Macroeconomic Indicators Of Australia’s Economic Growth: GDP, Inflation, Employment, And Trade Volumes

GDP growth trends in Australia

1. Australian economy in the last five years 

Being one of the largest mixed economies and one of the wealthiest nations across the globe, the economy of Australia has experienced its share of dynamics which can be seen from the trends observed in different macroeconomic indicators of the country. This is discussed in the concerned section of the report:

2.GDP growth trends in Australia 

One of the primary indicators of the overall economic wellbeing of a country at a point of time is the Gross Domestic Product of the country and its changes with time. Measuring the total value of the final services and commodities produced within the country’s geographical domain within a specified time, the GDP of a country indicates towards the overall productivity situation of the same and its dynamics, which in turn acts as an indicator of the overall wellbeing of the population of the concerned country.

                                                     

The GDP of Australia, much to the contradiction of the overall economic stability and development over the decades, can be seen to be decreasing to some extent, consistently from 2013 to 2016. However, the increase in the same in 2017, to 1690 billion USD, indicates towards the fact that the fall in the GDP over the concerned three years may have been a temporary phenomenon. However, the GDP, although being a robust indicator of the overall economic does not consider the distribution of the economic welfare among the population of the country (Schneider 2012). This can be seen from the growth of the per-capita GDP of the country, which shows the income or economic abundance enjoyed by each of the residents of the country.

                                                                 

From the above figure, the growth of the PPP adjusted Per-capita GDP of Australia can be seen to be increasing stability and consistently over the last five years. The measure being purchasing power parity adjusted, indicates towards the increase in the real economic welfare and purchasing power of the major share of the population in Australia, which contradicting the decline seen in the GDP dynamics, asserts towards an overall increasing economic welfare and standard of living of the residents of the country (Carr 2014).

Demand and consumer’s welfare in Australia, 2012-2017

                                                                  

The growth rate of the GDP of the country can be seen to be considerably fluctuating over the last five years, with the frequency as well as the magnitude of fluctuations (both positive as well as negative) being more intense in the last couple of years, as can be seen from a (-0.4%) growth rate in 2016 and a 1.1% growth rate almost immediately after that, which in turn may explain the sudden increase in the GDP of the country in 2017, after three consecutive years of showing declining trends (Plumb, Kent and Bishop 2013).

However, the overall economic growth of the country cannot be only observed and interpreted on the basis of the growth and dynamics of GDP and its variants as all of them only indicates towards the overall productivity aspects of the economy and does not take into consideration the other aspects of economic growth and welfare like overall price level, employment and labour market dynamics, trade activities and economic welfare of the population of the country. Taking this into account, the other aspects of economic growth of Australia in the last five years are discussed with the help of these macroeconomic indicators in the following section of the report:

3. Demand and consumer’s welfare in Australia, 2012-2017 

One of the primary measures of the economic growth of a country is the economic wellbeing of the population of the same, which in turn can be gauged from the overall consumption volumes and trends of the people in the country over the years, as this in turn shows the aggregate demand and overall productivity situations of the country over the years.

                                                       

As is evident from the above figure, the consumption expenditure of Australia, over the last few years, can be seen to have increased impressively with a stable linear trend and no decline in the same. This, however, may have two different reasons. While an increase in the consumption expenditure due to an actual increase in the purchasing power of the population of the country can indicate towards positive economic development in the country, an increase in the same due to increase in the price levels can be actually a negative aspect for the overall growth of the economy (Downes, Hanslow and Tulip2014). In case of Australia, to observed whether the increase in the consumption spending is actually a positive indication towards economic growth of the country, it is required to observe the inflation dynamics in the country over the last five years.

