Australia ‘Quarry’ Caricature Masks Services Economy, Swan Says
Swan will highlight to a forum organized by the Reserve Bank of Australia, the Treasury and International Monetary Fund today that while the nation’s biggest resource boom in a century draws most attention, services account for almost 80 percent of gross domestic product, according to the text of his speech.
“As millions of people are added to the ranks of Asia’s middle class in the next decade, the demand for Australia’s services will also grow,” he said at the ‘Structural Change and the Rise of Asia’ conference in Canberra. “There will be greater opportunities in everything from agriculture and food, to travel and tourism, to education, engineering, arts and architecture, to banking and financial services.”
Swan’s spotlight on Australia’s services industry follows a plunge in the price of iron ore, the nation’s biggest export, and the sustained strength of the currency prompted mining companies including BHP Billiton Ltd. (BHP) and Fortescue Metals Group Ltd. (FMG) to put off projects and cut jobs in the past month. He cited the surge in Asian students studying in Australia in the past decade and the growth in tourism from the region.
“The caricature of our country is one of a quarry, but we know in fact that Australia is a services economy -- sophisticated and diversified,” Swan said.
Other speakers at the conference today include RBA Assistant Governor Christopher Kent and Anne Krueger, a former deputy managing director of the IMF and now a professor of international economics at Johns Hopkins University.
Australia is coming through the largest terms of trade boom in its history, Swan said today, referring to a measure of windfall gains from exports. The economy has low unemployment and contained inflation “despite the very difficult adjustments faced by some sectors,” he said.
The government is struggling with a so-called two-speed economy, a phrase used to distinguish resource-rich regions in the north and west that are powering growth, from struggling manufacturing and retail industries across the south and east.
“To those who mount the argument that we are too closely tied to China or too dependent on Asia’s demand for our resources, I say this: it’s extremely difficult to make a case that we should be doing less trade with the fastest-growing, most dynamic region in the world,” Swan said.
Australia’s resource investment expansion is turning a boom in prices into a sustained increase in the economy’s capacity, which will see a higher level of production and exports for years to come, Swan said.
“Our success so far, in stark contrast to past booms, hinges on our sound macroeconomic frameworks, and our openness and flexibility brought about by successive reforms,” he said.
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