A Study On Australian Economic Trends In The Last Five Years

Australia: Economic Overview

In the last few decades, the global economic scenario has experienced huge development and dynamics in its domain which can be attributed to the growth and modifications of the economies of the different countries as well as to the international phenomena of immense significance like that of Globalization, trade liberalizations, industrial and technological innovations and others, which in turn has led to the increase in the inclusion and integration as well as connectivity of the different economies across the globe with time.

Over the years, different economies have emerged as influencing and globally dominating economies and many lost their positions as globally dominant economies over time. However, there have always been several economies in the global economic scenario, who have maintained their economic growth and prosperity consistently, despite discrete fluctuations and dynamics. Australia has been one such globally dominant economies, which have over the years developed impressively, showing positive and robust performance in almost all the economic indicators and a high growth trend in the economy as a whole, much of which can be attributed to the increasing growth of industrial and commercial prospects, the country’s robust economic ties with other major countries across the globe and the stable and robust government and policy framework which has over the years contributed in developing the country as a whole.

In this context, the concerned report tries to explore and study the economic trends and the overall performance of the economy of Australia in the last five years, that is in the period of 2012-2017, taking into account the fact that in the contemporary period the country has experienced considerable fluctuations in the economic domain due to both endogenous activities as well as exogenous factors happening outside the economy itself but having considerable impacts on the economy. The report tries to observe the dynamics in the major macroeconomic parameters in the country during the concerned period and also tries to analyse the policy framework present in the country in this respect. Apart from that the report discusses the industrial shifts and industries which have been growing in the contemporary period, thereby exploring the reasons behind the growth of the same.

As discussed above, the economy of Australia is an example of a highly developed and visibly stable and probably the largest mixed economy in the global scenario. The country, ranking fourth globally in terms of Nominal GDP and second in terms of total wealth of the adult population, is known for its gradual growth and visible stability which in turn have contributed to the industrial development and the economic prosperity of the country[4]. The country has enjoyed the status of a mining and technological giant in the global framework for decades and has developed huge multi-lateral and prosperous long-term trade and commerce relationships with all parts of the globe which has also contributed to the increasing development of the economy.

Keeping this into consideration, the following section of the report tries to analyse and interpret the dynamics which the economy of the country has been experiencing in the last five years, by observing the trends in the performance of the major economic indicators of the country.

Australian Economic Trends in the Last Five Years

The economic growth and performance of a country can be measured and analysing the trends or movements of some macroeconomic indicators of immense significance for the economy, which primarily include the indicators like GDP, inflation, unemployment and others. These indicators and their dynamics collectively as well as individually reflect the how well the economy in consideration is performing.

The primary and the most important economic indicator which is widely used to observe the performance of an economy is the Gross Domestic Product and the growth of the same over the years[5]. The GDP of a country within a period shows the value of the goods and services which are produced within the geographical domain of the same in that particular period. Taking this into consideration, the GDP of Australia in the last five years can be seen as follows:

Figure 1: GDP of Australia (2012-2017)

In spite of the considerable stability in the economic growth of the country over the years, in the last few years, the GDP of the country is surprisingly found to be decreasing gradually. In the last five years, the GDP of the country decreased from 1538 billion to almost 1204 billion which is quite unusual for the country, given the fact that the country had been prospering considerably and stably over the decades. To understand the dynamics in the GDP statistics of the country, the growth rate of the same in the period of concern is seen as follows:

Figure 2: GDP Growth Rate of Australia (2012-2017)

From the above figure, it is evident that the growth rate of the GDP of Australia has been subjected to considerable fluctuations in the last five years. However, these fluctuations have been positive as well as negative, with one major trough in late 2016. The economy however recovered from the visible dip abruptly by the beginning of 2017. However, the growth rate trends of the GDP in the country in the last five years did not show any visible positive trend, which is also augmented by the observation of falling GDP the country in the period under consideration[8].

The GDP of a country however does not fully reflect the individual economic wellbeing of the population of the country, to observe which the per-capita GDP of the country is taken into account, which measures the average income or economic welfare of the population in the country. Keeping this into consideration, the per-capita GDP of Australia can be seen as follows:

Figure 3: Per-Capita GDP of Australia (2012-2017)

As is evident from the above figure, the per-capita GDP of Australia has increased consistently over the last few years, which in turn is a contradiction to the disappointing trends of the GDP itself in the country. However, the per-capita GDP being a nominal indicator does not reflect on the actual purchasing power and economic well-being of the individuals of the country, which can be thus taken into account by measuring the per-capita GDP in terms of the Purchasing Power Parity index. Keeping this into consideration the PPP adjusted per-capita GDP of Australia over the last five years, can be seen as follows:

Dynamics in the Gross Domestic Product and Its Growth Rates in Australia

Figure 4: PPP Adjusted Per-Capita GDP of Australia in the last five years

This is one of the most appropriate indicator for the economic well-being of the population of the country as it measures the economic welfare and purchasing power in the real terms. Australia, in this aspect is seen to be performing well as the PPP adjusted per-capita GDP of the country increased visibly over the last five years.

