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UWA Business School
Fourth-year business and engineering student Ganesh Viswanath Natraj, from The University of Western Australia, has been named as the winner of the 2010 RBA Economics Competition.

The competition is run annually in conjunction with the UNSW Economics Society. This year, entrants were required to discuss the trends in the real exchange rate over the past decade, and then consider the economic implications for Australia.

Ganesh, who is completing a double economics major, won with his essay titled ‘Australia's Real Exchange Rate Appreciation: Determinants and Implications for the Economy.' This is the second time that a UWA student has won the prize, after Callum Jones won in 2007, the competition's inaugural year.

‘I was ecstatic at winning the RBA competition, as I believe it is the ultimate honour as an undergraduate studying economics and it is something I've been working towards for years,' said Ganesh. ‘It is a nice reward for all of the hard work I've put into my studies and is a testament to the knowledge I've gained of economic concepts and analysis.

‘It was also nice to win as I feel I have overcome my struggles with essay writing. It is an area I have improved at tremendously, particularly in making the essay more professional and readable.'

The competition, Ganesh explained, was especially enjoyable because of its focus on both macroeconomic and socio-economic factors. ‘Economic issues have a profound effect on society and the competition invites you to analyse economic trends or suggest policies to address an economic problem,' he said.

‘My essay found four fundamentals - the favourable terms of trade, a booming mining sector (responsible for the rising relative price of non-traded goods), positive real interest rate differentials and the surging current account deficit - to be the main determinants of the appreciation.'

The real exchange rate has appreciated by roughly 60% in trade-weighted terms over the last decade. The result, argued Ganesh, has been to induce the effects of the well-known "Dutch Disease". This is where the appreciation, itself caused by factors such as the booming mining industry, then causes a decline in the competitiveness of the lagging tradable sector (such as manufacturing), and a reallocation of resources from the lagging to booming sector (mining) and the non-tradable sector. The booming mining sector tends to reduce the relative price of traded goods in the manufacturing sector, squeezing their profitability.

‘The theory is strongly backed up by data that show Australia's manufacturing industry undergoing a decline in investment and employment,' said Ganesh. ‘The structural change in the economy suggests Australia is becoming more commodity-based, which would make Australia's current account and income more vulnerable to shocks in commodity prices.'

Ganesh's success has affirmed his intention to pursue a career in economics. After finishing his double degree, he hopes to complete honours in economics, before either embarking on a PhD or working for a policy-based institution such as the RBA or Treasury.

Meanwhile, Ganesh encourages other economics undergraduates to enter the RBA competition next year. ‘By writing the essay you will not only learn a lot about a current economic issue, but also how to conduct effective research and communicate your ideas in a concise and organised manner,' he said. ‘These skills are invaluable in the workplace as most jobs on offer for economists involve writing reports and research papers.'

Media Reference

Heather Merritt
Director, External Relations
UWA Business School
T: +618 6488 8171
E: [email protected]

Verity Chia
Communications Officer
UWA Business School
E: [email protected]