Staying up to date with current events within both the Australian and Global economy is essential for your HSC exams. A current understanding of the economy is something that HSC markers look for and will reward. Staying up to date doesn’t mean you have to read the newspaper everyday, cover to cover. A simple 5-minute skim is all it takes. You can do this when you’re sitting on the bus, in the shops for a couple minutes or eating breakfast. A little bit of a review every day will keep you up to date. Focus on papers such as The Australian or the Australia Financial Review (AFR) for current Australian economic news.
When reading through the news, make sure to take note of any interesting developments that you find and add them to your notes. If you can put a couple of recently released stats about the state of Australia’s economy in an answer or use a real-world example of a theory from the past couple of weeks, it may really impress markers.
So, what has happened in the past couple months in Australia that you might want to draw upon?
1. The Pandemic’s impact on the economy
The main issue of the day has obviously been COVID-19, with lockdowns in Victoria, NSW and the ACT contributing another economic contraction in quarter-on-quarter terms in Q3 of this year. As NSW and Victoria begin to exit lockdown (Freedom Day!!!!!) GDP growth in the fourth quarter of the year is expected to grow modestly. Overall Australia’s year on year growth for 2021 is still expected to be around 4% p.a., which has been caused by strong increases in private investments (property & share market) and consumption. The COVID-19 Disaster Payment for those who lost working during the pandemic supported over 2m Australians with $9bn paid out, accounting for 1.8% of GDP in the 3rd quarter alone.
2. Monetary Policy and the RBA
The RBA in its October meeting maintained the current cash rate of 0.1% and indicated that it would not be looking to move it for the foreseeable future. “The board is committed to maintaining highly supportive monetary conditions to achieve a return to full employment in Australia and inflation consistent with the target” Governor Lowe. Even with property prices reaching all time high levels of growth, the RBA is mainly focused on the recovery of the labor market with its three mandates being:
1. Stability of the currency of Australia
2. Maintenance of full employment in Australia
3. Economic prosperity and welfare of the people of Australia
The global economy is still feeling the effects of China’s 2nd biggest property developer, Evergrande, announcing that it could no longer service its liabilities (reported at over USD 300bn). This added to the sharp fall in iron ore prices since July 19, with the global price falling from USD 223 / ton (19 July) to a bottom of USD 102 / ton (23 September). This will have a contractionary effect on Australia’s GDP as it will reduce income from our iron ore exports which make up about 40% of all Australian export revenue.
With Evergrande being a symbol of the problems faced by the Chinese property market (which accounts for 30% of their GDP), this could be a potential tipping point for the Australian economy. Construction has been a major driver of Chinese economic growth, which has supported the Australian economy for the past 30 years. This could result in a major problem for Australia’s export base. The fall in iron ore prices and reduction in demand from china will lead to a reduction in our Current Account surplus and taxation revenue as well.
4. Political changes
The announcement of the strategic partnership between Australia, the UK and US could have significant repercussions for Australia’s trade and financial flows. This alliance was formed to address the geo-political issue of China’s increasing influence in the Asia-Pacific region and was not received well by the Chinese government. Currently 39% of Australia’s exports are bought by China, even with Chinese bans on Australian products (coal, barley, wine etc) which came into effect last year. This deteriorating situation could see Australia look for alternative markets to export to and see further increases in exports to other Asia-Pacific partners (e.g., India, ASEAN, Japan).
RaboResearch - Economic Research. 2021. Australia: Economic update. [online] Available at: <https://economics.rabobank.com/publications/2021/october/australia-economic-update/> [Accessed 14 October 2021].
 Tradingeconomics.com. 2021. Iron Ore | 2021 Data | 2022 Forecast | 2007-2020 Historical | Price | Quote | Chart. [online] Available at: <https://tradingeconomics.com/commodity/iron-ore> [Accessed 14 October 2021].