Australia's economy (1 Viewer)

[trying2learn]

Hi


In July 2006, in a special discussion paper on Higher Education, Research and Innovation, Australia’s Shadow Minister for Education, Training, Science and Research, Jenny Macklin, made the following statement:

"Australia has to pick itself up urgently. Productivity is falling. We are failing to innovate. Our economic competitiveness is slipping. Despite a resources boom, trade and balance of payments deficits are blowing out."

Does Jenny Macklin have a point? Does Australia have a problem with its trade and balance of payments figures, and is the situation so bad that it needs to “pick itself up urgently”?

 

[sk8ie_boi]

I believe so, if you look at Australia economy's current situation. High inflation at 4% meaning a low real growth rate. As a result of having a target price level, the govt' uses contractionary monetary policy but at the same time, it reduces investment and decreases consumer confidence ==> which results in a low AE (Aggregate Expenditure).

About the productivity part. I guess that's natural, as technological advancement can't be kept to a constant growth. So the other part of growth is population growth. So either by creating more migrants or make people to have more babies lol

Economy's competitiveness is decreasing. Well, that could relate back to the exchange rate. A current strong $AU creates easier import but difficult to export, so lower Net Export. Also, higher inflation in comparison to the rest of the world would also me less competitive.

And lastly, trade balance Haha, one big problem. Almost 5-6% of our GDP. Now, if we continue to have such high deficit, it means that we need to borrow more. And think about the interests we need to pay on that. Also! Who's gonna lend us money in the future if they think that we might not be able to pay it back. So as a result, it would affect the exchange rate (Appreciation ==> result of economy correcting itself) and then ... you get the point, less growth. Oh and by the way, same situation is happening in the U.S. Oh and so we need to pay back the money right? That means, the balance is going to be surplus and that's a contractionary fiscal policy which also means a downturn for the economy.

So, I think ... well, from my point of view, the economy is in a state of uncertainty, and private confidence is uncertain which creates fluctuation and also bust. So, if I was the RBA, I would put the economy into a recession for say a year and then let it grow, but that growth will be constant and much better off than it is now.

 

[wuddie]

i disagree.

aust's foreign debt is without doubt in its record high and we owe about 55% of our GDP to overseas firms. BUT it is much like the saying 'you have to spend money to make money' - as long as aust can serivce/ finance this debt, as long as our primary commodity and resources can attract enough foreign funds to come in, as long as our credit rating does not drop significantly, i don't believe we have a problem.

also, the howard government is already trying to increase nation savings by introducing compulsory super. several time since the last election has the govt tightened the monetary policy YET consumers are still willing to spend as if nothing happened, which is evident that our economy is growing steadily.

HOWEVER, it is a concern that once the commodity boom is over, our economy will go into a recession. western aust and qld, the two states which are most benefitted from the huge resource demand, are the only ones dragging the australian economy along. states such as nsw and sth aust are growing at around 1% pa. how bad will this recession be? i dont know, maybe ross gittins will have a few ideas.

 

[Sparcod]

Compared to 15 years ago (during Hawke's and Keating's years)......the CAD is almost the same. HOWEVER...
today, we have a much lower inflation rate, higher mineral prices, higher Chinese demand and more awareness of the CAD problem.

Ironically, John Howard campaigned against rising CAD to get himself into where he's at now.

 

[Bank$]

There is a reason why the whole world looks at Australians as lazy and laid back.

This is because Australia in LARGE SCALE ECONOMY terms has not changed. Australia got its wealth from Briton and hasn't changed since......very soon country's like Brazil, Russia and obvious China and India will all over take Australia standed of living GDP, PPP and Unemployment rate. Think of Australia's economy like working out,,,, after doing the same cycle too long u hit a plateau (no more muscle growth) that is where Australia's economy is now.

 

[S1M0]

Yes.

Our minerals drive our economy, otherwise we're pathethic. We do fail to innovate, we aren't known for our manufacturing, and our minerals are a limited resource, they will run out, especially at the rate that china is consuming them with its massive economic growth.

(but then again, i'm really no expert on the subject)

 

[trying2learn]

i disagree.

aust's foreign debt is without doubt in its record high and we owe about 55% of our GDP to overseas firms. BUT it is much like the saying 'you have to spend money to make money' - as long as aust can serivce/ finance this debt, as long as our primary commodity and resources can attract enough foreign funds to come in, as long as our credit rating does not drop significantly, i don't believe we have a problem.

also, the howard government is already trying to increase nation savings by introducing compulsory super. several time since the last election has the govt tightened the monetary policy YET consumers are still willing to spend as if nothing happened, which is evident that our economy is growing steadily.

HOWEVER, it is a concern that once the commodity boom is over, our economy will go into a recession. western aust and qld, the two states which are most benefitted from the huge resource demand, are the only ones dragging the australian economy along. states such as nsw and sth aust are growing at around 1% pa. how bad will this recession be? i dont know, maybe ross gittins will have a few ideas.

But Australia does import more than it exports so that a real bummer for the economy!