Description of the Australian economy and its growth over the years
In the past two decades, the economy of Australia has been experiencing continuous growth, very low public debt, contained inflation, stable financial system and low levels of unemployment. However, at the same time it faces a number of constraints especially the unpredictability of global prices for important export items (Adam.2012). With the increase in the level of demand of energy and resources specifically by china, the overall prices of goods have been hugely affected.
The services sector accounts for over seventy percent of the Australia growth Domestic product (GDP) making it the largest. It also provides seventy five percent of the jobs. The Australia banking system still remains stronger and stable since it was not impacted by the financial crisis (Shintani e t al 2013). It should be noted that Australia has been one of the beneficiaries of the recent year’s trade dramatic surge; however the fall in global commodity prices has in one way or the other reversed the trend (Bekaert e t al, 2013).
The country is also known for its high levels of food, energy and natural resource exports (Alex 2017). Moreover, the diverse and abundant natural resources present in the economy have been one of the attractors of and promoters foreign capital inform of investments. It is predicted that the US$40 billion Gorgon Liquid Natural Gas Project and other investment series will obviously encourage the resource sector expansion (Clogg, 2016). Australia is a free or open economy with little or no restriction on services and goods from other economies (Alex 2017).
This has stimulated the levels of growth, flexibility and productivity. Further, Australia as a country has a strong influence in the G20, WTO and APEC (Alex. 2017). It also has a number of free trade agreements with various countries such as china, New Zealand, Singapore, Korean republic, Malaysia, china, US, Thailand and others. Therefore, in this report focus shall be put on the examination of the Australian current economic performance. This will base on a various sources of data, economic variables and the economic growth trends (Ian 2016). In addition, the impact of the current economic stand visa-vi future growth will also be discussed. Lastly, the paper shall also present the next six month economic forecast of Australia (Bekaert e t al, 2013).
Current status of the Australian economy
Early this year, there was an acceleration of the overall Australian economic growth levels mainly brought about by numerous contributors from the various sects of the economy. In the first quarter, the economy of Australia performed beyond expectations registering a one percent growth. This led to annual rise in the growth Domestic product by 3.1 percent. As per the data from the Australian Bureau of statistics the growth in the March quarter was facilitated by commodity exports (Adam 2012). Half of the growth in the Gross Domestic product was due to rise in the level of exports.
Factors that have impacted the Australian economy
The mining sector overall output increased by over 2.9% (Adam 2012). This was due to increase in LNG production, coal and iron ore. Further, in the March quarter there was an increase in the levels of the corporate profits to around 6%. The main rationale behind the increase in the corporate profits was due to rise in the level of mining exports. This has forced businesses to raise their overall level of equipment and machinery investment. There was also an overall 1.6 percent increase in the level of Government Consumption ( McGaughey 2018).
The overall performance of the economy of Australia has in the past two decades registered tremendous growth levels in import, export, employment and gross Domestic product. Further, in the last twenty five years the economy has not been impacted by a recession (E McGaughey 2018). The Australian economy is an open economy that trades with other countries. The overall freedom score of the Australian economy is currently at the level of 80.9 percent. The above standing made the Australian economy freest in for as the index of 2018 is concerned (Alex 2017).
However, the overall index has declined by a point of 0.1. Government integrity had higher scores and on the sad note declines in property rights and labor freedom were offset by Government spending indicators. In the Asia pacific region, Australia is currently in the fourth place with high levels of score above the world and regional averages (Clogg 2016).
The GDP growth rate of Australia
In the March quarter of 2018, there was a one percent advance in the Australian economy. This was slightly above the 0.9 % market consensus expansion. This was the highest growth level attained since the 2017 second quarter.
The growth level was mainly facilitated by a rebound in exports. There was a 3.1 growth in the economy since the year started up to the first quarter (Bekaert e t al 2013). There was a 3.1 percent growth in the economy after in in the prior quarter registering a 2.4 percent expansion. This was also one of the rapid increases in the level of growth since the second quarter of 2016. The average level of the Gross domestic product has an average of 0.86% from 1959-2018.The lower record score of Gross domestic product in the second quarter was registered in 1974 at -2 percent and the highest in 1976 at 4.40 percent (Bekaert e t al 2013).
The services sector and its contribution to the Australian economy
Table showing the GDP growth rate of Australia (Trading economics.com 2018)
Australia levels of inflation
The overall levels of consumer price inflation as per the 2018 june quarter stood at 2.1 higher than the 1.9 level registered in the last periods. This is ranked as one of the highest since the 2017 quarter. Transport costs were the main contributors. Consumer prices rose up to 0.4 percent on the quarterly basis. From the period of 1951- 2018, the levels of inflation were at an average of 5.02 percent (Shintani e t al, 2013).
As clearly indicated in the figure above, the overall levels of inflation in Australia are unfavourable and thus have a number of consequences on the overall level of economic performance (Eryk and James 2017).
