Australian Economy
With just about 24.99 million people, Australia caters for 2% of the global economy, twelfth position behind some of the enormous world economies such as the United States, China, European Union states, Japan, and other large economies. Being an open economy, Australia undergoes exemplary economic growth and development, but it is also subjected to various economic policies for sustenance. The Australian economy has over the few decades undergone evolutionary changes that have been marred with both enormous success and difficulties as a result of the uncertainties witnessed around the globe and other internal economic concerns.
Current Economic Challenges Facing Australia
The last couple of decades has been greatly challenging to Australia in terms of maintaining its economy because of the upheavals brought by current turmoil leading to economic depression and relatively poor economic growth. Some of the current economic issues faced by Australia include the Coronavirus chaos, isolation, waves of openness, technological puzzle, slowdown of globalization, geopolitical disintegration, ecosystem concerns, the shift in terms of governance, and politic, just to name but a few (Thirlwell, 2020). The chaos of Coronavirus, the present global health pandemic which is largely known as the Coronavirus (Covid-19) that was announced to have originated from China a few months ago has spread across the globe to infect over five million of the world’s population.
The pandemic has claimed over three-hundred and twenty-eight thousand lives leaving great social and economic impacts on various world economies; both large and small. Initial data on the economic impact of the Coronavirus revealed drastic drops in various economic activities across the world, more so in the service industry and manufacturing, particularly in China which had been the most recent leading world, technological supplier. Other world stock markets have also stumbled on uncertainties brought about by the virus, Australia being one of them (Mackenzie & Louth, 2020). Within this short period, economic growth for various countries has almost halved. Australian Treasury has also predicted tremendous negative shifts in growth, which means challenging economic times ahead. Undesirable effects of Covid-19 for supply chain, logistics, cross-border engagements, and movements have threatened various world economies (Laurenceson, & Zhou, 2020).
A slowdown of global growth for most nations from the 2008 global financial crisis and economic depression has been ongoing, and most countries have not fully recovered. Even before the current health pandemic, the economic growth for Australia was facing difficulties although not as slow as its peers. In the year 2019, Australia witnessed a two percent fall in its annual gross domestic product, which also affected shortfall in the per capita progression. The dreary levels of productivity in Australia, especially in the labour sector has had a weak-run from the fiscal year 2012-2013 up to now. This shift (economic decline) has been echoed in the reduced productivity and economic growth which was initiated in the year 2005 (Thirlwell, 2020).
The Technological puzzle that involves technology and innovations have not significantly impacted the growth statistics nor productivity. Even though there numerous technological improvements in various areas including AI, digitalization, computing (cloud), been no consistent results on economies yet. This paradox, as described by Robert Solow in 1987, has no straight explanations. The only mentionable reasons may be inadequacies in measurements and offsetting of growth in other sectors of the economy (Thirlwell, 2020).
Globalization uncertainties entail the economic difficulties brought about by the continued slowed growth and ineffective technologies that have worsened by the falling world economic order, which has transitioned to a more closed, growth-unfriendly, and restricted alignment. Before the great depression of 2008, the world was focused on achieving hyper-globalization. Until then, a different trajectory has been taken; lethargic and downward international trade flows of capital, trade wars and restrictions, rise in protectionism in many countries across the globe, this exists in trade blocks like the case of United Kingdom-Brexit, and despair by the global trade organization (WTO). This has shifted the focus and commitment towards globalization vision.
Geopolitical disintegration, which is the fragmentation of geopolitical order, has shifted the worldwide geo-economic structure. Just as many countries, Australia has changed in its strategic competitiveness along with the multipolar world. Trade partnerships, standards of technology, offshore investment plans, and other commercial options have considerably shifted, leading to risky engagement which may entangle the country which is caused by international policies.
Impacts on the ecosystem take cognizance of the environmental stress caused by humans. The results are generated by a rise in population, urbanization, global warming, and adverse effects of industrialization. This has multiplied the occurrence of natural disasters such as forest fires leading to great environmental losses, negative impacts on tourism, and ultimately on the national economy (Russell-Smith, 2020). Political Instability is characterized by the rise in political unrest and shifts in the country’s political landscape triggered by democratic struggles and the decline of trust in the government. In Australia, this has caused a massive failure in economic progression and created a democratic recession.
Evolution of Economic Issues
The current economic distresses affecting Australia has been imminent since the year 2010 and majorly the year 2015, except the year 2008. Subsequently, the country has been characterized by slow growth in the economy and increased uncertainty, which peaked last (2019) in June and July. This was shown when the Chinese-American technological and trade war intensified. The attempted truce between these economies fell flat earlier this year (2020). Brexit also has got nastier and unaccomplished, leaving world economic order in uncertainty. These partners have severely impacted the economic growth of Australia because of the existing trade and foreign policies among them.
Macroeconomic solution policies
Several macroeconomic policies can be used to boost Australia’s economy, including fiscal policies, exchange rates, and monetary policies. To begin with fiscal policy, it will help initiate an economic recovery process by shifting the government’s expenditure, taxation levels, and governmental borrowing. The Australian government can unswervingly sway the country’s economic activity by redirecting both capital and recurrent expenditure and spending, circuitously spending, regulating taxes, property transfer and doing investments etcetera (Williams, 2011).
The other solution to this economic problem is the monetary policy by Australia’s Reserve Bank (RBA), this can be done by regulating the cash flow in the country in terms of mending interest rates to change the demand and supply forces. This will go a long way in influencing the country’s financial systems to promote more economic activity (Winston, 2007). In a nutshell, radical changes are vital for Australia to boost its sluggish and falling economy by employing various economic recovery policies, renegotiating its trade agreements, strategizing its existing foreign partnerships, and taking conservative environmental measures for long-term recovery and economic stability.
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http://aicd.companydirectors.com.au/membership/company-director-magazine/2020-back-editions/april/issues-facing-the-australian-economy-in-2020
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