Analysis of Australian Economy
Discuss about the Statistical analysis of driving factor of resident.
Introduction:e will rise in the inflation, however it is expected that little higher inflation from present situation is about to enhance the growth of the economy (Fan, MacGill and Sproul 2015). Thus it can be stated that the economy will be one of the resilient economy in coming days with its enhanced expenditure and rise in aggregate demand.
Conclusion:
From the above analysis it can be seen that the Australian economy has increased at a sustainable rate over the last five years and in coming days if the projected growth is considered, then the economy will become a highly potential nation. Owing to recent mining boom and the rise in the government and consumption expenditure the economy is stable enough to withstand any sudden shock in the market. However, it has also been found that the unemployment rate in the economy has been rising due to absence of skilled labor in the economy and in a
Australian economy is one of the largest economy in the world, which is accounted for 1.94% Gross Domestic Product (GDP) out of total world GDP (Budget.gov.au. 2018). According to the economic outlook from government of Australia it can be seen that the economy is presently going through its 26th consecutive economic growth path, which is expected to rise in coming years.
This report is aimed to discuss the present economic condition of Australia with special focus to the investment, government expenditure, net export and consumption expenditure of the county’s economy. In addition to this this report is aimed to provide forecast of the Australian economy for next six months while depicting the rationale for this prediction.
Australian economy is now one of the most stable economy in the world that has altered itself to become where it is not through successive government planning since 1960(Reserve Bank of Australia, 2018). During 2016-2017 financial year there has been weather related shock that caused the country to fall in growth; however decline in the mining investment and enhancement in the household consumption along with the continuous improvement of the export has aided the economy to become where it is now in 2018.
Figure 1: Australian GDP growth rate
Source: (Tradingeconomics.com 2018)
As figure 1 highlights, over the year there has been various fluctuation in the GDP growth of the country; however, it has maintained itself enough to have stability in the market. During 2016, there was slight fall in the GDP growth however as of now GDP of the economy is growing at 0.4% annual growth rate. In addition to this, analyzing the Australian economy it can be seen that unemployment of the economy has reduced over the time that showcase bettering economic condition of the country.
According to the Mao and Xu (2014), consumption expenditure is one of the key element of the GDP. As per the survey of 2015 it can be seen that consumption expenditure is accounted for 74.83% of nation’s GDP that highlights the importance of this key instrument for the growth of the Australian economy. According to the figure 2 it can be seen that the Australian consumer spending has increased sharply since 2014 that highlights the rise in national income as well as enhancement in the disposable income (Yusuf and Leeder 2015).
Consumer Expenditure
Figure 2: Australian consumer spending
Source: (Tradingeconomics.com 2018)
Better consumer confidence over the market ensure better economic growth. Figure 3 highlights the rising consumer confidence on the Australian market for last five years, which has aided the economy to enhance its growth. Figure 3 highlights there has been various fluctuation in the consumer confidence over the time, however, the economy has been strong enough to hold it at a sustainable positiion (Atalay, Whelan and Yates 2016). Lowest consumer confidence can be observed during 2015, when the economy faced another recession due to natural shocks as well as shock in oil price.
Figure 3: Australian consumer confidence
Source: (Tradingeconomics.com 2018)
According to the ABS data, there has been rise in household goods by 0.9% and the sales has been increased by 0.8% during 2017 compared to the previous year (Reynolds et al. 2015). From this it can be seen that Australian consumption expenditure has been rising at a sustainable speed, which is leading the economy towards sustainability in true sense.
Investment expenditure is another important component that has influenced the economy of Australia since decade. From the figure 4, it can clearly be seen that there has been rise in the investment expenditure since 2016 and during the last quarter of 2017 it started to fall again (Dwyer et al. 2014). Comparing this with the GDP growth of the economy it can be seen that the GDP has reacted in the same fashion as the investment expenditure that highlights the magnitude of correlation between this two factors.
the interest rate of the economy, which helps to determine the investment expenditure of the economy. It can be seen from the figure below that interest rate of the Australian economy has been falling over the time that has enhanced the liquidity in the market that has germinated higher demand and growth of the economy (Findlay and Garnaut 2017).
business confidence in the Australian market has been good enough that has curtailed the GDP growth rate to enhance further. Though there has been fall in business confidence during 2017, yet the economy has managed itself good enough to become where it is now(Tradingeconomics.com 2018).
Government expenditure is another instrument that has influenced the Australian economy over the time. Considering the government expenditure of last five years from figure 7 it can be seen that the Australian government has enhanced its expenditure sharply during that has enhanced the growth of GDP as well (Drew, Krott and Dollery 2014).
According to the report from RBA, government shares 26.6% of the country’s GDP, thus with better government expenditure prospect the economy has increased its growth rate substantially.Post Global Financial Crisis in 2008, government spending has increased, however most of the quarters has faced budget deficit during the 2016. Situation has better off during 2017 that highlights ailing condition of the Australian economy(Tradingeconomics.com 2018). In order to enhance the aggregate demand government deficit has provided substantial amount of influence as it has prejudiced the government expenditure while reducing the corporate rate soberly.
