Australia exports many commodities, including coal, iron ore, gold, meat, wool, alumina, wheat, machinery and transport equipment. Interestingly, Australia is the world's largest coal exporter, accounting for nearly 30% of all of the world's coal exports. Much of this coal is exported to China, which has large energy demands.
Australia's imports are items such as machinery and transport equipment, computers and office machines,
telecommunication equipment and parts, crude oil and petroleum products. Australia spends approximately $240B on imports, and exports in the neighborhood of $260B a year, based on 2012 economic estimates from the World Book.
Australians use the Australian dollar (AUD) to purchase their goods, which is currently valued at 1.06AUD/USD. It is common to evaluate this exchange rate in Australia, as the strength of the AUD vs. the greenback is important in estimating the strength of exports in future months and years. The AUD has not fluctuated greatly in recent years, staying stable around a range of .97AUD/USD and 1.05AUD/USD.
Many immigrants to Australia come from the United Kingdom, as well as New Zealand. While there are many Americans that move to Australia, the immigration from the UK dwarfs that in proportion - for every one American that becomes a permanent resident in Australia, more than 10 do so from the UK. Other countries with high immigration rates to Australia include China and India - a no-brainer considering their proximity.
As for emigration, Australians are emigrating to the United Kingdom, the United States and New Zealand, with just under 90,000 people leaving permanently in 2010-2011.
Australia has few international affairs, as foreign policy tends to be noninvasive. Interestingly, Australia asserts land and maritime claims over Antarctica. They also have an unsettled dispute with India over the extent of their Exclusive Economic Zone (EEZ) boundary. Tasmania (though having the cleanest air in the world), is a large producer of opiates, which leads to some problems over government regulation of growth. Other than that, it would seem that Australia is pretty set.
Thursday, April 25, 2013
Wednesday, April 24, 2013
China Relations
According to The Australian:
We've been talking in class about exports, imports and tourism, and this relates. If Australia cannot form a more beneficial partnership with China, they will increase their trade deficit further by continuing to import more from China than they currently export.
As far as fixing this situation, people aren't sure - China still has a strong comparative advantage when it comes to manufacturing goods, though Chinese workers are demanding higher wages as of late, so that may end sometime in the near future.
What is good news for Australia is that exports may be increased due to tourism, as tourism is included in the exports category. The Chinese market for tourism brings in around $3 billion a year for Australia and is expected to grow substantially over the next ten years as GDP/capita increases in China. Even if Australia cannot generate a better position trading with China, tourism may be what saves them.
AUSTRALIA'S economic relationship with China is not yet a reciprocal one and needs considerably more attention -- including by government to follow up new arrangements agreed during Julia Gillard's recent visit -- if it is to broaden beyond today's resources focus.Of course, many nations are currently trying to become trade partners with China, as they have a large and quickly growing economy. Australia currently isn't on particularly great terms.
We've been talking in class about exports, imports and tourism, and this relates. If Australia cannot form a more beneficial partnership with China, they will increase their trade deficit further by continuing to import more from China than they currently export.
As far as fixing this situation, people aren't sure - China still has a strong comparative advantage when it comes to manufacturing goods, though Chinese workers are demanding higher wages as of late, so that may end sometime in the near future.
What is good news for Australia is that exports may be increased due to tourism, as tourism is included in the exports category. The Chinese market for tourism brings in around $3 billion a year for Australia and is expected to grow substantially over the next ten years as GDP/capita increases in China. Even if Australia cannot generate a better position trading with China, tourism may be what saves them.
Thursday, April 18, 2013
Information and Transaction
Gresham's Law is an interesting one - that given time, inferior goods will drive high quality goods out of a market.
McMillan uses this law to demonstrate the effects of imperfect information in a market - that is, having either the buyer or seller know more about the good being bought or sold than the other. In the example of Indian milk, buyers that are unable to differentiate between 100% milk and a watered-down 60% milk 40% water mixture end up willing to pay a price that is lower than the cost to produce the best milk, forcing those suppliers out of business. Eventually, only poor-quality milk is being produced, forcing the price even lower.