However, only looking into the GDP dynamics of the country to understand the macroeconomic performance of Australia in the last five years can be over-generalization and biased as there are other indicators of considerable significance which contribute hugely in the dynamics of the economy of the country. The following section of the report tries to take into account these factors and observe their performance in Australia in the last five years.

The inflation dynamics in a country shows the overall price levels prevailing in the country at a point of time, which is a significant indicator of economic health of the country as both very high price levels as well as very low-price levels are detrimental for the economic well-being and prosperity of the population of the country. While a very high price level can lead to lack of purchasing power of the consumers a very low level of price can lead to lack of production and economic stagnation.

Keeping this into account the rate of inflation in Australia over the years can be seen as follows:

Figure 5: Inflation rate in Australia (2012-2017)

Inflation in Australia can be seen to be experiencing considerable fluctuations in the last five years (2012-2017). From 2012 till the end quarter of 2014, the rate of inflation went on increasing in the country, following which the rate of inflation decreased considerably and barring several insignificant fluctuations, the rate remained considerably low till 2016[13]. However, in the last year, the rate of inflation increased to a visible extent from 1% to nearly 2%. However, inflation rate is still within the manageable range in the country.

Another macroeconomic indicator of considerable importance with direct linkage with the inflation of the country is the unemployment rate, which shows the labour market conditions in the economy. The unemployment rate of Australia, in this context, in the last five years, can be seen as follows:

Figure 6: Unemployment rate in Australia (2012-2017)

As is evident from the above figure, the unemployment rate increased in the country considerably till 2015. However, from 2016, it decreased considerably and though considerable fluctuations are present in the trend of the same, in the last couple of years the rate has been comparatively lower than what prevailed in 2012-2015, implying that jobs are getting created and the individual economic welfare of the population of the country is increasing which can also be seen from the increasing per-capita GDP of Australia in the last few years.

Another important economic indicator which shows the welfare of the population of the country in terms of their aggregate demand, thereby showing the overall productivity and economic growth of the country is that of the consumption expenditure of the population of the country. Keeping this into consideration, the trend in the consumption expenditures of Australia over the last five years can be seen as follows:

Rate of Inflation in Australia over the Last Five Years

Figure 7: Expenditure in consumption in Australia (2012-2017)

The country shows a steady increase without any negative fluctuation and an almost linear trend in the increase in the consumption expenditure in the country in the last five years. This increase can be due to the increase in demand or due to the increase in price levels[17]. However, given the fact that the inflation in the country is at moderate levels and the employment is increasing much of the increase in the consumption expenditure in Australia can be attributed to the increase in the aggregate demand in the country.

From the trends observed in the different macroeconomic indicators for Australia over the last five years, it can be asserted that despite the decrease in the overall GDP of the country, the overall economy of Australia has been performing more or less impressively as can be seen from the stability of the inflation rate, increasing level of consumption expenditure and a falling unemployment rate in the country along with an increasing PPP adjusted per-capita GDP of the country.

One of the primary reason behind the impressive performance of the economy of Australia is the robust and insightful as well as efficient policy framework designed by the government of the country over time. Australia, in spite of a temporary slow down in its economic growth, can be seen to be enjoying higher economic growth than many of the globally eminent and developed economies in the contemporary period:

Figure 8: Australia leading many countries in terms of economic growth (2017)

This can be attributed to the stability of the overall policy framework of the economy of the country, the major components of the same, contributing to the growth of the economy can be discussed as follows:

The economy of the country concerned, as discussed above, has been known for its inherent stability, which comes from the stability in the economic policy framework. The fiscal as well as the monetary policy frameworks of the country consist of several inherent stimuli, which help the country during the crisis period by automatically adapting to the situation. The most eminent example of their efficiency can be seen during the time of the Global Financial Crisis. Due to their ability to adapt, the economy of the country sailed through one of the worst economic crisis which had immense negative implications on other global economies[19].
The economic policies of the country support industries and expansion of businesses in the country and create favourable and pro-business environment in the economy, shielding and aiding the small and medium enterprises from both domestic as well as international competitions, which help in the industrial growth of the country.
Australia has a pro-trade and highly liberated policy framework which attracts foreign investors in the country, which can be seen as follows:

Figure 9: FDI in Australia over the years

In spite of considerable fluctuations, FDI is seen to be considerably high in the country, which is also a contributing factor to the growth of the economy of Australia.

