It is hardly a competition but when reviewing stats about any nations economy you always end up comparing numbers against another nation. But with any statistical information it is all relative to how the data is being viewed. According to the International Monetary Fund the GDP of Australia is 12th in the world, however if you break it down by population you will see that Australia’s GDP is 2nd in the world only behind the US. So when analyzing any information, it is always best to know and understand how and why the statistics were collected. Once you understand the reason for the information being analyzed it can give you a window into understanding how the data was collected in the first place.
Now that we can see that per the population the GDP of Australia shows that per person they will buy just over $50,000 worth of goods and services each year. Since only the US has a higher GDP per person rating, you can presume that the standard of living between the US and Australia is similar. Whereas Russia has a higher 2016 GDP it also has a higher population. Russia’s GDP per person is only $8,933 in USD. So the consumption of goods and services per person is how you can really see how the economy is doing at a personal level.
Employment in Australia
If each person in Australia is consuming roughly $50,000 USD in good and services, you’d have to believe that their unemployment rate would be consistent with these findings. You have to have a job to purchase goods and services, and per TradingEconomics.com in 2008 unemployment rates were approximately 4-4.5% and after the US recession began, unemployment rose to 5-6% and has had a steady incline to 6.25 in 2015, but has remained static around 5.5-6%. This increase during the US recession from 2008 to 2009 shows the global effect from one nation to the next. Australia was not participating in poor mortgage lending programs and processes, yet their economy still reacted.
While the unemployment rate has been rather steady, the growth in wages has been declining. What’s that mean? It means while Australians are employed, they are not receiving raises or higher pay. This means that the GDP per person referenced above could have been higher if wages had not stalled in their growth. While Australians are spending money on goods and services, they lost roughly a possible 2-2.5% in wage growth from 2008-2017. So if an Australian was used to receiving a 3% raise YOY (year over year) they maybe only received 1%. This means while they did receive a raise and increased their purchasing power, it was less purchasing power than expected.
Because of the politically stable economy in Australia it has been one of the top traded currencies in the world, ranking 5th. The Aussie economy offers high yielding interest rates which transitions to world money being invested in Australia. Over the last year the AUD to USD has ranged between .7175 and .804. The purchasing power of the Aussie has been on the upswing to the USD. Earlier in the year it took $1.39 AUD to buy $1 USD, now it only takes $1.25 to buy $1 USD. The Aussie is strengthening against the USD.
Gross Domestic Product Growth
The growth of the GDP, what does that break down to? It means that each person in Australia is spending more on goods and services than they did the previous quarter. Typically 1st quarter of the year is lower than the previous quarter of the last year, with holiday spending usually accounting for a large influx in spending. Australians stated that while the growth is slow, moving forward is still better than moving backwards. According to SkyNews.com.au Australia saw only a .3% growth in the 1st quarter of 2017. While they aren’t setting any records for positive growth, they are showing positive signs for 2017. They did set a world record for the longest length of time without an economic recession. That is something to be proud of!
Inflation and Interest Rates
These two go hand in hand, inflation rates and interest rates. Inflation is the change in pricing for goods and services in a nation, otherwise known as the CPI (Consumer Pricing Index). Inflation would be if last year you bought a pair of jeans for $20, and this you want to buy the exact same pair with all other laws of supply and demand remaining unchanged, and the price is now $21. Inflation has occurred. YOY would show the Australian economy experiencing and average of 3% inflation rates.
Australian interest rates have a historical rate of just above 4.5%. Currently, the interest rates are well below the historical average at just below 2%. This means if you are an Australian wanting to borrow money, you can borrow and the interest charged in your loan is lower than average, which is fantastic. However if you are an investor, you would not feel the same way about the low interest earning accounts. When you are used to earning on average 4.5% on your investments you are now earning less than 2% on them. So this current situation is great for borrowers, not so great for lenders.
According to cnbc.com Australia the housing market is HOT and the government weary of the housing market boom and bust the US experiences last decade has plans to rein in the non-bank lenders under proper lending regulations. Anytime a market is booming, you can expect that even if the booming slows or stops that the economy will feel it. It doesn’t have to go backwards for the economy to feel the twinge of a stunt in growth. They have slowed their lending in efforts to lessen speculative property investors. There is a bill that will bring these non-banking lenders under the same regulations as the Australian banks.
While its not a competition, Australia is certainly in the front running! They might be slowing in their economic growth per capita, but slow and still moving in the right direction. The Aussie has been strengthening against the USD, which gives it more buying power. And a slow but positive GDP growth is still growth! And they have had the longest growth streak and now hold a record for it. The unemployment remaining steady at a low ~5%, this is a good position for employees and employers. If the rate drops too low employees run the labor market. If it rises too high, it is an employers market. Wages while increasing are doing so at a slow pace. While Australia is slow in growth, it is showing positive growth in every aspect of its nations economy at this time. So it’s good time to be Australian! And if you are thinking to make this big step, read our tips on Moving to Australia to be sure that you have an easier transition.