Australia is a country located beside the Pacific and Indian oceans. The country whose capital is in Canberra has cities such as Adelaide, Perth, Melbourne, Brisbane, and Sydney. Australia is classified among the best economies in the world. It has one of the most successful mixed economies characterized by low poverty rate and high gross domestic product (Nieuwenhuysen, Lloyd & Mead, 2011). Australia’s free market is made up of components such as financing, services, manufacturing, and trade. Australian has recorded a tremendous economic growth over the last ten years with its annual gross domestic product averaging at 3.46%. Economic growth rate recorded a steep rise from 2.4% to 3.1 in June 2018. The 3.1 Annual growth is a collection of quarterly growths of 1.01% in March, 0.54% in December and 0.52% in September. The increase in growth rate has increased output rate to match the rate of growth in jobs which had risen to an unsustainable level of 3.5% in 2017 (Hutchens, 2018).
The growth rate is currently at a strong annual rate of 3.4%. This is beyond the growth rate anticipated in June. According to the Bureau of statistics; this hastened pace of growth was as a result of mining commodities and exports. Exports are the greatest contributor to the increase in gross domestic product accounting for 50%.On the other hand, a third of the increase has been attributed to the increase in government spending. Government spending and household consumption are together referred to as final consumption expenditure. These two have contributed a significant percentage to the growth of Australia’s Growth Domestic Product (Hutchens, 2018). The Performance of the Australian economy is evaluated through the use of a Gross domestic product which is viewed as the most important measure of Economic growth.GDP figures are published on the quarterly and annual basis by the Australian Bureau of statistics.
The Australian Economy has maintained its resiliency and stability over the last ten years despite major forces such as the decline in the mining sector. No recession has been experienced over that period. With a gross domestic product of A $1.69 trillion, it has remained to be among the best economies in the world. It has stood out to be the only economy in the developed world to have experienced moments of uninterrupted growth for over the last twenty years. From 1991 Australia has not had a negative GDP growth (Coghlan, 2011). The Last ten years have stood out as the period in which the country has experienced the longest growth period in the past 50 years with its average annum growth reaching a high of 3.2%.20 years of pure economic growth is a trend which has not been experienced before not only in Australia but also in other Developed Countries. Although the country has experienced a period of unprecedented economic growth, its rate of growth slowed down 0.7 in 2009’s March quarter and the period between 2000 and 2001. Despite these economic hitches, however, the economy has not experienced negative economic growth. Despite the positive growth, however, a conspicuous rise in the rate of unemployment was caused by the two slowdowns in economic activity (Balcerowicz & Rzonca, 2015). This remarkable economic performance can be attributed to many factors.
Population growth
Growth in the country’s population is one of the factors that contribute to economic growth. With the growth in the population comes an increase in the availability of human resources. A growing population followed by a lack of growth in employment opportunities can, however, be a cause of unemployment. Australia has experienced steady growth in its population from 21.1 Million in 2008 to its current population of about 24.7 million. This increase in population has increased the number of employees available to offer their skills in the labor market. With the easy availability of different categories of employees the country’s output. This has in return spurred economic growth (Groenewegen & McFarlane,2014).
Human resources are considered to be one of the most important determinants of a Country’s economic growth. Their contribution to the economy does not only depend on the quantity but also the quality of the human resources available. This quality is determined by level and quality of education, training, creative abilities and skills possessed. Australia is known to have a well trained and skilled workforce. The rising Australian population has also led to the increase in the number of available skills and competencies. The increase in Australia’s population has therefore been one of the factors that have led to the resiliency of the Australian Economy (McLean, 2013).
The rise of China as an economic giant
The Economy of China is the world’s largest by purchasing power and the second largest regarding the gross domestic product. China Economy has also been classified as the world’s fastest growing economy with an annual growth rate of 10%. These aspects make China’s economy a force to reckon with. After the global financial crisis, the China Economy has experienced a boom leading to one of the strongest economic giants in the world. Australia has been a major beneficiary of the China economic boom (McCombie & Thirlwall, 2016).
