Economy_of_Australia_vs_Vietnam

Section A The economy of Australia is classified as a developed mixed market economy as it combines elements of a market economy and a mixed economy. A market economy is where the economy is based on a division of labour and the prices of goods and services are determined in a free price system. A mixed economy is where there is a variety of private and government control, as well as a mixture of capitalism and socialism. This essentially means that decisions are made by producers and consumers and the government ensures that equality in these decisions. Australia’s private sector and government sector both have significant roles in economic decisions. The private sector has ownership of property, ability to ensure freedom of enterprise and ability to create competition between consumers. The government sector intervenes by regulating and enforcing a law system, providing collective goods and services to the community, produce goods and services that would not normally be produced by the private sector, to redistribute income and try to ensure equality between people and to stabilise economic activity to achieve macroeconomic goals. An example of this would be that the private sector allows individuals to earn an income that reflects on how they are contributing to the community, but the government sector would tax them on their income so it can be distributed back into the community. This economic structure is effective for Australia as over the last 15 years, Australia has grown at an average annual rate of 3.6%(https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html'countryName=Australia&countryCode=as®ionCode=au&rank=19#as)which is well above the OECD average of 2.5% (https://www.economist.com/finance/displaystory.cfm'story_id=8931798). Section B When compareing the economy of Vietnam and the economy of Australia, it is wise to take into account large population differences. Vietnams population is around 80 000 000 (https://www.cia.gov/library/publications/the-world-factbook/geos/vm.html), and Australia’s population is only around 20 000 000 (https://www.cia.gov/library/publications/the-world-factbook/geos/as.html). The economy of Vietnam is a developing mixed economy or an economy in transition, which means it is working towards having private and government control and a mixture of capitalism and socialism. Over the last twenty years, Vietnam has made a shift from a centrally planned economy, where state or worker councils manage the economy and the government makes all the decisions, to a Socialist-oriented market economy, where the market economy is incorporated into the planned economy in Vietnam. This process is known as renewal or doi moi. For the last 30 years, Vietnam has been recovering from the after effects of war, the loss of financial support from the Soviet Bloc and the problems caused from being a centrally planned economy. Since reunification in 1975, Vietnam has had problems in production, imbalances in supply in demand, inefficiencies in distribution and circulation, high inflation rates and rising debt problems. All these factors led to Vietnam becoming one of the poorest countries in the world with negative or very slow economic growth. In recent years however, as Vietnam is moving towards being a mixed economy, poverty has declined and Vietnam to 12.3% (https://www.cia.gov/library/publications/the-world-factbook/geos/vm.html) is creating more jobs to meet challenges of a labour force that is rapidly growing. The government is using stimulus spending to help the economy though the global financial crisis, which has had a negative impact on Vietnams economy. One significant difference between the economy of Australia and the economy of Vietnam is the fact that Australia’s population is ageing due to the baby boomers, where as less than 6% of Vietnam’s is over the age of 65(http://www.heraldsun.com.au/business/fully-frank/vietnams-economy-is-scooting-along/story-e6frfinf-1225818331499) due to the large number of people killed in the Vietnam war and the high birth rate. This is causing Vietnam to experience economic growth which is a big change considering there has been little economic growth in Vietnam. Another difference between Australia and Vietnam is the effects from the global economic crisis. Even though Australia was affected by the financial crises, the problems that arose were far worse for Vietnam than they were for Australia. Vietnam’s export-orientated economy was heavily affected. WHY. In 2009 exports fell 11% year-on-year, prompting government to consider adjustments to tariffs to limit the trade of deficit (http://www.theodora.com/wfbcurrent/vietnam/vietnam_economy.html). The crises also affected Vietnam’s currency, the dong, as it was devalued by more than 5% in December 2009. (http://www.theodora.com/wfbcurrent/vietnam/vietnam_economy.html). Foreign donors pledged $8 billion into new development in Vietnam to help with the struggle of the economic crises. Australia and Vietnam were not simular in past years, but as Vietnam moves towards being a mixed market economy, it is becoming more alike Australia. Section C Australia has a strong and effective economic system, but there are many problems that will arise in the future for Australia. One of these problems is how the availability of water will influence the pattern of economic development. Water is essential to every industry whether it is agricultural, mining or manufacturing. Water is essential for Australia’s economic prosperity. Low rainfall and extreme climate along with extraction of Australia’s water resources being exceeded will cause water to become so scarce it will only be used for the basic needs. Kevin Rudd has recently explained that he is optimistic, but not complacent, about Australia’s future and that there it is important that as a nation we sustain fiscal discipline and we confront the long term challenge of an ageing population. (http://www.treasurer.gov.au/DisplayDocs.aspx'doc=economicnotes/2010/003.htm&pageID=000&min=wms&Year=&DocType). Along with the problem of an ageing population, there is the problem that Australia’s population is growing by more than a million every three years. If Australia continues to grow like this, by the end of this century Australia will have a population of around 100 million causing economic and environmental problems (http://eclipsenow.wordpress.com/2009/08/15/population-an-economic-problem-for-australia/). Peter Ridd explained that Australia is too worried about the effects on things like global warming and the demise of the Great Barrier Reef to take notice on the big obvious problems economically and environmentally posed by population growth. (http://eclipsenow.wordpress.com/2009/08/15/population-an-economic-problem-for-australia/). Australia’s large current account deficit has also raised concerns with economists as in the 2007-2008 financial year the account was up 4% to %19.49 billion (http://abs.gov.au/AUSSTATS/abs@.nsf/mf/5302.0/). When there was news of Australia going into a recession, the Rudd government borrowed large amounts of money from overseas, which stabled the economy. Due to the large amounts of money borrowed, Australia now owes a lot of money to overseas; meaning taxes in the future will be higher. An example of the effects that will occurs is the amount of tax paid in relation to superannuation funds. (How many years) ago, an individual over the age of 65 could invest $100 000 into a super fund without paying tax. This has recently decreased to $50 000, and in the next two years it will drop to $25 000.