BUSN9231: Critical Review of Global Issues faced by Australian Business - Global Business Assessment Answers

Business Assignment Help

Introduction

This study of the critical review of global issues is conducted in order study, evaluate and analyse the two business issues faced by the Australia. In this context, the crisis of the Chinese investor confidence and reduction in the live cattle import quota by Indonesia is taken into account for this discussion. This study is primarily focussing on exploring that out of these two global issues involving China and Indonesia which is more influencing for the Australian business practices. Therefore, this study has crucially discussed both the issue considering all the relevant factors and their impacts on the business practices of the Australian market. Moreover, this study has even done considered a comparative analysis of both the issue in order to derive the global challenge which has its adverse effects over Australian business. Overall, this study has incorporated all the necessary approaches and discussions which are necessary in order to meet the conclusion of this study.

Overview of Chinese Crisis

China has recorded the least economic growth of 7% since 1990 (Financial Times, 2016). The reason behind the crisis is considered the restructuring of the Chinese economy. The Chinese government is running campaigns to abolish corruption from its county and also, restructuring the state-owned companies so that equal distribution of wealth could eliminate the inequality within the society. Furthermore, China has shifted from export-oriented economy to domestic consumption economy, which resulted in the decline of its foreign reserves. The downfall in the real-estate sector in China has also changed the interest of its real-estate investors towards Australian real-estate sector. Another reason for the slowdown of the Chinese economy is the devaluation of Yuan. China stunned the world by devaluating its Yuan. Devaluation is considered as the sign of economy crisis. However, such devaluation was a strategic move by China to increase the demand for its currency globally in long-run (Kroeber, 2016).

The unstable growth model of China is also the biggest element behind its volatile economy conditions. Being world’s second largest economy, China did mistake by allowing an excess of foreign investments into China, which hammered its domestic trade and also decreased the demand for its products globally. The China’s economy slowdown has become a matter of concern for its native countries partners mainly Australia and Canada. Any change in the economy of China impacts the economy of Australia. China is going through economic transition which is leading the slowdown of its economy growth. However, it is expected that soon the country will come back with immense economic growth and prosperity (World Bank, 2016).

Impact of Chinese Crisis over Australian Business

China is the biggest trading partner of Australia, and the economies of both the countries are intrinsically interlinked. Australia signed a free trade agreement with China in the year 2013, which cemented their economic relationship stronger ever. However, the trade between China and Australia has been growing day by day. The major trading commodity between these two nations is iron ore, which Australia is exporting to China. Being the most populous country and second-largest economy of the world, the Chinese market has always been the first choice for every business as it has the largest consumer market in the world (World Bank, 2016).

On an average, 100 million Chinese tourist visits Australia in a year, which is contributing a large part to its GDP. As per Australian tourism, in the year 2015 around $5.3 billion had been added to its economy by Chinese tourists and expected to exceed $13 billion by the year 2020 (Kroeber, 2016). Australia has more resources and opportunities such as well-educated workforce, world’s leading institutions, open economy and multicultural community than China, which is attracting the Chinese towards Australia. Till now, Australia was supplying mainly raw materials to China; however it began to supply finished goods to the worker class of China and direct customers in China. Australia has not seen recession since last twenty-five years, which makes it a safer economy from the investor’s perspective. Australia exports more than 60% of its total export to China and after the free trade agreement, Australia is flooding the Chinese market with its products. However, the devaluation of Yuan by China made the export cheaper for Australia. The demand for iron ore also declined which lowered down the mining production in Australia (World Economic Forum, 2015).

Overview of the relationship between Australia and Indonesia

Australia-Indonesia relations are termed as foreign relations between Australia and Indonesia which was started in the year 1640 between the mutual consent of Indigenous Australians and Makassan trepan Gers from the region southwest Sulawesi. In the year 1949, the Australia was being formally introduced and recognised by the Republic of Indonesia. In the context of live cattle import quota, import business of the cattle is a huge contributor to the economies of the both the nations. This is also needed for the well-being of the population living in the Indonesia and Australia. This is a twin-way profit situation for both the nations. In the year 2015, this business has experienced the least trade of the last 5 years. Indonesia slashed the import of Australian cattle by 80% and imported only 50,000 head of cattle in the month of July as compared to 250000 cattle heads imported in the previous quarter (Medhora, 2015). Such trade practices gravely affected the economical standards of both the nations and it also symbolises that Indonesia is going through a lack of feed slots, reduction in the slaughter number and upward pressure on beef prices in Indonesia.

In the year 2014, Indonesian president Joko Widodo declared that soon Indonesia would be self-sufficient in the sector of beef production (Norman, 2015). The primary reason behind this issue is the uncertainty in the number of live cattle imports in the Indonesia and this issue can be resolved only by mitigating this domestic problem of Indonesia. Such trade practices need constant care and attention because this is essential and necessary for both the nations with the perspective of employment, economy and development. In this essence, Indonesia’s ambassador Mr. Nadjib Riphat Kesoema clarified that this slash in import is not the result of the political and social conditions Indonesia-Australia relations (Norman, 2015). The decision of reducing the quarterly live cattle import was mainly based on the financial conditions of the Indonesia with the objective to meet the needs of the beef consumers of Indonesia.

Impact of the reduction in live cattle imports quota

As discussed above, that in order to become self-sufficient, Indonesia slashed its import of live cattle from Australia by 80%. It was a huge decision taken with the perspective of trade policies between two nations because this was a huge economic contributor for both the nations. Moreover, it was very significant in order to meet the needs of the beef consumer of Indonesia. This reduction in the import has gravely affected the policies of both the nations in the below-mentioned ways:

• Economy: As mentioned above, that Indonesia has reduced the import of live cattle heads from 250,000 to 50,000 which clearly drives that the economy has also been reduced. This sudden uncertainty became a matter of concern for the beef farmers of Australia as their expected economic gains are suffering because of this reduction (The Conversation, 2013).
• Unemployment: Beef farming was considered an occupation having good returns; therefore, a huge population of Australia was associated with this sector but this reduction in the demand of live cattle head import of Indonesia has led to higher unemployment rates in Australia (Kahn and Cottle, 2014).
• Financial Crisis: This decision of reduction in the import of live cattle heads from Australia can also lead to a financial crisis in the nation as it has slashed the way of earning of a huge population and establishment of new earning essentials require huge capital amount.
• Impact over the Indonesia-Australia relation: Though it has been clearly stated that this reduction in import was only done because of the economic conditions of Indonesia with the aim to meet the needs of the beef consumer of Indonesia but this issue can gravely affect the terms and relations of Indonesia and Australia in the field of business and trade policies (Kahn and Cottle, 2014).

Conclusion

Australia has good relations with both China and Indonesia. Australia was the biggest exporter of live cattle to Indonesia till the beginning of first quarter of the year 2015. Indonesia used to import around 250000 live cattle in a quarter from Australia, which slashed down by 80% in the first quarter of 2015. This became an intense matter of concern for the beef farmers of Australia and resulted in unemployment of beef farmers in Australia. On the other hand, slowdown of China’s economic growth also impacted the economy of Australia as China is the biggest export market for Australia. The real estate downfall in China resulted in a rush of investors towards Australian real-estate sector. Australia has also started to export finished products in China. The devaluation of Yuan and slow economic growth affected the trade relations between these two nations as China decreased the demand for iron ore and other materials from Australia. Thus, it can be concluded that China has more impact over Australian economy as their trade is not limited to certain products and their relations are now more deepen with the signing of free trade agreement.