Introduction
Australia is one of those economies whose government is chosen by the public and in that regard it is often times regarded as one of the strongest democratic county around the world. Authority of political and government powers are highly decentralized between the different states in the economy. Government has taken various steps to improve the budget of the economy and also took various measures to strengthen its money laundering mechanism. But there are few areas where government were have never been up to the mark especially in the areas of implementing policies for carbon and mining taxes. During the financial crisis of 2008 all the major developed economy were badly impacted but Australia managed to escape the worst hit but economy faces stiff challenge about the international trade and the rising external debt.
Budget deficit of the Australian economy is expanding and this is one the most adversely impacting situation for the business and the political environment for the economy. There are always few positives for the business opportunity and the location where Australia is located is very influential itself that boost trading. Mining is one of the popular business in the region and let’s look at few strength, weakness, opportunity and weakness of the business environment for the Australian economy.
Presence of better infrastructure and the working age population is strongest point for the business development in the country. The work force in the country is highly educated and this is again factoring the business opportunity for the Australian economy. Australia as a country has also developed free trade agreements with the countries like New Zealand, Thailand and United States and this helps country to have business advantage compared to the other economies and countries.
Weakness in business environment
Policies of the country are pushing economy little and they really need changes to pull more foreign investor in the economy for real estate or infrastructure development. For example if there is any foreign investor investing in the real estate and the project is more than $5 million then in that case, Investor needs approval of Foreign Investment Review Board for the project. These kinds of policies push back interest of the foreign investor in the economy. One more factor which creates problem for the Australia business development is the total consumption strength of the economy. Consumption strength of the economy is very less due to less population therefore it is far below the regional standard. This creates problem for the business due to poor demand of their product.
Opportunity for business
Urban infrastructure development will also lead to better growth for the population of the Australian economy. This can be done with the help of public private partnership, and government is also trying to join hands with the private business entities to develop rural areas for the overall development of the business environment in the economy.
Health care benefit is also one of the most developing businesses for the Australian people. With the launch of the federal government’s National Disability Insurance Scheme, more aged population would like to take benefit of the same and will lead for the demand of the health care business.
Rate of corporate tax is higher in the Australian economy compared to the other similar economies, in the near future chances of reducing them is also very less, but if it is lowered than more business and corporate houses will establish their entity in the country.
Threats for business
In recent past Chinese firms has proposed to extract the mines of the Australian countries and that can possibly be the lost of strategic assets of the country. Considering the situation we can see more regulation for the foreign investors who are interested in the assets of Australia for exploration and mining.
Further to boost the chances of re-election ruling party has changes few industrial laws that would make hiring and firing more complicated and would cost more.
Australia is considered as an open investment climate economy with less corruption, strong legal framework, and protection of the firms for its property rights. But congestion on the roads and the railways network suggests that physical infrastructure of the economy is really under lots of pressure and government is helpless in pouring out the full potential of the economy. Government had thus decided to rope in extra budget for these deficiencies and has even proposed the same in the last few budgets. Again one more problem that the economy is facing is the shortage of the skilled labour, but the government is taking right steps in the right direction to provide education and to train labour in lieu to achieve better output form the economy.
Strong Business Environment
Among the top 183 countries, Australia ranked 15th by the World’s bank doing business ranking for 2012. According to the research by the World Bank it takes only two days to start up a business in Australian compared to 5.6 in OECD region. This indicated the hassle free business environment of the Australian economy increases efficiencies of the company to develop products faster. Other than government spending and fiscal deficit problem Australia garnered better ranking in all the measures that suggests that Australia is right destination to develop business. Fiscal deficit is the problem which government is looking into and in coming few years it is expected that the economy will turn into the budget surplus due to continuous growth in the demand of the commodities from the Asian region and other trading partners.
Steps against Corruption
Australia is one such economy in the world where level of corruption is minimal. In Transparency International's Corruption Perceptions Index for 2011, Australia ranked 8th out of the total 182 countries for the corruption test and transparency of the government policies. Whistle blowers problem is also set to reduce in the economy as federal government is taking steps towards the same by implementing few limits to check whether the law is used properly or not.
Economic Growth boosting business
Australian economy at the end of 2012 grew at the rate of 3.6% which is the economy’s strongest performance since the year 2012. Economic Intelligence Unit expects Australian economy to grow at an average rate of 2.9% for the year 2013. Mining sector of Australia is one such segment where continuous investment will make GDP of the economy to perform continuously in the right direction.
Demands in the construction sector for the capital equipment lead to imports and the combination of the strong currency and demand for import, counter balances the performance in the export sector of the economy. Demand of the mining sector from the other Asian countries makes the sector most vibrant and the planned expenditures for the sector is at the record levels due to the high demand of the commodity form the nearby Asian region. LNG (Liquefied natural gas) is expected to overtake the demand of iron ore and coal, as high prices of oil will push the demand of for the commodity, making it the most important driver of growth in the region.
Economy has more problems with the external factors like export to the countries where condition has not improved much after the crisis like Europe. China’s housing market correction is also regarded as the major problem for the export of commodities to that region, creating huge deficit in the payment. Any downward fall in the price of commodities in the international market would again impact the country due to its huge dependencies on commodity exports.
Business Legislation and Labour Force
Legal system of Australia is based on the common English Law. It represents the federal structure with states and territories having their own law and court. In respect of all the matter high court is the highest court of the country. Legal system of Australia is considered as responsive, moderns and enforces contracts only in some non discretionary matter.
Property right are protected well with the courts and many a times private property can be expropriated for the public purpose. In the case due process righted are taken care and right compensation is paid for the same. Intellectual property rights the fort the protection for the patents, trademarks and designs to protect the rights of any particular company.
Out of the total population of 22 million, workforce population is considered at 12 million which is roughly two third of the total population. Service sectors of the Australian economy employs more than 75% of the workforce population, while industrial sector accounts only 20%. Financial industry faced lots of cost cutting and crisis during global crisis period and caused lots of unemployed workforce during the period. Workforce is educated, 48% of population ageing 15 to 64 have secured their post secondary school qualification. This shows that industry and business can have favourable labour force to develop their business.
Conclusion
Favourable government policies and adequate investment opportunities have roped in many investors for the business development in the Australian economy. Fiscal deficit is one problem which government is facing at the current moment, but looking at the policies it seems in the next couple of years, deficit would be converted in surplus. Demand of commodities from the Asian Region has also prompted better business environment for the country. Low corruption and favourable protection act has made it very easy for the local and foreign investors to set up their business in the country which is raking 15th for the better business environment among 183 countries.
References:
- Macro Business. (2013). Australian Economy. Retrieved from http://www.macrobusiness.com.au/category/australian-economy/
- The Economist. (2013). Australia. Retrieved from http://www.economist.com/topics/australia
- Business Spectator. (2013). Australia could face recession. Retrieved from http://www.businessspectator.com.au/news/2013/4/26/australian-news/australia-could-face-recession-economists
- Australia on Net. (2013). Australia Business and Economy. Retrieved from http://www.australiaonnet.com/economy-business/
- Live Trading News. (2013). Australia Economic Report. Retrieved from http://www.livetradingnews.com/china-australia-economic-report-111844.htm