With perfect information though, this problem is eliminated. Buyers can be sure of what they are purchasing, and sellers can't get away with ripping off customers. Both buyers and honest producers benefit.
So is there perfect information everywhere? Is the market a perfect machine that brings everyone to always get the best quality items at the lowest prices?
Of course, perfect information does not exist everywhere. In reality, if one agent holds more information than the other, they have a distinct advantage in the bargaining process.
Let's look at life insurance as an example - the buyer must talk to an agent about buying insurance. The insurance company, prior to meeting the customer, has no knowledge about this person's health. Thus the buyer has an advantage here, and may be able to get a better deal than if the seller was perfectly informed.
On the other hand, look at used-car salesmen. The buyer knows nothing about the car in question, while the seller has a detailed history. Who wins here? Of course, there are companies and businesses that strive to help the consumer stay informed, but one still can't be certain of the car's history.
So if perfect information is so hard to achieve, can we at least have zero transaction costs?
Not necessarily, though the Internet certainly helps to bring us as close as possible.
McMillan notes that although the Internet allows us to research things and know far more than we would have 20 years ago, transaction costs still exist - whether they are money you have to pay or simply opportunity costs. A concrete example McMillan uses talks of paying $.10 to talk to each merchant. In a more realistic way, that $.10 is time that you could have been doing something else. Transactions cannot take place if the buyers and sellers do not locate one another, and this search does not always come free.
McMillan uses this law to demonstrate the effects of imperfect information in a market - that is, having either the buyer or seller know more about the good being bought or sold than the other. In the example of Indian milk, buyers that are unable to differentiate between 100% milk and a watered-down 60% milk 40% water mixture end up willing to pay a price that is lower than the cost to produce the best milk, forcing those suppliers out of business. Eventually, only poor-quality milk is being produced, forcing the price even lower.
With perfect information though, this problem is eliminated. Buyers can be sure of what they are purchasing, and sellers can't get away with ripping off customers. Both buyers and honest producers benefit.
So is there perfect information everywhere? Is the market a perfect machine that brings everyone to always get the best quality items at the lowest prices?
Of course, perfect information does not exist everywhere. In reality, if one agent holds more information than the other, they have a distinct advantage in the bargaining process.
Let's look at life insurance as an example - the buyer must talk to an agent about buying insurance. The insurance company, prior to meeting the customer, has no knowledge about this person's health. Thus the buyer has an advantage here, and may be able to get a better deal than if the seller was perfectly informed.
On the other hand, look at used-car salesmen. The buyer knows nothing about the car in question, while the seller has a detailed history. Who wins here? Of course, there are companies and businesses that strive to help the consumer stay informed, but one still can't be certain of the car's history.
So if perfect information is so hard to achieve, can we at least have zero transaction costs?
Not necessarily, though the Internet certainly helps to bring us as close as possible.
McMillan notes that although the Internet allows us to research things and know far more than we would have 20 years ago, transaction costs still exist - whether they are money you have to pay or simply opportunity costs. A concrete example McMillan uses talks of paying $.10 to talk to each merchant. In a more realistic way, that $.10 is time that you could have been doing something else. Transactions cannot take place if the buyers and sellers do not locate one another, and this search does not always come free.
Tuesday, April 16, 2013
In Search of a Fez
A Fez of the Heart by Jeremy Seal illustrates the dramatic change in culture in Turkey of the past 20 years - from allowing nudity on beaches to rejecting the fez, which Seal calls quintessential to Turkish culture. But why the sudden shift in attitude?
This comparison between nudity and fez hats is probably the most interesting point of the passage. Turkey is an Islamic nation where exposing of flesh is frowned upon - yet the fez is also "Islam," as noted in the passage.
Seal seems to think that it comes down to business and tourism.
When Pomegranate was not popular tourist attraction, bikini-clad women were not even allowed into towns, let alone topless, and there were not many places to stay. Offering food and shelter was seen as a hospitality gesture, and there were many farmers. These conditions all changed once residents began to realize the opportunity to capitalize on the tourists' willingness to pay for shelter, food and trips to ruins. There were many less farmers and many more places to stay. And Turkey embraced the wants of the west for the sake of good business.
