GDP of Australia in the Last Five Years
Discuss about the Importance of Services Trade Company.
The Australian economy is an advanced economy and Australia also ranks within the G10 of the world countries which is in no small way due to its feats as such a highly developed economy. By nominal standards it ranks 13th in the world in terms of GDP while in terms of purchasing power parity it ranks 19th in the world as of 2017 (Data.worldbank.org, 2018). It also has has the second largest wealth per capita in the world, second only to Switzerland. It also has flourishing trade with it being one of the highest exporters and importers helping the economy grow. It also has shown brilliant performance regarding growth and has had a period of continuous growth from the last recession in July 1991.
The backbone of the Australian economy is the service sector employing the majority of the workforce and also contributes most highly towards GDP. At the height of the mining boom that happened in Australia, mining went to contribute about 8.4% of the GDP of Australia. Though it has since decreased, mining continues to be one of the more labour intensive sectors employing a large sector of people. Another one of the main sectors of the Australian economy is manufacturing. Though it has seen a steady decline over the years with many companies such as Mitsubishi and Ford shutting down there companies down under, it still remains as a major contributor to the GDP. Another is agriculture which contributes around 3% when taken at just the production of crop levels but taking into scope the by products and such it has a much larger contribution to GDP. Lastly there is Financial industry and the tourism industry which also puts in. Fair share towards the GDP management. In the following section, we will have a look at how GDP and then these components of the contribution to GDP has changed through the last 5 years.
The GDP for Australia in nominal terms and when presented as in international dollars has been steadily increasing in the last 5 years. There is no downturn and the upward trend look robust. The same is true for the GDP per capita and as has seen a constant upward trend in the last five years. Due to the population also steadily increasing the last 5 years there might have been a chance that GDP per capita would have stagnated but what this indicates is that the growth in GDP was higher than the growth in population. (Scutt, 2018) As for the rate of growth of the Gap which is taken as a proxy for the rate of growth of the Australian economy it is at present showing an upward trend. From 2012 to 2013 there was steep decline in the growth rate mainly fostered by the pull back in capital expediter seen during the year. Also at the time while the manufacturing of the supply side was real string the people were saving and hence the consumer spending was at an all time low which weakened the economy. The numbers improved in the next year but again fell in 2015 to the lowest they had been in quite. Few years. This was mainly due to the collapse of the mining boom which brought about much pains in the economy. The mining boom in Australia was a once in a century kind of investment opportunity with investment flowing in from all parts of the world. With that ending , it hit the Australian economy hard and there was much panic if the Australian economy could be actually heading for a recession. (Farrer, 2016) Though in the next year the rate of growth of GDO had risen but not by enough to completely mitigate the fears of the people. Though it must be highlighted that even if the growth numbers were very bad this was better than what the economists were expecting, mainly helped by the growth in the final consumption expenditure. The economy again rose in 2016 and with the 2017 numbers just released it has again decreased from what it was in 2016. With this there is again talks as to if the country could be heading into recession again. But there is every reason to believe that this wont be happening. The investment from mining had been one of the major things that was holding the economy back. The pull back of investment from mining was negatively affecting the economy as that would be contributing to the GDP. However that effect is almost over. The mining boom was a positive shock to the economy and the economy is still even mildly rolling from the effects of that shocks being over. What is a better news is that there has been a steady increase in the investment in the non mining sectors and that could really help increase the rate of growth of the GDP in the coming years. The final household consumption expenditure (per LCU) is also on the rise and could very well be another major factor that could boost the GDP of the economy. Free trade that is practised in Australia is another thing in the favour of the country that could be looking to and the net trade balance would be positive for the country helping boost the economy (Scutt, 2016).
The Service Sector in Australia
The main components of the Australian economy have already been highlighted below. Australia is a service providing county at the core and the bulk of the economic weightage goes to that. There are other industries like manufacturing and mining but their fate has fallen on some hard times in recent times. Below we will focus on the services sector management and the mining sector so as to show how these two major sectors changed in the last 5 years.
The service sector contributes to the majority of the GDP of Australia. It contributes around 70% of the GDP and imply around 80% of the Australians. This industry also account for the trade with other countries and made up around 21% of the exports in 2016. There are a variety of things that is there in the service industry in Australia, such as education, professional services, IT support as well as environmental services and also financial technological services. Australia being an open economy encourages more trade through open markets and as such non discriminatory treatment can lead to higher income levels, improved standard of living and higher employment levels for all. Having open markets also helps increase competition and thus provides better quality services and also leads to innovation so as to provide a market edge. The service sector obviously does not exist in isolation and this innovation here has a feedback effect where that also majorly helps the other sectors of the Australian economy.