Investment Expenditure
Australia being a developed nation is indulged in international trade in higher amount with various economies around the world. The nation is one of the largest exporter to china and it imports good amount of goods and services from the US (Morrison 2014). With rise in net export expenditure economy is ought to face better growth prospect.
it can be seen that during last five years there has been rise in the balance of trade that goes with the GDP growth path of the nation. It also highlights that during 2017 there has been highest amount of rise in the export expenditure in the selected time frame and in the same time frame Australian economy has faced highest growth too (Manalo, Perera and Rees 2015). During 2017 first quarter there has been rise in demand of the Australian mining products that has aided the economy to have better growth.
Australian economy is one of the growing western economy, which is set to face higher growth in recent days due to government’s monetary expansion policy. According to the forecast the economy is set to rise at 3% rate in next 6 months of the 2018(charts, 2018). Though there has been fall in the growth rate since GFC in 2008; however, the economy is now facing higher demand of mining product in the world market as well as government expending and the consumption expenditure is on rise. Thus the economy is all set to face higher growth in future.
the inflation of the nation is expected to rise to 3% to attain the natural inflation rate, which can aid the economy to have better future growth prospect. In addition to this, forecasted change rate of economy will remain between 3 to 2.5% that highlights the higher growth prospect of the nation in coming 6 months (Rees, Smith and Hall 2016).
it can be seen that the employment of the Australia is set to fall from present rate to below 5%, which highlights the better job employment and growth structure of the nation.
it can be seen that the growth of the nation is set to rise in 2018 due to rise in the consumer expenditure and government’s monetary reformation taken by the RBA in recent days, post weather shock in 2016. Though forecast entails that there will rise in the inflation, however it is expected that little higher inflation from present situation is about to enhance the growth of the economy (Fan, MacGill and Sproul 2015). Thus it can be stated that the economy will be one of the resilient economy in coming days with its enhanced expenditure and rise in aggregate demand.
Government Expenditure
Conclusion:
From the above analysis it can be seen that the Australian economy has increased at a sustainable rate over the last five years and in coming days if the projected growth is considered, then the economy will become a highly potential nation. Owing to recent mining boom and the rise in the government and consumption expenditure the economy is stable enough to withstand any sudden shock in the market. However, it has also been found that the unemployment rate in the economy has been rising due to absence of skilled labor in the economy and in addition there has been budget deficit too. To conclude it can be stated that though the economy has good growth of GDP, however, it is slow during the last one year. Government under this scenario need to take monetary expansion policy so that it can influence the foreign direct investment and growth of the infrastructure in order to reduce the unemployment through generation of skilled labors.
Reference:
Atalay, K., Whelan, S. and Yates, J., 2016. House prices, wealth and consumption: new evidence from Australia and Canada. Review of Income and Wealth, 62(1), pp.69-91.
Budget.gov.au. (2018). STATEMENT 2: ECONOMIC OUTLOOK. [online] Available at: https://www.budget.gov.au/2017-18/content/bp1/download/bp1_bs2.pdf [Accessed 10 Apr. 2018].
charts, F. (2018). Government spending from Howard to Turnbull in 10 charts. [online] ABC News. Available at: https://www.abc.net.au/news/story-streams/federal-budget-2017/2017-05-09/federal-budget-2017-howard-to-turnbull-spending-in-charts/8510160 [Accessed 10 Apr. 2018].
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Fan, H., MacGill, I.F. and Sproul, A.B., 2015. Statistical analysis of driving factors of residential energy demand in the greater Sydney region, Australia. Energy and Buildings, 105, pp.9-25.
Findlay, C. and Garnaut, R. eds., 2017. The political economy of manufacturing protection: Experiences of ASEAN and Australia (Vol. 19). Routledge.
Manalo, J., Perera, D. and Rees, D.M., 2015. Exchange rate movements and the Australian economy. Economic Modelling, 47, pp.53-62.
Mao, R. and Xu, J., 2014. Consumption Structure Evolutions in an Aging Society and Implications for the Social Security System. Public Policy Review, 10(2), pp.349-370.
Morrison, W.M., 2014. China’s economic rise: History, trends, challenges, and implications for the United States. Current Politics and Economics of Northern and Western Asia, 23(4), p.493.
Rees, D.M., Smith, P. and Hall, J., 2016. A Multi?sector Model of the Australian Economy. Economic Record, 92(298), pp.374-408.
Reserve Bank of Australia. (2018). Statement on Monetary Policy | RBA. [online] Available at: https://www.rba.gov.au/publications/smp/index.html [Accessed 10 Apr. 2018].
Reynolds, C.J., Piantadosi, J., Buckley, J.D., Weinstein, P. and Boland, J., 2015. Evaluation of the environmental impact of weekly food consumption in different socio-economic households in Australia using environmentally extended input–output analysis. Ecological Economics, 111, pp.58-64.
Tradingeconomics.com. (2018). Australia – Economic Indicators. [online] Available at: https://tradingeconomics.com/australia/indicators [Accessed 10 Apr. 2018].
Yusuf, F. and Leeder, S.R., 2015. Making sense of alcohol consumption data in Australia. Med J Aust, 203(3), pp.128-30.
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