Australian Economy Analysis

This assignment requires students to analyze the current state of the Australian economy. Students must utilize a set of provided news articles and reports, focusing on topics such as inflation, interest rates, commodity prices (especially coal), and global economic trends like US job growth. The analysis should demonstrate an understanding of key economic indicators and their impact on the Australian economy.

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Economics for a Sustainable World

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Table of Contents
Introduction................................................................................................................................4
Overview of Aurizon Holdings Limited....................................................................................4
Name and Location of Business.............................................................................................4
Type of Business....................................................................................................................4
Products of Aurizon...............................................................................................................4
Main Customers of Aurizon...................................................................................................7
Location of Customers...........................................................................................................7
Main Competitors to Aurizon................................................................................................7
Location of Main Competitors...............................................................................................8
Approximate Market Share of Aurizon and its Competitors.................................................8
Analysis of the Competitive Environment of Aurizon..........................................................9
Close Substitutes for Aurizon’s Products..............................................................................9
Elasticity of the Demand Curve of Aurizon...........................................................................9
Ability of Aurizon in generating a Mark-Up.......................................................................10
Production Costs and Scale......................................................................................................10
Factors of Production...........................................................................................................10
Manpower........................................................................................................................10
Locomotives and Trains...................................................................................................10
Fuel and Energy Resources..............................................................................................10
Other Factors....................................................................................................................11
Grouping of Factors of Production......................................................................................11
Overall Cost Structure of Aurizon’s Business.....................................................................11
Macro Business Environment of Aurizon................................................................................11
Political Situation.................................................................................................................11
Economic Situation..............................................................................................................12

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Rate of Inflation...............................................................................................................12
Unemployment Rate.........................................................................................................12
Average Interest Rate.......................................................................................................12
Boom or Recession..........................................................................................................13
Exchange Rates and Changes of Export Country............................................................13
Quality of the Main Products...........................................................................................13
Nature of Demand during Recessions..............................................................................13
Impact of the Economic Climate on Sales.......................................................................13
Problems in getting access to Key Factors of Production................................................14
Impact of Change in Exchange Rates on Imports and Exports........................................14
Sustainability Practices of Business.........................................................................................14
Impact of the Production Process of Aurizon......................................................................14
Impact of Consumption of Product Generated by Aurizon.................................................16
Impact of Sustainability Practices on Long-Term Viability of Firm...................................16
Conclusions..............................................................................................................................16
References................................................................................................................................17

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Introduction
The report focuses on conducting an evaluation of Aurizon Holdings Limited in terms of its
operation in Australia and a foreign branch like United States. It would also focus on
conducting an economic analysis of the Australian and the Chinese market where Aurizon
tends to export its products. Finally, sustainability analysis and evaluation of Aurizon would
also be carried out in the report.
Overview of Aurizon Holdings Limited
Name and Location of Business
The name of the business is Aurizon Holdings Limited and it is based in Queensland,
Australia (Aurizon Holdings Limited , 2017).
Type of Business
Aurizon operates as a potential rail freight operator in Australia and ranks as one of the top
50 companies listed in the Australian Securities Exchange (ASX). Aurizon contributes in
supporting around 250 million tons of merchandises that helps in generating a network
between miners, producers and also the greater industry constituted by both international and
domestic markets. Further, Aurizon also contributes in generating effective freight and
logistics solutions to its clients based on a network of rail and road (Aurizon Holdings
Limited , 2017).
Products of Aurizon
Aurizon serves its customers in terms of helping in the movement of increased amount of
coal resources amounting to greater than 500,000 tons for different markets like Japan, South
Korea, China, India and also Taiwan.

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(Aurizon Limited , 2017)
Further, Aurizon also operates as a specialist in Bulk Rail Freight where it serves in
generating supply chain solutions in an integrated fashion to miners, producers and other
domestic and international clients (Aurizon Limited , 2017).
In the intermodal category, Aurizon operates based on rail freight for movement of large
containers and also pallets between different Australian regions.

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(Aurizon Limited , 2017)
Further, Aurizon provides different types of specialist services to its clients in the form of rail
designing, engineering services, construction activities, management and maintenance of
construction works and also other types of supply chain services (Aurizon Limited , 2017).

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(Aurizon Limited , 2017)
Main Customers of Aurizon
The main customers of Aurizon focus on procuring different types of commodities and
services associated to the mining, agricultural, retail and also associated to different industrial
sectors.
Location of Customers
The customers are located along different towns and cities across various regions of
Australia. The customers purchasing coal products are based along Eastern ports and for iron
products reside along the western region. Further, coal rail networking services are rendered
by Aurizon to clients along Central Queensland region (Aurizon Limited , 2017).
Main Competitors to Aurizon
Different competitors of Aurizon are listed as follows.