Inflation rate in Australia, 2012-2017

4. Inflation rate in Australia, 2012-2017 

The rate of inflation shows the changes in the average price levels of everything in a country over time, thereby acting as an indicator of economic well-being of the population of the country. In case of Australia, the changes in the rate of inflation within the concerned period of time can be seen to be as follows:

                                                     

The rate of inflation in the country in consideration, can be seen to be considerably fluctuating over the concerned period of time, with the trend showing increasing traits from 2012 till 2014, the rates reaching up to 3% and then considerable decline (till 1.5%) by 2016. However, in the last year, the inflation rate of Australia can be seen to be touching 2.1%, thereby showing a slight increase from the previous years. However, the level of inflation in the country over the last five years, has remained considerably moderate (Kumar, Webber and Perry 2012).

This in turn implies that the significant increase in the consumption expenditure in Australia, in the last five years, may not have been due to increased price levels and actual economic growth has possibly occurred in the country, thereby increasing the economic well-being of the population of the country. One of the possible ways in which this benefit of the possible economic growth can percolate among the population of Australia is through increased purchasing power, which may occur due to increased employment generation. To study the presence or absence of the same, the unemployment rate dynamics of the country can be taken into consideration.

5.Unemployment in Australia, 2012-2017 

The level of unemployment in a country, over a period of time, shows the overall labour market situations. Higher unemployment rates indicate towards sluggish job creations in the economy, which in turn decreases the economic welfare as well as overall productivity, thereby slowing down economic growth and vice versa.

                                                                

The unemployment rate of Australia, in this context, can be seen to be slowly increasing from 2012 to 2015 (the highest peak being at 6.3%) and then declining and achieving stability to some extent, within the range of 5.5% to 5.8% in the recent period, which in turn indicates towards a recent improvement in the labour market situations and creation of jobs, which in turn may also be a contributor to the increasing GDP per-capita and consumption expenditure in Australia, in the last few years (McLean 2012).

Unemployment in Australia, 2012-2017

6. Trade volumes in Australia, 2012-2017 

One of the significant contributors to the economic growth of a country is the increase in the trade prospects of the country and its positive trade balances which occur from the surplus generated by increased exports over imports in the country and vice versa. In this context, the dynamics in the export volumes in Australia, in the last five years can be seen to be as follows:

                                                                 

Australia, has over the last two three years, experienced a sudden and impressive hike in the volume of exports to other countries, as can be seen from the above figure. The country mainly exports gold, minerals, natural gas, iron ores and others to different parts of the globe (Plumb, Kent and Bishop 2013). However, the level of trade, in the country, barring the last couple of years, has not been able to create positive balance of trade, as can be seen from the following figure:

                                                                   

As is evident from the above figure, the trade balance in the country has only reached positive numbers in 2017, after that of 2014, which indicates towards higher volumes of imports than exports in the country over the years, barring the last couple of years.

From the above discussion, it can be concluded that in spite of a not so impressive performance of the export dynamics and a mostly declining GDP in the last five years, barring the last year, the economy of Australia has been growing in the last five years, showing mostly positive and stable trends in its economic growth indicators. This, to a considerable extent can be linked with the policy framework designed and implemented by the government of the country.

7.Economic policy structure of Australia 

The Australian economic policy structure is one of the most stable yet dynamic and responsive ones present across the globe, with inherent components of stability and growth, which are monitored, changed and implemented as and when required. Of this, the primary components are as follows:

• The primary component of the economic policy in the country is the priority emphasized on achieving full employment in the economy over time. To reach this goal, the government of the country has been implementing various policies like Indigenous Employment policy, the National Employment Strategy and so on (Kumar, Webber and Perry 2012). The government also provides unemployment insurances and supports to the job seekers and different vocational training and skill development programs with the objective of increasing the overall skill and productivity of the labours in the economy.
• The unique deficit exit strategy is one of the key components of the deficit financing aspects of the country, in the domain of which the country does not encourage deficit financing of more than 2% till surplus is generated.
• The economic policy structure of the country also has various fiscal and monetary stability stimuli which act as safety valves in case of any irregularities or turmoil in the economy, as can be seen to have helped the economy during the time of economic crisis of 2008-2009, when in spite of the presence of Global Financial Crisis, Australia managed to recover soon without any significant long-term damages (Lowe 2012).
• The economic policies of the country are pro-industrial and pro-commerce. Australia has over the years attracted huge investments from all parts of the world and also has set up robust trade relations with nearly all parts of the globe which has contributed in the exemplary industrial growth of the country (Penrose 2017). The country is part of several crucial international Free Trade Agreements with most of the other significant economies across the globe.
• The policy frameworks of the country, in spite of encouraging foreign companies and people to come in and do business, tries to protect and support the growth of the various indigenous small and medium companies within the country itself, by shielding from competitions from big and cost-efficient multinationals and providing them with financial and non-financial aids as and when required.

