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Forecast of Financial Crisis and Lower GDP of Australia Assignment Answer

It is predicted that Australia’s GDP will fall below 3% in 2019; Australia’s slow growth is not only because of a slow growth in the domestic housing market but also because of China’s economic slowdown. Do you agree? Present your analysis as a report.

You are only required to use academic references; maximum word limit is 2500 words including references. Please use the report format and submit a professional report.


Answer

The prediction is that Australia’s GDP will fall below 3% in 2019


Introduction 

The purpose of the paper is to critically analyse the forecast of the financial crisis and the lower GDP of Australia in the year 2019. The paper will effectively discuss the GDP of recent years that are being focused in Australia. The paper also discusses the impact of the domestic housing market on the economic condition of Australia. The discussion is also regarding the economic downturn of China and its impact on Australia.

Australia GDP in recent years 

The country Australia has sustained economic growth, which is also termed as the lucky country in the world. The recent data from the World Economic Forum effectively show that Sydney or the state Melbourne eventually continue to maintain their rank among the some of the most liable cities all over the world (Australia - A Coming Financial Crisis? 2019). This rank is analysed in term of the human capital business as well as the cultural experience where they effectively maintain the global stage. Moreover, it can be seen that the population rate of the country has grown up strongly to almost 25 million that also with the 60 percent resulting from that overseas migration the population of the country is projected to be double by the year 2060. Due to the change in the population rate within the country, it is considered to be one of the biggest drivers for the economic condition of the country. The change in population rate is highly affecting the increase in the housing market and also the price of the house within the real market.

The economy of Australia is having the advanced in the seasonally adjusted to almost 0.2 percent for December of 2018, which show the expansion of almost 0.3% from the previous market. The GDP of Australia was having the worth of around 1323.42 billion US dollar that also in the year 2017. It is the fact that the GDP of the country represent almost 2.13% of the entire world economy (Australia's GDP growth may fall to 2.5% in 2019, 2019). The country has faced the average rate of gross domestic product with being 417.40 billion dollars within the era of 1960 till 2017. But the growth of Australia GDP for the year 2019 is projected to be slow by almost 2.5 percent and also the continuous slowdown within the Chinese growth that will have the effective impact on the demand like mining export from Australia. The growth moderation in the 3rd quarter is primarily due to the sharp moderation within the private gross that fixed the capital formation growth that is eventually slowed to almost 0.7% year over year from the 6.4% year over year in the 2nd quarter (Irvine, 2019). 

The recent economic condition of the country effectively shows that the country has entered the 27th years of the recession-free growth in the economy. The treasury of the country has undergone various and significant tax reforms that create a diverse impact on the rate of the country regarding the uncompetitive in term of the start-up companies. The economic condition of the country is not robust as it can be seen that is ranked 86 in term of the economic complexity within the countries like Kenya, Iran and Senegal economic complexity (Ng, & Feng, 2016). The economic condition of Australia is mostly due to the price slip of the residential property within the country. The downfall of the price took place when the amount slipped to almost 0.6 percent year over year in the country in total and in individually the states have faced the lowered in Sydney by 3.9% then in Perth the percentage was 0.9% and in Darwin it was counted for 6.1% that also within the four quarters that is till June (Kuttner, & Shim, 2016)

Impact of Domestic housing market of Australia on country GDP 

The housing market is one of the biggest factors within the country that lead to various activities regarding the lowering of the economic condition of the country. The housing market in Australia is having a high degree of exposure regarding the property activity, and for that, the local investing opportunities are highly limited for the Australian people (Wildauer, & Stockhammer, 2018). It is due to the fact that at the moment it can be seen that the 9% of the individual salary generally goes within the process of superannuation and for that the scene is quite huge for the asset price while it is entirely wrong to think that the property dealing is one of the best options for maintaining the economic condition of the country. The economist generally expect that the country will show that the GDP of the country will grow by 0.6% that also within the next three months with the annual growth of the moderating from the rate of 3.4% to the rate of 3.3% (China's economic slowdown poses a significant threat to Australia, 2019). The things are becoming more clear when the Reserve Bank of Australia have valued almost 3.5% for the forecast of December but at the same time there are some worries regarding the potential impact from the combination of the sluggish wage growth along with the weak consumption of the household that has provided huge impact on the economic condition of the country. 

The process of superannuation within the country has lead to the numerous situations that have been effectively used within the system of housing property as a matter of fact for their development. The things that people are unable to understand regarding the superannuation sector is that it is actually providing high leverage within the property as well as in the finance sector, and if either of them goes to the south then it could effectively mean that the value will go down (Grintzalis, Lodge, & Manu, 2017). It is the fact that the Australian has enjoyed the living of high standard along with the numerous privileges but due to this the country has been leading to the highest corporate tax rates, and they are considered to be the third highest payer of corporate tax in the world. Despite the highest tax rates, it can be seen that numerous Australian companies pay the little or even no tax to the government and for that, the burden was falling upon the middle as well as the lower class people. The living of Australian people is creating a huge impact on the economic condition of the firm that eventually leads to the decline of the GDP of the country.  

In Australia it can be seen that the house price at Sydney has been effectively declined by almost 9.5% since the peaking within the year of 2017 as well as it is considered to be the biggest crash for the GDP and the economic condition of the country (Australian economy exposed to two housing markets: CBRE global economist, 2019). The video clearly shows that the housing sector and its price are some of the vital aspects within the market that is highly effective regarding the downfall of the economic condition of the country. Moreover, it can also be seen that the state Melbourne is even following the suite that they are also leaving the consumers tightening the belts with the fact that they feel less wealthy and even they are unable to respond to the rising repayments regarding the offloading the public properties of the country. It can be also seen that the Reserve Bank of Australia had effectively cited two of the cities that are in the way of declining the housing market as the primary area for the potential concern especially when the cash rate was held at the record to below of around 1.5 percent (CesaBianchi, Cespedes, & Rebucci, 2015). Moreover, it is the fact that the RBA can effectively play down the implication regarding the falling house prices with the suitable and effective view that the stronger growth within the household income would primarily provide suitable and effective support regarding the spending of the consumers.

