Australia: How is the economy performing?
The global recession had a big impact on economies around the world, with nations across the world implementing various recovery strategies with sometimes vastly differing results.
Since then, its clear that some countries have managed to bounce back relatively quickly to healthy growth, whilst others have experienced a much slower improvement, if any at all.
As a company, we operate across Australia, SE Asia and Europe. Here, we look at Australia's economy in the first half of 2014, and outline some predictions for the rest of the year.
Australia was largely unaffected by the global recession, so unlike Europe it has not had to make a recovery of sorts. Growth has, however, been sluggish in recent years, which has been a source of concern for politicians in the country.
Fortunately, firmer growth was recorded around the turn of the year, making the first half of 2014 look a little brighter for Australia. Government figures show that GDP was up 1.1 per cent in the first quarter, which beat economist's expectations and was the fastest pace of expansion in two years.
Inflation has also remained within the Reserve Bank of Australia's (RBA) two to three per cent target through the first half of the year, and this has allowed policymakers to keep interest rates at their record low of 2.5 per cent, which is helping with efforts to diversify away from mining.
Australia has experienced a boom in mining investment in recent years, and there are concerns over what will happen now that it has peaked. There have already been signs of a slowdown in investment during the first six months of 2014.
This slowdown is expected to continue into the second half of the year, and this has led to uncertainty about the economic outlook. Some commentators believe living standards may decline in Australia since mining makes such a significant contribution to the country's economy and employs such a large number of people.
As for unemployment, the figures are lower than those seen in Europe, for example, but the jobless rate has risen during the first half, up from 5.8 per cent in April to 5.9 per cent in May. More recently figures revealed it has risen to six per cent.
There has been much debate about the outlook for the Australian economy, with some commentators expressing serious concern with regards to growth, jobs and the county's heavy reliance on mining, and others taking a much more optimistic view of where things are heading.
What is generally agreed upon is that improved economic growth is needed to support job creation in the country. RBA governor Glenn Stevens said recently: "There has been some improvement in indicators for the labour market in recent months, but it will probably be some time yet before unemployment declines consistently."
Growth was, of course, firmer during the first quarter of the year, but Mr Stevens explained that this mainly resulted from robust increases in resource exports, which may not be quite as robust in the quarters to come.
It's why the bank is widely expected to keep interest rates at current levels in the coming months because they do not want to stifle growth any further. Growing uncertainty about the outlook for growth is prompting predictions that interest rates will remain at record lows throughout the second half of 2014 and even into 2015.
There are also concerns over the Australian dollar and its dampening effect on growth. On this issue, Mr Stevens warned: "The exchange rate remains high by historical standards, particularly given the declines in key commodity prices, and hence is offering less assistance than it might in achieving balanced growth in the economy."
Overall, these factors are not expected to send growth crashing over the second half of the year, but GDP expansion for the whole of 2014 is nonetheless expected to be a little below trend. There is ongoing uncertainty about the depth of impact the bursting of the mining bubble will have.
The outlook is much brighter for all three of our operating regions - Australia, SE Asia and Europe. Economies are improving steadily, and there is an air of optimism.
However, growth is still relatively new, economies are still relatively fragile and susceptible to new disruptions. The second half of the year will be crucial in securing the longer term health of all three areas in the next few years.
To read our report on SE Asia’s economic performance click here.
To read our report on Europe’s economic performance click here.