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How Australia and China’s economies differ

China is now the second largest economy in the world while Australia ranks as 13th biggest. But Australia is regarded as an advanced economy whereas the International Monetary Fund defines China as an “emerging and developing” economy. So what defines the level of advancement?

Commsec Economist Craig James recently gave a great explanation of how the two economies differ in Peter Switzer’s newsletter. 

Craig James explained it as follows:

Certainly there are many ways economies can be distinguished. The traditional way is to look at GDP per capita – that is, the size of the economy divided by the number of people in it. And on this measure, the gap between Australia and China is huge. GDP per capita in Australia is estimated at US$54,869, compared with China at US$4283. And that gap isn’t going to close any time soon.

Other ways of distinguishing economies include social measures like education advancement. And comparisons can be made on consumer measures like the number of vehicles per head of population.

In Australia, the latest motor vehicle census was published just a few days ago. The figures showed that Australia had 16.06 million motor vehicles as at March 2010, up 2.5 per cent over the previous year and a gain of just over 15 per cent over the past five years. The actual number of cars or passenger vehicles stood at 12.27 million while the remainder of vehicles included trucks, buses, motorcycles and vans.

Interestingly, while population growth in Australia has been solid in recent years, the car population has actually increased at a faster rate. The Bureau of Statistics estimated that there were 721.1 motor vehicles per 1000 people in Australia as at 31 March 2010, up from 686.3 vehicles per 1000 residents five years ago.

The data on cars per head of population doesn’t get updated regularly across the globe. But the latest data showed the US out in front with 842 motor vehicles per 1000 people. Based on the latest data, Australia would now be in second spot, up from fourth in the last survey.

So where does China stand? Figures published for the 2008 year indicated that there were just 128 motor vehicles per 1000 in China, which puts it level with countries such as Fiji and the Seychelles. But China is no doubt quickly moving up the league table.

In 2010, a record 13.8 million cars were sold in China. When combined with trucks and buses, total vehicle purchases totalled 18.1 million units, up 32.4 per cent on a year ago. By comparison, there were 11.6 million vehicles sold in the US over 2010. While Chinese vehicle sales are tipped to slow in 2011, it will still retain its position as the biggest car-buying nation.

While China has passed the US as the largest car-buying nation, it would need to purchase 50 million vehicles a year to be on level terms on a per capita basis. Clearly another reason to be positive on resource stocks.

As Australians we certainly live in a wealthy country and we seem well positioned to enjoy future growth and wealth.

Source: Switzer



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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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