The global economy has grown significantly over the past decade, with output more than doubling from US$30 trillion to US$74 trillion between 2000 and 2013.
Growth in Australia's GDP has been consistently above three per cent per annum since 1993, except during the Global Financial Crisis, when it dipped to 1.5 per cent.11 Major world economies, excluding China, have been projected to return around 2.8 per cent average GDP growth rate by 2014-15.
Beyond 2019, global economic growth is expected to taper off to around three per cent per year through to 2031.12 China's GDP growth is expected to stabilise in the near term to around eight per cent per year, before slowly declining to around six per cent per year by 2031.
These changes are the result of profound shifts in global economies, according to a recent study prepared for the Business Council of Australia (BCA).13 The factors driving these changes include:
■ technological change and digitisation;
■ changing demographics;
■ rapid economic growth and more competition from emerging economies; and
■ reconfiguration of value chains and the global market.
The BCA study reports that technology will penetrate into every aspect of business, including those of our overseas competitors. This will require domestic businesses, even those that do not trade globally, to compete with businesses in other countries. An example of this trend is online retail sales, which now represent 6.9 per cent of retail sales and grew by nine per cent in 2014.14
A common trend in many developed countries is the increasing proportion of the population over 65, and the peaking of the employment participation rate for people over 15 years of age. This will place greater demand on social services while diminishing the proportion of the working population. As a result, government expenditures will need to increase while income tax revenues decline.
Global growth is broadly projected to continue at two distinct speeds, with emerging economies growing at twice the pace of advanced economies. Many high-growth emerging economies will increasingly become direct competitors to developed economies, including Australia. More rapid and concentrated urbanisation in these emerging economies will further enhance their competitive advantages.
The BCA study predicts that the reconfiguration of 'value chains' and the global labour market will have profound implications for economies across the world. Competitiveness at national and enterprise levels will be defined by local skills and capabilities, as technology and improved transport allow specialised products and services to be produced and exported at every level in the value chain.
Increasingly, Australian firms will be able to compete internationally at all stages of the production cycle. Firms will need to become competitive at a global level to retain domestic market share. As a result of both international competition and global opportunities, our export-related infrastructure, such as freight transport, will need to become more efficient.
_________________________________________________________________________________
11. ACIL Allen Consulting (2014a)
12. ACIL Allen Consulting (2014a)
13. Business Council of Australia (2014)
14. National Australia Bank (2015)