Assessment of the investment conditions in the Australian economy

Assessment of the investment conditions in the Australian economy

Introduction

The purpose of this study is to expand the boundaries of our knowledge by exploring some relevant information relating to the assessment of investment conditions in the Australian economy. With time, Australia has been able to alter itself to a export dependent economy. For achieving this task, the governemnt of Australia has taken several measures including the cut down of tariff rates, encouraging the privitization, and eradicating the trade barriers. If we look at the macro economic indicators of Australian economy, it is evident that the economy is highly dependent on services sector. 72.8% of GDP is attributed to services sector, whereas 24.6% and 2.6% of GDP is attributed to agriculure and industry sectors respectively. Australia is a major exporter of iron ore, coal, alumina, gold, and machinery and industrial equipment. Moreover, the country's trade in services is growing, and it is a major financial services exporter. International trade increased from $410bn in 2009 to $439bn in 2010, with Asian countries accounting for more than 50% of the trade. Inflation was 2.9% in 2010. Between May 2010 and May 2011, the labor force increased from 11.79 million to 12.03 million, and the participation rate increased from 65.2% to 65.6%, while the unemployment rate declined from 5.1% to 4.9%. Although the financial crisis battered many of its partner countries, Australia managed a low growth rate of 1.3% in 2009. GDP grew to 3.0% in 2010 due to the government's expenditure programs to revive the economy. The government plans to return the country to a budgetary surplus in 2012-13. According to forecast, the economy is expected to grow by 3.5% in 2012 (RBA, 2012). In this paper, the author will use the graphical analysis to examine the recent history of the Australian stock market and form a prediction as to the investment conditions in the current Australian stock market.

Overview of the Australian Economy

Intially, the Australian economy was largely dependent on wool production. With the passage of time, the Australian economy has expanded itself in different other sectors, the most worth noticing is the penetration in mineral sectors. Gradually, the country became self dependent in extracting and exporting abundant amount of minerals including gold, iron ore, coal etc. The Australian has developed in different phases, there came a phase when the country adapted the strategy of selling bonds to the London Market, the basic purpose of adapting this strategy was to amplify the infra structure development in the country. In the year 1880 till 90s, another trend was seen in the Australian economy where foreing investors have started taking interest in the business environment of Australia. However, this situation could not sustain for too long, the return on investment has started to drop down at a sharp rate which made the foreign investor withdraw their investment from the country in large numbers. Eventually, due to increase in withdrawal of investment, the depression hit the economy of Australia in ...