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Location of Main Competitors
The competitors of Aurizon are based along different regions of Australia and also along
other international markets based in United States.
Approximate Market Share of Aurizon and its Competitors
Aurizon Holdings Limited tends to holds the highest market share in Australia while sharing
the same with its closest competitor, Asciano Limited. They are followed by companies like
Intoll Group, Riverside Motorway Group and finally Engenco Limited. The same is reflected
in the following illustrated below.

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(GuruFocus.com, 2017)
Analysis of the Competitive Environment of Aurizon
The above situation reflects that Aurizon Limited operates in a perfectly competitive market
in Australia.
Close Substitutes for Aurizon’s Products
Trucking Services or Truck Load Services act as an effective substitute to Intermodal
Shipping Services rendered by Aurizon Limited in Australia. It serves as an effective
transportation system shifting cargoes across road networks (Levinson, 2015).
Elasticity of the Demand Curve of Aurizon
The demand curve for Aurizon Limited is observed to be elastic in nature such that the
demand for the intermodal and rail freight services is affected owing to changes in the price

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structure. The freight services of Aurizon are financed by the regional and national
government of Australia for helping in the reduction of prices to customers (Aurizon, 2017).
Ability of Aurizon in generating a Mark-Up
The impact of the Debbie Cyclone reflects that Aurizon has required incurring increased cost
for generating repairs and also for development of haulage lines for hauling of coals. The
same has affected the ability of Aurizon in generating an effective markup (Regan & Freed,
2017).
Production Costs and Scale
Factors of Production
The factors of production operational in Aurizon Limited that contribute in the generation of
freight services to diverse client groups are identified as under.
Manpower
The productivity of the staffs involved in conducting the operations of the company based in
Queensland region is enhanced through the involvement of needed flexibility and also the
alignment of the human resources with necessary tools. The operational crew in Queensland
was directed to go on leave during the period of low or no demand. Similarly, the
identification of roles and responsibilities for the staffs also accounted for improvement of
productivity.
Locomotives and Trains
Locomotives and trains also account for another important factor of production that helps
Aurizon in effectively conducting its freight networking. The company management
increasingly focused on improving the productivity of the same for generating greater returns.
Fuel and Energy Resources
Fuel and energy resources were employed by Aurizon in a considerable scale for running of
train and other locomotives. Developments were brought about in the designing of trains for
helping in enhancing the efficiency levels of fuel and energy consumption (Aurizon Holdings
Limited , 2016).

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Other Factors
Aurizon Limited continues its freight operations through the involvement of needed
infrastructure, technology, land, plant and equipments and also machineries that amount to
potential production factors for the company. It also consists of telecommunication resources
with computers and other signaling systems.
Grouping of Factors of Production
The manpower resources, fuel and energy resources and trains and locomotives employed by
the organization are identified to be variable factors such that the cost associated with
employing the same tends to increase with growth of production and sales. On the other hand,
the cost associated to building and machinery and plant and other types of equipments held
by the institution are identified to ideally constitute the fixed cost for the organization. The
costs associated with such factors do not increase or decrease with the increase in the level of
production and sales (Harris, 2014).
Overall Cost Structure of Aurizon’s Business
The analysis of the overall cost structure of Aurizon reflects that the company has large
amount of fixed factors compared to variable factors of production. The existence of larger
amount of fixed costs compared to variable costs potentially reflect that the company tends to
gain on greater profits and margins in periods where increased freight services are rendered
by the organization. In cases however, with lower production of services the margin and
profitability of Aurizon tend to get affected. The higher profits and margins are gained by
Aurizon during periods of high productivity owing to the fact that fixed costs tends to remain
the same and are not affected by growth in level of operations. It also reflects that Aurizon is
a larger organization in terms of size.
Macro Business Environment of Aurizon
Political Situation
The existence of political stability in Australia with also the presence of an effective
regulatory system rightly encourages the formation and growth of business enterprises in the

