Australia Pestle

Australia and Fosters
Well to begin with Australia, world??™s smallest continent??¦came into worl??™d view in 1901 when the six colonies federated and became the Commonwealth of Australia.
Political Environment
Type of Government system:-
The form of government used in Australia is a Constitutional Monarchy ??“ ???Constitutional??™ because the powers and procedures of the Commonwealth Government are defined by a written constitution, and ???Monarchy??™ because Australia??™s Head of State is Queen Elizabeth II.
In Australia rule making powers are distributed between the Commonwealth, six States and two Territories: New South Wales, (NSW) Victoria, Queensland, Western Australia, South Australia, Tasmania, the Australian Capital Territory (ACT) and Northern Territory (see map ??“ Norfolk Island Territory has also been given some local rule making powers by the national government)

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(Australia??™s government system is a liberal democratic one – a political system that has free elections, a multiplicity of political parties, political decisions made through an independent legislature, and an independent judiciary, with a state monopoly on law enforcement , in short a system working in the interest of the citizens.)
Control structure of Australia:-
The Australian government structure is quite centralized as major areas such as taxation, defence, foreign affairs, postal and telecommunications services are managed by the federal government while rest of the matters such as police, hospitals, education and public transport are taken care of by the state and local government.
Benefit of centralization – Things run more smoothly and decisions take less time. There is strong power centrally located so problems are just altogether swiftly executed.
Centralized government means that one body makes all the important decisions for the nation or state, and handles all responsibiliites, it is best for smaller nations that dont have much territory to control, therefore must keep everything tight and concentrated.

POLITICAL PARTIES:-

Three political parties dominate the center of the Australian political spectrum.

1) The Liberal Party (LP), nominally representing urban business interests, and its smaller coalition partner.
2) The Nationals, nominally representing rural interests, are the more conservative parties.
3) The Australian Labor Party nominally represents workers, trade unions, and left-of-center groups.

Julia Gillard Prime Minister of Australia ??“ Member of which party What is that party??™s morals and how it would impact the country

Economic Environment

??? For Australia, the terms of trade are at their highest level since the early 1950s, and national income is growing strongly as a result.
??? In the household sector thus far, there continues to be a degree of caution in spending and borrowing, which has led to a noticeable increase in the saving rate.
??? Asset values have generally been little changed over recent months and overall credit growth remains quite subdued, notwithstanding evidence of some greater willingness to lend.
??? Employment growth has been very strong over the past year, though some leading indicators suggest a more moderate pace of expansion in the period ahead. After the significant decline last year, growth in wages has picked up somewhat, as had been expected. Some further increase is likely over the coming year.

From 1980??™s many structural reforms were witnessed which transformed Australia from a conservative, highly protected and regulated market place to an open, internationally competitive, export-oriented economy.
Since the 1980s, Australia has undertaken significant structural reform of its economy and has transformed itself from an inward-looking, highly protected, and regulated marketplace to an open, internationally competitive, export-oriented economy.
Many economic reforms were undertaken resulting in economic liberalization for the country. They were:-
1) Unilaterally reducing high tariffs and other protective barriers to free trade
2) Floating the Australian Dollar
??? The advantages of floating rates include automatic stabilisation of the exchange rate.
??? Floating rates offer greater flexibility of trade
Will have to take explanation on the concept of Floating currency
3) Deregulating the financial services sector including liberalizing access for foreign banks
4) Reforming the taxation system including introducing a broad based Goods and Services Tax (GST) and large reductions in income tax rates.
Australia is a mixed economy, with major state-owned enterprises in communications, transport, banking, energy generation and health services, as well as privately owned enterprises in the same areas. In common with capitalist economies such as the UK and New Zealand, Australian governments are reducing these activities by privatizing state-operated businesses.
(Australias economy is dominated by its services sector, yet its economic success is based on abundance of agricultural and mineral resources.
Australias comparative advantage in the export of primary products is a reflection of the natural wealth of the Australian continent and its small domestic market.
(ENVIRONMENTAL BACKGROUND POINT)

Social Environment
Australia has a diverse culture and lifestyle. It reflects liberal democratic traditions and values. This diverse culture is because of millions of migrants who are settled in Australia from a long time. When people migrate to new place they spread their culture and knowledge also.
Australia is a unique blend of different traditions and cultures. Australia??™s original inhabitants were the Aboriginal and Torres Strait Islander peoples; they have been living in Australia for at least 60,000 years.
The rest of the Australia has migrants or descendants of migrants who have arrived in Australia from all across the globe. In the year 1945, Australia??™s population was around 7 million, but today it is more than 21 million people.
These migrants have enriched Australian culture; it has influenced traditional customs, lifestyle, education system, culture and arts. It has turned society in many ways creating a broader outlook.
The defining feature of Australia is not only its diversity but it is the extent to which they are united despite of differences in culture. Australian laws allow everyone to express their culture and customs.