And so we see why Seal makes the comparison between nudity and the fez - it comes down to incentive for the Turkish people. They allow tourists to be naked and embrace the fact because it brings in business. As to why they reject the fez - neither Seal nor I can be certain.
People are drawn to Australia for its distinct culture and beautiful reefs. As mentioned in this post, the Great Barrier Reef accounts for much of Australia's tourism, as it cannot be found anywhere else in the world. This is also true of the Sydney Opera House of course, as it is an iconic structure.
This comparison between nudity and fez hats is probably the most interesting point of the passage. Turkey is an Islamic nation where exposing of flesh is frowned upon - yet the fez is also "Islam," as noted in the passage.
Seal seems to think that it comes down to business and tourism.
When Pomegranate was not popular tourist attraction, bikini-clad women were not even allowed into towns, let alone topless, and there were not many places to stay. Offering food and shelter was seen as a hospitality gesture, and there were many farmers. These conditions all changed once residents began to realize the opportunity to capitalize on the tourists' willingness to pay for shelter, food and trips to ruins. There were many less farmers and many more places to stay. And Turkey embraced the wants of the west for the sake of good business.
And so we see why Seal makes the comparison between nudity and the fez - it comes down to incentive for the Turkish people. They allow tourists to be naked and embrace the fact because it brings in business. As to why they reject the fez - neither Seal nor I can be certain.
People are drawn to Australia for its distinct culture and beautiful reefs. As mentioned in this post, the Great Barrier Reef accounts for much of Australia's tourism, as it cannot be found anywhere else in the world. This is also true of the Sydney Opera House of course, as it is an iconic structure.
Australian Tourism
Tourism is a large industry in Australia, accounting for just over 2% of Australian's GDP. Interestingly, this large tourism number is mainly from domestic tourists - people already living in Australia exploring the country. About 73% of all tourism in Australia is from this source. Another large source is New Zealand, with tourists often purchasing tourism packages that pass through all of the major attractions.
The largest attraction when visiting Australia is, of course, the Great Barrier Reef, which attracts nearly 2 million visitors each year to enjoy the colorful corals and aquatic life. Australian officials have been careful to minimize the total impact people have had on the reef, both for environmental and economic reasons.
Another attraction is the Sydney Opera House - the iconic building in Sydney built to resemble sails on the open ocean.
Australia has over 500 national parks, and many other marine parks and World Heritage areas. Australia is home to the largest number of different marsupials, such as the kangaroo and koala. This diverse wildlife also spurs tourism and increases demand for exploration through the outback.
As for museums, the oldest museum in Australia is the appropriately named Australian Museum, which was established in 1827. It is home to a large range of different displays and welcomes kids to learn about history. Other museums include the National Museum of Australia and the Museum of Sydney. The Museum of Sydney is particularly popular, due to its prime location in one of the most popular tourist cities in the country.
The largest attraction when visiting Australia is, of course, the Great Barrier Reef, which attracts nearly 2 million visitors each year to enjoy the colorful corals and aquatic life. Australian officials have been careful to minimize the total impact people have had on the reef, both for environmental and economic reasons.
Another attraction is the Sydney Opera House - the iconic building in Sydney built to resemble sails on the open ocean.
Australia has over 500 national parks, and many other marine parks and World Heritage areas. Australia is home to the largest number of different marsupials, such as the kangaroo and koala. This diverse wildlife also spurs tourism and increases demand for exploration through the outback.
As for museums, the oldest museum in Australia is the appropriately named Australian Museum, which was established in 1827. It is home to a large range of different displays and welcomes kids to learn about history. Other museums include the National Museum of Australia and the Museum of Sydney. The Museum of Sydney is particularly popular, due to its prime location in one of the most popular tourist cities in the country.
Thursday, April 11, 2013
Australian Economics
Australia has a large economy - it is ranked as the 19th largest in the world with a GDP of nearly $1T.
