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Economics | Biocity Studio


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Manufacturing and exporting natural resources were Australia’s major industries in from 1913 till after WWII. The Australian economy has boomed and had downturns in the past. Currently the economy is only growing at 3.7% per year, inflation has risen to 4.3% and home loans are at the highest in 22 years. In the future fuel prices may increase, economic growth may decrease and climate changes likely create major economic problems.

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Economics | Biocity Studio

  2. 2. Where we were <ul><li>The creation of a private economy was essential to the viability of the colony . </li></ul><ul><li>Agriculture was established through giving land grants to senior officials and emancipated convicts. </li></ul>
  3. 3. Since Colonisation (1788 – 1820) <ul><li>Government was central to the economy. It supplied goods , money and foreign exchange </li></ul><ul><li>1820s onwards; economic growth was driven by the production of fine wool and other rural commodities for Britain and Europe </li></ul><ul><li>The expansion of transport , communication and urban transportation needed British finance </li></ul>
  4. 4. Back to the past (1820 – 1930) <ul><li>Economic expansion required significant immigration to meet demand for workers </li></ul><ul><li>Rule of law, secure property rights and democratic political systems nurtured growth. </li></ul><ul><li>1901: The commonwealth government had a strong capability to intervene in private markets . </li></ul>
  5. 5. Still in the past <ul><li>An essential foundation for Australian manufacturing was the introduction of the first protectionist tariff in 1907. </li></ul><ul><li>The Great Depression of 1929 had serious effects for Australia: record high unemployment , lack of foreign investment and a severe drop in value of exports . </li></ul>
  6. 6. Wars past (1930 – 1970) <ul><li>During WWII and after, manufacturing growth did accelerate and the following sectors emerged: </li></ul><ul><ul><li>Cars; </li></ul></ul><ul><ul><li>Chemicals </li></ul></ul><ul><ul><li>Electrical equipment </li></ul></ul><ul><ul><li>Iron and Steel. </li></ul></ul><ul><li>Instability in the world economy and weakness at home ended the post-war boom . </li></ul>
  7. 7. Forward to the future (1970 – 2005) <ul><li>By the 1970s, economic reform was well due </li></ul><ul><li>Sweeping reform was brought in by the Hawke and Keating Governments and built on by the Howard Government </li></ul>
  8. 8. Up the the present (1970 – 2005) <ul><ul><li>Floating of the dollar; </li></ul></ul><ul><ul><li>deregulation of the financial system; </li></ul></ul><ul><ul><li>Removal of protection of manufacturing and agriculture; </li></ul></ul><ul><ul><li>Dismantling of the centralised system of wage-fixing ; tax reform </li></ul></ul><ul><ul><li>Privatisation and elimination of government monopolies . </li></ul></ul>
  9. 9. Where we are now
  10. 10. Not going anywhere <ul><li>Primary Industry ≈ $12, 953 million </li></ul><ul><li>Retail Trade Industry ≈ $18, 101 million </li></ul><ul><li>Manufacturing ≈ $ 34, 368 million </li></ul><ul><li>Services ≈ $215, 585 million </li></ul>
  11. 11. Haven’t left yet <ul><li>NSW’s major exports have moved away from agriculture and manufacturing . </li></ul><ul><li>Now services are the major export. </li></ul><ul><li>Exports are currently worth </li></ul><ul><li>over $47 billion to the </li></ul><ul><li>economy </li></ul>
  12. 12. We’re still here <ul><li>Australia’s Economic Growth (as of Sept 2008) is 3.7% </li></ul><ul><li>NSW’s Growth is approximately half of that. It is the lowest of all states . </li></ul><ul><li>Inflation Rate (basically the rate at which prices are rising [alternatively, the rate at which the money you have loses its value]) ≈ 4.3% (Sydney) </li></ul><ul><ul><ul><ul><li>It is desired to keep this rate between 2-3% so that it does not distort the economy in any </li></ul></ul></ul></ul><ul><ul><ul><ul><li>significant way. </li></ul></ul></ul></ul>
  13. 13. Still here <ul><li>In September 2008, the Reserve Bank of Australia reduced the Cash Rate to 7.0% after 12 consecutive raises. </li></ul><ul><li>The Average Per Capita Income is sitting at ≈ $39, 000 up from approximately $30k in 1999 </li></ul>
