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Australia/EstudiosEconmicosCoface

INICIO ESTUDIOSECONMICOS AUSTRALIA

POPULATION

23.599MILLION

AUSTRALIA

GDP

1482.539US$BILLION

A2

A1

COUNTRYRISK
ASSESSMENT

BUSINESS
CLIMATE

SYNTHESIS

MAJORMACROECONOMICINDICATORS

2012

2013

2014

2015(f)

GDPgrowth(%)

3.6

2.4

2.5

2.7

Inflation(yearlyaverage)(%)

1.8

2.5

2.6

2.3

Budgetbalance(%GDP)

3.5

3.5

3.3

3.5

Currentaccountbalance(%GDP)

4.2

3.1

3.3

3.5

Publicdebt(%GDP)

27.2

28.8

30.8

31.3

(f)Forecast

STRENGTHS

WEAKNESSES

GeographicproximitytoemergingAsia
Miningresources
Moderatepublicdebt
Specific geographic features which favour
tourism

Vulnerable to commodities cycle and Chinese

demand
Substantialhouseholddebt(148%ofdisposable
income)
Shortageofskilledlabour
Highlyexposedtonaturalhazard
WidedisparitiesbetweenfederatedStates

RISKASSESSMENT
Growthsettoslowin2015
In2014,growthheldupwelldrivenbyhouseholdconsumption.Nevertheless,theriseinunemploymentcoulddent
householdconfidence(6.4%atend2014comparedwith5%in2012).Accordingly,savingslevelsareexpectedto
rise slightly in 2015 and constrain activity. Households will prioritise paying off their debts. Their debt levels are
actually high (148% of GDP) compared with the other OECD economies. Moreover, the rise in real disposable
incomes(1.5%in2014)couldsubsideasrawmaterialspricesfall,whichwillsqueezethemarginsofcompaniesin
thesector(20%ofGDP).
Since2012,almosthalfofAustralia'sgrowthcanbeputdowntotheminingsector.Itattractsalotofinvestments,
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especially foreign, which will be forced to slow down in 2015. To counter the downturn in prices, the Australian
centralbankhasannouncedthatitwillmaintainanaccommodativemonetarypolicy.Thekeyrateis,therefore,likely
to remain at 2.5% in 2015. Investment in infrastructure will contribute to growth needed as it is aging and
inadequate, especially in the large towns and cities. In 2014, the Federal government introduced incentives to
stimulate investment by the states pledging a bonus of 15% of the proceeds from the sale of public infrastructure
assets,providedtheincomeisreinvestedinnewinfrastructureprojects.
The construction sector will remain sound in 2015, as property prices continued to grow strongly in 2014 (+10%)
encouraginginvestorsnottoreininspending.However,theAustralianmarketneedstobewatched,asaccordingto
theOECDhousepriceswere31%toohighin2013.

Publicdeficitontherise
Thegovernmentcouldpushbacktheseadjustmentobjectives:publicspendingcutsatatimeofrisingunemployment
willcurbactivity.At30%ofGDPin2014,thelevelofpublicdebtwasthelowestofthelargeOECDeconomies.

ExportshamperedbytheChineseslowdown
Ontheexportsside,activityinthemining(coalandironore)andenergysectors(coalseamgasandnaturalgas)is
largelydependentondemandfromChina(21%forgoodsandservices,60%foriron).AlthoughAustraliahassigned
afreetradeagreementwithChina,whichallowsittopositionitselfasaprivilegedpartner,thecountryhastoadaptto
theChineseslowdown.Thefallinimports,especiallycapitalgoods,ishoweverexpectedtolimitthedeclineinthe
tradebalance.
Exports of services (tourism, education) will be at a disadvantage in terms of price competitiveness due to the
Australiandollar'shighexchangerateagainsttheeuro.Apartfromthedeteriorationofthetradebalance,thebalance
of transfers and of revenues is also posting a deficit. This is the result of large outflows of investment income,
especially as regards the mining sector. Moreover, Australia is dependent on expatriate workers due to low birth
rates.Emigrants'incometransferstotheirfamiliesalsoputpressureonthecurrentaccountbalance.

TheAustralianbankingsystemisexposedtopropertyrisk
The sector is highly developed, with assets representing three times the size of the economy (340% of GDP). It
observesBaselIIInormsandthereforeappearscapableofresistingalargescaleeconomicshock.Nonetheless,itis
veryconcentrated,asitisdominatedby4largebankswithverysimilaroperatingsystems.Theyhold80%oftotal
assetsand90%ofmortgages.Theyarefinancedmainlythroughtheinternationalmarketsandareinterdependent
(provide finance to each other). Two thirds of the real estate stock is backed by a mortgage. Outstanding loans
represent1,150AUD(75%ofGDP).Apropertycrisiscould,therefore,seriouslyweakenthebanksandtheeconomy.

Littlepoliticalchangein2015
ElectedinSeptember2013,TonyAbbottisthe28th Australianprimeminister.With88seatsoutof150intheHouse
ofRepresentatives,theliberalcoalitionhasalargemajority.Thenextelectionsarescheduledfor2016,givingthe
leaderstimetoimplementtheirprogramme.
Internationally, Australia is conducting a balanced foreign relations policy regarding two poles of power. On the
economicfront,itisseekingtoimproverelationswiththeMemberStatesofASEAN,while,onthediplomaticfront,it
willremainveryclosetotheUnitedStatesgivenChina'srisingpowerintheAsiaPacificregion.

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