Some statistics about Australia (from the World Factbook):
Climate in Australia is diverse - though the air is generally arid, Australia enjoys a temperate climate in the southeast and a tropical climate in the north. Much of Australia is uninhabited due to the harsh heat in the outback. Queensland experiences the highest rainfall, and the many deserts make much of the land in the north and central regions of the country impossible to farm. Regardless, Australia is still able to produce wheat, barley, sugarcane, fruits, cattle, sheep, and poultry.
The labor force in Australia is 12.27 million workers, with nearly 70% in the services industry. Australia spends an equivalent of 5.1% of GDP on education, with each state determining its own education program. Post-secondary education comes in two forms, as mentioned on the Australian government's website:
Some statistics about Australia (from the World Factbook):
- GDP: $960.7 billion (2012 est.)
- GDP per capita: $42,400 (2012 est.)
- Life expectancy: 81.7 years
- Poverty rate: NA%
- Literacy rate: 99%
- Unemployment rate: 5.2% (2012 est.)
- Inflation: 2.1% (2012 est.)
Climate in Australia is diverse - though the air is generally arid, Australia enjoys a temperate climate in the southeast and a tropical climate in the north. Much of Australia is uninhabited due to the harsh heat in the outback. Queensland experiences the highest rainfall, and the many deserts make much of the land in the north and central regions of the country impossible to farm. Regardless, Australia is still able to produce wheat, barley, sugarcane, fruits, cattle, sheep, and poultry.
The labor force in Australia is 12.27 million workers, with nearly 70% in the services industry. Australia spends an equivalent of 5.1% of GDP on education, with each state determining its own education program. Post-secondary education comes in two forms, as mentioned on the Australian government's website:
Australia exports coal, iron ore, gold, meat, wool, alumina, wheat, machinery and transport equipment, due to its large mining industry and equipment processing industry. Australia is also known for farming, producing chemicals, and steel production. Australia is the world's lead exporter of coal.
"Each state has a Vocational Education and Training (VET) or Technical and Further Education (TAFE) system. VET prepares people for work in a career that does not need a university degree. Each state manages their system and meets at a national level to coordinate their effort. VET is transferable between all states. Study done in one state gains the same status in another state. Typically, a VET/TAFE course takes two years of study."
Tuesday, April 9, 2013
Australian Trade Deficit Shrinks
The Australian Bureau of Statistics reports that in February, the trade deficit in Australia was $178 million. This number, compared to a $1.2 billion deficit in January and projected $1 billion deficit analyst forecasted, is odd to say the least.
Trade deficits are driven by two things: world demand for goods and the strength of the nation's currency. Each plays a large part in the overall market for foreign goods.
For example, Australia had predicted a larger deficit due to February being a short month, as well as the Chinese New Year lowering demand for key exports, such as coal and iron. Despite these predictions, exports were strong throughout the month.
The nation's currency also plays a large role in whether it has a trade deficit or not - and in a kind of strange way. A weaker currency leads to stronger exports - due to those good being comparatively cheaper in the country they're exported to. The AUD is currently quite strong though, and so the world demand must out-weigh this.
Each of these effects is, of course, determined by markets. World demand is a downward sloping demand function, and Australia is a large part of world supply for its output.
The FOREX, the foreign exchange market, is a supply and demand model for currency that changes the equilibrium prices of currencies. These two elements combine to determine if a country will be running a trade deficit or surplus.
While Australia hasn't run a trade surplus in over 12 months, it still kicks the crap out of the United States - which hasn't had a trade surplus since 1975.
Sunday, April 7, 2013
Australian Culture
Australia has many interesting cultural aspects to it that make it both very interesting and unique.
Popular sports in Australia include cricket, rugby, netball and field hockey. Some popular athletes are Steven Hooker, Ian Thorpe and Cathy Freeman.
Musical taste in Australia seems to be very similar to here in the United States, with the Top 40 looking alike to our own. Currently, Mackelmore tops both charts, though with different songs.