One of the primary focus of the policy framework of the country is that of creation of employment. Australian policy framework has always been a pro-employment generation one and in the last year itself there were nearly 300,000 new jobs created in the economy, which is one of the primary contributors towards the economic prosperity of a major share of the population of the country[21].
The government follows a deficit-exit strategy in terms of government spending structure, where the real growth of government expenditure is held to a nominal 2% till surplus is generated and the government also has the power to vary the tax collections as per the need of the situations and for deficit financing.

As mentioned above the economy of Australia is a pro-industry and business economy, known for its highly developed manufacturing industries which developed gradually over the years. However, in the recent period, the industrial aspect of the country is experiencing a sectoral shift in terms of a highly growing service sector and a shrinking manufacturing and basic industrial sector. This can be seen with the help of the following figure:

Figure 10: Sectoral changes in the types of industries in Australia

As can be seen from the above figure, the service industry has steadily been growing in Australia over the years whereas the mining, construction, manufacturing and agricultural industries have been shrinking in size. This can be seen more evidently seen in the nature of job creation in the country in 2017:

Figure 11: Sector wise job creation in Australia (2017)

From the above figure, it can be seen that while a considerable number of new jobs have been created in the different service sector industries, jobs have however been lost in the agriculture, mining, construction and manufacturing sectors.

Unemployment Rate in the Last Five Years

In the contemporary period the Australian economy has been experiencing development of considerable amount of capital and investments which can be seen as follows:

Figure 12: Capital formation in Australia over the years

This in turn has led to a sectoral shift in the economy from manufacturing and labour-intensive industries to capital-industry and high-skill based service sector industries. Apart from this the quality as well as the skill levels of the workers in the economy have also been increasing over the years, which have augmented the growth of the service sector industries in the country[25].

Conclusion

The above discussion asserts that the economy of Australia, being one of the most stable economies in the global framework over the decades, have however been facing considerable fluctuations in the economic performance over the last five years as is evident from the dynamics and trends seen in its major macroeconomic indicators. The GDP of the country can be seen to be decreasing to some extent, while the per-capita GDP is seen to be growing. The inflation is in a moderately high level and the unemployment rate can be found to be decreasing. Overall, the economy is seen to be performing well, much of which can be attributed to the stable and robust policy framework in the country. The economy of the country into consideration can also be seen to be shifting from manufacturing and basic industries to capital-intensive service sector industries in the recent periods, which can be attributed to the increasing capital formation and the development of skill and quality in the overall work force of the country.

References

Budget.gov.au. “Budget 2016-17 – Sticking to our national economic plan for jobs and growth in a stronger, new and more diversified economy”. Budget.gov.au, 2018. Online. Internet. 14 May 2018. . Available: https://budget.gov.au/2016-17/content/glossies/jobs-growth/html/.

Bushouse, Brenda K. “Leveraging Nonprofit and Voluntary Action Research to Inform Public Policy.” Policy Studies Journal 45.1 (2017): 50-73.

Butlin, Noel George. Investment in Australian economic development, 1861-1900. Cambridge University Press, 2013.

Damar, H. Evren, Reint Gropp, and Adi Mordel. “Banks’ financial distress, lending supply and consumption expenditure.” (2014).

Dyster, Barrie, and David Meredith. Australia in the global economy: continuity and change. Cambridge University Press, 2012.

Gould, John Dennis. Economic growth in history: survey and analysis. Routledge, 2013.

Gregory, R. G., and Ralph E. Smith. “15 Unemployment, Inflation and Job Creation Policies in Australia.” Inflation and Unemployment: Theory, Experience and Policy Making(2016): 325.

Groenewegen, Peter, and Bruce McFarlane. A History of Australian Economic Thought (Routledge Revivals). Routledge, 2014.

Hakansson, Hakan, ed. Industrial Technological Development (Routledge Revivals): A Network Approach. Routledge, 2015.

Hartwell, Ronald Max. The industrial revolution and economic growth. Vol. 4. Taylor & Francis, 2017.

Hatfield-Dodds, Steve, et al. “Australia is ‘free to choose’economic growth and falling environmental pressures.” Nature 527.7576 (2015): 49.

Mander, Jerry, ed. The case against the global economy: and for a turn towards localization. Routledge, 2014.

McLean, I. W. (2012). Why Australia prospered: The shifting sources of economic growth. Princeton University Press.

Mosco, Vincent. “Political Economy.” The Routledge Companion to Global Popular Culture. Routledge, 2014. 35-44.

Rba.gov.au. “The Changing Nature of the Australian Workforce | Speeches | RBA”. Reserve Bank of Australia, 2018. Online. Internet. 14 May 2018. . Available: https://www.rba.gov.au/speeches/2016/sp-so-2016-09-21.html.

