By: Dr. Mike Campbell
With a GDP of roughly $1.6 trillion, Australia ranks as the world’s 19th largest economy. Australia was the only major economy not to fall into recession during the global financial crisis and one of the first to increase central bank interest rates once the worst of the economic storm had passed. It also posted the best GDP figure of any OECD nation in 2009 of 1.3%. Unemployment stands at a relatively enviable level of just 5% of the workforce, just under 624000 people.
As a major producer of raw materials, Australia enjoyed continued demand during the worst of the global financial crisis, notably from China. Natural disaster in the form of devastating flooding hit the nation’s output somewhat last year. However, Australia’s relative prosperity, stability and interest rates have made the Australian Dollar into a safe haven currency. This and the Euro’s troubles have seen the Australian Dollar appreciate by 10% over the past year. Since a peak EUR:AUD of 2.0735 in December 2008, the Euro has fallen by 25.3%.
The Q4 2011 figures have just been released and show that the economy grew by 0.4%. This figure was roughly half of the value anticipated by analysts and sent the Aussie Dollar to a six week low against other major currencies. The (relatively) lack-lustre performance has been attributed to a knock-on effect of weaker demand in Australia’s import markets due to lessened global demand in response to the general downturn. This has hurt commodity prices, dealing a double blow to Australia’s fortunes.
In the longer term, the outlook for Australia is set to be good on the back of increased investments in resource exploitation. The Reserve Bank of Australia is predicting full-year growth for the next two years to come in between 3 and 3.5% and is maintaining its interest rate at the astronomical level (in relative terms compared to the US, UK and Eurozone) of 4.25% in a bid to boost growth!