Much beyond what Shinzo Abe is going to do and India's growth story, I think September will be remembered for a few major breakthroughs - Elections in Australia, Elections in Germany, Likely attack on Syria, Bo Xilai trial, Rajan's appointment as RBI governor, and likely outcome of the Fed Chairman election. Lets start with Australia in today's post.
Australia today cannot be ignored for it has occupied the center stage in many geo-political and economic forums. A 1.3 trillion dollar economy with a population of about 22 million, Australia has the highest GDP per capita in the Asian continent. Australia is the world's largest exporter of Coal and Iron Ore besides live stock. Between 2000 and 2013, the economy has grown at an average rate of 2.8% per year and today is ranked among the developed economies in the world. Iron Ore exports increased by 25% between 2000 and 2013 (reaching AUD 4.5b per month today) and Coal exports increased by 337% between 2000 and 2013 (reaching AUD 3.4b per month today). However between this period, exports to China increased from mere 3% to 30% and exports to USA marginally increased from 4% to 6%. Close to 70% of the countries trade happens within the Asia Pacific. So this large dependence on China and Asia pacific has affected Australia equally when the emerging markets were hit. In addition, cooling demand from China has pushed Coal prices to rock bottom (price of coking coal used in steel manufacturing dropped by 50% and Coal used for electricity has dropped by 30%). The coal mining industry that was one of the largest employers in the country had to cut down about one fourth of its labor force (~ 11000 employees) in the last two years.
The boost period also saw Australian dollar appreciate and was considered one of the best performing currencies in the world besides the Chinese Renminbi in the last decade. As the currency was performing well, non-discretionary exports such as Coal and live stock gained due to high prices. On the other hand, sectors such as Education (Australia is one of the largest attracts of international education particularly for the Asian market) Tourism, and manufacturing suffered as these were deemed relatively less essential. In addition, during this boost period, the country also saw high level of Immigration. Besides formal Immigration, more than 200000 people reach Australian shores annually through boats (illegal residents) - termed as Asylum seekers. On this base, this high profile elections due this month will see the Labor party and the Liberals fighting for the place to govern the state for the next 3 years.
The labor party (currently in government) is trying to ride on the fact that they saved the country from the GFC (I am not sure if they did - mounting corruption is not being touched by either parties surprisingly) and are promising to work on investments in education sector and roll out a fiber-optic broadband cable across Australia. On the other hand, the liberals are getting the climatic change issue on the lime light. We all know that Australia is, along side some European countries, very serious on the climatic change forum. However the population feels that the carbon tax levied is inappropriate and is not governed as required. So if the Liberals were to come to power, there is a likelihood that the carbon tax might be off. On top of all these is how to get the economy moving considering that it is largely dependent on China and Asian economies.
My personal feeling is that - Labor party should come to power (at least Kevin Rudd is more popular than Julia and relatively more popular than the liberal candidate - Tony Abbott... Though I love this name "Abbott") as most of the people sentiments are there with them and this could help them make some aggressive policy reforms (particularly in mining and manufacturing). However i recently read an article where the business community feels that there should be change and so Liberals should come to power. At the end whoever comes to power, we all want to see Australia flourish for I cannot see at least the live stock exports suffer. Lets wait and watch!
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