China’s economic prosperity has seen a rise in trade between China and Australia. Several Australian businesses have benefited from well-paying trade deals with China. China and Australia have strong economic ties. Their trade is based on mutual benefits with Australia being the tenth largest Consumer of China’s Exports, Fifth largest supplier of China’s imports and sixth largest trading partner to China (Smyth & Buchanan,2013). Approximately 13% of manufactured Imports to Australia are from China. The emergence of China as an economic giant has therefore played a role in Australia’s economic growth. Trade between Australia and China has also been fuelled by the signing of the Chinese free trade Agreement. The emergence of China has provided Australian businesses with new opportunities and enabled them to take advantage of new global markets. The bilateral trade between the two countries is worth over AUD$100 billion (Hutchens, 2018). The rapid growth of Australian business attributed to trade with China has therefore been one of the major reasons for Australia’s economic growth.
However, the over-reliance on China by Australia can be viewed as a risky affair. While multiple Australian businesses have benefited from the Chinese Boom, the economy of China is characterized by a lot of uncertainty. The Chinese government has been criticized for handling its massive debts crisis poorly. There are also growing concerns over the stability of China’s currency, reserves for its foreign currency and fluctuations in the prices of commodities. The debt-fuelled growth, therefore, puts China at risk of economic crisis and a possible recession shortly. Because Australia relies on China, therefore, it will be largely exposed and likely to be affected in case of such a crisis (Hartwell, 2017). A slowdown in the economy of China is likely to have a negative impact on the economy of Australia.
Australia’s Mining Boom
The mining boom has also played a major role in the growth of the Australian economy. Australian mining boom has not only increased the expenditure of the mining sector but also increased the Country’s mining exports. The mining boom represents the greatest shock that has ever been experienced by the Australian economy. Over the period, the country’s living standards have improved significantly as a result of the boom. The boom had by 2013 lowered Australia’s unemployment rate by 1.25%, increased real wages by 6% and increased the country’s disposable income by 13.Mining contributes about 60% of the Australian Exports and about 6% to the gross domestic product. It has also led to the initiation of billions US dollars worth of projects and contributed about $174 billion in earnings from exports. With this high injection into the Economy, Mining boom has significantly contributed to the exceptional growth in the Australian Economy. However, the shock created by the mining boom has come with its drawbacks. Some parts of the economy have been affected negatively. The appreciation of the Australian dollar has hit other industries such as agriculture and manufacturing which are also exposed to trade.
The Australian policy response to the global financial crisis
A series of policy responses by the Australian Government followed the 2007-2008 global financial crisis that hit major world economies. In spite of all these challenges, the Australian economy was doing better than other major economies. The reason for this was the timely response of the Reserve Bank of Australia and the Australian Government meant to mitigate the effects of the financial crisis. A sound regulation of the Australian banking system has also played a major role in the current stability of the Australian economy. This is evident in the fact that the Australian economy recorded a 0.4% growth in the first quarter after the recession while other global economies were recording negative growth. These policy responses included acting to ensure the stability of the country’s financial system and facilitating the flow of credit to the economy.
Despite its commendable economic growth over the last ten years, Australia faces multiple challenges in enhancing its growth rates.
Unemployment
The rate of unemployment in a country refers to the percentage of people among the total labor force without jobs. Unemployment increases with a decrease in economic activity and decreases with an increase in economic activity. Despite the high rate of economic growth Australia still faces mild unemployment. For almost a year now the country’s unemployment rate has remained between 5.4 to 5.6 %. The main reason why Australia’s unemployment rate seems to be stuck at this percentage is that of the increasing number of people entering the labor market in search of jobs. The unemployment rate can hurt the economy by depriving it of revenue from consumer spending and affecting its productivity. Although Australia’s unemployment rate is not so high, it has hindered Australia from realizing its full economic potential. Its unemployment rate currently stands at 708,800 People. The country recorded a steady rise in unemployment from 5.23% in 2012, to 6.07% in 2014 (Hatfield-Dodds et al., 2015). This has however been declining but despite the declining rate of unemployment a significant part of its population is still unemployed,
Poverty and the gap between the rich and poor
Poverty in Australia has been growing over the last ten years. It is estimated that more than 2.9 Million Australians are living below the poverty line. These statistics represent 13.3% of the Australian population. Australia’s inequality and poverty are caused by factors such as access to health services, housing, education, income, and work. 731,100 Australian Children out of which 17.5% are children below the age of 15. Australia’s rich population has been getting richer while on the other hand the poor have been getting poorer (Podger & Trewin, 2013). These wage imbalances have been the cause of social fragmentation in a country run by big businesses.
