Australia: Selected Issues
IMF Staff Country Reports, March 5, 2020
Source details
- Canonical URL
- Australia: Selected Issues
Other formats
Bibliographic details
- Published: March 5, 2020
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513536125.002
Summary and focus
- Investigates the drivers of business investment in Australia, focusing on the non-mining sectors.
- Identifies aggregate-level drivers for non-mining business investment by looking at long-term trends.
- Delves into firm-level investment behavior and assesses the role of credit availability and uncertainty in different types of firms.
- Long-term empirical and simulation-based analyses suggest that global factors such as rising policy uncertainty and weaker commodity prices have been key drivers of the slowdown.
- In the short term, a renewed escalation in US–China trade tensions could spill over to investment and growth in Australia.
- Domestic factors are also at play, including domestic policy uncertainty and financial constraints, especially for smaller and younger firms.
- The pace of product market reforms can also impact business investment.
Major findings on drivers of investment
- Global drivers:
- Rising policy uncertainty (global).
- Weaker commodity prices.
- Potential short-term spillovers from renewed escalation in US–China trade tensions to investment and growth in Australia.
- Domestic drivers:
- Domestic policy uncertainty.
- Financial constraints disproportionately affecting smaller and younger firms.
- The pace of product market reforms influences business investment outcomes.
Firm-level analysis
- Examines heterogeneity in investment behavior across firms.
- Assesses the role of credit availability and uncertainty in different types of firms, highlighting greater vulnerability for small- and medium-sized enterprises and for younger firms.
Policy recommendations
- Reduce domestic policy uncertainty.
- Ease credit constraints for small- and medium-sized enterprises.
- Incentivize research and development.
- Continue with product market and tax reforms.
Subjects and keywords
- Subject: Commodity markets, Financial markets, International trade, National accounts, Private investment, Production, Productivity, Terms of trade, Trade policy
- Keywords: Australia, Commodity markets, CR, Global, intangible investment, investment, investment slowdown, ISCR, Non-mining business investment, panel regression, Private investment, product market, product market reform, Productivity, R&D investment, Terms of trade, Trade policy, uncertainty indices, venture capital
Content in this bundle
- Australia: Selected Issues; IMF Country Report No. 20/69; February 6, 2020