In an interview given to Channel 9, Australian Treasurer Wayne Swan stated that the country’s economic growth is expected to stay strong, helped by business investment and rising commodity prices, but added that spiraling inflation was of greatest concern. Australia being a major commodity exporting nation, the updates on commodity prices are very favorable to the country. Despite global economic melt down, the country’s economy is poised for growth owing to the labor shortages, skill shortages, and unabated business investments in various sectors. The largest export revenue earners, iron ore and coal are expected to rise by 60% to 100% when annual contract negotiations conclude in April, which will further boost the economy.
Swan claimed that the primary challenge is to contain inflation at any cost. Reserve Bank of Australia is understood to have decided to raise the interest rate by 25 basis points which puts the interest rate at 7.25 percent taking it to a 12-year high. This is a clear indication of government’s seriousness towards this end. The hike would be the fourth after August 2007, which has taken place in regular intervals since then. The central bank’s continuous effort to check inflation which is at 3.6%, highest since July 1996, re-establishes government’s intentions to restrict it between 2 and 3 percent.
However, after 16 years of tremendous growth, the country is facing challenges like that of most developed nations including implementation of Kyoto protocol, rising fuel prices, etc. Yet the country’s retail demand, acquisitions in emerging economies and New Zealand, higher auto sales, etc. are expected to be key drivers to push economic growth. Nevertheless, in a study by business advisory firm 333 Performance Management shows that up to 20 percent of Australian companies were in poor corporate health, with a further 11 percent in declining health. The positive outlook which Swan shared would only materialize if these struggling firms make a turn around in their profits and government provides sustained support to failing firms.