Over the years the rate at which the GDP of Australia has improved, GPI i.e. Genuine Progress Indicator reflected a minimal growth. So what is the catch in this point
This indicates that higher economic growth and social growth didn??™t go hand in hand. Its high economic growth did not have much impact on the welfare and quality of life of Australians.

An overview if Australia definitely gives a nice view with higher standard of living and longer life expectancies however this is true for certain groups in Australian society. While searching for the details I was looking for some positive notes but came across this data which changes the mindset and gives a totally different view of Social envt of Australia.

There are still certain groups in Australian society under the burden of unemployment, poverty, homelessness and inadequate housing, education and health.

Socio-demographic change is an important factor underpinning many of the trends and issues analysed in the following pages. Australia??™s population is ageing, increasingly mobile, more and more reliant on overseas migration for population growth as fertility rates decline, and organised in increasingly diverse ways with a fall in overall household size and growth in diverse family
and household formations.

Immigration

Australia has one of the highest immigration rates of all developed countries, and has sustained high immigration for most of the past 60 years
??? Traditionally, Australia has relied on immigration to sustain economic growth
??? For most industries, population growth means market growth, and some industries, particularly the residential construction industry, have a very strong interest in high immigration levels.
??? Even the government finds immigration attractive it helps keep the population young, thus maintaining a high proportion of tax-paying working Australians and a comparatively lower number of older Australians drawing pensions and health care benefits.

AGEING POPULATION

An aging population can have a significant impact on society in Australia. In one of the sources it was mentioned that by the year 2027, there will be a marked increase in the number of Australians over sixty four years of age.

Another cause of Australia??™s aging population is improved life expectancies.
??? The first positive economic effect on the Australian economy will be economic growth and expansion. As older generations tendency to save more in the form of investments in financial sector will act as an injection into the economy causing the economy to expand.
??? The second positive economic effect on the Australian economy will be increased government spending which will lead to economic growth

It is important to take into account the negative effects that an aging population could give rise to. Which is nothing but an indication of rise in unemployment – a negative sign for any economy.

??? Australias population, like that of most developed countries, is ageing as a result of sustained low fertility and increasing life expectancy.
??? This is resulting in proportionally fewer children (under 15 years of age) in the population.
??? Over the next several decades, population ageing is projected to have significant implications for Australia, including for health, labour force participation, housing and demand for skilled labour.

Technological Environment

Research and development
Australia??™s strong business performance in recent years has been underpinned by a record of innovation and a longstanding commitment to research and development (R&D), aimed at increasing productivity, building new markets and boosting international competitiveness.

The Australian Government supports R&D through direct funding as well as providing significant tax concessions to encourage private sector investment.

R&D priority areas include information and communications technology (ICT), biotechnology, manufacturing, mining and the food industry.

Technology greatly impacts on farming in Australia. Scientific and technical advances have helped to make Australian farmers some of the worlds leaders in efficiency and productivity.

As previously said, Australia??™s economy is dominated by the Service sector. And this is visible through the Information and communications technology

The telecommunications sector in Australia has undergone a significant transformation in the past decade??¦ The Internet and e-commerce have boosted the international competitiveness of Australian businesses. Many Australian firms are now using internet technology to expand into new foreign markets.

Important research is also being conducted by the Australian Government-funded Commonwealth Scientific and Industrial Research Organisation (CSIRO) ICT Centre. This research focuses on innovation that creates a competitive advantage for Australia and leads to globally adopted solutions.

Australia is today well connected, both domestically and internationally, with a modern fibre-optic backbone, satellite coverage and an extensive mobile network.

