How is Australian economy placed? Lens through Key Economic Challenges

However, warning signs of recession are looming on the country and analysts believe that this scenario is about to change. Yet again, if we compare the performance of Australia with its peer countries, it appears to be pretty strong.

Last few months have given a lot to wave to Australian development. Australia has witnessed a tide of technology and is changing the way the kind of products bought in the market.

The digital transformation is so contagious that you barely miss a news on what is happening around. Be it the growth of app based taxi system or the high usage of solar panels, it is helping the country to combat the slowdown in its productivity.

Let us see some of the major economic issues faced by Australia!

Climatic Changes: The glorified environment which attracted the tourists has now gained the attraction of the world. Recently, Australia has been wrecked by most horrible bushfires, destroying more than 2,000 homes and taking a toll on human and animal lives.

The tourism industry is bound to face a huge setback. The severe conditions of bushfires have restricted the ability of the country to produce many farm goods. As per Analysts,the fires have ripped the rural areas.

It is also expected that the damage will result in the upward pressure on the prices of the consumer-based goods. The workers productivity has also plunged because of the air pollution and the health spending has also increased. The intensified fires are likely to threaten more than 800 million animals and is majorly hitting the biodiversity of the country. Insurance sector is also facing huge costs in terms of rising number of claims.

High Reliance on Natural Resources: The Australian economy is facing risks owing to the global financial crisis. One major problem of the economy is that it is highly dependent on the natural resources. A large part of Australian growth is owing to the exports of coal, iron and other minerals. Also, natural resources are finite in number and hence, it might be highly impacted by the fluctuation in prices.

Many economists suggest that the country should focus more on the development of its people and should move towards the services-based industry. If in case the recession strikes, the country could face a bad downturn, owing to the high reliance on natural resources.

Unemployment Scenario: The government of Australia has done a pretty good job in the past few decades and has been successful in achieving high growth in jobs as well. The country recently recorded growth in job vacancies by 1.6% for the November quarter.

This no doubt commendable but may be not for a country like Australia.

Reason being the number of workers still outnumber the jobs available. This is adding to the unemployment situation and is alarming for the coming years, as per some economists.

The situation doesn’t end here! Owing to rising number of people, employers are not willing to increase the wages, creating a vicious circle of unemployment. This further results in rising debt with people striving to maintain the basic standard of living.

Impact of Global Wars: One third of Australian exports are made to China, consisting of commodities like iron ore and coal. Trades in Australia has benefitted to such an extent that it recorded a surplus in its current account.

Exports of LNG have soared to over 20%, all thanks to tariffs imposed on the US goods. Also, investors around the globe fearing for the global recession amidst UR-Iran tensions have started to invest in gold, which is one of the precious metals among its top exports.

Of course, the wars come up with the twists and turns! Many analysts suggest that if the situations continue to worsen, Australia could be in a difficult position in the longer term.

The Reserve Bank of Australia has decreased the interest to new record low of 0.75% with three consecutive rate cuts last year, reflecting the weak performance of the country due to the uncertainties around the world, thereby largely affectinh the investments.

Good News:

On the other hand, November trades have recorded a surplus of $5,392 million.

Though, it went down by $455 million on the month on month basis, it recorded an increase of $1,725 million on the seasonally adjusted terms.

On the same basis, goods and services credits witnessed a rise of $706 million to $40,893 million and non-rural goods went up by $718 million (by 3%).

Also, goods and services debits fell down to $35,093 million, representing a fall of $1,020 million or by 3%.

Balance on Goods and Services (Source: Australian Bureau of Statistics)

For the period ending November 2019, the number of dwellings increased by 0.8%, which was driven by approvals for private sector dwellings excluding houses. The seasonally adjusted assessment for total dwellings authorized soared by 11.8% in November.

Another good news is Australian slowdown is not expected to last for a longer time. Housing market scenario is set to revive in 2020. This is mainly because of the steps taken by APRA (Australian Prudential Regulation Authority) to increase the access for credit and also because of the reduction in interest rates. House buyers may also witness a raise via the first Home Loan Deposit Scheme of federal government. One of the Big 4’s also anticipates that mining investment will resume as a source of economic development.

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