INTRODUCTION:
This report will show an overview of the current state of the Australian economy and its management by the Federal government through examining economic indicators such as economic growth (GDP), unemployment, inflation and trade.
In this report you will find current and past trends and target values for these indicators and the current macroeconomic policies of the Federal Government of Australia and the RBA.
In conclusion, the report will outline if the policies implemented are suitable for the present economic environment of Australia and policy recommendations to achieve targeted economic growth, unemployment, inflation and trade outcomes.
1. ECONOMIC GROWTH:
Economic growth is an increase in the capacity of an economy to produce goods and services from one period of time to another. In simple terms, it refers to an increase in aggregate productivity.
The Australian economy expanded 0.5% in the June quarter of 2016, slowing from a downward 1.0% growth in the previous quarter and slightly below market consensus of a 0.6% growth. It was the weakest expansion since the second quarter 2015, weighed down by net trade while investment was flat and final consumption remained steady. Through the year, the economy grew by 3.3%, accelerating from a 3.1% in the March quarter, which is the strongest expansion since the June quarter 2012, bringing the annual growth of 2.9% for the 2015-2016 financial year and going 100 quarters without experiencing a
The benchmark investment rate in Australia was last recorded at 2.25%. Investment Rate in Australia found the middle value of 5.13 percent from 1990 until 2015, arriving at an unequaled high of 17.50 percent in January of 1990. Inflation Rate in Australia averaged 5.21 percent from 1951 until 2014. Customer costs in Australia rose 1.7% during the time to the December quarter 2014, the slowest yearly pace in more than two years as petrol costs dove. Australian yearly inflation rate abated to 2.3% in the second from last quarter of 2014 from 3.0 % in the past period, determined by a fall in cost of electricity, after the removal of tax duty on carbon discharge beginning early July. An alternate key variable that impacts the business is the unemployment rate. While the unemployment is staying high it is normal that RBA will keep the investment rates and trade rates low. Unemployment Rate in Australia diminished to 6.30% in February of 2015 from 6.40% in January of 2015. Unemployment Rate in Australia found to be in between 6.91% from 1978 until
Currently the Turnbull Government is creating negative growth in employment. The Government needs to implement an expansionary fiscal policy to stimulate the economy and create job growth. The expansionary fiscal policy is to improve the current economic situation, the government does this by reducing tax rates and increasing government spending. This process encourages people to put money back in the economy, while the economy is being stimulated job growth is occurring as companies have an increased money supply while there is an increase in economic
There has been a rapid growth in the service sector jobs and a strong decline in manufacturing employment (Murphy and Watson, 2009). Since the economic boom in the 1950s and 1960s, the Australian economy has been unable to stand the growth of living standards appreciated by households in that period.
Whilst the Australian economy has enjoyed an unprecedented period of economic prosperity that provided ample opportunities to address poverty, inequality and improve opportunities for the poor. The real kicker is the economy would have gotten a welcome boost if these issues had been addressed. Instead, successive governments have failed to meet our infrastructure needs, failed to plan for the future and failed their social obligations.
Economic growth is defined as a quantitative sustained increase in a nation’s output, referring to the volume of goods and services produced, over a period of time, generally per annum. It is indicated by an increase in the real GDP, which implies a rise in a nation’s economic capacity. As such, Australia’s current economic growth rate is 3% (May 2016). Inflation refers to a sustained increase in the general level of prices over a period of time, usually one year. It is measured by the percentage change in the consumer price index (CPI), which encompasses the price of a normal, weighted basket of goods and services purchased by households in the nation. Another economic issue is that of unemployment, which consists of
Figure 4.0 depicts how Australian labour productivity has increased significantly over the last two decades, but real wages lag behind significantly. One contributing factor to this could be the profit produced from the increased productivity has not necessarily been redistributed as increased wages for employees. An increase in wages will increase in consumer spending on goods and services as well as better living standards. This increase has the follow-on effect of creating additional labour requirements for the unemployed. Figure 4.1 displays the trend of how the nominal and real wage growth has been slow and even dipped into negative rates.
Outline: This article discusses the economic growth within the australian economy and its effects. It is stated that the Australian economy’s economic growth is driven mostly by immigrants rather than natural increase. The business bible shows a growth of average of 1.42 per cent being the weakest in the past 15 years. Slower growth in the economy leads to slower growth in GDP, lower standard of living, harder to reduce budget deficit and reduced productivity of labour. The drive for smaller government spending doesn’t rapidly increase standard of living. The federal budget will be hard to surplus back into.
