Australian government has supported the car manufacturers of the country for several years as it has become difficult for the manufacturers to continue operations inside Australia. Holden has received around $2.2 billion from the government as subsidy over the last decade. In August 2013, the government pledged another A$200 million to bailout the car manufacturers in the country. All the manufacturers in the country have laid off thousands of workers recently. The anger of the workers and the unions over the corporations and the government has created a problematic situation for the policymakers to
4 resolve. The government reduced tariffs significantly for countries that did not do the same for Australia. The exchange rate policy has also caused several objections to be put on the government for mismanaging the economy and for being careless regarding the protection of local manufacturers. Reduction of tariffs along with a strong Australian dollar has also led to higher imports, lower exports and higher costs of production. Economic Australia is the 12 th largest economy in the world with 3% GDP growth rate. Services contribute the most to the Australian economy (70% of GDP) while industries contribute around 25% and agriculture around 5%. Australia finds itself in a very favorable position as compared to other developed economies as its Net Debt as a percentage of GDP stands at 13%. Per capita GDP is $40680. Inflation rate is estimated to be around 2.5%. Exchange rate of Australian Dollar per US dollar stands at 0.963, which clearly indicates the strong position of the Australian currency, which is also one of the most traded currencies in the world. AAA rating for Australia was awarded by major credit rating agencies which points to the favorable economic environment in the country for business. Unemployment rate stands at more than 5% in the economy. Main industries include mining, transportation equipment, food, chemicals and industrial products. Australian Manufacturing is counted now amongst the most underperforming ones in the developed world. Manufacturing and services sectors have been contracting while finance; insurance and real estate sectors are on the rise. The Australian economy had grown for the last 17 years before the global financial crisis hit the world economy. The cuts in the interest rates to historic low levels reduced cost of debt for businesses. The Australian economy survived the crisis but the growth has remained slow. The car manufacturers have been cutting thousands of jobs since the year 2012. Ford announced closure of its manufacturing facilities, as its locally produced cars are not any more profitable. Toyota has also been making losses
5 on its locally produced cars. Two thousand people were laid off for in 2013 alone. The car manufacturers have also cut down production due to crisis and lower demand for locally produced cars. Imports have become cheaper due to the strong Australian dollar and it has resulted in the locally produced cars becoming unattractive to the market at home and abroad as well.
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