  14. 14. Not gone yet <ul><li>Servicing a Home Loan now costs 37.4% of your Gross Income . Worst in 22 years. </li></ul><ul><ul><ul><ul><li>That’s $3 out of every $8 that you earn! </li></ul></ul></ul></ul><ul><li>But after tax, up to 50% of your income can go into your Mortgage. </li></ul>
  15. 15. Looking back <ul><li>Manufacturing was one of the major industries in Australia from 1913 till post-World War 2 when it was making up 1/3 of GDP . </li></ul><ul><li>Natural Resources remained the most important suppliers of export during this time; </li></ul><ul><ul><li>Wool ≈ 40% of total exports </li></ul></ul><ul><ul><li>Minerals ≈ 10% of total exports </li></ul></ul><ul><ul><li>Wheat/Flour = 20% of total </li></ul></ul>
  16. 16. Financial Crisis (in brief) <ul><li>Lender’s income is proportional to the number of loans they sell = increasingly risky loans sold. </li></ul><ul><li>Housing prices/income are deliberately overvalued to create the illusion of a stable loan. </li></ul><ul><li>Loans can’t be re-paid . People forced to foreclose. Banks run into debt . </li></ul>
  17. 17. Financial Crisis (still briefing) <ul><li>People lose faith in market; withdraw money; furthering the downturn. </li></ul><ul><li>Most loans to Australian Banks are recalled ; forcing a downturn. </li></ul>
  18. 18. Where we’re going (prediction) <ul><li>Exports will change once again. Will be worth less to Australian economy due to sharp increases in fuel prices . </li></ul><ul><li>More goods will remain domestic . </li></ul><ul><li>Economic growth will begin to slow . </li></ul><ul><li>Interest rates will rise again once the current crisis is over </li></ul>
  19. 19. Where we’re going (predictions) <ul><li>Climate change to create major problems economically. </li></ul><ul><ul><li>Increase of 2°C = livestock carrying capacity decrease 40% . </li></ul></ul><ul><ul><li>Increased road maintenance costs by 31% by 2100. </li></ul></ul><ul><ul><li>711, 000 addresses and billions of dollar from coastal damage. </li></ul></ul><ul><ul><li>More severe weather including drought . 2006-07 drought slowed economic growth by 0.75% </li></ul></ul>
  20. 20. What can stop us <ul><li>Australia, and NSW in particular, is still very reliant on the finite natural resources still available to us. </li></ul><ul><li>While resources like coal apparently have 200 years of supply left, global resources (oil) have limited years left. </li></ul><ul><li>We can use this as an excuse for not investing as much, as quickly into renewable sources . </li></ul>
  21. 21. Where we should head <ul><li>C arbon P ollution R eduction S cheme (2010) </li></ul><ul><li>Requires industries to buy Carbon Credits (CC) for each tonne of carbon they produce. </li></ul><ul><li>Each credit allows for 1 tonne of COx to be produced. </li></ul><ul><li>Allows companies to buy CC off </li></ul><ul><li>other industries </li></ul>
  22. 22. No Missed exits? <ul><li>$25 per tonne (based on 2010 nominal terms) . </li></ul><ul><li>Expecting to make $11.5 billion in 2010-11 in CC sales. </li></ul><ul><ul><ul><ul><li>You could build the North West Metro for that </li></ul></ul></ul></ul><ul><li>All revenue used to assist homeowners and small businesses transition to energy efficiency . </li></ul>
  23. 23. Wrong turns? <ul><li>Increased power bills $4 a week if CC set at $25 a tonne. </li></ul><ul><li>Greater assistance to lower/middle income households </li></ul><ul><li>Pushes the price of coal higher. </li></ul><ul><li>Causes renewable energy options; solar, wind, wave; to be relatively affordable technologies to pursue. </li></ul>
  24. 24. Follow the rest of the world <ul><li>The size of the Carbon Market in 2007 was $US 64 billion . </li></ul><ul><li>Not a new concept. </li></ul><ul><li>In 1991, Sweden put a $US100 per tonne tax on carbon emissions. Forced changes in energy use. </li></ul><ul><ul><ul><ul><li>That’s 4 times the Australian cost and was in place almost 20 years ago! </li></ul></ul></ul></ul>
  25. 25. A new hope <ul><li>There is hope on the horizon. </li></ul><ul><li>Australia needs to speed up. We may be a young country, but we can’t let that be a reason anymore. </li></ul>