ECONOMICS AND INTERNATIONAL TRADE
A remarkable performance has been seen in the economy of Australia in the recent five years which is unprecedented in the history of an economy of Australia and also all other various developing economies over that period. However, this rise in the growth of Australian economy had raised various questions across the globe. The GDP growth rate is also expected to rise in the upcoming days and the reasons behind this are due to the constant increase in the expenditure of the government and the personal household expenditure.
This project will throw some light and will focus more on these reasons behind this growth by doing a proper analysis of the GDP and economic growth of the past five years. Though there was a recession in the past years of early 1990, still Australia managed to overcome that later, however, this recent growth had outnumbered the histories. This project will reveal the strong growth of the Australian government, which will bring about a change in the economy of the country as well as the growth of GDP of the country.
Gross Domestic Product (GDP) and Economic Growth
Gross domestic product or GDP is the total value of money for all the services and goods over a particular time. This GDP includes public consumption, investments in various plans or businesses, exports and imports and even private consumption too (Daley and Wood, 2015, p.23). The calculation of the GDP is given in the below figure:
The above formula depicts GDP as the Gross Domestic Product, C represents the private consumption, G represents the Expenditure of the Government, I represent the Investment of the country and NX represents the Net Exports of the country that is subtracting exports from the imports. GDP is used to find the comparison of productivity of several countries. It helps in identifying and measuring the productivity in terms of economic growth of the country. In order to identify the products, this GDP is basically divided into two parts. These parts include:
The inflation rate is not at all included in case of nominal GDP; still, it helps in increasing the economic growth of the country.
The corrected rate, which has been rectifying post inflation, is taken into account in case of Real GDP.
One of the best procedures to calculate and find the growth of an economy and the living standard is to consider Real GDP. This Real GDP shows the purchasing power of all the individuals residing in the country. The output gap gives the difference between the difference between the potential GDP and the actual GDP and can be obtained by subtracting Y* from Y (where Y* is the potential output and Y is the actual output). If the above calculation fetches a positive number, then it suggests that the aggregate supply is quite lower than that of aggregate demand and this indicates that there is a sudden rise in the inflation. However, the GDP percentage is calculated by subtracting potential GDP from the actual GDP and the result obtained is divided by the potential GDP to fetch the final percentage. If the out-group is found to be positive, then it indicates that there is a high demand, however, if the out-group is found to be negative, then it indicates that there is a low demand. The real GDP and the price level can be obtained from the supply and demand. With the rise in the level of price, there is an increase in the GDP supply, thus the output falls.
From the above diagram, LAS represents long-run aggregate supply, while SAS represents the short run supply (theguardian.com, 2018). E represents the equilibrium level, AD represents the aggregate demand and Y represents the actual output and Y* represents the potential GDP.
There is a certain increment of 0.6 percent since the past quarter while 2.8 percent over the past few years in the GDP of Australia. It is showing an increased result in the growth however, there were more expectations from the country (Burck et al. 2014, p.16). A few economists from Russia had surveyed and predicted Australia's economic growth to be 0.7 percent in the quarter of September and an overall three percent since the past year. However, in the last quarter, both the private and public sectors drove the economic growth of Australia.
There is an increase in the activity of both the public infrastructures and private business investments across various industries in Australia. According to Goodman et al. (2017, p.14), this was due to the reason as investment played a key role in the uplifting of the GDP growth rate (Hajkowicz et al. 2016, p.17). This investment had driven the growth in a much consistent way, however, in a midway; it was flattered with a sudden rise of a dwelling construction received from two LNG platforms of Australia.
The above graph depicts that there is a huge growth in between the years 1995-2000. However, there was no such sudden steep rise in the later years. Moreover, after 2015, it had fallen drastically, after which in recent years it is again raising. As published by the Australian Bureau of Statistics (ABS), the GDP figures are obtained below in the given screenshot. The below table clearly shows the change in the adjusted price of the Australian GDP, which in other words known as the economic growth of Australia. On an average, there is a growth of 3.4 percent of GDP per year. However, the graph further states that there is a decrease of 1.6 percent of economic growth in the year 2009. However, this growth was a remarkable as Australia was one of the few countries that had shown growth of GDP in the year 2009.
shows actually the fluctuation chart of their GDP. The above graph represents the trend and seasonally adjusted fluctuation of the GDP. it is pretty clear from the above chart that the seasonally adjusted GDP had gone below zero quite a number of times in the recent years. However, the trend had not gone beyond zero since the past years.
Analysis of Australian Government Policies
With the intervention of the Australian Government in achieving a quite, a heavy number of the outcomes in the policy include the improvement of social equity. At the same time, the government also tries to address the several failures of the market by further distributing their resources. In order to implement their policies, the Government of Australia had used one mechanism of direct expenditure (Summers, 2015, p.64). However, this type of spending has a mere advantage over the mechanisms of policies, which includes tax expenditures, loans, guarantees, and regulations too. Now in order to make this more clear and transparent, the Australian Government determines the sustainability and distribution and the burdens too. The Government had also allowed the community to make their Governments accountable in case of taking any types of wrong decisions. The more the accountability, the more the Government becomes effective in achieving its objectives.
Growth in real and nominal terms
The involvement of the Australian government in the economic activity involves in spending to promote the GDP in taking these measures. As a result, it gets two benefits parallelly. Firstly, it helps in providing a good base for the much-spent time in the growth of an economy.
