Australia Economy

Australia economy is modern and vibrant, has a strong growth record and has benefited from the resources boom. How does the global recession impact it?

This was an easy topic to write about in any of the last 17 years. Australian economy has continuously grown since 1991.

2008 has changed the face of the world economy and Australia is not immune to what is happening everywhere else. However, most experts predict that the crisis will be milder here.

In 2007 Australia economy ranked as the 9th biggest industrialised economy in the world.

Australia is the 15th richest nation. Its population has one of the highest quality of life, access to good health and education systems, an enviable lifestyle.

Quite a good place to start a new life.

Australian Economy
The Exports

Another major export item are agricultural products. Just 6.5% of Australia’s soil is good for agriculture. Drought is a major factor which impacts it negatively.

But the variety of climates and use of high technology makes Australia a strong supplier of food to the world. Food industry is a source of employment and business opportunities in regional areas of the country.

Both resources and agriculture account for just a small proportion of the country’s GDP.

Australia Economy
The Services Sector

Setting up a new business in Australia is a fairly easy process. You can start a business in just two days, as compared to an average of 20 days in OECD countries, according to World Bank.

IT and telecommunications are driving the growth and efficiency of Australian economy. Electronic payments and shopping online have become part of the daily routine for many consumers.

Australians have a continuous love affair with investment, whether in shares or property.

Over 65% of households own their home, with or without a mortgage. Some continue to buy properties and rent them out. Others prefer shares, with more than half of the adult population owning some.

But the current situation is bad news for share investors, with sharp falls in Australian shares after years of very strong growth.

So How Does the Global Crisis
Impact Australia Economy?

The fact that at the end of 2008 Australia economy was in a better shape than most of the world economies supports the optimistic angle.

From a consumer’s standpoint, prices have gone a little bit down and most retailers are having sales. The interest rates are much lower, which means people pay less on a mortgage and have more money available to spend.

House prices have inflated during the boom period. They have not taken a big fall yet, unlike what's happening in other countries. There are more new first home buyers on the market as the government has doubled the first home owner grant from $ 7000 to $ 14000 and even tripled it to $ 21000 for those who build or purchase brand new houses.

Update November 2009 - this scheme is being phased out. As of January 2010 the first home owner's grant goes back to $ 7000.

Australian banks are strong and in a much better position than elsewhere. They have a lower exposure to sub-prime debts.

The government put in place an economic stimulus package and increased public spending to "cushion" Australia from recession.

But a number of companies have announced job cuts, which will increase the 2008 4.8% unemployment rate. And will make home buying difficult.

With all our major trading partners deep in recession, it is likely Australia will follow suit but the impact will probably be milder. How much milder, if at all? No crystal ball here...

Still a lucky country, hopefully.

Update November 2009 - Australia seems to be one of the first countries that have bounced back from recession. The Reserve Bank increased interest rates twice, in October and November. And the economy is predicted to grow and generate more jobs.

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