Trade volumes in Australia, 2012-2017

8. Industrial dynamics in Australia 

The overall prosperous and impressively developed industrial sector of Australia, being one of the major contributors to the GDP of the nation and one of the biggest generator of national employment and wellbeing has however been facing considerable changes and almost a paradigm shift in the last few years, as can be seen from the following figure:

                                                                  

As is evident from the above figure, with time the industrial sector of the country has been experiencing a decline in the previously prosperous manufacturing sector and a simultaneous and impressive increase in the expansion of the service sector in the country (McLean 2012). In the last year, 2017, itself, 300,000 jobs have been created in the country, most of which can be seen to be getting created in different service sector industries in Australia, as can be seen from the following figure:

                                                                     

The manufacturing sector can be seen to be losing a considerable number of jobs while the different household, business, financial and other services can be seen to be generating more employment (Lowe 2012).

9.Reasons behind the sectoral shift 

The primary reason behind the increase in the growth of the service sector in the country can be attributed to the increase in the capital formation in Australia over the years:

                                                                     

The service industries being capital intensive and high skilled ones require considerable capital generation which can be seen to be happening in the country in the recent times (Penrose 2017). The skill levels of the workers are also increasing in the recent period owing to the various skill development training and overall high levels of education, thereby contributing to the development of the service sector industries in the country.

Conclusion: 

As can be seen from the above discussion, the economy of Australia, in the last few years, has been showing overall positive and stable growth patterns, barring several fluctuations in the aspects of the GDP and a mostly negative trade balance. Much of this economic development and overall increased wellbeing of the population of the country can be attributed to the efficient and responsive policy framework and its inherent stability in the country. The industrial sector of Australia, being one of the primary reasons behind its economic prosperity, has however been facing a paradigm shift from the manufacturing to high end service sector industries over the last few years, which can be possibly due to higher capital formation and development of skill of the labours in the country in a generalised framework.

Economic policy structure of Australia

The global economy has over the years experienced huge changes and modifications due to the changes in the economic traits of different countries as well as that of the globe itself. Different countries have emerged as leading economies in the global framework at different points of time, performing significantly well in all aspects of the economy. However, there are several economies, which have over the decades remained as globally dominant ones due to their impressive and sustained growth and overall economic development and increased welfare of the residents of the countries (Lenzen et al. 2012). One of such consistently dominant and influential economies, in the global framework, is that of the economy of Australia.

The economy of Australia, has been showing consistent development and economic prosperity over the decades, thereby emerging and remaining as one of the significantly developed economies in the global framework. The economy, being one of the most stable economies across the world, is known for its highly developed industrial sectors, employment generation, trade openness and expansion as well as several booms in mining, residential and commercial as well as banking sectors of the country (Dyster and Meredith 2012). The prosperity of the economy can be seen from the performance of the different macroeconomic indicators of the country over the years.

The economy of the country has however been subjected to considerable fluctuations, over the last few years, due to both internal as well as external factors. Keeping this into account the concerned report tries to analyse the dynamics in the GDP and overall economic growth in Australia in the last five years, thereby discussing the policy frameworks present and contributing to the same. Lastly, the report tries to discuss the nature of the industrial growth in the concerned economy in the last five years.

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