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The effect of foreign competition on the country’s productivity is also measured.
Depending on the spending ability of the market and the economy trends of their region of interest, the investor should consider their ability to attract new consumers in a manner that will lead to maximum profit gains and growth of the business in the face of competitors.
As is indicated in the NAB Business Survey statistics, the business condition of corporations shows an unsteady state of the overall financial condition, with a noted rise in the profit levels towards the year 2012 (NAB, 2012).
When using the top-down fundamental analysis, the investor will study the trends starting at the highest level of economic indicators down to the lowest level.
Therefore, this means that they will consider the global indicators such as exchange rates, energy prices and inflation rates, before looking at national indicators such as the nation’s GDP, interest rates, the productivity level in that country.
However, in the end due to increased borrowing, the interest rate offered by banks will be increased to discourage borrowing and due to increased income from production in the local industries, the GDP will be lowered leading to decreased inflation.
According to the statistics provided by the RBA (2012) in the period where there is a drop in the GDP, there is an increase in the inflation level and this may be explained in that with a lower GDP the country’s currency is weaker hence its value is lower.
Therefore, the consumer price inflation levels have dropped making the economy a viable market for investors as consumers have the spending power and the currency is strong.
When considering the consumer price index, the current market prices and the new capital expenditure are put into consideration.
According to ABS statistics, the credit level in the Australian economy has been raising between the period of ’92 and ’08 a trend that resulted in the high inflation level, in the 2008 period (2012).
This is because there was so much capital in circulation.