After the comeback of sectors like retail and also of employment in general which has been humming along greatly, finally it might be the chance of service decor which is howling signs of life in the recent times and moving past the stagnation it had fell into. In March 2018, the sector showed improved activity levels thus invigorating the country. Inventory is at a high in the sector which signals that the consumers feel that there is an increase chance of greater demands coming their way. Improvements in the service sector has sadly been noticed only for the higher skilled Labour such as business oriented or finance oriented jobs while the demand for low skilled jobs such as retail remain low. But due to the service sector which provides jobs to most Australians is being revived, the unemployment rate may fall in the coming months. Business oriented sectors have been perming largely well but the activity levels of the consumer facing services have not been up to par.
The Mining Boom in Australia
Encouraging more trade in services through open markets and non-discriminatory treatment can lead to higher employment levels, improved incomes and better standards of living.Opening up some service sectors to competition gives Australian consumers access to a wider range of services and more national and international expertise (Department of Foreign Affairs and Trade, 2018).The increased competition that free trade brings also encourages local service providers to become more innovative and efficient in the way they deliver their services. This has benefits for other areas of the Australian economy that rely on the services sector.What remains to be seen is how much the former can overcome the latter and bring in happy days for the service industry in the country.
Australia had been the focus of one of the largest mining booms in its history and it was huge even by global standards having an impact on the overall economy of the country as well as on the country’s trade relations with the rest of the world. Thus it also did have an impact globally. Over about 15 years it changed the landscape of the Australian society and changed the economy and the ways of employment in the country like no other event since the gold rush of the 1800s. Though started in the iron ore mines of Pilbara and the coal mine of the Bowen Basin it had far reaching consequences. This began with the increase in the prices of iron and coal mainly due to the demand from countries like China in 203 but then people found that there was under investment in this sector. Across the board, the prices of everything went up and stayed there. The biggest beneficiaries of this were the workers some of whom like truck drivers were paid around 150,000 AUD. However this does not mean that the big corporations in no way profited from the boom. Big corporations as well as small Australian companies were the ones who made enormous profits during this time. These mining operation were decreasing cost industries with the infrastructure needing to be set up once but the profits increasing by multiples every quarter.This mining boom also helped Australia as a whole and helped it not fall prey to the Global Financial Crisis (Farrer, 2015).
However , government failed to save the income that was generated by this boom. There was almost a feeling in the air that this boom might be going on forever but that was obviously not the case. By 2013, the mining boom was almost over. There was no way for the government to come out of this without falling commodity prices due to decrease f demand from its main markets like China and also with the loss of jobs and thus rising unemployment int he sector. As of 2018, the boom has finally ended and so have its effects. The boom might be over but it has left the Australian economy stronger than before with more resilience to withstand external shocks that might lead to more panic in other parts of the world.
Conclusion:
Australia is one of the strongest economies in the world and in its current stage it looks like it will continue to be so in the coming future. Even with the decrease in the GDP growth rate , there is very good reason to feel optimistic about Australia’s future and that is the tenacity of the country’s economy as well as its ability to withstand global shocks while also being integrated into the trading systems. The fallout from the end of the mining might finally be over and the Australian economy has stood string and continued to grow. Now with the end of the mining boom, which was once in lifetime kind of event, Australia might go back to relying on its states and wont find any major shocks there. With the fall of the mining investment in recent times it has also been hampering the GDP of the country and that comment might now finally come to standstill where it stops being a major player for a slowed economic growth. Also non-mining investment in Australia is on the rise thus providing proof to the thought hat the correct infrastructure is in place to provide the needed help for the Australian economic growth rate t be on the rise again.
References
Data.worldbank.org. (2018). Australia | Data. [online] Available at: https://data.worldbank.org/country/Australia [Accessed 25 May 2018].
Department of Foreign Affairs and Trade. (2018). The importance of services trade to Australia. [online] Available at: https://dfat.gov.au/trade/services-and-digital-trade/Pages/the-importance-of-services-trade-to-australia.aspx [Accessed 25 May 2018].
Farrer, M. (2015). Australia’s economy: is the lucky country running out of luck?. [online] the Guardian. Available at: https://www.theguardian.com/business/2015/apr/15/australias-economy-unemployment-china-coal [Accessed 25 May 2018].
Farrer, M. (2016). Australian economy grew 3% in 2015 to defy end of mining boom. [online] the Guardian. Available at: https://www.theguardian.com/business/2016/mar/02/australian-economy-grew-3-in-2015-to-defy-end-of-mining-boom [Accessed 25 May 2018].
Scutt, D. (2016). Australia’s services sector is strengthening and that bodes well for the broader economy. [online] Business Insider Australia. Available at: https://www.businessinsider.com.au/the-most-important-part-of-australias-economy-is-revving-up-2017-7 [Accessed 25 May 2018].
Scutt, D. (2018). The early signs are looking good for Australian GDP. [online] Business Insider Australia. Available at: https://www.businessinsider.com.au/australia-economic-growth-q1-gdp-trade-2018-2018-5 [Accessed 25 May 2018].
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