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Robert answered on
Dec 22 2021
Australian Stock Market – Fundamental Analysis 1
Australian Stock Market – Fundamental Analysis
Australian Stock Market – Fundamental Analysis 2
Australian Stock Market – Fundamental Analysis
Introduction
Australian economy is one of the largest economies of the world. By nominal Gross
Domestic Product, it was ranked as the 13
th
largest economy in the world. It is the 17
th
largest
economy as measured by PPP adjusted GDP. It is one of the market economies with high growth
ate and low inflation. It also has a large service sector and its share is about 70% of the GDP.
IMF itself predicted last month this year that in next 20 years Australia will be the best
performing economy outshining other advanced nations. One of the major reasons for this
country to be counted amongst the advanced nations such as U.S. , U.K., Japan is that Australian
economy has abundant reserves of natural resources such as coal, iron ore, natural gas,
enewable energy resources etc. This sector has attracted a high level of foreign investment. In
order to expand the resource sector, significant investment has been made into Gorgon Liquid
Natural Gas project. This project is aimed to improve the production capacity of Liquefied
natural Gas and undertaken to meet the needs of clean burning fuels by Asia.
Other trading partners of Australia are Japan, U.S. , China, Korea. It imports mainly from
Asia. It depends highly on imports of petroleum products and crude oil from Asia. Its major
items of export are wool, iron ore, agricultural products, LNG. Along with petroleum products it
also imports manufactured goods and machines.
Like other countries, Australian economy was also affected by financial crisis of 2008 but the
effect was not that adverse as compared to other economies. The Rudd Government (2007-2010)
undertook expansionary fiscal policy to reduce unemployment. In that period, Reserve Bank Of
Australia reduced interest rates to significantly low levels. These two measures helped Australia
to soon come out of the spiral of low growth and high unemployment. Because of increased
Australian Stock Market – Fundamental Analysis 3
Government expenditure and low taxes in 2008 and subsequent years, budget deficit increased
ut now the situation is stable and in 4-5 years, Australian Government will be able to reduce
udget deficit significantly. Now the focus has shifted to increase productivity in Australia.
Productivity has been declining in Australia since late 1990’s. Since many years, there is mining
sector boom in the country at the cost of other sectors. The business sector incentive to invest in
skill formation and infrastructure is low. Committee for Economic Development of Australia
(CEDA), has recently, in 2012, shifted its focus to the need for increased productivity in all the
sectors; otherwise the growth will be unsustainable.
World Economy
In 2009, the world had undergone major financial crisis which has affected the stock
market and the economy of the whole world. After the financial crisis, the economy was able to
ecover, The GDP of the world reached the all-time high in last ten years but have decreased
incredibly after that. The global economy is expected to 3% per year, the projected growth for
2012 is 3.5% which is going to increase to 3.6% from 2013 to 2016, which may further decrease
to 2.7% from 2017 to 2025. The different economies across the worlds will witness different
growth, the emerging economies are expected to have a growth rate of 5.6% in 2012 and 3.3%
from 2012-2017. There are different challenges that are faced by the world which includes
increase in productivity, increasing unemployment, because of which the GDP of the world is
deteriorating.
Australian Stock Market – Fundamental Analysis 4
Australian Economy
The economy of Australia is considered as the advanced economy which is highly
dominated by the service sector which represents about 68% of the total GDP of the country. The
economy of Australia has grown dramatically from last 17 years before the global financial
crisis. With the economic crisis that hit the world, slowed down the economic growth of the
country and Australia had witnessed a quarter of the negative growth in the GDP. In 2009, the
economy grew by 1.3% which increased to 2.7% in 2010 and 3% in 2011. The unemployment of
the company also fell to 5% in 2011 as compared to 9% in 2009.
This is the sign that the Australian economy has improved dramatically. As per 2011, the
GDP in terms of purchasing power parity was recorded at $917.7 million and $1.507 trillion in
official exchange rate terms. And the per capita GDP as per 2011 report is considered to be
$40800. Considering the inflation and GDP of the company we can see that the GDP and
inflation of the country is at a deteriorating rate. The average inflation of Australia is considered
Australian Stock Market – Fundamental Analysis 5
to be 6.02%, the recent inflation rate is 1.6% in quarter 1 of 2012. The CPI rose 1.6% through the
first quarter of 2012 as compared to rise of 3.1% in the last quarter of 2011.
As can be seen by the figure above, the fall in...