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region. Moreover, existence of sound governance policies potentially contributes in creating a
safer operational environment for the business organisations (Australian Government ).
Economic Situation
Rate of Inflation
Australia
The annual inflation rate in Australia is estimated to amount to below 2 to 3 percent as
targeted by the Reserve Bank of Australia. Consumer Prices were accounted to rise only by
0.2 percent that led the inflation rate to amount to 1.9 percent (Janda, 2017).
United States
The current rate of inflation in the US economy amounted to 1.39 percent while the year-to-
year inflation percentage amounted to 1.73. Further, rate of monthly inflation in US was
recorded to show a negative rate or deflation at around -0.07 percent during July 2017 (Stat
Bureau , 2017).
Unemployment Rate
Australia
The rate of unemployment in Australia amounted to 5.6 percent with a reflection on the
growth of jobs in the economy. Estimates reflect that around 27,900 jobs were generated in
the region that accounted for the reduction in unemployment rate (Hutchen, 2017).
United States
The current unemployment rate in United States is observed to have dropped to around 4.3
percent owing to the growth of jobs in the US Market (Mutikani, 2017).
Average Interest Rate
Australia
The average rate of interest in Australia is taken to increase by around eight times which
would create problems like increasing the level of mortgage in the region (McCauley, 2017).
United States

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The average rates of interest in United States as a sum for total marketable and non-
marketable debt amounted to 2.3 percent (Treausry Direct , 2017).
Boom or Recession
The Australian economy currently reflects going through a recessionary period with growth
of large number of events like shut down of the car industry with the fall in prices of property
and infrastructure. Further, the emergence of the banking crisis in Australia with also the win
of Trump as President of United States further fuelled the recessionary climate in the region
(Janda M. , 2017).
Exchange Rates and Changes of Export Country
The currency exchange rate between Australia and China taken as the exporting country for
export of services and products of the business reflects the following exchange rate.
1 AUD amounts to 5.24 Chinese Yuan.
Quality of the Main Products
Aurizon continually focuses on enhancing the quality of service through the development of
railway and logistics networks based on building effective ties with overseas companies.
Aurizon focuses on development of its base of raw materials like steel and other materials for
enhancement of its service potential (Viellaris, 2017).
Nature of Demand during Recessions
Aurizon is taken to effectively counter the recessionary period in Australia through its
significant measures associated to cost cutting and also in terms of generation reductions in
the level of capital expenditure of the organization. The same would help the company in
generating affordable prices for its logistics and coal transportation services along the region.
Further, a reduction in the level of fuel costs further contributes to such effect (Duyn, 2016).
Impact of the Economic Climate on Sales
Aurizon reflects growing demand for coal resources along different economies Japan and
South Korea in Asia along with the Indian subcontinent. Similarly, Asian economies like
Japan, China and also India are observed to be potential consumers of steel products exported
by Aurizon.

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(Aurizon , 2016)
Problems in getting access to Key Factors of Production
Aurizon with a focus on carrying out its steel production activities in China is taken to face
emerging challenges owing to the policy of the Chinese government to curb the production
steel in the region for generating a safer environment. The same would affect its possibility in
getting easy access to effective resources and employing the same for steel production (Metal
Bulletin , 2017).
Impact of Change in Exchange Rates on Imports and Exports
Analysts reflected that the exchange rates between Chinese Yuan and the Australian Dollar
would be stable in the forthcoming period. The same would thus not affect the export and
import trading activities carried out between the two countries. It would thus help Aurizon for
exporting the coal and steel products to China in an effective fashion (Conerly, 2017).

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Sustainability Practices of Business
Impact of the Production Process of Aurizon
Aurizon is required to become an active participant of the Global Reporting Initiative (GRI)
in terms of reporting its sustainability practices mainly along nine different domains. The
same is reflected as under.

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(Aurizon, 2014)
The Australian Government focuses on the generation of a regulatory environment for
checking the emission levels from business operations and also in development of efficient
supply chains. Similarly, the Australian Government also focuses on the generation of
effective regulations generating greater safety in the organisations (Aurizon, 2014).
Impact of Consumption of Product Generated by Aurizon
The impacts from the consumption of products and services rendered by Aurizon is rightly
countered through the reduction of carbon footprint by around 2.5 percent while also
enhancing the level of community engagement by around 86 percent. Further, developments
of effective partnerships are generated with the customers such that the same would help in
increasing of coal demand in the region.
Impact of Sustainability Practices on Long-Term Viability of Firm
The total consumption of coal in the OECD countries is taken to increase by around 73
percent at the close of 2035. Aurizon here acts as a active partner in the sourcing and
transportation of coal products in the region (Aurizon, 2014).
Conclusions
The analysis carried out in the report reflects on the economic situation of Australia and
China where Aurizon focuses on exporting its products. It also focuses on evaluating the
economy of United States as a potential region where large number of employees operates
along the transportation and steel development sector. The analysis also reflects on the
sustainability initiatives undertaken by Aurizon and its feasibility both in reducing the
impacts of consumption and also the initiatives undertaken by the Australian government
based on such.

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