AUSTRALIAN ECONOMY

Economic Analysis

Economic Analysis of Australia

Introduction

Introduction

This report is written with the purpose of analysis of Australian economy, its historical and current trends, performance of stock market and analysis of investment in stock market that whether one should invest in Australian stock market or not and yes than in which stock and why. This report is written using top down fundamental approach. Analysis of world economy and Australian economy is done in which world GDP Growth, Australian GDP growth and inflation, Consumer Price Inflation (CPI), interest rates, Australian bond yields, and exchange rates are analyzed.

Overview of Australian Market

Australian Economy is one of the fastest growing economies of the world. It is ranked 13th in the world in terms of Nominal GDP. In 2010, Australian GDP increased by 3.94% to $882.344 billion. For last two decades, Australia has been enjoying a robust growth with an annual real GDP growth of 3.3%. GDP growth in 2012 is expected to grow by 4%. The services sector is dominated by the Eastern part of Australia, while Western Australia controls the natural resources of the country. Australia in past decades has been significantly dependent on trade with western countries, but with time and reforms introduced by the country, it is now not heavily dependent on trade with western countries (OECD, 2011).

Analysis

World Economy

Real GDP Growth by Economy

As a whole world economy achieved growth of 3.2% in the period of 2000 and 2007, but there was a slight dip in 2001 and 2002 due to global crises after 9/11. In 2004 to 2007 there was a boom in growth. Economies of emerging countries, India, China, Brazil, and Russia, achieving high growth rate of 7 to 10% for years. In Europe and North America, booms in stock and property market suggest steady growth. Due to new investments Middle Eastern and African economies are getting better economic development. And Japan is also showing a recovery from deflationary conditions.

According to theories of economy developing economies contributed a great part in the global economy; theories also suggest that global economy may enjoy further years of tolerant growth, as potential markets will most likely to achieve a huge growth spurt and will respond to the impacts of lowering growth to other places. It has also observed that economies of Asia are disconnecting to be separated from United States of America and now they have ability to grow in its own flow which is due to Asia's two giant economies (Economy Watch, 2010).

Australian Economy

Australian Bureau of Statistics states that unemployment in Australia declined in March 2011, as 32,100 full-time and 5700 part-time jobs were created. The unemployment rate declined to 4.9%, showing good performance and effectiveness of economic policies. It raised concerns over employment shortage in other industries. This issue was raised due to the fact that Employment opportunities increased by 2.9% while labor force participation increased by only 65.8%. This will put pressure on the government to spend on training despite a constrained budget position (OECD, ...