Consumption Expenditure

Tradingeconomics.com. “Australia Consumer Spending | 1959-2018 | Data | Chart | Calendar”. Tradingeconomics.com, 2018. Online. Internet. 14 May 2018. . Available: https://tradingeconomics.com/australia/consumer-spending.

Tradingeconomics.com. “Australia Foreign Direct Investment | 1992-2018 | Data | Chart | Calendar”. Tradingeconomics.com, 2018. Online. Internet. 14 May 2018. . Available: https://tradingeconomics.com/australia/foreign-direct-investment.

Tradingeconomics.com. “Australia Gross Fixed Capital Formation | 1959-2018 | Data | Chart”. Tradingeconomics.com, 2018. Online. Internet. 14 May 2018. . Available: https://tradingeconomics.com/australia/gross-fixed-capital-formation.

Tradingeconomics.com. “Australia Unemployment Rate | 1978-2018 | Data | Chart | Calendar”. Tradingeconomics.com, 2018. Online. Internet. 14 May 2018. . Available: https://tradingeconomics.com/australia/unemployment-rate.

[1] Mander, Jerry, ed. The case against the global economy: and for a turn towards localization. Routledge, 2014.

[2] Mosco, Vincent. “Political Economy.” The Routledge Companion to Global Popular Culture. Routledge, 2014. 35-44.

[3] Dyster, Barrie, and David Meredith. Australia in the global economy: continuity and change. Cambridge University Press, 2012.

[4] Groenewegen, Peter, and Bruce McFarlane. A History of Australian Economic Thought (Routledge Revivals). Routledge, 2014.

[5] McLean, I. W. (2012). Why Australia prospered: The shifting sources of economic growth. Princeton University Press.

[8] Butlin, Noel George. Investment in Australian economic development, 1861-1900. Cambridge University Press, 2013.

[11] Hartwell, Ronald Max. The industrial revolution and economic growth. Vol. 4. Taylor & Francis, 2017.

[13] Gould, John Dennis. Economic growth in history: survey and analysis. Routledge, 2013.

[14] Tradingeconomics.com. “Australia Unemployment Rate | 1978-2018 | Data | Chart | Calendar”. Tradingeconomics.com, 2018. Online. Internet. 14 May 2018. . Available: https://tradingeconomics.com/australia/unemployment-rate.

[15] Gregory, R. G., and Ralph E. Smith. “15 Unemployment, Inflation and Job Creation Policies in Australia.” Inflation and Unemployment: Theory, Experience and Policy Making(2016): 325.

[16] Tradingeconomics.com. “Australia Consumer Spending | 1959-2018 | Data | Chart | Calendar”. Tradingeconomics.com, 2018. Online. Internet. 14 May 2018. . Available: https://tradingeconomics.com/australia/consumer-spending.

[17] Damar, H. Evren, Reint Gropp, and Adi Mordel. “Banks’ financial distress, lending supply and consumption expenditure.” (2014).

[18] Budget.gov.au. “Budget 2016-17 – Sticking to our national economic plan for jobs and growth in a stronger, new and more diversified economy”. Budget.gov.au, 2018. Online. Internet. 14 May 2018. . Available: https://budget.gov.au/2016-17/content/glossies/jobs-growth/html/.

[19] Bushouse, Brenda K. “Leveraging Nonprofit and Voluntary Action Research to Inform Public Policy.” Policy Studies Journal 45.1 (2017): 50-73.

[20] Tradingeconomics.com. “Australia Foreign Direct Investment | 1992-2018 | Data | Chart | Calendar”. Tradingeconomics.com, 2018. Online. Internet. 14 May 2018. . Available: https://tradingeconomics.com/australia/foreign-direct-investment.

[21] Hatfield-Dodds, Steve, et al. “Australia is ‘free to choose’economic growth and falling environmental pressures.” Nature 527.7576 (2015): 49.

[22] Rba.gov.au, “The Changing Nature of the Australian Workforce | Speeches | RBA”, Reserve Bank of Australia, 2018, online, Internet, 14 May 2018. , Available: https://www.rba.gov.au/speeches/2016/sp-so-2016-09-21.html.

[23] Budget.gov.au. “Budget 2016-17 – Sticking to our national economic plan for jobs and growth in a stronger, new and more diversified economy”. Budget.gov.au, 2018. Online. Internet. 14 May 2018. . Available: https://budget.gov.au/2016-17/content/glossies/jobs-growth/html/.

[24] Tradingeconomics.com, “Australia Gross Fixed Capital Formation | 1959-2018 | Data | Chart”, Tradingeconomics.com, 2018, online, Internet, 14 May 2018. , Available: https://tradingeconomics.com/australia/gross-fixed-capital-formation.

[25] Hakansson, Hakan, ed. Industrial Technological Development (Routledge Revivals): A Network Approach. Routledge, 2015.

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