Business Academic Skills - Case Study Example

Business Асademic Skills Name ID no Unit Code and name Lecturer’s name Due Date Introduction Australia is an explicit example of an economy that has been resilient even amidst the recent global financial crisis. This was attributed to priorities by the Australian government to maintain a low debt, increasing competiveness essentially within the Asian market and the development of effective fiscal policy incentives. Although Australia was able to escape the implications of the financial crisis, analysts argue that the economy is increasingly becoming dependent on the emergent Asian markets. The Asian market is progressively becoming a service and consumer market as opposed to the manufacturing base. Consequently, various debates have been raised concerning the dependence of Australia’s economic growth on Asia’s continuing demand for resources. This paper therefore seeks to evaluate the issue of Australia’s economic growth being dependent on Asia’s continuing demand for resources. According to Pannett and Curran (2012, p5), Australia’s growth is in deed dependent on the demand for resources from Asia. In an article in the Wall Street Journal, Pannett and Curran (2012, p5), reveal that Australia’s Treasurer Wayne Swan unveiled a 12 year plan in which rich resourced Australia, would benefit from the fast growing demand of resources that exists in Asia. The basic objective of the plan was to get closer to Asia through a policy blue print. The policy is expected to diversify exports to the Asian region, not just by exporting raw material required in factories but rather the diversification would also involve placing more emphasis towards meeting the demands of the fast growing Asian middle class in terms of tourism, food and also financial services. Pannett and Curran (2012, p5), highlight that although the proposal of getting closing closer to Asia would benefit the Australian economy, opponents argue that the growing dependence of Australia on the demand from Asia essentially China may expose Australia to the slowdown in China. Based on the report disclosed Pannett and Curran (2012, p5) it can therefore be argued that in deed Australia’s growth, is highly dependent on the demand of resources from Asia. This is attributed to the continued efforts by the government to get closer to Asia and meet the demands of the fast growing society. Gyngell (2005, p100) also argues that Australia’s growth is dependent on the demand for resources from Asia. Gyngell (2005, p100) highlights that Australia no longer perceives Asia as an economic threat, but rather as an economic opportunity. According to Gyngell (2005, p100) the economic threat or perspective that hard working Asians were bound to derail Australia economy has been eliminated in contemporary Australia. Foremost Japan was a significant market from the 1950s, and then came South Korea and now China and Japan. The increasing economic growth of the Asian region is therefore perceived as a complimentary factor to the Australian mineral and agricultural resources. Consequently, due to the standpoint that Asia is a prolific market for Australian resources, then the dependence on demand from Asia is bound to continue in order for Australia to witness continued economic growth. Australia’s resilience during the global financial crisis is also an aspect that can be linked to the dependence on the demand for resources from Asia. According to a study conducted by Edwards (2010) Australia escaped the crisis with slight injuries due its capability to meet the demand in the Asian market essentially China. According to the analysis of Edwards (2010, p362), a country like China is already the second largest economy in the globe. It will not be long until the Chinese economy accounts for a higher share in the worlds output. Thus it can be argued that Australia should depend on a demand of a large economy like China in order to facilitate its growth. Furthermore, a study by Domingueza, et al (2012, p394) also attributed the resilience of Australia during the recent crisis to her ability to meet the resource demand of the Asian region. Based on the findings of Edwards (2010, p362) and Domingueza, et al (2012, p394) it can therefore be argued that by meeting the Chinese resource demands, then Australia’s growth is evidently dependent on Asia. Australia’s economy can respond to either growth or contraction in the Asian demand through the use of various approaches. Foremost in order to respond to the growth in Asian demand, Australia should take advantage of her resource base and produce to their full capacity. As highlighted by New and Shael (2012, p85) the demand for energy and mineral commodity by Asian economies is expected rise. New and Shael (2012, p85) reveal that one the major factors influencing the increase in this demand is a stronger economic growth in Asian economies. A case in point is China whose demand for energy and mineral commodities continues to be increased by the rapid increase of the demand of energy intensive goods and urban infrastructure. For example the increase in demand for energy and mineral commodities was boosted by the construction of approximately 10 million residential units in the year 2011 and 2012. Additionally, an economy such as Japan is also another potential market for Austrian resources. New and Shael (2012, p86) highlight that; the March 2011 earthquakes and the tsunami greatly affected Japanese infrastructure and buildings. In addition