The Australian Economy – Current Economic Growth Essay
The Australian Economy is currently at a weak stance with economic growth declining at a below trend pace. Economic growth occurs when there is a sustained increase in a country’s productive capacity over time. This may be attributed to Australia’s trend pace. This may be attributed to Australia’s reliance on the narrow export base and lowered business investment. The faltering GDP growth subsequently affects Australia’s businesses, consumers and the government as unemployment, labour productivity and business investment become prominent issues.
Australia has reached the end of the mining boom as now, commodity prices and demand lowers.
This is hurting economy growth due to the structural issues facing Australia’s economy. The narrow export base that Australia holds proves to be detrimental to the economy as it is highly volatile and subjected to fluctuating commodity prices and the market forces of supply and demand. As 60% Australia’s exports are comprised of mining and agriculture, this means that export revenue can easily change and it has. Evident from Australia’s resource boom in 2011, demand from China’s emerging economy allowed for exports to exponentially increase however revenue is rapidly decline due to decreased demand. The deterioration in Australias terms of trade from 100 in 2013 to 82.6 indicates this. As Australia transitions away from mining, growth has been a slow process as the economy faces its largest trade deficit of $3.888 billion. Australian tourism cannot compensate for the fading mining boom however it only comprises of 2.43% of GDP but employees 7.05% of all workers. As the price of major exports fall by 30% in the past twenty years, it is evident that it is required for Australia to diversify their exports, exploring elaborately transformed manufacturers (ETMs) to add more value to trade.
Additionally, Australia’s major trading partners have had a significant influence on economic growth levels as they look to invest in businesses and trade exports and imports. As largest major trading parter partner and the largest importer for commodities, Australia has become highly reliant on China’s economy over the past few years. As China’s demand and growth slows, it is reflected in Australia’s export revenue decline of 14%. The reliance has been evident as the slowdown of China has exacerbated the fall. The chief buyer of bulk commodities has demanded less, causing a fall in prices and thus, reducing the growth of exports. The collapse of commodity based economies like Canada and Brazil, it is a likely trend for Australia to reach close to a recession.
Infrastructure bottlenecks and low productivity have caused slow growth in the Australian economy. This is due to the clogged ports, congested roads and poor rail infrastructure that were disabling ease of transportation and exportation of goods. These