The Australian Economy Growth - Essay Example

? Australian Economy In the just completed financial year, Australia experienced a superb economic growth comparedto other advanced economies. The economy has been sailing on even amid international financial cataclysm that was prompted by the fall of Lehman brothers. Australia is believed to be having lots of resources as per the Geoscience and the resources include largest recoverable deposits such as gold, silver, rutile, coal and iron ore. The massive and diverse natural resources in Australia have attracted wonderful foreign investments. Trade policy in Australia supports open trade as well introduction of Doha Round of multilateral trade negotiations which promoted economic growth for 17 consecutive years just before the global financial crisis. This writing analyses the degree of success that the Australian Government and the Reserve Bank of Australia been in running the Australian economy over the last two years. Australia’s economy is believed to have performed successfully in the recent years due to policies and strategies that the government and the Reserve Bank of Australia have made. Although there have been challenges and some sort of inconsistency in the economic growth for the last two years, the government has done tremendous things to boost the economy. According to Greber (2013, n.p), the Australian government has attempted to curb debt but the budgetary position has not fared on very well in the last few years leading to higher deficits and high level of unemployment. Additionally, there has been a reduction of revenue accompanied with increase in expenditure, which has greatly strained Australia’s budget for the last two years. However, the budget deficit was lower than the Europe’s making Australia to be in a somehow better situation compared to the region. Australia’s credit rating is currently AAA but the credit rating agencies have received strong criticism since the 2008 financial crisis. The agencies could not detect the jumble financial products that led to eventual fall of various financial institutions thus raising lots of questions regarding reliability of credit ratings. It is therefore apparent that dynamics of microeconomic indicators be used in determining the strength of Australian economy. On the other hand, Australia is one of the largest capitalist economies in the world and in 2011; it was position 13 in terms of national economy. The economy is dominated by service sector which makes up a bigger percentage of the GDP although economic growth mostly depends on the mining sector. According to Australian Government (2013), the government has somehow enhanced economic freedom thus making her economy the most free in 2013 index. The free economy has been consistent for the last two years especially freedom from corruption and business freedom. The government’s commitment to economic freedom as well as openness to investment and global trade has made Australia to rebound so quick from the global recession. This is actually plausible because most countries have not been able to recover from the crisis. Unfortunately, the government has not done much in terms of labor and poor management of expenditure. According to Thirlwell (2013, n.p), government and the Reserve Bank of Australia have ensured stabilized fiscal and monetary policies thus allowing banks to withstand the global financial crisis. In addition, public finances have somehow been managed well thus reducing the national debt compared to other economies. The government has created a stable and transparent climate for doing business making it one of the most steadfast and appealing place for entrepreneurs. There is also an independent judicial system, which has ensured protection of property rights and further allows easier and reliable enforcement of contracts. There is a tradition of clean and fair government that has smoothly worked for the last two years thus reducing bribery of public officials. Moreover, Australian government has boosted and attracted investors from various parts of the world through imposition of low tariffs and fair treatment to both foreign and local investors. There are highly developed competitive financial sectors which involves private owning of all banks and introduction of banking reforms which has promoted transparency in the sector. According to Australian Government (2013), Australia’s economic growth has remained positive while other big economies are struggling. The Australian government has established very positive link with the emerging economies of Asia, which acts as the heart of world economic growth and this, may help in sustaining growth and creating more employment that has been low for sometimes. China and India are fuelling strong demand for the various Australian resource commodities thus making a great impact on the Australian economy. These nations have created good trading relationship with Australia because of the strong institutions that have been established by the government for the last two months. The government came up with two structural reforms aimed at ensuring unrelenting economic progress including the Mineral Resource Rent Tax (MRRT) and carbon pricing. MRRT will help spreading benefits to the economy and carbon pricing will provide incentives for business to invest on clean technology and clean energy to sustain strong economic growth. The government has also reviewed business taxation as a way of promoting innovation and seizing every investment opportunity. Australian government introduced tax treatment of losses to allow smooth operations for struggling businesses and also R&D tax incentives for businesses to carry out constructive and innovative developments. Looking at Australia’s economic success for the last two years, it is obvious that the Australian government and the Reserve bank of Australia have worked hard to guarantee this success. According to Thirlwell (2013, n.p), the government has made very tremendous moves to stabilize the economy that was hard hit by the global financial crisis. The positive actions and policies introduced by both the government and the Reserve Bank of Australia have taken the country a step ahead of other nations. Although there have been many other economic challenges over the last two years and especially after the global financial crisis, Australia is recovering progressively. Net debt to GDP is a good indicator of the economic stability and Australia’s net debt to GDP ratio has been increasing for the last two years. After the global financial crisis, Australia, like most of the countries adopted expansionary fiscal policies which involved tax cuts as well as higher public expenditure. Works Cited Australian Government 2013, Skills for all Australians-The Australian economy of the future. Retrieved 31 October 2013, . Greber, J 2013, ‘Economic growth at slowest pace since 2011,’ Financial Review, 5 June, n.p, retrieved 31 October 2013, . Thirlwell, M 2013, ‘Can Australia Keep Beating the Economic Odds?’ Pacific Standard, 11 March, n.p, retrieved 31 October 2013, . Read More