High Cost of Living
The rising cost of living in Australia has left many people struggling to pay for basic goods and services. Australia has recorded one of the fastest rises in the cost of life basics such as transport and fuel (Meredith & Dyster, 2012). The rise in the cost of basics has not been followed by a subsequent growth in wages. In 2017 for example, the cost of living rose by 2%, while the people’s living cost rose by 1% over the same period (Taylor, 2018). For the poorer folks, their living cost index has raised consumer price index. The rise in living costs has put pressure on Australians and made it hard for them to afford life basics. The economy is characterized by an increased cost of living whereby the prices of almost all goods have increased, lack of wage growth, inflated house rates, unaffordability of housing, money problems, financial insecurity, and economic instability.
Escalation of US-China Trade wars
As its main trade partner, the growth of Chinese economy is largely dependent on China’s economic boom; instability in the Chinese economy is likely to create a lot of uncertainty in Australia’s future economic growth. The mounting trade war between China and the US is quite likely to be a major setback to Australian traders. The slapping of $200bn by Trump administration on China’s imports is already being felt in Australia through a slowing economic momentum. The projected economic growth towards 2019 likely to be a negative one (Farrer, 2018).
References
Balcerowicz, L., & Rzonca, A. (2015). Puzzles of economic growth. Washington, District of Columbia: World Bank Group.
Coghlan, T. A. (2011). Labour and industry in Australia. Cambridge Books.
Farrer, M. (2018). Australia’s economic growth at risk as US-China trade war escalates. The Guardian. Retrieved from https://www.theguardian.com/business/2018/sep/19/australias-economic-growth-at-risk-as-us-china-trade-war-escalates
Groenewegen, P., & McFarlane, B. (2014). A History of Australian Economic Thought (Routledge Revivals). Routledge.
Hartwell, R. M. (2017). The industrial revolution and economic growth. Routledge.
Hatfield-Dodds, S., Schandl, H., Adams, P. D., Baynes, T. M., Brinsmead, T. S., Bryan, B. A., … & McCallum, R. (2015). Australia is ‘free to choose’economic growth and falling environmental pressures. Nature, 527(7576), 49.
Hutchens, G. (2018). Australia’s GDP growth jumps to 3.1% on the back of mining exports. The Guardian. Retrieved from https://www.theguardian.com/business/2018/jun/06/australias-gdp-growth-jumps-to-31-on-back-of-mining-exports
Hutchens, G. (2018). Australia’s economy hits a 3.4% annual growth rate, exceeding expectations. The Guardian. Retrieved from https://www.theguardian.com/business/2018/sep/05/australias-economic-growth-exceeds-expectations-at-34
Meredith, D., & Dyster, B. (2012). Australia in the global economy: Continuity and change. Cambridge: Cambridge Univ. Press.
McCombie, J., & Thirlwall, A. P. (2016). Economic growth and the balance-of-payments constraint. Springer.
McLean, I. W. (2013). Why Australia Prospered: The shifting sources of economic growth. Princeton, NJ: Princeton University Press.
Nieuwenhuysen, J. P., Lloyd, P., & Mead, M. (2011). Reshaping Australia’s economy: Growth with equity and sustainability. Cambridge, UK: Cambridge University Press
Podger, A., & Trewin, D. (2013). Measuring and promoting well-being: How important is economic growth? : essays in honor of Ian Castles AO and a selection of Castle’s papers.
Smyth, P., & Buchanan, J. (2013). Inclusive Growth in Australia: Social policy as an economic investment. Sydney: Allen & Unwin.
Taylor, D. (2018). Rising cost of living leaving many people struggling to pay for essentials. ABC News. Retrieved from https://www.abc.net.au/news/2018-02-08/cost-of-living-rising-at-concerning-pace-warns-economist/9407320
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