Emerging Market Impacts In Australian Market

Introduction

The emerging market should be approached as the high risk but has a high return sub class for the world equities.  The risk related to the emerging market include the relatively high beta as well as illiquidity, sensitivity to the world economy as well as the investor risk appetite as well as the propensity, which is towards the volatility(Fedorova and Saleem, 2009). In Australia, there are various key challenges, which are affecting business these are as follows: political instability, absent of the reliable government, weak legal system, slow judicial process, bureaucracy and the corruption. This research is aimed to explain the challenges that have been affecting the emerging market in Australia.

Political Instability

The current political uncertainty environment in the Australia has contributed much with the situation in the country whereby the investors, households as well as businesses are holding off their spending until the election. This unfortunately could cause a subdued activity, which can cause a damage to the Australian market (Lepone, Mollica and Wright, 2013). Moreover, the overseas investors as well as the managers want to see certainty when it comes to the political environment. Their confidence has further been hampered by the falling Australian dollar, which has overwhelming sentiments offshores, which will make it to fall below the 0.90 dollars. The market is believed to stabilize at the higher level and thus it is unlikely that the equity market would be supported by the significant inflows of the offshore money.

Absent of the Reliable Government

A reliable government is a major player in the market. In Australia, the government has not been present to help with the growth of the emerging market in the country. The government can play a major role when it comes to the monetary policy as well as solving the issues of the currency inflation. The government could do some fine control when it comes to the tax policy in order for the investor to be able to move capital between the investments since there is a favourable tax status. Further, the government could legally create their respective currency. This way they will provide short-term economic boost and the companies in the country could charge more for their products.

Weak Legal System

The legal system of a given country is important to the international businesses.  The differences when it comes to the legal systems could affect the attractiveness of a country on the market. In Australia, there is a weak legal system, which has affected its market. One way is the issue of the access to justice (Lepone, Mollica and Wright, 2013). There has been a counterbalance of the administration as well as the respect for the fundamental values and the principles, which have, underpin the Australian legal system and the quality along with integrity to those administering it.  The ordinary individuals in Australia cannot get access to the legal system (Ramamurti, 2009). There has been issues relating to the cost of the legal services, which are high, there is no provision of the legal aid and there is in no justice system of delivering fairness on the cases brought before them.

Slow Judicial Process

The judicial process in the Australia have impacted negatively on their market. The level of the quality and the integrity of individuals who are administering justice is questionable (Eljelly, 2004). The ordinary Australian cannot an access to the judicial system and the efficacy of the system in the practice in the delivery of the justice is to those who need it. The slow process has been affecting their market, which makes many investors to shy off to invest in this country since their legal matters take time to be addressed (Wong, Penm, Terrell and Ching, 2004). There should be system in place where all the legal issues, which are influencing the economy, could be addressed quickly.

Bureaucracy

Bureaucracy and the excessive regulation that is also known as the red tap has impacted greatly in the Australian economy. In Australia, there have been many rules, permits, taxes, procedures as well as the requirements that could be vital when doing business in the new market (Eljelly, 2004). Many organization shy away from the business in this country. As a result of the bureaucracy, it has impeded many foreign investor to take the appropriate action in order to adapt to the changing market in the country (Ramamurti, 2009). Further, it has led to frustration as well as failure along with promoting stereotypes, which has resulted to making interpersonal relationship to be difficult.

Corruption

In Australia, it has been placed to the international watch list because of the increase in the amount of the fraud and the corruption cases.  According to the corruption perceptions Index which was done in 2016 it ranked Australia 13 in the world (Cai, Kim and Wu, 2017). Australia percentage for corruption is at seventy-nine with hundred percent being the highest. The country has been involved in the recent foreign bribery scandals as well as threats to the independent institutions (Cai, Kim, and Wu, 2017). This has greatly affected on the country economies due to the misuse of the power, unfair ways and the corruption. This has greatly caused this emerging market as well as the society to be affected.

Conclusion

Australia is an emerging market with many investors channelling their investment to this country. Just like any other country there has been challenges, which have been affecting the country. Some of these challenges are corruption, weak legal system, slow judicial process, bureaucracy and the political instability, which have been exhibited in the country. I believe with the right policies from the government and their involvement in the emerging market there could be reduction in some of these challenges if not all.

References

Cai, P., Kim, S.J. and Wu, E., 2017. Foreign Direct Investments from Emerging Markets: The Push-Pull Effects of Sovereign Credit Ratings. 

Eljelly, A.M., 2004. Liquidity?profitability tradeoff: An empirical investigation in an emerging market. International Journal of Commerce and Management, 14(2), pp.48-61. 

Fedorova, E. and Saleem, K., 2009. Volatility spillovers between stock and currency markets: Evidence from emerging Eastern Europe. 

Lepone, A., Mollica, V. and Wright, D., 2013. Technology Impact on Capital Markets Research commissioned by the Financial Services Council (FSC). 

Ramamurti, R., 2009. 13 What have we learned about emerging—market MNEs?. Emerging multinationals in emerging markets, p.399. 

Wong, W.K., Penm, J., Terrell, R.D. and Ching, K.Y., 2004. The relationship between stock markets of major developed countries and Asian emerging markets. Journal of Applied Mathematics & Decision Sciences, 8(4), pp.201-218.