Australia macroeconomic state and recent trends

Solution Preview

The Australian Economy

Australia is a member of the Organization for Economic Cooperation and Development (OECD), a group of mainly rich countries and is one of the largest economies in the Asia-Pacific region. The country scores highly on global development indices and the 2009 Economist survey of most livable cities in the world had three Australian (Melbourne at Number 3, Perth at Number 5, and Sydney at Number 8) cities in the top 10. The country is rich in natural resources, particularly coal, and iron ore, and more than half of all Australian exports comprise of commodities. This report examines the evolution of the Australian economy over the last few decades and looks at the future prospects of the same, particularly in the wake of the longest recession in the post War period that has engulfed much of the developed world.

The Past

Australia was occupied by the British in the late 18th Century and the first establishments to come up were Port Jackson (modern day Sydney) and Hobart. At that point of time Australia was primarily a penal station: a place where the British sent their prisoners. Australian economy developed as an agricultural economy and continued to do so till the discovery of gold in 1851. Even though agriculture declined from its lofty heights it continues to be one of the most important sectors of the economy, and along with minerals forms the bulk of Australian exports.

Since the end of the Second World War Australia has seen a lot of inward investment. Accompanied with a restriction of imports this led to the development of a domestic manufacturing base that primarily caters to the local demand. Most of the manufactured exports from Australia comprise of high end manufactures. The economy was again liberalized starting in the early 1980s and the Australian dollar was allowed to float on the forex markets in 1983. This was the ...