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Source: www.asiaecon.org |

AN UPDATE ON AUSTRALIA'S ECONOMIC PROGRESS


Australia was one of the few major economies, along with India and China that grew in the first quarter. Its GDP grew 0.40 percent compared with the same period last year because of the increase in consumer spending, investment, exports and the government's large fiscal stimulus.


Australia was one of the few major economies, along with India and China that grew in the first quarter. Its GDP grew 0.40 percent compared with the same period last year because of the increase in consumer spending, investment, exports and the government’s large fiscal stimulus.

Government Stimulus:
In May, the government announced plans to launch an unprecedented $18 billion program on infrastructure to stimulate domestic demand.

Exports:
According to the Financial Times, Australia has benefited from price increases of iron ore and coal of 500 percent over the last six years. Exports of iron ore and coal are “two of the country’s biggest earners”.

Agricultural exports have increased their numbers as well, after some years of drought. In total, rural exports increased more than 18 percent in the first three months of the year.

In addition to the success of these exports, the country is now “focused its stimulus efforts on the retail and construction industries, two of the country’s biggest employers.”

Investment
As reported by a Credit Suisse Group AG index based on swaps trading, because of the positive signs in the economy, investors have increased bets that Australia’s benchmark rate will be higher in a year. Traders predict that the key rate will increase 79 basis points in 12 months.

Also, JB Hi-Fi Ltd, a retailer, increased its profit predictions after starting up new stores and also increased its goal for future stores openings, from 150-160. This will increase employment.

Consumer Spending and Employment
As a result of the stimulus, retail sales increased 2.2 percent in March and rose another 0.3 percent in April.

According to David de Garis, a senior economist at National Australia Bank Ltd. in Sydney, “A lot of the anxiety on the economy has dissipated, so employers are saying we’re not going to shed large numbers.”

The participation rate that measures the labor force as a percentage of the population over 15 years of age increased from 65.4 percent to 65.5 in May alone.

The Financial Times also reports that, “Australia’s recession will be mild by world standards. Its financial system is one of the strongest in the world and China is the country’s biggest two-way trading partner. Japan, Australia’s biggest export market, has also continued to be a strong buyer of Australian goods despite its own sharp downturn.”

Source: www.asiaecon.org |


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