Australia’s Economic Growth and Its Relationship With Inflation

Forecast For 2021 – Australia’s Economic Growth Slows But Not Onshore

Australia’s economy is the largest in the whole world. The recent economic downturn in the United States caused a great reaction in Australia as well. Australia’s economy is based on the country’s commodity export market. It depends largely on the Great Barrier Reef for its tourism income and the employment rate is among the lowest in the developed world.

Australia’s Economy

As we all know, Australia’s economy is driven by the Great Barrier Reef and its natural beauty and there is no looking back. This reef attracts hundreds of thousands of tourists every year from every part of the world. It’s one of the major contributors to Australia’s Gross Domestic Product (GDP). Its economy is based on the high level of international migration, which results in an enormous inflow of skilled workers and investors. These people buy property in Australia and either live in the cities or migrate to the outlying areas where they settle.

• Over the last few years the outlook for economic growth has been blemish-free.
• Australia’s growth has relied almost entirely on the strength of the resources market.
• The price of oil and gas has stayed relatively high over the past couple of years and is predicted to remain so.
• Australia’s trade surplus is probably the largest in the world and it is expected to increase over the coming years.

These factors have combined to make Australia one of the easiest countries to invest in.

The Global Financial Crisis

When the global financial crisis hit the United States, Australia’s economy took a big hit. The drop in house prices was one of the main reasons that house buyer confidence disappeared. Although the price growth should pick up over the next couple of years, house price inflation makes owning a first home much more difficult than it used to be for average buyers.

• In response to this, many property investors are investing overseas.
• One of the areas in which they are investing is China, and the Australian housing market has been hit by this trend as well.
• Recently the country’s most popular property magazine, Smart China, published an article titled “Australia’s Prime Property Buyer – Why Chinese Investors Are Flocking to Australia”.

This article indicated that the housing price growth in Australia has not been helped by its local market.

The Fastest-Growing Countries in The World

In response to this, some house price analysts have suggested that the major reason why house prices have not grown 10 per cent over the last couple of years is the relatively poor state of the economy. On the contrary, China is one of the fastest growing countries in the world, and it has developed its own rapid house price growth policy. Many in the business sector believe that it may well be the government’s policy to encourage house-price growth, and they argue that the recent slew of investment announcements by the state-owned banks and financial institutions is designed to support this. If this is true, then house prices have certainly picked up over the last couple of months.

Important Indicators

However, other analysts point out that there are certain indicators that suggest that there may be more to all this than meets the eye. For instance, while the country’s main banks have announced a series of new investments that are likely to help stimulate the economy, some experts have pointed out that none of these announcements seem to have any connection to Australia’s rapid house price growth. In fact, the country’s central bank governor, Mr Jim Flaherty, has already indicated that it would be a surprise if house prices would accelerate in Australia this year. As such, some experts have suggested that house price growth may be a function of other factors, such as demographics and immigration. There is also a widespread suspicion within the financial industry, that the decline in real estate investment may simply be the start of the slowdown that many economists had been predicting for the end of the year.

Property in Australia

Regardless of whether you agree with these analyses of underlying causes, it is clear that there is no clear signal that the housing market is on the verge of a crash. Even if house prices are increasing at a rate which would have been considered too fast for the Australian economy to handle even a decade ago, they are still expected to rise around six percent over the next year, and have remained on an upward trend so far this year. In fact, many economists have predicted that Australia’s economy will grow around two percent over the next four years. For those looking to invest in property in Australia, this seems like pretty good news.

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