Economy has become one of the most important identities for any country of the world. The stronger the economy of any country betters its control over the geopolitics. There are a number of factor that determines the economic performance of any country. Few of them are the policies of the government and the performances of different industries that contribute to the Gross Domestic Product (GDP). The aim of this paper is to discuss the economy of Australia. It analyses the GDP and the economic growth of the country along with the actions taken by the government of the country. In addition to that, the paper also talks about the reforms in the agricultural sector of the Australian economy. Furthermore, the demand and the supply for the solar power industry of the economy have also been discussed in the study.
The data and information used in the study of the paper have been collected from the different journals and articles related to the economy of Australia. In addition to that, the data and information have also been collected from website of Australian statistical bureau. The paper synthesise the data collected through the content analysis process and presents the study as a form of descriptive layout.
Australia is one of the major economic powers of the market and its steady growth rate adds to the credibility of the country. The investment inflow in the economy has grown over the years following many changes in the economy such as the mining boom and the changes in the policies of the government. The reforms in the agriculture sector has reduced price, while the solar power created more jobs for the people of the country.
Discussion and analysis
Analysis of the GDP and the economic growth of Australia in the last 5 years
Australian economy is one of the largest and well performing mixed economies of the world. The GDP of the country as per the figure of 2017 is 1.79 trillion USD and its per capita is wealth is second largest in the world. The total wealth of the country as per the figure of 2016 is around $8.9 trillion USD. In terms of the nominal GDP, this country is the 14th largest economy of the world. Among all the developed economy of the world, Australia has a record of longest run of uninterrupted economic growth.
Figure: The GDP of the country from the year 2012 to 2017
The largest economic sector of the country is the service sector which accounts for 64.4% of the overall GDP of the country. In addition to that this sector of the Australian economy also employs 79.2% of the overall labour force of the country. The uninterrupted economic growth that it has experienced over the years is attributed to the impressive performance and expansion of the service sector of the economy (Antonakakis et al. 2015). However, since the end of 3rd quarter of the year 2016, the service sector of the country started to shrink compared to the other sector of the economy. This initially affected the GDP of the Australian economy. The figure above shows the dip in the GDP of the country during the year 2016.
Figure 2: the GDP growth rate of the Australian economy
In the meantime, in the last five years, the economy of Australia has experienced an increase in the manufacturing sector of the economy. George, Lin and Chen (2015) highlighted that the manufacturing industry of the economy expanded due to the mining boom that the economy experienced in the year 2003. Following the mining boom, the government of Australia also increased the interest rates that attracted high amount of foreign investment in the country. Due to this policy of the government and the mining boom, the manufacturing sector of the economy grew steadily in the last five years. While in the year, 2012 the contribution of the manufacturing sector was 27%, it increased to 42% in the year 2017. This means that, the recent economic growth and the uninterrupted performance of the economy has been done through a collective force of the service and the manufacturing sector of the economy (Voudouris et al. 2015).
Furthermore the expansion in the export of the country to east Asian countries have also contributed towards the growth of the Australian economy between the 2012 and 2017. Benavides et al. (2017) pointed out that around 64% of the export of the country is done in the east Asian countries and since the year 2012, the export figure has increased by 19%. It needs to be noted that the betterment of the performance of the Australian economy in terms of the expansion of export volume also attributes to the performances of the East Asian economics and the policies of the respective governments. These performances of the Australian economy coupled up with the accurate government policies have helped the economy of Australia to grow during the year 2012 and 2017. However, Frisch, H. and Worgotter (2016) in this context have stated that, the government has not been able to make the most of the mining boom that it experienced. The restricted operation of the central bank of the country and the protective polices of the government that kept the interest rate low in the initial phase of mining boom did not allow the economy to capitalise on the mining boom.
Reforms in the agriculture industry of the economy and its contribution towards the growth
Agriculture sector of the Australian economy is 12% of the GDP of the country. Despite the small comparative size of this sector, the country is an exporter of agricultural products. Since the year 2012, the size of the agriculture sector of the economy has increased manifold. In the year 2012, this sector was only 3% of the GDP of the country from where it has increased steadily. Dairy industry and the beef industry are two of the major agricultural industry of the country. However, over the years there have been changes in the policies of the government that influenced the performance of the agricultural sector of the Australian economy.
Since the mid 90’s the government of the Australia has been reducing the support provided to the agricultural industries of the country. Kalt (2015) highlighted that, subsidies and grants have been gradually reduced over the years in a process to reform the sector of the economy. The deregulation and the sector resulted in an increase in the private players of the market. According to the data presented by Van Ark (2015), the number of sellers in beef market of Australia increased 31% between the years 2012 to the year 2016. Its impacts have also been felt on the price level of the agriculture product of the Australian market as well. The number projects in the agriculture sector of the economy have also increased following the reform in the policies of the government. Sadiku, Ibraimi and Sadiku (2015) stated that, this have led to the increase in innovation in the market and hence an increase in the number of products. In addition to that, the job has also grown for this sector over the years.