Un employment rate
As per July 2018 the overall level of seasonally adjusted unemployment rate was at 5.3 percent. Registering a 0.1 decrease from the previous month. This was a below a 5.4 percent market consensus. The 5.3 level of unemployment was regarded as the least level since 2012 November. The total number of unemployed individuals fell by 5700 and the economy lost a total of 3900 jobs. However, the overall level of unemployment in the country of Australia from the year 1978- 2018 stands at 6.87 percent. A record low of unemployment levels was attained in month of February 2008 and the highest level was in December 1992 and stood at 11.20 percent (Adam 2012).
Population growth in Australia
As per 2018 the overall population of Australia stands at (24.77 million) making it one of the largest countries is the world. The overall population density is 7 per square mile or three people per square kilometre and thus one of the overpopulated nations globally. The coast is the main area in Australia associated with high levels of population growth especially in the areas of Melbourne and Sydney. Most of the people in Australia reside in territory capital cities and states. This accounts for over 67 percent (Alshahrani e t al 2014). The main cause of increase in population growth in Australia has been the immigrants accounting for over sixty percent and the natural increase was 38 percent. Most immigrants that come to Australia usually originate from south Africa, china, India, Britain and Philippines (Alshahrani e t al 2014).
Australian balance of trade
There was a 158 percent widening of the overall Australian trade surplus. This was at a level of AUD 1.87 registering a slight increase from the original AUD 0.73 billion. The above increase suppressed the market expectations that stood at AUD 0.9 billion. Thus showing an improvement. This was the largest surplus registered since last year may. Generally the level of imports declined and exports increased. Important to note is that from 1971-2018 the Australian balance of trade stood at an average of -535.43 million. The lowest was in April 2015 standing at -4210 and the highest was 4537 million in 2016 December.
Natural resource exports and foreign investment
Australian foreign exchange rate
As per Monday September the AUD USD rose to 0.7213 (0.46 percent 0.46 percent). This was higher when compared to 0.7180 in the previous one. A record low of Australian dollar was attained in the year 2001 at a rate of 0.48 and the highest was attained in the year 2011 July at a rate of 1.10.
Six month economic forecast
In the next six month the Australian economy is expecting to be growing at a rate of 3 percent meaning that higher growth levels are expected . Exports will continue to increase and the level of business investment will also pickup. The growth will be supported by investment in public infrastructure. Inflation and private consumption will be sustained by rising household incomes and a relatively stronger labour market. There will be a gradual rise in wages (Adam 2012).
By the end of the year, the central bank will have tightened the monitory policy or increase the cash rate due to the expected rise in prices and wages. The strict monetary policy will be aimed at reducing the overall levels of purchasing power and at the same time protect the most vulnerable consumers and also encourage economic activity (Alshahrani e t al 2014).
Conclusion
Conclusively, the overall economic variables are stable except in some few cases where stronger improvement is needed for purposes of attaining the country’s economic objectives. From the above analysis it is clear that Australia has been experiencing a tremendous growth rate for the past decade. It is also listed among the top growing economies. However, it still faces serious issues in terms of population growth levels. The population growth rate in Australia is one of the fastest growing in the whole world. It has been created by the ever increasing influx of immigrants. This creates a lot of pressure on the existing economic infrastructure and other services. Therefore there is need to streamline population control mechanisms for purposes of encouraging sustained economic growth and development.
Further the monetary policy should also be tightened to curb cases of inflation emanating from rise in incomes and wages. It should be noted that inflation has various consequences on the economy both in the short and long run period. Therefore, it is important to be effectively managed. Lastly, more investments should be undertaken in productive ventures in order to create more employment opportunities, raise the growth domestic product and at the same time improve the balance of payments performance in the short and long run period.
References
Alshahrani, M.S.A. and Alsadiq, M.A.J., 2014. Economic growth and government spending in Saudi Arabia: An empirical investigation. International Monetary Fund.
Bekaert, G., Hoerova, M. and Duca, M.L. 2013. Risk, uncertainty and monetary policy. Journal of Monetary Economics, 60(7), pp.771-788.
Clogg, C.C., 2016. Measuring underemployment: Demographic indicators for the United States. Academic Press.
Creighton, Adam.2012. “Reserve Bank governor says Australia has long had a two-speed economy”. The Australian.
E McGaughey. 2018.’Will Robots Automate Your Job Away?. Full Employment, Basic Income, and Economic Democracy’ SSRN, part 2(1), on ‘Three views on unemployment’s causes’.
McLean, Ian W. 2016. Why Australia Prospered: The Shifting Sources of Economic Growth,
Millmow, Alex. 2017. A History of Australasian Economic Thought (Routledge ), 250 pp.
Shintani, M., Terada-Hagiwara, A. and Yabu, T., 2013. Exchange rate pass-through and inflation: A nonlinear time series analysis. Journal of International Money and Finance, 32, pp.512-527.
Trading economics.com. 2018. Australian Dollar 1993-2018 | Data | Chart | Calendar | Forecast |
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