Over the past two decades, Australia has failed to build significant positions in the technological revolution that has transformed the global economy. In high-tech industries such as software and electronics Australia has been left behind, and in emerging sectors such as biotechnology, it threatens to be.
There is no intrinsic reason for Australias poor innovation performance. Australia is not less entrepreneurial than other developed countries or less scientifically creative. We have the human and financial resources. The challenge is to ensure policy settings provide the right incentives to encourage and develop frontier technologies such as biotechnology and nanotechnology, as well as ensuring the diffusion and upgrading of new technologies within established industries.
The CEDA report contains analysis of Australias recent innovation performance by a group of leading innovation experts. Key findings include:
??? Australia has failed to develop financial and organisational vehicles capable of managing the inherently risky nature of investment in technological innovation, which is characterized by far greater levels of risk than routine production.
??? In no successful economy is innovation risk managed by markets alone. Nations that have established sets of institutions to achieve risk-sharing have succeeded in innovating in complex and uncertain fields such as software, electronics and the life sciences. Those that havent developed such national systems of innovation have failed to build those industries. In almost no country other than Australia does the stock market attempt to finance innovation in its early phases.
??? If Australia wishes to participate in technology creation (as opposed to simply consuming technology) appropriate risk management vehicles need to be developed.
??? Policy attention has tended to focus on science-based industries with high levels of direct R&D and strong links to universities (such as computing, electronics, pharmaceuticals and biotechnology). While these high-tech industries are very important and can potentially act as transforming platforms, they are also very small (accounting for only 3 per cent of GDP in most OECD economies). The role of low and medium technology industries tends to be neglected. This is a serious failing. These industries (such as food processing, timber products, textiles, wine, mechanical engineering and services such as transport and health) are intensive users of R&D and scientific knowledge.
??? Economic growth is based not just on the creation of new sectors but on the internal transformation of sectors that already exist-that is, on continuous technological upgrading. Potential growth trajectories may rest as much on sectors such as engineering, food, wine and vehicles as on radically new sectors such as ICT or biotechnology.
??? Australia has a conservative innovation system that is only slowly generating new paths of technological accumulation. The majority of innovation is incremental, involving improvements in products, processes and methods and is based on knowledge sourced from overseas. Despite a decade of strong economic growth, many standard indicators of innovation have been failing.
??? While Australia has high levels of technological specialization in mining and agriculture and patenting in biotechnology and pharmaceuticals has grown rapidly over the past decade, we have one of the lowest levels of change in technological specialization among OECD countries. Australia has not seen the emergence of any major new sector such as telecommunications in Finland and Sweden, oil in Norway, semiconductors in Korea and Taiwan and motor vehicles in Germany.
The report argues that an effective national innovation system plays a central role in enhancing competitive capability. If current weaknesses in Australias innovation track record are not addressed, our future economic development will be seriously impeded.

Legal

close regulation of key economic sectors,

he Australian economy will have to increasingly address environmental and Aboriginal issues. Environmental damage caused by mining and agriculture, especially, have come under frequent media attack. Current issues include soil erosion caused by overgrazing, urbanization, and poor farming practices; increases in soil salinity largely due to farming practices; depletion of fresh water supplies, again largely due to farming and urbanization; and coastal damage, especially around the Great Barrier Reef on the Queensland coast, caused by shipping and extensive tourism. Mining impacts on the environment, such as the release of toxic substances, tend to be more localized. Mining and agricultural enterprises are becoming more responsive to environmental issues, but there is still room for improvement.
Envt
emergence of a green economy in Australia
Energy industries have emerged as the greatest emitter of green houses gases in Australia.

LEGAL/REGULTORY FACTORS

Australia, the member of OECD escaped the Global financial crisis.
OECD mentioned that Australia??™s strong regulatory frameworks and sound policies have helped Australia weather the global crisis better than the other OECD countries.

The monetary and fiscal policy played a key role in supporting the Australian economy

MONETARY policy

The Reserve Bank of Australia is responsible for formulating and implementing monetary policy.

Since the early 1990s, inflation targeting has been the main objective of Australias monetary policy framework as controlling inflation preserves the value of money.
The current inflation rate is 2.80% and the RBA has set policy to achieve an inflation rate of 2-3 per cent on average.

The inflation target is achieved through periodic adjustments to the Central Bank interest rate target
i.e. the interbank rate (cash rate) at which the banks lend to each other overnight for cash flow purposes.

To control inflation, the interest rate plays a significant role??¦.if interest rate is high, the aggregate demand tends to lower thus stabilizing the prices. In 2010, there was constant rise in the interest rate and the now the current interest rate has been maintained at 4.75%

The rate of inflation tends to increase when the overall demand for goods and services exceeds the economys capacity to sustainably supply goods and services. Hence

To help avoid the country falling in recession, the Australian central bank cut interest rates to a 45-year low of 3.25% in February.

FISCAL POLICY

Fiscal policy uses two actions:-Taxation and Government spending to steer the economy.

Taxation

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