Demand and supply for solar industry in Australia and its impact on economy
Solar power is one of the emerging natural resource industries of Australia. As per the current figures, the country is already installed with around 7800 megawatt of photovoltaic cells over across the country. In addition to that, more 2305 Mega watt of PV project is under construction in order to meet the increasing needs for the solar power in the Australian market. Lea (2017) pointed out that PV projects and solar industry currently meets 4% of the electricity demand of the country which is still low compared to the other bigger economies of the world. In this context it is important to note that, government has an intention to substitute most of the conventional power requirements of the country by solar energies that would also allow the country to reduce the environmental degradation as well.
The government of Australia is trying to influence the market demand for solar power through awareness campaigns. Feed-in-tariff has been widely used in case of South Australia where the economy has experienced the highest increase in the demand for solar power. As a form of campaign the government installed solar PV cells on the roof of most of the administrative buildings of the South Australia. Smith and Pickles (2017) stated that, 61% of the overall demand for the solar power of the country comes from the southern part of the country. In the future, the government is looking for further $8million dollar investment for installing new units and spreading awareness among the people of the country.
The demand for the solar power has not only increased in the southern part of the country, it has also increased in significantly in other parts as well. According to Benavides et al.(2017), the demand for the solar power in the overall country has increased by 31% since the year 2009. From the perspective of the consumer, the solar power panels are also economically convenient. It requires only one time investment from the side of the consumers. Hassine, M.B. and Harrathi (2017) stated that, as per the estimates, the demand for the solar power will increase in the near future. The increase in the demand for the solar power will not only come from the end customer, as automobiles using the solar power as a fuel can also give rise to the demand for the natural resource.
Along with the demand side of the solar power market, the government of Australia has also worked to increase a matching amount of supply in the market as well. Since the year 2009, the government has invited foreign investors to invest in the solar power projects of the country. Lin and Du (2015) highlighted that, the intention of the government to substitute the solar power has boosted the investment inflow in the economy of Australia. Since the year 2009 to the year 2014 the investment in the solar power projects of the country has increased by a thumping 43%. Apart from the government initiatives, there has been effort from the private sector as well. Country’s first commercial PV project started operating in the year 2011. Since then the industry have grown a lot both in terms of the number of private players and the volume it produced for the increasing demand.
The major impacts of the solar power on the economy of Australia include increase in the investment inflow in the country. Australia has a vast area of land which is best suited for PV projects and hence is an attractive market for the private solar power producers. In addition to the solar producers, the investment in the related industries has also increased over the years. Products such as domestic solar lights, solar bulbs have also found its place in the market (George, Lin and Chen, 2015). The immediate repercussion of the expansion of the solar power industry is the increased in the job growth in the sector. Labours have also been reported to shift to solar industry from the conventional power production industry. Furthermore the increase in the demand and the supply for the solar power has also reduced the negative externality of the conventional power production where in a high amount of coal is burnt. Therefore the government have reduced on the amount to subsidise against the negative externalities of the conventional power production.
Based on the study, it is clear that, the economy of Australia is growing at a little but steady state. While it is positive side that the manufacturing sector of the economy is expanding helping the overall GDP of the country to expand. It is recommended to the government to increase the foreign investment cap in the service sector of economy as well. This will allow the IT services of the economy to export their services in different parts of the world especially in the Eastern Asian countries which itself is increasing at an impressive pace.
Another recommendation as per the study of the agriculture sector is that, regarding the support of the government towards the private players of the market. The government needs to take care of the credit availability to the new businesses in this sector. This will allow most of the small businesses in the agriculture sector to flourish thereby having a greater impact on the GDP growth of the country. This is also necessary for the important for the further expansion of the sector as well.
Therefore, Australia is one of the best performers when it comes to the economic affairs. Although the mining boom has helped it in achieving a unique feat of uninterrupted economic growth, the corresponding policies of the government is also commendable and have been successful. The service sector of the economy is shrinking and hence needs more assistance from the side of the government. However, as per the data of the year between 2012 and 2017 the collective effort of the service sector and the manufacturing sector has helped it to grow even further. Again, the government has also played its role in case of the agricultural performances of the economy as well. The gradual deregulations and liberal policies of the government have allowed this sector to attract foreign investment. Lastly, the emerging solar power market has also been crucial for the Australian economy due to the fact that it has created a lot of jobs in the recent future. Furthermore the size of the solar power market corresponding to the increase in the demand and supply has also reduced the subsidy amount of the government as well. Reference
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