I have decided to choose Australia, and to discuss about its current economic issues and how these issues would affect the global economy. This country interests me because of its efforts in improving the economy. Initially, the economy of Australia was inward looking, much protected, and a highly regulated market (Gittins, et al., 2009). With time the economy has become open and competing internationally with a main base of exports. The Australia’s economy had several issues which needed to be changed so as to achieve this improvement of its economy. Much attention was paid to these areas such as reduction of high tariffs, ensuring floatation of its dollar, having liberalized foreign banks access, changes in the taxation system etc.
The Australia’s population
This country is among the g7 countries, and apart from the United States of America it’s the one which enjoys the highest standard of living among other G7 countries. According to the research which was done in March 2009, the population of Australia was estimated to be 21.7 million. In every 1 minute and 50 seconds it’s estimated that the country receives a new born. One death is estimated to occur in every 3 minutes and 48 seconds (Gittins, et al., 2009). Most of the Australians have settled along the eastern and southeastern areas of the continent. Australia is the world’s smallest continent but on the other hand the biggest island. Its portion of about 40% is found within the tropics. This continent is world widely known for its beaches and surfing. Australia is also among the driest regions in the world. This continent became independent in the year 1901 through the United Kingdom.
The Australia’s GDP and the World Bank
In comparison with most of the countries the economy of Australia is very strong. Its strength in the economy is seen in the growth of gross domestic product. In the year 2007 Australia had a GDP of 2.7% and in the year 2008 it experienced a gross domestic product of 4%. According to the international monetary fund Australia is considered to possess one of the worlds best gross domestic product per capita figures of $36,226. The Australia GDP per capita has been growing steadily on annual basis, which is also a mark on the economic strength of Australia (Gittins, et al., 2009). The reports gotten from the IMF confirms that Australia has been in a good position to face the global financial market instability. Australia has been supporting the operations of the World Bank. It has been managing this through its capital shares, adding more contributions and replenishments. Australia on the other hand has been benefiting from becoming a member of the World Bank. The Australian firms are put in a better position to compete for contracts of supplying goods and services which are financed by the World Bank.
The current issue of inflation in Australia
The current event in the Australia’s economy is the price instability. The government in Australia has promised to eradicate inflationally pressures through the announcements of the federal budget surplus (Cornish, 2008). Inflation which is marked by increasing prices of goods and services which is also seen through the consumer price index increment. Any country which is faced with high rates of inflation experience some inefficiency which affects the growth of the economy and the welfare of its people. The interest rates have been completely reduced in Australia as a result of world wide financial problems. As a way of solving this problem the Australia’s monetary policy has proofed to be effective than other countries by trying as much as possible to cut down the interest rates to the borrowers. The reserve bank of Australia has given the citizens and organizations some hopes that the issue of inflation will soon be a history. This step will be initiated by decreasing the prices of the goods and services, and slowing the pace of global and domestic demands (Cornish, 2008). The surplus budget which is being promised the Australian government is aimed to cut down the economic activity and inflation by raising the levels of taxations and decreasing the expenditures. The government is aiming at maintaining a decreased inflation rate throughout. The problem of the price instability may have an adverse effect on the world economy. This may happen through high rates of inflation, increased rates of interests, and experiences of recessions in the economy.
Effects of inflation to the global economy
When there is inflation in any country the demands of the goods and the services in the economy go beyond the supply available. This leads to an increased prices of these goods, affecting everyone whether the rich or the poor in the whole economy. This situation imposes a threat to the economy because for one to maintain his standard of living he has to use more money than before (Cornish, 2008). The prices of goods and services increases but the sources of income for people remain the same. The country suffering from inflation ends up printing a lot of money as an effort to lower the value of their money. For one to purchase a single item he must part with a lot of money. Inflation imposes a great threat to the economy a great deal. Although it’s very common for every country to face inflation in one time or the other, all the measures should be taken to control it.
Gittins, et al. (2009). The Australian Economy. ISBN1921128216, 9781921128219. Warringal Publications.
Cornish, D. (2008). How Does Inflation Affect the Economy?