Australian Economic Analysis
Agriculture has remained a significant employer in Australia in 2015 and is highly likely to remain an essential component of the country’s economy. Forestry, Fishing, and Agriculture are responsible for almost 2.2% of the country’s economy. Although its share has shrunk over the years, the output from the Agricultural sector has continued to expand, and the total industry value that has been added to the sector rose by just over 1.5% in real terms in 2015. 2016 is slowly turning out to be a brighter year for the Agricultural sector in Australia with an overall improved trading environment that has been predicted for the coming years (Hundloe, Sarah & Hannah 47).
Rabobank, a global agricultural banking specialist, states in its 2016 Agribusiness Outlook that the depreciation of the Australian dollar will act as a significant tailwind for the country’s Agriculture. Australia’s agricultural production is expected to surpass the $60 billion mark for the first time in 2017 (Australian Bureau of Agricultural and Resource Economics Sciences (ABARES) 2016). The Australian government has a policy on imported fertilizer that restricts the amount of foreign agriculture that can be used on Australian farms. Fertilizer can only be imported as bulk in containers or ship holds. This policy has forced Australian farmers to mostly use locally produced fertilizer that may be more expensive than imported brands (Reid 86).
Australia’s manufacturing ended 2015 with a sixth consecutive month of growth. The growth concluded the longest unbroken growth run since 2010. However, the country’s industry group’s performance in the manufacturing sector slightly slipped by 0.6 points to 51.9 in the month of December, but it still managed to stay above the critical level of 50 points, which is an indicator of expansion of the sector. The following graph outlines the long term growth prospects of the Australian manufacturing sector based on its contribution to the overall GDP (Glover 67).
It is worth noting that the contribution of the manufacturing sector to the overall size of the economy has been declining over the years. For example, in 2013-2014, its approximate share of the gross domestic product or GDP was just over 6.4%, which represents less than half of what it was more than three decades earlier. This recorded decline shows no clear signs of abating with the sector’s share of overall GDP falling at a relatively constant rate over recent years (OCDE 39).
The financial services sector is the country’s biggest contributor to the overall economy. The sector contributed close to $150 billion to the GDP during 2015. It has been a significant driver of economic development and growth, and with half a million people employed in the sector will carry on being a core sector of the economy in the future. Australia’s four main banks are among the largest in the world based on market capitalization. They also rank among the globe’s top 25 safest banks.
The 2012 World Economic Forum Financial Development Index rated Australia as one of the globe’s safest performing financial centers due to its strength in terms of financial intermediation and stability (Kawai, Peter & Pradumna 91).
Over a five-year period up to mid 2014, the financial services sector has expanded with annual turnover increasing by 27% to hit the A$125 trillion mark. The figure is 80 times the size of the nominal GDP of Australia, thus reflecting the depth of the financial markets. The industry’s assets are valued at $5.6 trillion, which is close to four times Australia’s nominal GDP. Local banks, superannuation funds, as well as insurance firms dominate the industry’s core revenue base.
The financial services sector contributes 10% per annum to the country’s GDP ranking it as the largest. On an annual basis, the financial services sector contributes $19 billion in the form of tax to the coffers of the Australian Government. However, the sector employs a narrow range of careers. Administrative works, clericals, and professionals dominate the sector, making up for close to 80% of the entire workforce (Mallin 84).
Even though it is true that the sector employs less than 5% of the entire workforce, the sector has a unique characteristic of boosting its workers with a higher educational level than the other sectors. Over 50% of all the workers in this sector hold at least a bachelor’s degree or higher.
Although the financial system is viewed as robust, the actions of the Government in response to the Financial System Inquiry will significantly enhance how well the country is positioned to respond to the opportunities or challenges that may crop up in the future. The blistering rate of technological innovation coupled with increasing penetration of mobile devices will have far-reaching implications for the manner in which Australia’s financial services get structured, delivered, and consumed. Financial services offered on mobile platforms are a new trend that is evident in Australia but is more apparent in the other countries in the Asia-Pacific region (Kawai, Peter & Pradumna 107).
These three sectors contribute a combined 18.6% of the entire GDP of the economy. The financial services sector plays a crucial role in providing financing to the other two sectors to fund their expansion, and this drives growth for the rest of the economy. A healthy financial services sector is thus important for the smooth running and growth of the other sectors of the Australian economy. According to Professor Roy Green of the UTS Business school, over the years, Australia has relied too much on the mining sector leading to a reduction in its competitiveness in the manufacturing sector due to lack of innovation.
The Australian government ought to enact policies that will wean the country of its reliance on the mining sector to drive its economic growth. Over-reliance on this sector dangerously exposes the economy to foreign currency fluctuations and volatility. Australia is not faced with any shortage of creativity and talent; its real deficit lies in the performance of its innovation systems as well as the imagination of those tasked with coming up with policies that will revive the manufacturing sector.
Glover, Dennis. An Economy Is Not a Society: Winners and Losers in the New Australia. Sydney: Penguin Random House Australia, 2015. Print.
Hundloe, T J, Sarah Blagrove, and Hannah Ditton. Australia’s Role in Feeding the World. Clayton: CSIRO Publishing, 2016. Web.
Kawai, Masahiro, Peter J. Morgan, and Pradumna B. Rana. New Global Economic Architecture: The Asian Perspective. Cheltenham: Edward Elgar Publishing, 2014. Web.
Mallin, Chris A. Handbook on Corporate Governance in Financial Institutions. Cheltenham: Edward Elgar Publishing , 2016.Web.
OCDE, OECD. Back to Work: Australia. Paris: OECD Publishing, 2016. Web.
Reid, R L. The Manual of Australian Agriculture. Sydney: Butterworths, 2015. Web.