Australia Economy



Australian economy‘s GDP growth is expected to slow down temporarily to 2.5% in 2013 and to 3.25% in 2014.The decline in the mining sector boom will progressively be offset by the sector’s rising export capacity and bolstering growth of non mining sector.Australia occupied it non-permanent seat in the UN Security Council in 2013/14.It will have the G20 Presidency in 2014. However Australian economy is facing challenges because of the persistent rise in the exchange rate and dwindling confidence, inhibiting the evolution of new elements of growth.

Current Situation
The Australian economy is in a progression phase, which witnessed a decline in the growth from 3.25% to 2.5% between 1st and 2nd halves of the year 2012 in the wake of worldwide economic uncertainty and fiscal consolidation.The intensification in the mining investment which is expected to attain its zenith in 2013 is steadily losing its impetus on activity, while new forces of growth are not expected to emerge very soon. The indications of upheaval of non mining sector, which the laxity of monetary policy tries to boost, remains slow because of the gradual rise in the exchange rate acting harsh on the company’s confidence and investments. The inflation rate was 2.5% in the early 2013 & the rate of unemployment  is likely to remain around 5.5% until April 2013.

Australia Economic Performance GDP Inflation Graph 1980-2013

Australia Economic Performance GDP Inflation Graph 1980-2013

Monetary policy
The Central Bank lowered its cash rate by 25 bps in December 2012 and May 2013 to 2.75%. This revised monetary easing was accompanied by an upheaval in the prize of financial assets and stabilization of house prices. The exchange rate has remained persistently high, however long term interest rates have risen only by small bits and credit growth has remained downcast.

Fiscal Consolidation
Fiscal consolidation is likely to continue but is expected to be eased in future. During the present economic progression phase, the steady approach undertaken by the authorities to lower down the public deficit is apt. The government has given up on its mission of balancing federal account as early as 2012/13,  because of weaker tax revenues, slower nominal growth, a slow recovery in capital gains tax, a comparative unfavorable business situation and low receipts from the mining tax.The authorities have henceforth taken a correct decision to give a free rein to automatic stabilizers with the withdrawal of the federal deficit, delayed probably until 2015-2016.

Slow Short Term Growth
The growth in the short term is expected to be slow. The momentum of growth is likely to pick up at the end of the year 2013. The monetary temperance accompanied with the improving external environment should also gradually instigate investment in the non mining sector, which is trying to cope up with the rising exchange rate.With the output gap being negative and unemployment running around 5.5%, inflation should remain low within the range of 2.25%-2.5%.

Poverty Eradication
In order to eliminate poverty in Australia, it will continue to provide aid on the basis of four criteria:

  • level of poverty
  • national interests
  • its capacity to make a difference
  • effectiveness of its ongoing program.

External Risks
A significant slow down in the Chinese economy would decelerate exports and the terms of trade which would expedite the slowdown in the mining investment and make increase in monetary support necessary.

Australian Economic Performance GDP and Inflation 1980-2013
Year GDP % Change Inflation % Change Year GDP % Change Inflation % Change
1980 3.05 10.13 1997 3.94 0.25
1981 3.36 9.69 1998 4.43 0.85
1982 3.32 11.15 1999 5.00 1.47
1983 -2.23 10.11 2000 3.87 4.48
1984 4.63 3.95 2001 1.93 4.38
1985 5.25 6.74 2002 3.86 3.00
1986 4.09 9.08 2003 3.08 2.77
1987 2.59 8.49 2004 4.16 2.34
1988 5.80 7.23 2005 3.22 2.67
1989 3.90 7.56 2006 2.99 3.54
1990 3.53 7.27 2007 3.76 2.33
1991 -0.43 3.22 2008 3.70 4.35
1992 0.40 0.99 2009 1.73 1.82
1993 4.02 1.81 2010 1.96 2.85
1994 4.04 1.89 2011 2.32 3.39
1995 3.88 4.64 2012 3.73 1.76
1996 3.95 2.61 2013 2.51 2.45

Source: World Bank

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Last Updated on : 23th February 2015 Next Update : February 2016