disruptions also occurred in the energy manufacturing and supply chains. Consequently, in order for Japan to rebuild her economy after the disruption caused by the 2011 catastrophe, there has been an increase in Japans demand for resources. The increase of demand from Japan also implies that Australia should take advantage of her resource base and produce to her full capacity, in order to capture the growth demand for resources from particular nation. In order to respond to contraction in Asian demand, Australia can react by lowering the prices of her resources. As highlighted The Economist Intelligence Unit (2010, p9) the main risk of Australia’s dependence on the Asian market for instance on China is that it makes the Australian economy to be vulnerable. This is because as the Chinese economy develops a slowdown, the implication of the slowdown is that China will experience a decrease in demand for resources, which will definitely be felt by Australia. As indicated in the graph 1.0 a decrease in demand is bound to shift the demand curve to the left side. In addition the equilibrium price will fall and also the quantity demanded. Thus, as highlighted by the graph, in order for Australia to continue to depend on the Asian demand there is need for the lowering prices. Lowering the prices of resources will retain the demand even amidst a slowdown in the Asian economy. Graph 1 Also in order to respond to contraction in Asian demand, the Austrian government should respond by cutting expenditure in order to offset revenue reduction. Das (2012, p16) reveals that as the growth in China and other upcoming Asian countries continues to decline, the demand of commodities is bound to decrease. Yet, on the other hand, the Austrian government has been engaging in numerous infrastructural projects in order expand its resources for export. For instance; the Australian Mines and Metals Association states that; projects worth $236 are underway additional projects worth $191 billion are awaiting approval. Das (2012, p16) argues that projects depend on the demand for the products and the capability to fund them. Therefore if there is a decline in demand the basic response that should be taken by the government is to cut down expenditure essentially on the many projects. There are various companies listed on the ASX that have played a significant role in enhancing export to Asian countries. One such company is the Alumina Limited which is a leading mining company that mines aluminum extracted from Bauxite. The company does add to the Australian economy by exporting aluminum. The company is renowned as the industry market leader that produces approximately 15% of aluminum in the world. Approximately 90% is exported to smelters who produce aluminum that is used for in aerospace, construction, packaging and transport (Alumina Limited, 2013). As reveled by a study undertaken Schand, et al (2008, p5) mining essentially, aluminum is one of the major export oriented activities that has brought about a positive impact on Australian GDP. Another company is the BC Iron Limited which is a new venture that deals with the production of Iron ore and also exportation. The main assets of the company are located in Pilbara area in western Australian. BC Iron Limited is adding to the Australian economy through export. The company currently has numerous projects that are underway for instance the Nullagine Iron Ore Project. The basic objective of the projects is to boots the export of oil to oversee countries. BC Iron company has targets to expand its level of exports to the Asian market. For instance the company forecasts to improve its production capacity from 5Mtpa production rate in 2012 to 6Mtpa 2013. This will enable it to meet the demand within the Asian countries. Conclusion The discussion above has presented an analysis of the view that the Australian economy is dependent on the demand of resources from Asia. After reviewing various studies, paper supported the notion based on the initiatives by the Australian government to get closer to Asia. Another aspect was on the changed perspective about Asia and also resilience during the recent global financial crisis. The paper also highlighted ways in which Australian can deal with the contraction and growth in demand from Asia. In conclusion, the paper proposes that although the demand from the Asian market is useful for Australia’s growth, there is need however to eliminate vulnerability incase the Asian economies experience an adverse slowdown. References Alumina Limited 2013, Retrieved 18 January 2013, From BC Iron Limited 2013, Retrieved18 January 2013, From Das, S 2012, A vulnerable state, the economic outlook for Australia , Copyright Agency Limited, p15-19. Domingueza, K, Yuko, H, Itob, T 2012, International reserves and the global financial crisis, Journal of International Economics, 88(2), p388–406. Edwards, J 2010, Australia after the global financial crisis, Australian Journal of International Affairs, 64( 3). Gyngell, A 2005, Australia’s emerging Global role , Institute for International policy, p100-103. New, R and Shael, T, 2012, Energy and mineral overview, Australian Commodities, 18(2), p85-90. Pannett, R and Curran, E 2012, Australia Plans to Get Closer to Asia, The Wall Street Journal . The Economist Intelligence Unit 2010, Country Report 2010, The Economist Intelligence Unit. Schand, I , Poldy , F, Graham M 2008, Australia's Resource Use Trajectories, Journal of Industrial Ecology, 12, I(5-6), p 669–685. Read More