The Australian economy has being doing rather well over the last few years.
Boosted by the dramatic rise of the Chinese economy, which has created an almost insatiable demand for Australia's natural resources, the economy has been transformed.
Overview of the Economy
Australia is a long way away from the UK on the other side of the world and the saying "as different as night and day" is literally true as the UK day is mirrored by the Australian night.
Despite the vast distance between the two countries, there is actually a sense of "foreign familiarity", the feeling that despite being in an obviously foreign place with fierce sunshine, exotic birdsong and strange animals, there is a comforting sense of familiarity and how things work. Close historic and cultural links remain between Australia and the UK.
However, in the last couple of decades, a period of uninterrupted annual growth, low inflation and low unemployment has seen Australia emerge onto the world stage as a significant economic power. Previously, its location on the other side of the world from rich Europe and the United States gave Australia a sense that the world was passing it by.
The economic rise of Asia has comprehensively changed that view. Now Australia has a strategic location on the Pacific rim, located close to the rapidly growing, resource-hungry East Asian tigers, the highly developed Japanese market and, above all, the huge market that is China.
Relationship with China
China's boom, based on a huge supply of cheap labour, has allowed it to out-compete other countries in manufacturing. In combination with a dramatic rise in exports, that has transformed the global economy, there has been an unprecedented surge in domestic investment and infrastructure spending.
This almost insatiable demand for raw materials has, in turn, allowed Australia to undergo an export-led mining boom that has underpinned an unprecedented period of growth. GDP is currently growing around 2.8% a year whilst unemployment remains low by international standards at 5.8%.
Not only has this surge in mining exports (the mining sector is currently around 13% of GDP) transformed the economy, it has insulated Australia from the financial crisis that engulfed practically every other developed country in recent years.
Now, with China's economy needing to undertake a structural shift towards greater domestic consumption, many commentators are warning that Australia is potentially vulnerable to a peak in the mining boom that have helped the huge infrastructure and housing development that has taken place in China.
Already the terms of trade (the difference between the price of exports and imports) has turned as demand from China has waned and there is a consensus that Australia needs to refocus on its service and manufacturing exports, sectors that have been the hardest hit by the strength of the Australian dollar which has been buoyed by the mining boom and the consequent strength of the domestic economy.
With low inflation allowing the maintenance of low rates, there is the basis for a successful re-balancing of the economy. The OECD recently recommended that Australia should lower, and reform, taxes, focus on skills and education to help raise productivity and potentially set up a stabilisation fund with some of the revenues from the resources sector.
Whether Australia successfully adapts its economy to the changing economic environment will determine, in large part, if Australia can continue its unprecedented period of economic growth to develop into a truly diversified regional economic superpower.
For a more detailed look at the Australian economy, designed to help you understand how the economy will perform in the future and where the opportunities are for you and your family, why not download our free Expat Guide to the Economy of Australia.
Packed full of information to help you understand and assess how you can prosper in the modern economy of Australia and whether making the move abroad is the right one for you.