The dependence of Australia on the construction segment has eventually raised the alarm bell in term of the exposure that can cause that housing correction to trigger the downturn of the wider economy. It is the fact that the housing cycle of the country has shown the downturn, and for that the country is facing a high impact over the economy. The housing downturn within the country involve the poor affordability of the houses then the tight credit as well as the surge within the supply of the units and even collapse of the foreign demand. In this downturn, it can also be viewed as the reduction in the future demand for investing within the property and maintaining the housing sector suitably and effectively. The house price has , and for that, the country is facing some of the huge downturn in its GDP as the housing sector has also faced a huge impact on their business activities. The scale of property crashed when the financial crisis took place within the country, and for that, it becomes much effective for the country to maintain its business value and the understanding process within the field.

Impact of China’s Economic slowdown on Australia GDP 

The explosion of China in term of the economic powerhouse was considered to be one of the biggest sources for global anxiety. But in the year 2019, it is considered to be the opposite that might cause the problem for the business growth and the value of the country. The IBIS world has the previous warning to the factors that the downfall of China GDP would lead to the biggest consequences for the economic condition of Australia (Pham, Nghiem, & Dwyer, 2017). This is due to the fact that the two-decade economy of China is coming towards the end, which will have a diverse impact over the business and the value of economic condition mostly for Australia. The annual GDP growth of China has been declined over the years, and for that, it particularly concerns to the economic condition of Australia. In numerous activities of the field, it could be effectively seen that by considering the effective way which has provided the tight value for the economies to get over in the last decades (Rahman, & Mamun, 2016). Due to the downfall of the economic condition of China, it could be seen that the mining then the education, tourism as well as the retail sector will have a direct impact. The economic condition has effectively changed the way of a lookout for Australia and China to the entire world.  

The economic downturn in China is due to the United States along with their ongoing trade war that has caused the sudden decline regarding the GDP of the country and even it can be seen that the effect of a trade war has been felt globally (Pham, Nghiem, & Dwyer, 2017). All the other countries that are associated with China are facing some of the huge impacts in their economic condition, and the same thing has been faced by Australia. The impact is directly on Australia due to the fact that they are the largest trade partner with China and for that downturn within the economic condition of Australia has to lead to the diverse impact over the business process and the economic condition of the country. Due to the trade war, the impact is directly upon the largest trade partner as it can be seen that almost 30.6 percent of the total revenue in term of Australian export is with China (Dixon, 2017). Due to the downturn of the Chinese economic condition t can also be seen that the country is facing economic problem in term of the mining that is associated with iron ore as 80 percent of the revenue of the country is generated from the iron ore industry within the country.

The decline of the Chinese economic value also has the direct impact over the business sector and the market condition of the firm where the availability of the valuable process needs to be developed for dealing with the situation and providing some of the suitable growth within the market of Australia (Dixon, 2017). The downturn has also provided a huge impact on the education sector of the country. It is the fact that the education sector of Australia has a huge number of students from the various part of the world, and in this, they even have the Chinese students of almost 32 percent. It is quite a huge number for the country to maintain their relationship and their economic value within the process (Knoll, Schularick, & Steger, 2017). One of the biggest facts for the firm is to analyse the situation and provide some of the effective value within the market. The universities of Australia holds the numerous Chinese students but due to the downturn of the economic condition in China they are unable to maintain their financial sector, and for that, the wages of people in China along with the various activities have lowered the value which eventually leads to the fewer students within the country Australia. It clearly shows that the few students from China in Australia will have the great impact over the business process and for that the direct impact will be over the country and their GDP will face the downfall within the market. 

The tourism sector of the country is also having the highest impact regarding the downturn of the economy of China. It is the fact that the Chinese tourist in Australia primarily spent almost 11.5 billion , which were one of the most effective economic growth for the country (Dixon, 2017). The downfall of Chinese economic condition has lead to the various impacts over the business, which has been created a huge impact on the diverse actors within the market. In most of the situation, it could be seen that the entire activity of the business process is to develop their market and their value to understand the effective economic condition development process for the country. The global economic condition is getting weak for the financial year 2018-2019 and for that there are numerous countries which are getting the diverse impact on their development process and their valuable activity within the field (Cashin, Mohaddes, & Raissi, 2017). The trade war has to lead to diverse action for the business value and also it leads to the numerous activities within the field. The economic condition of the country has lead to a valuable process for dealing with the situation and providing diverse activity over the business. Australia has faced the issue within the market due to the huge impact of the Chinese economy, and for that, the country is able to deal with the business process and valuable activity within the market. Due to the trade war, the situation has been created for the country, and they are facing the issue in every sector within the country regarding the development of the economic condition in Australia.

Conclusion 

The paper concludes that the economic condition of Australia is highly associated with the two factors that are housing sector and the economic condition of China. The paper eventually concludes that the fact that the house price at Sydney has been effectively declined by almost 9.5% since the peaking within the year of 2017 as well as it is considered to be the biggest crash for the GDP and the economic condition of the country. It clearly shows that the housing sector has a huge impact on the economic development of the country as it is associated with the stock market and also the construction business of the country. The papers also conclude that economic downturn of China is having a direct impact over the economic condition of Australia.

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