Though they are not similar to the dollars, still it gives a meaningful comparison between the past years of an economy with the present ones. Secondly, the intervention of the Australian Government in Australian Economy helps much in the analysation of the social science.
Growth in policy decisions
In the recent years, the growth had reflected much both in the increment of various measures of policies and the measures of the cost (Bloch et al. 2015, p.11). Since the announcement of the total number of decisions, which also include savings and tax measures, the government of Australia had made an enormous improvement in the decision-making policy. As seen in Figure 8, the number of measures taken by the Australian Government is increasing gradually years after years.
As per the policies and decisions are taken by the Australian Government, the below statistics reflects the growth rate of the real GDP of Australia from the year 2012 until 2017 with the rise in the projections until the year 2022. According to Jarrett and Anderson, (2017, p.20), it is clearly seen from the below graph, that Australia had grown on an average of 2.27 percent in the past years.
One of the primary and foremost indicators to determine the economic growth of a country is the GDP. It helps in determining the health and state of the economy of the country.
Australia Unemployment Rate
With the steady increase in the GDP, the Australian Government had made a steady move in their unemployment rate. The government had worked hard in adjusting the unemployment rate and fixed the same at 5.5 percent in the month of March of 2018. The economy of Australia had been able to add almost 5000 jobs and in return, the unemployment number drastically reduced to almost 2500. This rate of unemployment was at an average of 6.88 percent since the years 1978 until the year 2018, reaching at an altitude of 11.20 percent in the month of December 1992. This had literally recorded a decrease or low of 4 percent in the month of February of 2008.
In the month of March, these figures had reduced by two thousand four hundred. The number had reduced to seven lakh thirty thousand two hundred only. However, the ones who were looking for a full-time work had increased the number by nine thousand three hundred. This number had reduced to five lakhs twenty-two thousand four hundred only. While the ones who were hunting for only part-time work had reduced by eleven thousand seven hundred. The number had reduced to two lakh seven thousand eight hundred only.
The Australian Government had taken certain steps to increase the number of employment by almost four thousand nine hundred and this number had increased to one crore twenty-four lakh eighty-four thousand one hundred. That was an enormous gigantic increase in the figures. However, the part-time employment had been increased to twenty-four thousand eight hundred and the total figure had risen to thirty-nine lakh and seventy thousand. There is a sudden decrease in the number of full-time employment, which was nineteen thousand nine hundred, and it resulted in the total number to go down to eighty-five lakh fourteen thousand one hundred only.
The participation rate of the labor force had stepped down to 65.5 percent from 65.6 percent in a single month and this resulted in the expectation which was a slightly more which was assumed to 65.7 percent (Summers, 2014, p.68). However, the average monthly working hours of all the jobs were increased to 4.5 million hours (almost 0.26 percent) to 1,740.4 million hours. In the meantime, the ratio of employment to population got much steeper to 61.9 percent that what was earlier at 62.0 percent.
Growth of the Industries
The gentle rise in the growth in Australian economy is the result of the growth of the industries where the major sectors include the service sectors and the mining sectors. However, the export of iron ore is also increasing rapidly in the country, which also increases the growth of the industries across Australia. Since the country's annual growth had risen to three percent, hence the performance of the economy is also rising in the Australian territories. Moreover, the supply and demand had partly affected the Growth of GDP of the whole country. Most importantly, there is a high involvement of the consumers and the government, which influences the economic activity of Australia.
The main reason for the growth of these industries in Australia is that the Australian government had worked endlessly in reducing the number of unemployment throughout the country, which as a result boosted the industrialists to grow and expand their business across the country. This in turn also helped them to increase their infrastructures and thus resulted in exporting machinery across the globe (Menegaki, 2014, p.35). While expanding the same across the globe, the industrialists had also enriched themselves, which helped them to increase the number of the employees across the country. The mining industry has also played a huge role in this development. As a result, the overall GDP of the country was increased and made the unemployment rate stable.
Lastly, the service sectors also played a significant role in the development of the country. The economy of Australia had increased since the involvement of the software industry in the country. According to Miller et al. (2015, p.18), these industries get several projects from outside the country too. Both the private sectors and the public sectors had played a significant role by driving the economy of the country extensively. This also helps in outsourcing which as a result makes a gentle economic growth of the country. A rise in the rate of consumption along with falling rate of savings from 5.3% to 4.6% shows that unstable drop in the rate of savings requires robust improvement.
Since the uplift of the economic growth of Australia, the Government had played a significant role in increasing their domestic GDP. Hence, as a result, it is recommended for them to maintain this growth all over the years, which will enable them to lead from other countries in the upcoming days. As seen in Figure 8, it is clear that there is a high increase in the number of measures across the country, which has been seen since 2012. However, if they can continue to give this type of efforts in the upcoming days, then they can easily achieve the numbers mentioned in Figure 8.
This project had highlighted the essential measures in order to increase the GDP and economy growth of Australia. Moreover, the budget process had also provided a robust analysis of the spending proposals proposed by the Australian Government. This project had highlighted the demand graph as well as the growth of GDP until the recent years. The fluctuation chart of GDP had also been analysed with the total number of measures taken by the government. Lastly, the actions taken by the Australian Government in order to increase the economic growth of the country is also highlighted. The report has highlighted on the industry trends that are seen in the country Australia. Furthermore, the merger of the international trade with the GDP growth has helped in enriching the growth of the companies operating in world Economy.
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