Australia GDP forecasts has reduced 3% versus
prior forecast of 3.4% for 2012. However, the economy is taking suitable measures and is
well protected against the negative global trends.
O Australia has a relatively higher unemployment rate (5.192% in 2010) & this remains to be a
concern in the coming years since workforce population is constantly increasing.


. ConcIusion





















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