Contrast Two Economies in the Asian Region and Justify Which Nation Is the Best Investment Option

Submitted By mtmccormick
Words: 935
Pages: 4

During the last decade, Asia has been experiencing tremendous economic growth and subsequently creating a powerhouse in trade, business and finance. Two nations that have been amongst this dramatic increase in growth in the Asian region are Australia and Japan for various reasons. However both countries are in extremely different situations at the present.

Australia’s economy has been growing from strength to strength in the last decade despite the challenges of the Global Financial Crisis of 2008. With a comparatively small population of 22.93 million in 2013 against Japan’s 127.8 million, an unemployment rate of approximately 5.4% and a youth unemployment rate of 11.6%, Australia has been able to continue to be a powerhouse in exporting, particularly natural resources to several Asian nations and consequently has been able to maintain strong growth in GDP. In the last five years of data, Australia’s GDP has progressively increased from USD 47,875 to USD 67,983 at a rate of 3.1% per annum.

The Japanese economy has performed similarly if not better to Australia on several fronts; USD 39,578.07 (JPN) to USD 67,983 (AUS), 4.2% unemployment (JPN) vs 5.4% (AUS), HDI ranking of 0.901 (JPN) vs 0.929 (AUS) and finally Gini co-efficient rating of 0.329 (JPN) vs 0.331 (AUS). On the other hand Japan has performed significantly worse in numerous respects. Japan’s immense government debt of USD 12.441 trillion, approximately 211 % percent of their GDP, dwarfs Australia’s USD 244.3 billion, only 22.90% of their GDP. Business and Consumer confidence is low at -12 and 43.3 index points respectively whereas in comparison, Australia’s Business and Consumer confidence is high at 3 and a 108.33 index points respectively. Due to the aforementioned unstable nature of the Japanese economy, the inflation rate has fell 0.1% while Australia’s has been able to be kept healthy at 2.20%.

Australia is very much a free market economy but the government still plays a large role within it. In the beginning of the 21st century, the Australian government took a pledge to further reform its economy which has led to a significant rise in the standard of living, rivaling that of the United States. An integral part of the economic system in Australia is the Australian Securities Exchange (ASX). Taxation is also a large part of the countries’ economic system; divided into state and federal sectors. Important taxes such as income tax and business tax, as well as goods and services, social securities levy, and capital gains tax, help the government to regulate and control economic growth. Despite these heavy restrictions placed on companies and individuals, the Australian economy has still prospered due to the stable government, healthy politics, and huge abundance of natural resources.

The Japanese government plays a huge role in the development and control of the Japanese market economy. The governments participation within the economy is fairly limited but their influence which they hold over business is stronger than most other market economies. The government used to control through consultations with businesses that monitored performance and set targets for almost every branch of the economy. Bureaucrats used to use discretionary power to implement official policies, but since the 1990’s efforts have been targeted to limiting the use of unwritten orders, resulting in a sort of collusion between the authorities and big businesses.

In the last few decades and the most recent in particular, Australia has made the most of the naturally abundant resources available, fueling massive economic growth over a