Australia’s economic growth relies on Asia’s continuing demand for resources

Table of Contents
Executive Summary3
1. Introduction4 1.1 Overview of the task4 1.2 Report purpose and structure4
2. Australian economy5 2.1 Introduce stimulus package 5 2.2 Government’s guarantees 5 2.3 Mining Boom5
3. Australian economic growth6 3.1 Investment of mineral resources 6 3.2 China’s economic development6 3.3 Low interest rates6
4. Australian economic vulnerabilities (weaknesses)7 4.1 Crisis in banking sector of European and United States 7 4.2 Development slowdown in China7 4.3 Global Climate 7
5. Recommendation8 5.1 Recommend and supporting reason8
Reference List9

Executive Summary
The purpose of this report is to explore and analyse the topic of ‘Australia’s economic growth relies on Asia’s continuing demand for resources’. This has been done by finding Australian economy, Australian economic growth and the vulnerabilities of its economy.
This report has found out that Australian economy able to cope crisis because of the stimulus package, government’s guarantees and mining boom. For the growth of demand in mineral resources are affected by the investment, China’s economic development and low interest rates. Nevertheless, there’re several vulnerabilities of Australian economy which are slowdown in China, crisis in European and US and the climate. The report recommends that diversify its industries and export markets will be the best way to reduce its vulnerabilities on Asian demand.

1. Introduction
1.1 Overview of the task
This report will deal with the issue of Australia’s economic growth which is depends on Asia’s continuing demand for our resources. Therefore, to do this report, it will analyse three key criteria in relation to the Australian economic. The first of these criteria is the conditions which able for Australian economy to cope after the crisis. The second criterion is the reasons for the Australian economic growth in demand for minerals resources. The last will be the ways that Australia’s economy weaknesses are subject to the factors that it cannot control.

1.2 Report purpose and structure
The purpose of this report is to address the three criteria listed above to investigate the topic of Australian economy. The report will be structured formally using the headings and sub-headings.

2. Australian Economy
The first criterion is the conditions which able for Australian economy to cope after the crisis and those three conditions are as follow:

2.1 Introduce an economic stimulus package (ESP)
According to Das (2011, p.16), the government introduced a stimulus package with transferring cash to those household which live in a lower income level. To do so, this will help to improve the economy as it encourages the low-income household to consume more for increasing the level of consumption. Once the economy has improved, even there is crisis, Australian economy still able to cope with it.

2.2 Government’s guarantees
Australia government ‘s guarantees help the economy recovery, once the economy of the country has recover, the country will able to isolate or even cope the problem with crisis. For Australia, ‘a government guarantee on bank deposits and borrowing ensured that financial institutions were insulated from many of the problems’ (Das 2011, p.15)

2.3 Mining Boom
New and Shael (2011, pp. 85&89) estimated that the Australia mine production and exports will increase which having a good forecast. They also point out that most of the mineral will have an increase in price which is ‘the world’s largest economies recovered’. Since the production and prices will have an increasing trend, it will attract more investment that help its economy to cope with the crisis.

3. Australian economic growth
In this section, it will include the three reasons for the demanded growth of Australia’s mineral resources which are as the follow:

3.1 Investment of mineral resources
As Australia having a geographically well-placed than other countries, more investor would invest on the resources as they find the wealth of mine in Australia. Das (2011, p.16) stated that the increase in price will attract more investors to invest in it for improving and expanding current mines, even construct new mines. Consequently, there is the demanded growth of the mineral resources.

3.2 China’s economic development
As China’s economic is improving and hopes to fuel much of its economy expansion, it tries to improve in different sector especially in mine industry even become the largest mineral resources consumer. ‘Energy and minerals exports are the most important components of Australia’s trade with China’ (Zhang & Zheng 2008, p.104) Once China need to import resources from Australia, it will keep having the demanded growth.

3.3 Low interest rates
Das (2011, p.16) tells that demand and price will be helped by the low interest rates because of the cut of costs. People will buy more with lower interest rates as the cost of borrowing money decrease and they can buy more then hold it as same as an investment.

4. Australian economic vulnerabilities (weaknesses)
The economy of Australia is affected by some external factor which is outside their control. The ways are included banking of European and United States, development in China and climate.

4.1 Crisis in banking sector of European and United States
There are reduction of credit in European and United States which will affect the exports of Australia as ‘the withdrawal of European banks from Asia and other emerging markets is affecting the ability of companies to finance trade and investment project.’ (Das 2011, p.18) Since the European having a withdrawal that will impact the finance project, Australia cannot evade from the possible crisis of other country that having financial relationship with them.

4.2 Development slowdown in China
Australia is seems like start linking with China, however ‘the close trade relationship with China makes Australia vulnerable to a slowdown in Chinese growth’ (The Economist Intelligence Unit Limited 2010, p.7) which stated that the development of China will affect the economy of Australia indirectly. According to Das (2011, p.16), when the development in China and other developing countries are declines, ‘demand for commodities is likely to slow’ which probable impacts our export downturn.

4.3 Global Climate
Global climate change is one of the external factors that outside Australia’s control even other countries. The supply chain of mineral resources affected by the unstable weather, one of the resources is iron ore. According to New and Shael (2011, p. 88), growth of iron ore is affected by the wet weather in Australia which will limited their production.

5. Recommendation
5.1 Recommend and supporting reason
One of the weaknesses of Australia is rely heavily on Asian demand and it is recommended to diversify its industries and export markets. Australia could growth in other industries like education, pharmaceutical and wine, etc. Once Australia has diversified its industries, it can expand its export markets, even Asian demand slowdown, it still has other export to support the economy. For diversify the market, government can lower the export duties simultaneously for encouraging entrepreneurs to export different commodities or products to other countries. This will help to reduce the vulnerabilities of Australia to the Asian demand and improve its economy.

Reference List
1. Das, S 2012, ‘A vulnerable state – the economic outlook for Australia’, Keeping Good Companies, vol. 64, no. 1, pp. 15-19, retrieved 3rd December 2012.

2. The Economist Intelligence Unit Limited 2010, ‘Country Report August 2010’, pp. 6-9, retrieved 3rd December 2012.

3. New, R & Shael, T 2011, ‘Commodity Outlook: Energy and minerals overview’, Australian commodities, vol. 19, no.2, pp. 85-90, retrieved 3rd December 2012.

4. Yongsheng, Z & Chaoyu, Z 2008, ‘The implications of China’s rapid growth on demand for energy and mining products imported from Australia', Economic Papers, 27, 1, pp. 95-106, retrieved 8th December 2012.