For the December quarter of 2015, Australian GDP reported an expansion of 0.6% against the revised 1.1% increase in the last quarter, and is better than the market consensus based on the Australian Bureau of Statistics. The country’s economy rose by 3% which is more than the revised 2.7% growth during the September quarter and better than the market expectations. This primarily delivered the fastest expansion from third quarter of 2012. Meanwhile, the S&P/ASX 200 (INDEXASX: XJO) recovered by over 6.6% in the last three weeks (during February 15, 2016 to March 03, 2016).
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GDP growth for major economies (Source: The Australian trade commission)
Australia is the 12
th major economy in the world as of 2015, even though it has just 0.3% of the global population. The country’s nominal GDP is forecasted at US$1.2 trillion and comprises over 1.7% of the global economy. Australia has almost doubled its overall production value since the last decade and performed better than its peers over the last two decades. The productivity levels for over 15 Australian industries growth rate (out of 20) is better than the average productivity of its peers worldwide for the respective sectors. Moreover, the country’s performance for five major growth sectors like gas, education, oil, tourism and health is 20% better than the global average while for mining and agribusiness sectors the performance was 40% better than the global average. Apart from these sectors, the country’s performance in other major sectors like financial and insurance services, information media and telecommunications, professional, scientific, construction and technical services has witnessed decent growth. The country’s services sector reported an expansion by an average of 3.3% per annum.
Major driver for potential growth
The country’s proximity to Asia has opened a huge opportunity for Australia to become a key global exporter of minerals and energy resources and products. As a result, Australia delivered an overall resources and energy exports rise of over two and a half-fold to A$172 billion during 2004–2005 to 2014–15, wherein Asia was the major destination for these exports driven by China, Japan and South Korea regions. Having abundant reserves like iron ore, gold, zinc, nickel and uranium, Australia could continue to be the major exporter, despite short term pressures. Apart from commodity exports, the country is also developing its food and fiber exports which increased to over A$42 billion in 2014, driven by the Asian regions which comprised eight of the top 10 destination markets. With the OECD Development Centre estimating an increase of the Asia-Pacific region’s middle-class number to over 3.2 billion by 2030, Australia is well positioned to leverage this solid potential opportunity given its closeness to Asian region coupled with its ability to offer quality and premium products. Accordingly, Australia is building ties with Asian region to boost its medium- and long-term growth outlook. Meanwhile, the collective economies of China and India is expected to account over 28% of the globe’s GDP by 2020 which is a huge increase as compared to over 5% during 1980.
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Australian Exports to China (Source: Thomson Reuters)
The Inbound tourism expenditure in Australia is also improving on the back of rapidly growing interest from the China, India, Hong Kong and Singapore markets. Demand from the USA and New Zealand also improved and generated 12.5% and 3.6% rise, respectively, during 2014-2015. Given the international visitor spending being forecasted to grow by over 4.7% per annum to over A$42 billion by 2019–2020, the tourism opportunity is intact for the region with China, India and other Asian nations contributing to major growth. Consequently, Australia’s overall visitor spending is expected to rise to A$128 billion by 2019–2020.
Potential Outlook
Australia is estimated to deliver average annual real GDP growth of 2.9% during 2016 - 2020 based on International Monetary Fund (IMF) estimations report (as of October 2015) which is far better as compared to the major developed economies and also against the average growth rate of 2.7% during 2011 to 2015. Moreover, as per the IMF forecasts, the country’s government net debt is expected to be only 18.3% of GDP in 2016, which is very less as compared to the 71.9% estimate of the advanced economies as a group. This lower level of public sector debt indicates that the country’s government is in a stable financial position which would offer support for sovereign ratings and economy growth.
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