December 08, 2020

RCEP - Regional Comprehensive Economic Partnership

AUSTRALIAN ECONOMY BACKGROUND

 1951 :Gold Rush - Gold discovered at New

South Wales and Victoria
 1983: Australian dollar was floated and
financial deregulation was undertaken.
 2000 : Rise in commodity prices emphasis
on commodity export-Significant increase
in Australian terms of trade
 2003-13: Two speed Economy- Mining and
non mining states
 2014: Lower interest rates sparks surge in
housing market activity (Sydney and
Melbourne)
CURRENT ECONOMIC OUTLOOK
• Longest run of uninterrupted GDP growth in the
developed world - 28 years since the country had a
technical recession
• Australia’s free trade agreement (FTA) with China
entered into force in 2015, adding to existing FTAs
with the Republic of Korea, Japan, Chile, Malaysia,
New Zealand, Singapore, Thailand, and the US, and
a regional FTA with ASEAN and New Zealand
• Australia continues to negotiate bilateral
agreements with India and Indonesia
• Australia's largest export markets are China,
Japan , EU, South Korea, US and India
• Major exporter of agricultural products,
particularly wheat and wool, minerals such as iron
ore and gold, and energy in the forms of LNG and
coal
CURRENT ECONOMIC OUTLOOK

GDP Contribution
 Australia ranked 5th in 2019 Index of economic Ownership of Dwellings 9.0
freedom Health Care and Social Assistance 7.9
Education and Training 5.0
 Population of Australia: 24.8 Mn and Per capita Public Administration and Safety 5.7
Financial and Insurance Services 9.4
income 50,334$ with GDP of 1.69 Tn A$ Transport, Postal and Warehousing 4.9
 Income tax rate is 45 percent, and the flat Accommodation and Food Services 2.5
Construction 7.8
corporate tax rate is 30 percent Manufacturing 6.0

 GST was rolled out in FY 2000

Mining 8.4
Agriculture, Forestry and Fishing 2.5
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0
CHINESE DEPENDENCE

• Australian economy has been heavily influenced by 25

GDP Growth China GDP Growth Australia

Chinese, Japanese and US economic growth.

20

• The annual value of Australia’s exports to China is 15

$144 billion – 2.4 times that of Japan
10

GDP %
• Total two-way trade with China is worth 11.7 percent
5
of Australia's GDP.
0
• Exports to China have increased by $78.5 billion over 5 5 6 6 7 7 8 8 9 9 0 0 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8
00 00 00 00 00 00 00 00 00 00 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01
/2 1/2 0/2 1/2 0/2 1/2 0/2 1/2 0/2 1/2 0/2 1/2 0/2 1/2 0/2 1/2 0/2 1/2 0/2 1/2 0/2 1/2 0/2 1/2 0/2 1/2 0/2 1/2
0
the past decade. This compares with a decrease of 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3
6/ 12/ 6/ 12/ 6/ 12/ 6/ 12/ 6/ 12/ 6/ 12/ 6/ 12/ 6/ 12/ 6/ 12/ 6/ 12/ 6/ 12/ 6/ 12/ 6/ 12/ 6/ 12/

$0.2 billion to traditional markets, the US and Japan,

and an increase of $5 billion to emerging markets. 6

• China is the largest purchaser of Australian debt.

5
4
3
• Australia's special investor visa program introduced 2
1
in 2012 encouraged Chinese investment.

Change %
0
-1
• By 2017, almost 90% of the more than 1,300 -2

foreigners who used Australia's special investor visa -3

-4
program were from China 04 05 05 06 06 07 07 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
• Economic exposure to China presents Australia’s
%change in house prices GDP Growth Australia
economy with risks.
CURRENT ECONOMIC OUTLOOK
18
16
14
12
10
8

CPI
6
4
2
0
-295 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
/ 19 /19 /19 /19 /19 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
/ 3 / 3 / 3 / 3 /3 /3 /3 /3 /3 /3 / 3 / 3 / 3 /3 /3 /3 / 3 /3 / 3 /3 / 3 / 3 / 3 /3
12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12

CPI AUSTRALIA CPI China

External debt
1200000 30000

1000000 20000

800000 10000

AUD (MN)
600000
AUD (Mn)

400000 -10000

200000 -20000

0 -30000
04 04 05 06 07 07 08 09 10 10 11 12 13 13 14 15 16 16 17 18 19
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 04 005 006 007 007 008 009 010 010 011 012 013 013 014 015 016 016 017 018 019
-200000
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 20 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Net Public Sector Private Sector Current Account (AUD, Millions) Capital and Financial Account (AUD, Millions)
FUTURE OUTLOOK

GDP vs Interest in economy

8

4
Interest Rate

0
00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19
/ 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
31 /29 /30 /28 /29 /30 /31 /30 /31 /30 /31 /30 /31 /29 /30 /28 /31 /30 /31 /30 /31 /30 /31 /30 /30 /28 /29 /30 /31 /30 /31 /30 /31 /30 /31 /29 /30 /28 /31
3/ 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3

Interest rate GDP Growth

 Governor Philip Lowe says “reasonable to expect an extended period of low rates”.
 consumer spending and housing construction over the second half of 2018
 Increased government spending on transport and other infrastructure
 one-off factors (such as devastating drought conditions) that stifled net exports to recede
FUTURE OUTLOOK

 Australia’s current accounts deficit has

collapsed
 The Australian dollar helps stabilise the
economy: The A$ is down 38% from its
2011 high
 The drag from falling mining investment is
over- new LNG processing facilities
 Scope for extra fiscal stimulus- tax cut and 14 1.2

tax refund 12
10
1

0.8
 No sign of panic property selling: prices are 8
0.6
6
down nearly 20%. 4
0.4

0.2
 Disability support programme (worth
2
0 0

around 1 per cent of national income) is /

10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18
20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
19
30 /31 /30 /31 /30 /31 /30 /31 /30 /31 /30 /31 /30 /31 /30 /31 /30 /31
supporting growth 9/ 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3

GDP Growth Australia GDP Growth China

 Population growth remains strong CNH/USD AUD/USD

Weak 2019 to be followed by a better 2020

For 2020, real GDP growth of 2.8% ,as it expects household consumption to rebound