Global Independence and Macroeconomic Performance

Question: Discuss about the Global Independence and Macroeconomic Performance. Answer: Introduction: The firm operates in Australia which has an overall stability on political system or government. This means that the likelihood of destabilizing or overthrowing the government by unconstitutional or violent means alongside politically-motivated violence and terrorism is low on average (Papadakis, 2012). Thus, Australia remains one of the global most politically stable countries. The Economist Intelligence Units latest report showed that Australia had achieved one of the highest rankings of any nation in the globe for political stability translating to increasing ease of doing the business with low corruption as well as high government support. Unemployment Rate The unemployment rate in Australia measures the number of persons actively searching for a job as a proportion of the labor force. As at December 2016, the unemployment rate stood at 5.8%. This was the highest jobless figure after rising from 5.7% in November 2016 despite the economy adding 13,500 jobs with the number of unemployed rising by 14,700. The rate of unemployment averaged 6.92% between 1978 and 2016, hitting an all-time high of 11.1% in October 1992 and recording a low of 4% in February 2008 (Bell, 2012). However, in the US, the unemployment rate increased to 4.70% in 2016 December from a 9-year low of 4.60% in the past month and aligned to market anticipation. The unemployment rate in the US averaged 5.810% from 1948 to 2016, hitting an all-time high of 10.8% in 1982 November and a record low of 2.5% in 1953 May. Interest Rate On December 6th, 2016, RBA left the cash rate unaltered at a record low of 1.50% as anticipated. The inflation is expected to remain low for some time before returning to more normal levels. The rate of interest in Australia averaged 4.810% from 1990 to 2016, hitting an all-time high of 17.5% in January 1990 and a record low of 1.5% in August 2016. However, the benchmark of interest rate in the US has been increased by the US Federal Reserve by 0.250%, only the 2nd rise in ten years. The Central Bank voted in unison to increase the key rate to a range of 0.75% to 0.5% due to the sturdy growth of the economy and growing employment. Inflation Rate In Australia, there is a low rate of inflation. The consumer prices in the country rose 1.50% through the year to the 4th quarter of 2016 from 1.30% in September quarter, however, slightly below markets anticipation of a 1.60% increase. In the United States, however, consumer prices rose 2.10% year-on-year in 2016 December following a 1.70% increase in 2016 November and matching market anticipation. Australia in a recession, boom or otherwise? The country has always been tagged a lucky country. It is neither in a recession nor a boom. Despite the business investment having fallen sharply, GDP growth has remained nearly its 25-year average of three percent. This has made the commodity-price to fall hence quelling the rising inflation. Currency Exchange Rate for Exports Globe International exports its products to other countries like Hong Kong and China. The currency exchange rate between Australian and China can be stated as 1 Australian Dollars equals 5.21 Chinese Yuan. On the other hand, the currency exchange rate between Australia and Hong Kong is given as 1 Australian Dollar equals 5.88 Hong Kong Dollar. These are the levels of the currency exchange rates among the three countries. From 2013 to 2017, there has been a general drop in the exchange rate between the Australian and Hong Kong currency exchange from around 1AD=8.3 HKD to 1AD=5.88HKD. This trend has also been witnessed between Australia/Chinese exchange rate that dropped from 1AD=6.8 Chinese Yuan in 2013 to 1AD=5.21 Chinese Yuan in 2017. Commenting on Overall Macroeconomic Conditions The information reveals that the conditions will be more favorable in the future for Globe International Limited. The main products are likely to be normal, and hence the demand will likely decrease during the recession. The economic climate of the destination countries will reflect well on the Globe International Limiteds sales (Alesina Summers, 2013). The firm is not likely to face problem accessing key factor inputs since there is no shortage of skilled labor as shown by the unemployment rates above. Therefore, there is no possible adverse effects on the future operating costs. The recent trends in exchange rate between Australia/China and Australia/Hong Kong will unlikely affect the costs and revenues of the Globe International Limited. References Alesina, A., Summers, L. H. (2013). Central bank independence and macroeconomic performance: some comparative evidence. journal of Money, Credit and Banking, 25(2), 151-162. Bell, S. (2012). The Unemployment Crisis in Australia: Which Way Out?. Cambridge University Press. Papadakis, E. (2012). Constituents of confidence and mistrust in Australian institutions. Australian Journal of Political Science, 34(1), 75-93.