Food in Australia sounds delicious. Barbecuing beef or lamb in the open air is considered a national tradition of sorts, which sounds right up my alley. Also, because most Australians live near the sea, the seafood is considered some of the best in the world. Vegemite is a popular spread used on sandwiches, and popular desserts include pavlova, a meringue dessert, and lamingtons, sponge cake with icing and coconut.
Australia has no official religion, though 63.9% of Australians report themselves as Christians. A growing proportion are irreligious, with nearly 20% of people saying they do not have a religious affiliation.
As far as national holidays go, one interesting national holiday is the queen's birthday, which is celebrated every year by all of Australia. Of course, there are holidays that the United States shares, such as Easter, New Years, and Christmas, but it's the holidays that are unique to Australia that are the coolest. For example, Australia Day is celebrated every year, marking the day the First Fleet - a group of 11 ships that left Britain for Australia in 1787, arrived at Sydney Cove. A more somber holiday is Aznac Day on April 25th - a day to remember servicemen and women.
Popular television shows are "Homeland," "Mad Med," and "Girls." Popular stars include both familiar names like Hugh Jackman and some that I've never even heard of, like Michael Catan.
Some news sources include:
Considering I might like to live there one day, it's good to know that Australia allows expats to apply for citizenship. Of course, expats can also check out forums and ask others about the country before heading over.
Australia is a constitutional monarchy with a reigning queen and three branches much like the U.S., possessing a legislative, executive and judicial branch of government. The prime minister is Julia Gillard - the first female prime minister in the country's history, who took office in 2010. Australia's queen is Elizabeth II, who began her reign in 1952.
And that pretty much sums up Australian culture! Hope you found it interesting!
Popular sports in Australia include cricket, rugby, netball and field hockey. Some popular athletes are Steven Hooker, Ian Thorpe and Cathy Freeman.
Musical taste in Australia seems to be very similar to here in the United States, with the Top 40 looking alike to our own. Currently, Mackelmore tops both charts, though with different songs.
Food in Australia sounds delicious. Barbecuing beef or lamb in the open air is considered a national tradition of sorts, which sounds right up my alley. Also, because most Australians live near the sea, the seafood is considered some of the best in the world. Vegemite is a popular spread used on sandwiches, and popular desserts include pavlova, a meringue dessert, and lamingtons, sponge cake with icing and coconut.
Australia has no official religion, though 63.9% of Australians report themselves as Christians. A growing proportion are irreligious, with nearly 20% of people saying they do not have a religious affiliation.
As far as national holidays go, one interesting national holiday is the queen's birthday, which is celebrated every year by all of Australia. Of course, there are holidays that the United States shares, such as Easter, New Years, and Christmas, but it's the holidays that are unique to Australia that are the coolest. For example, Australia Day is celebrated every year, marking the day the First Fleet - a group of 11 ships that left Britain for Australia in 1787, arrived at Sydney Cove. A more somber holiday is Aznac Day on April 25th - a day to remember servicemen and women.
Popular television shows are "Homeland," "Mad Med," and "Girls." Popular stars include both familiar names like Hugh Jackman and some that I've never even heard of, like Michael Catan.
Some news sources include:
Considering I might like to live there one day, it's good to know that Australia allows expats to apply for citizenship. Of course, expats can also check out forums and ask others about the country before heading over.
Australia is a constitutional monarchy with a reigning queen and three branches much like the U.S., possessing a legislative, executive and judicial branch of government. The prime minister is Julia Gillard - the first female prime minister in the country's history, who took office in 2010. Australia's queen is Elizabeth II, who began her reign in 1952.
And that pretty much sums up Australian culture! Hope you found it interesting!
Thursday, April 4, 2013
What Makes a Market?
Economists talk about markets all the time, but what exactly is a market, and what makes them useful?
John McMillan begins his book Reinventing the Bazaar by stating
There are many aspects, though McMillan particularly emphasizes market design and the role of people in transactions.
On page 9 of his book, he writes:
Of course, it doesn't stop there - McMillan also notes the importance of human interaction in the market structure.