The economy in Australia runs through the economic cycle involves in the cycle of boom and recession in a business. In an economic boom, businesses make profits by increasing the prices of their products by the consumers who are willing to spend their personal disposable income. Although, there are disadvantages during an economic cycle when it comes to recessions in the economy. Recessions can make businesses not earn profits out of its sales because consumers didn’t have the confidence to spend their money. Employees need money in order to save but the business isn’t making a profit so they have to cut down some employees because they don’t have enough money to pay all of their employees. Economic influence is an external influence because
The main issue in the article is the decline of Australian dollar against the US dollar. Upon perusing it is understood that the Australian dollar is steadily declining during the current year. The economists said that this is due to the fall of commodity prices globally. The Australia is agriculture and resource based economy, and the Australian dollar heavily depends on commodity price and terms of trade. According to IMF the reason for the falling commodity prices is the slowing of demand globally. It’s mentioned that Australia, Canada and New Zealand are the three of the worst performing currencies of 2015. In order to stimulate economy the Reserve Bank of Australia is planning to cut its rate to 1.5% before March 2016 to deal with lower GDP and low domestic demand that is increasing unemployment. Mining investment has slowed down which reduced the value of iron ore causing Capital imports to fall in Australia. If the dollar declines too far then Australia’s import will be reduced and this is difficult for businesses. Another nail in the coffin for Australian economy is the plan to raise the rates of UK and US which could further decline the value of AUD.
The Gross Domestic Product in Australia enlarged by 0.2 percent in the second quarter of 2015 above the first quarter. GDP Growth Rate in Australia was around 0.87 percent from 1959 until 2015. It reached an all-time high of 4.4 percent in the first quarter of 1976 and a record low of negative 2 percent in the second quarter of 1974. In 2013, Australia’s GDP per capita was $67,458.36 in U.S. dollars, and the United States’ was only $53,041.98. The inflation rate in Australia was documented at 1.5 percent in the second quarter of 2015. Inflation Rate in Australia was around 5.18 percent from 1951 until 2015. It reached an all-time high of 23.9 percent in the fourth part of 1951 and a record low of -1.3 percent in the second quarter of 1962 (“Australia Inflation Rate,” 2015).
This paper focuses on Australia’s business cycle. It explains factors of Australia’s business cycle, the rise and fall and how these have changed over time. This paper shows and demonstrates the key features of Australian business cycles during 2010-2015. It, specifically, identifies the chronologies in the nation’s classical cycle (expansions and contractions in the level of output) and growth cycle (periods of above-trend and below-trend rates of economic growth). Which presented an assessment of where Australia’s economy, in the past, current and future.
In the past decade, Australia’s productivity growth, the main driver of growth in income in 1990s, has not only slowed down but also fell below its long-run average as shown in Chart 1 below (OECD, 2012).
Australian economy as a whole remains cautiously optimistic, due to the Euro zone sovereign debt-related issues and lack-lustre American economic performance. Strong financial and mining sectors offset weaker retail and manufacturing performance. Unemployment rate remains fewer than
The Real GDP % forecast for Australia is currently 2.8% and expected to decrease by 0.3%. The unemployment rate is predicted to remain at 5.9%, in line with market expectations (The Australian, 2017). The consumer prices in Australia increased inflation to 2.1% in 2017, with the market expected to rise a further 2.2%, making it the highest inflation rate since 2014 (Trading Economics, 2017). The current Government Bond 10Year Yield is 2.58%, indicating a consistent and stable economic growth (Trading Economics, 2017). It is important to note the increase in strength for the interest rates of USD and EUR against the AUD. (Economist, 2017). The RBA is unlikely to raise interest prices due to debt re-payment increase, which would has a negative economic effect due to the unbalanced supply and demand ratio within the market (The Economist, 2017). In correspondence with future political uncertainty, speculation is created over AUD depreciating against the USD within the next year from 0.77 to 0.66 and against EUR from 0.71 to 0.69 (Australian Dollar Forecast, 2017).
Although the exporting and importing of goods and services have totally grown by 646% and 585% percent through the last twenty-five years, the data for last year (2014) is not an optimistic outlook. The growth rate of exporting of goods and services was -2.02%, while the growth rate of importing of goods and services was -5.81%. Both data are negative. It means Australia’s exporting and importing conditions were all decreased in last year, which had never happened in the last fifteen years. (Figure 16)