George Magazine

economy may not be smooth but its demand for Australian resources will grow over time. The growing demand for resources has seen the Australian dollar (AUD) rise above parity against the US dollar. This is good for some and bad for others. Imports and overseas travel are cheaper but our exports are now more expensive. The high AUD has made life more difficult for local tourist operators, the overseas education sector and manufacturers, who face strong competition from imports. But consumers have benefited from the lower prices of imported clothing, footwear and electrical goods. We expect the AUD to remain close to parity for the next year at least. Global financial issues Greece moved on to the centre stage of global financial affairs in late 2009 when its true government debt position was revealed. Since then, it has been joined by a host of other European nations troubled by their government debt. This problem is serious, it will not go away in a hurry, but it is in everyone's best interest to see it resolved. European leaders appear committed to the euro, but the mixture of economics and politics is complex. More 'muddle through' seems to be the most likely outcome, with economic activity in Europe held back while the mess is sorted out. The US also has problems with government debt but due to its size and wealth, it is able to issue 10-year government bonds at yields below two per cent. The US economy is still growing but at a pace well below par. The US government is not in a position to stimulate its economy via its budget, so the US Federal Reserve has had to bear the burden of shifting the economy up a gear. With US short-term interest rates close to zero, this is no easy task! Getting back on the horse Australia is an outward-looking nation. We have strong trade links with all the major trading regions of the world. Our links to Asia, the most vibrant and rapidly growing region on the planet, have grown over the decades and these have helped us avoid recession for the past two decades. No one doubts there are challenges ahead but there is also good cause for optimism. KEY FINDINGS The news for the Australian economy is not all bad. • 94% of the labour force are employed and their income is rising. • There has been strong jobs growth in the areas of professional and technical services, mining and education. • Advances in technology will offer opportunities for Australian businesses. • Growth in Asia will continue to stoke demand for Australian products and services. European leaders appear committed to the euro, but the mixture of economics and politics is complex. More 'muddle through' seems to be the most likely outcome, with economic activity in Europe held back while the mess is sorted out. george.economy 19

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