Richard Dawkins described biological evolution as the actions of a "blind watchmaker," an intentionally ridiculous analogy to demonstrate that evolution happens not by the intention of an intelligent being, but by natural forces. McMillan brings forth this concept to illustrate that economic systems also evolve - but not as biological systems do. People - the agents of the market - are intelligent: they have the ability to walk away from deals they don't like and change aspects of the market structure over time. McMillan uses folk football as an example: as people played football, rules were established and upheld according to safety needs and player preferences, bringing forth sports we know today like soccer, rugby and American football.
McMillan also notes the inequality that arises from markets, saying
And so while markets can be described very simply, they are also very complex, with a human element that cannot be predicted. While people's opinions differ on markets, they are still seen as the most economically efficient model for exchanging goods and services.
John McMillan begins his book Reinventing the Bazaar by stating
"The dictionary defines a market as "a meeting together of people for the purpose of trade by private purchase and sale,"and "a public place where a market is held." This does not go deep enough though."If this is true, what does McMillan find to be sufficient to describe a market?
There are many aspects, though McMillan particularly emphasizes market design and the role of people in transactions.
On page 9 of his book, he writes:
"Market design consists of the mechanisms that organize buying and selling; channels for the flow of information; state-set laws and regulations that define property rights and sustain contracting and the market's culture, its self-regulating norms, codes and conventions governing behavior."This is basically a rewording of the fundamental characteristics of a perfectly competitive market - reworded for the casual reader. From this, one can see that McMillan finds the perfectly competitive structure to be the most suitable to fit the description of a general "market," and I would agree. Modern markets need exactly the above, and with such a strongly interconnected global market, I feel that self-regulating norms will become more and more useful as intergovernmental action will be a lagging factor.
Of course, it doesn't stop there - McMillan also notes the importance of human interaction in the market structure.
Richard Dawkins described biological evolution as the actions of a "blind watchmaker," an intentionally ridiculous analogy to demonstrate that evolution happens not by the intention of an intelligent being, but by natural forces. McMillan brings forth this concept to illustrate that economic systems also evolve - but not as biological systems do. People - the agents of the market - are intelligent: they have the ability to walk away from deals they don't like and change aspects of the market structure over time. McMillan uses folk football as an example: as people played football, rules were established and upheld according to safety needs and player preferences, bringing forth sports we know today like soccer, rugby and American football.
McMillan also notes the inequality that arises from markets, saying
"Markets provoke clashing opinions. Some people revile them as the source of exploitation and poverty. Others extol them as the font of liberty and prosperity."This, of course, stems from the fact that markets lead to to both winners and losers. I personally side with the latter opinion - entrepreneurs have the ability to take their ideas and prosper from their innovation and intelligence, and in a perfectly competitive market structure like the one above, consumers are able to purchase these goods at their lowest possible price as firms produce at the lowest possible cost.
And so while markets can be described very simply, they are also very complex, with a human element that cannot be predicted. While people's opinions differ on markets, they are still seen as the most economically efficient model for exchanging goods and services.
Tuesday, April 2, 2013
Why Didn't Native Americans Conquer Europe?
Why did history turn out the way it did? Why did the Old World conquer the New World and not the other way around?
Jared Diamond tries to answer these questions and more in his talk Why Did Human History Unfold Differently On Different Continents For The Last 13,000 Years.
Diamond begins by noting that "many, or even most" people feel that there is a biological reason for this disparity. As a biologist, Diamond doesn't buy this argument - saying that there is no empirical information to show that one group is more intelligent or likely to conquer than another.
Diamond's strategy is to evaluate each country as it was 13,000 years ago, incorporating history and economics to come to an answer.
Jared Diamond tries to answer these questions and more in his talk Why Did Human History Unfold Differently On Different Continents For The Last 13,000 Years.
Diamond begins by noting that "many, or even most" people feel that there is a biological reason for this disparity. As a biologist, Diamond doesn't buy this argument - saying that there is no empirical information to show that one group is more intelligent or likely to conquer than another.
Diamond's strategy is to evaluate each country as it was 13,000 years ago, incorporating history and economics to come to an answer.
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