United States

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May 2015

The United States is the world’s largest economy. It outperforms most other developed economies on measures of incomes per capita, economic growth, creditworthiness and business climate. The economy has recently emerged from its worst downturn since the great depression.

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This chart is a cobweb diagram showing how a country measures up on four important dimensions of economic performance — per capita income, compound annual GDP growth, business climate and creditworthiness. Per capita income is in current US dollars for 2013 as provided by the IMF. Compound annual GDP growth is measured over the 15 years to 2013. Business climate is measured by the World Bank’s Ease of Doing Business ranking of 189 countries. Creditworthiness attempts to measure a country's ability to honour its external debt obligations and is measured by its OECD country credit risk rating. The chart shows not only how a country performs on the four dimensions, but how it measures up against other comparable countries.

Economic outlook

A property-induced financial crisis in 2008 kept the US economy subdued for much of the last eight years. Deleveraging and chronic unemployment have weighed heavily on confidence and private sector spending.

But large bouts of monetary easing and fiscal support are now starting to pay dividends. The US economy is expected to grow above 3% in 2015. These growth rates will need to be maintained in order to absorb spare capacity created post 2008.

Long term growth will be constrained by an aging population and slower productivity growth. The IMF expects US long run growth will average 2%, down from 3% at the turn of the century. The government’s self-imposed debt ceiling and elevated levels of public debt continue to pose risks to the outlook—mandated budget cuts weighed on growth during the first half of 2013.

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Incomes per capita are amongst the highest in the world. But this belies 14% of the population living below the poverty line. Indeed the poorest 20% of households have 5% of the nation’s total personal income, while the richest 20% have 50%. Post-crisis monetary easing has exacerbated this divide by supporting a run up in asset prices. This has lifted the wealth of high-income individuals, with comparatively little impact on poorer households.

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Business climate

The US enjoys an investment grade credit rating. This suggests a relatively low likelihood that it will be unable or unwilling to meet its external debt obligations in a systemic sense (though, needless to say, individual debtors can and do default).

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This chart looks more closely at creditworthiness. It shows the country’s long-term foreign currency sovereign credit rating from each of the three major ratings agencies. It also gives the country’s OECD country credit risk rating. Basically, the longer the bar, the more creditworthy the country.

US business climate is ranked 7 out of 189 economies on the World Bank’s ease of doing business gauge — which measures regulation and red tape relevant to a domestic small to mid-sized firm. The US scores in the top quintile across most categories, however paying taxes and getting electricity are relatively difficult.

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Another cobweb diagram, this chart unpacks different aspects of a country's business climate as incorporated in its World Bank Ease of Doing Business Index. It provides a good set of measures of the operational risks of doing business in various countries, especially for small and mid-sized businesses.

The US scores in the top quartile in almost all areas of governance, but under performs poorly on measures of political stability and absence of violence. Political gridlock and bi-partisan squabbling continues to weigh on the government’s ability to effectively carry out its policy agenda.

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This chart shows how a country measures up on five important measures of institutional strength — voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption. The measures come from the World Bank’s governance indicators.

Bilateral relations

The US is Australia’s third largest trading partner. The two parties signed a free trade agreement in 2004, which allows most Australian exports favourable entry into the US and encourages greater bilateral investment.

Australian import payments to the US totalled US$24b in 2014, made up primarily of passenger vehicles, measuring instruments and medicines. Australian merchandise exports to the US were worth US$10.1b in 2014 consisting mainly of aerospace parts, beef and other meat. Ferra Engineering is an SME based in Queensland that exports aerospace structures and sub-systems to the US.

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Service exports to the US were worth A$6.4b or 11% of total service exports in 2013-2014 with professional and technical services accounting for 40% of this. OM Engineering for example has provided the design and supply of custom-designed formwork systems on US construction projects.

Tourism is the other big earner—the US is our third largest source of arrivals after New Zealand and China.

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Student enrolments from the US are large, comparable with Singapore, Saudi Arabia and the Philippines. Most of these enrolments are likely university students on exchange.

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The US is Australia’s largest source of foreign investment, worth A$660b at the end of 2013. For example, Chevron’s A$55b investment since 2009 in the Gorgon LNG project is the largest ever US investment in Australia.

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Investment in the US was worth A$430b in 2013, equivalent to 29% of Australia’s total foreign investment portfolio. This makes it the most important destination for Australian investment abroad.

Useful links

Department of Foreign Affairs

Country brief

Austrade

Market Profile