Australia: Commodities and Competitiveness (TN)

Laura  Alfaro; Richard H.K. Vietor; Hilary  White

Teaching Note | HBS Case Collection | February 2013

Australia: Commodities and Competitiveness (TN)

by Laura Alfaro, Richard H.K. Vietor and Hilary White

Abstract

For the past few decades, Australia has dealt with the benefits and costs of repeated mining booms—inflation, a housing bubble, a current account deficit and growing dependence on China. Between 1996 and 2007, however, Australia had most of these issues under control and grew at impressive rates, becoming one of the richest of developed countries. Yet competitiveness in its non-mining sectors declined. Since the financial crisis, additional challenges associated with climate change, minerals taxes, migration and an overvalued currency have complicated the issues facing Julia Gillard and her Labor Party, with a very thin majority.

Keywords: competitiveness; inflation; mining; current account; Exchange rates; trade; capital flows; commodities; environment; carbon tax; Goods and Commodities; Australia;

Language: English

Format: Print

11 pages

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Citation:

Alfaro, Laura, Richard H.K. Vietor, and Hilary White. "Australia: Commodities and Competitiveness (TN)." Harvard Business School Teaching Note 713-063, February 2013.

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In the decades following 2005, China faced significant financial challenges. Inflation spiraled upwards and China’s economy stagnated in the wake of the Global Financial Crisis. The country’s leaders took an interventionist approach to weather the storm, controlling capital and exchange rates. These actions raised criticism from other nations, and in 2017 the U.S. initiated the U.S.-China Trade Wars, which enforced tariffs and requirements for increased transparency. As implications of the trade wars remained uncertain, many wondered whether the central bank would introduce further discreet steps to change the yuan. Would China’s currency appreciate as substantially against the U.S. dollar as predicted by economists? And when would further change occur? The stakes were high; a freer yuan float would impact groups within and outside of China very differently. Would China’s currency then be allowed to depreciate or appreciate if fundamentals required it?

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Australia: Commodities and Competitiveness (TN)

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