The performance of Australian economy has been exemplary for many years. However, ‘the lucky country’, has been pushing its luck for some time especially with the global economic turmoil. Whilst it seems to be a likely scenario for coming years, some people are still optimistic into thinking the economic growth is here to stay. The reality of it is based on statistics and observations which aren’t in favor of that mindset unfortunately.
Australia has one of the highest living standards and some of the cities constantly appear on the top ‘most livable cities of the world’ lists. This has a great impact on big companies and investors to confidently invest in Australia creating more jobs and having a positive impact on the economy. Although, this stands true, the other side of the coin is those cities are among the most expensive places to set up a home. Not only that, much like any other country, Australian capital cities also have pockets of extreme poverty.
Financial experts have hinted that Australia will not go into an economic meltdown and the disciplined economic policies have had a positive impact. However, the global financial crisis since July 2007 has raised eyebrows as to how Australia will cope accordingly. Despite showing resilience towards negative impact of the crisis, the credit crunch is still ongoing and strangely entered a new dimension. Financial institutions faced liquidity issues, housing and stock markets collapse worsened. As a consequence, people are cautious in investing and are more inclined towards saving due to fear of unemployment in the long run.
In continuation of the unemployment issue, Terry Cook wrote an article published on World Socialist website in November 2013 with statistics showing employment rate falling at a drastic rate in various industries. Automotive giant Toyota axed 450 jobs, Qantas laid off almost 750 staff along with shutting down two aircraft maintenance facilities in Victoria. Such scenarios extend from food processing to consumer electronics and public sector which was severely affected after 12,000 public sector jobs were eliminated.
Some might argue that Australia’s constant economic growth and sustainability is largely associated with the country’s vast mineral wealth and the mining boom is a major contributor. This is in contrast with an article published by The Guardian on August 29th, 2014 that mining industry investment is coming to an end and there are rumors in the air that the entire mining industry will either be outsourced to or completely taken over by China. Not only that, the investment in buildings and structures and in equipment, plant and machinery dropped by 10.9% in 2014. Manufacturing consistently declined by approximately 7% the same year.
Since Australia has been constantly performing on the economic front based on the infrastructure that is already in place, very little has been done in the past in other areas like science and technology which were largely ignored. Until a few decades ago, the internet services were still operating on technology considered obsolete in the rest of the world. The telecommunication infrastructure is still not at par with current technological trends.
Currently, a lot of mainstream providers and sub-contracting companies are actively working on new technology infrastructure to provide faster broadband services which will also influence the economic growth. Although, nothing can happen in a wink of an eye and considerable time and cost investment is required to reach masses. To this date, there are people living in remote areas with limited or no access to the internet. It is reckoned that the National Broadband Network upgrade can take a long time.
In terms of banking, most Australian banks are optimistic about economic growth and are giving a lot of confidence to reduce the element of pessimism and predict the second half of 2015 will see economic recovery. Westpac chief economist, Bill Evans hinted that the annual growth predicted will still be comparatively lower. He also said “This is the tenth consecutive month where the growth rate in the index has been below trend”. The Westpac-Melbourne Institute leading index, which measures the likely pace of economic growth three to nine months into the future, fell from -0.15 per cent in October last year to -0.47 per cent in November.
One of the biggest elements of Australian economy is the retail sector. Lately, the retail sector has performed magnificently well and giants like Coles, Woolworths and Big W, are key players in meeting the supply and demand hence maintain the cost inflation effectively with intelligent planning. There is a big slice of cake that belongs to online retailing which is also one of the foundations of Australian economy.
In spite of the success, the latest sales figures show slowest monthly and annual growth. This turbulence is conceded by The Sydney Morning Herald report dated December 22nd, 2014 in which National Australia Bank reported online sales decline 0.2 percent in October alone and endorsed as slowest online growth recorded overall.
There are two possible interpretations of Australia’s economic performance over the last two decades.
One could be named The Australian Model. This interpretation suggests that Australia has a resilient approach of how to survive in fluctuating global economy when the weight is shifting to Asia. This observations stems from resource rich countries like Chile and Brazil which are now struggling with unemployment and low growth.
The second interpretation is a harsh reality that Australia has purely depended on the luck factor and benefited from temporary global boom. This can be named, The Australian Bubble and it is the most uncertain element to think of considering what will happen if Australia suffers on its own when the luck runs out, so to speak.
It cannot be argued that little things matter. In order for this to work for the economy and people, in a bigger picture, more creative and innovative approaches are required from every participating industry. Education industry should invest more in research to put Australia first and work on plans and strategy to help sustain long term economic growth with the government. The building industry and oil and gas sector is seeing a considerable growth recently and this growth should be maintained with full support by authorities.
Financial institutions should not fear of jeopardizing the current economic system with new disciplined and intelligent policies. If they are happy with the past 23 years of record growth and current status which is not totally dismal, then they should at least work on contingency plans which could be simulated in the current scenario. If successful, those plans can be implemented during any possible credit crunch. Also, careful consideration needs to be taken into account before any offshoring or outsourcing as long term national benefit should take precedence over short term business gain.
It is lucky enough that Australia survived the financial crisis on a global scale but more importantly Australia could gain great long term benefit from economic shift from Europe to Asia. This is not just another stroke of luck but a great opportunity. Australian economy can also benefit immensely from production and more needs to be done on that front and not just investments alone. Couple investment and production with property and employment and Australia will have a very strong foundation for future growth. No doubt, Australia is a lucky country, lucky to have a diverse workforce, hard-working, skilled professionals and entrepreneurs and established businesses. The current economy will be slow for some years but a surprised turnaround cannot be avoided.
By: Mansoor Habib