Australia was the only major economy to come through the Global Financial Crisis without going into recession, but that did not mean that the pain of the crisis was not felt by Australians. A key factor in Australia’s prosperity is derived from the nation’s natural resources, but as the rest of the world has crawled towards a fitful and shallow recovery, demand for Australia’s raw materials has dropped off.
The Australian economy is currently running a budget deficit of some AUD 47 billion ($42 billion) in the year to June. Growth forecasts have been trimmed back to 2.5% from 3% for the 2014-15 period on account of weak demand in export markets. The government is warning that spending will need to be cut back if Australia is to avoid having a budget deficit for up to a decade.
Treasurer Joe Hockey noted that: “This is an unsustainable fiscal position and the government is committed to taking the hard decisions to live within its means. More than half the deterioration in the budget position is due to the softer economy. This reflects a sharper-than-forecast fall in resources investment and a slower recovery in the non-resources sectors.”
A further blow was dealt to the Australian economy with the news that Holden, a subsidiary of General Motors, has announced that it will end car production in Australia in 2016, leaving Nissan as the only major car producer in the country. The move will cost 2900 direct jobs and many more in allied industrial sectors. The government has reacted to the news by announcing that AUD 100 million fund will be made available for job creation in the areas worst affected by the decision (Victoria and South Australia).
Over the past five years, the Dollar has appreciated by 30% against the US Dollar. The Australian car market is relatively small and the strength of the Aussie Dollar has led more Australians to purchase imported cars rather than domestically produced vehicles.