GDP And Economic Growth Essay: Australia | Last 5 Years.

Topic

GDP and Economic growth of Australia during last 5 years and analyse Australian Government policy towards this. Which industries have been growing and reasons of this growth?

GNI Growth of Australia

The global economy has developed considerably over the years, experiencing immense dynamics and fluctuations (both negative as well as positive) in its framework, which in turn has led to the creation of the current shape of the global economy. However, there has been always the existence of several significant economies in the global scenario, which have, over the years developed significantly, thereby emerging as the dominant players in the global economic scenario, with huge influences and decision-making power in the aspects of the global economic dynamics (Uribe and Schmitt-Grohé 2017).

One of such globally dominating and influencing economies, which have developed significantly over the years is that of the economy of Australia. Australia enjoys the position of one of the leading developed countries across the globe, with a highly developed, dominant and the largest mixed economy in the international framework. Australia also ranks as the fourth largest economy in the world in terms of Nominal GDP, with wealth of nearly 8.9 trillion AUD (2016) (Downes, Hanslow and Tulip 2014). The country also ranks second globally, in terms of the amount of wealth of the adult population, ranking just after Switzerland. The economy of the country also stands out for its incredible stability, as well as for its economic prosperity, which can be attributed to the growth of industrial and commercial sectors of the country over the years.

However, in the contemporary period, the economy of Australia has been subjected to considerable fluctuations in its growth parameters, both positive as well as negative, much of which can be attributed to the dynamics in the industrial and commercial sectors and the several booms as well as stagnation occurring in the business cycle in the contemporary period (Dyster and Meredith 2012). Keeping this into consideration, the concerned report tries to analyse the economic growth of Australia over the last five years (2012-2017), thereby analysing the economic policy framework of the country. The report also tries to discuss the industries which have grown in the country over the years, thereby trying to analyse the reason behind the growth of the concerned industries.

As discussed above, the economy of Australia has developed visibly over the decades, with a highly developed industrial sector and a prominent service sector, which has been growing significantly over the years. Australia has over the years, emerged as a mining as well as technological giant and much of the current prosperity of the country can be attributed to the mining boom which Australia started experiencing in 2003 (Downes, Hanslow and Tulip 2014). Australia, apart from a prosperous economy also has multi-lateral and long-term trade connections with almost all the significant economies in the world in the contemporary period, which in turn also contributes to the economic growth of the country over the years (McLean 2012).

GDP Growth of Australia

The growth of an economy, in general, is measured in terms of the dynamics in the economic growth indicators like that of the Gross Domestic Product (real as well as nominal), the growth rates of GDP and also the per-capita GDP growth rate of the country and others. In case of Australia, over the last five years, the Gross National Income has grown steadily which can be shown with the help of the following figure:

Figure 1: Gross National Income (2012-2017) of Australia in AUD million

(Source: Tradingeconomics.com 2018)

As is evident from the above figure, the gross national income of the country has been increasing consistently, with the increase being especially prominent post 2015.

This extremely positive pattern of growth of the Gross National Income of the country, however, does not tally fully with that of the GDP and GDP growth statistics of the country in the concerned period as can be seen from the following figure:

Figure 2: GDP (2012-2017) of Australia in USD million

(Source: Tradingeconomics.com 2018)

The economy of Australia, in spite of being one of the most dominant and developed economy in the global scenario, known for its economic stability and robust performance of the economic indicators over the decades, however, shows a strikingly negative trend in one of its primary economic indicators, the GDP of the country, which in turn, shows the total value of the goods and services produced within the geographical domain of the country within a particular period (Coale and Hoover 2015). The GDP of Australia, as is evident from the above figure, is seen to reduce consistently over the last few years, with the amount being 1538.19 billion USD (2012) to as low as 1204.62 billion USD in the recent periods. This in turn indicates towards a downturn in the growth of the economy of the country. This can be explained even prominently with the help of the dynamics in the growth rate of the Gross Domestic Product of the country, which can be seen as follows:

Figure 3: Growth rate of GDP (2012-2017) in Australia

(Source: Tradingeconomics.com 2018)

As can be seen from the above figure, the growth rate of GDP of the country has experienced considerable fluctuations over the last five years, with the fluctuations being much more evident post 2016, as can be seen from the huge dip in the growth rate in end quarter of 2016, which was however overcame by the economy quickly in the succeeding periods (Ianchovichina and Walmsley 2012).

Per-Capita GDP Growth of Australia

Thus, from the above statistical evidences, it can be asserted the economy of the country, has not bee experiencing a positive trend in its GDP and GDP growth dynamics over the last few years. However, the growth of GDP alone cannot fully reflect the overall economic growth and economic well being of the population of a country at a point of time (Downes, Hanslow and Tulip 2014). The growth and development of the economy of a country also depends on the distribution of the GDP across the population of the country, which is to some extent, measured by the Per-Capita GDP of the country, which in turn indicates the average income of the members of the population of the country. In case of Australia, this can be seen from the following figure:

Figure 4: Per-capita GDP (2012-2017) of Australia

(Source: Tradingeconomics.com 2018)

From the above figure it can be seen that the per-capita GDP dynamics in Australia has been almost contradictory to that of the dynamics shown in the GDP and growth rate of GDP as a whole in the country, as the same is seen to be consistently increasing over the last five years. However, the per-capita GDP, being a nominal measure itself, does not act as a perfect indicator of the actual economic well-being and purchasing power of the population of the country. Thus, the consistent increase in the per-capita GDP of the country can be attributed to actual income growth of the population of the country or also to a consistently increasing price levels in the country due to the presence of high inflation.

In order to remove the above-mentioned bias and to efficiently analyse the economic wellbeing of each of the citizen of Australia in the last few years, the Purchasing Power Parity adjusted GDP per-capita of the country can be observed, the concept of PPP being an actual measure of the real purchasing power of the people in the economy (McKinnon and Ohno 2016). For Australia, the same and its dynamics over the last few years, can be seen as follows:

Figure 5: Per-Capita GDP (Purchasing Power Parity Adjusted) of Australia (2012-2017)

(Source: Tradingeconomics.com 2018)

Like that of the per-capita GDP, the Purchasing Power Adjusted GDP of Australia can also be seen to be increasing steadily and consistently within the period of 2012-2017, which indicates towards the fact that the economic health of the country and the individual economic well being of the citizens of the same may not be as gloomy as is asserted by the GDP and the GDP growth rate of the country alone.

Purchasing Power Parity Adjusted Per-Capita GDP Growth of Australia

However, there are other economic indicators apart from GDP and its variants, which are also required to be taken into account in order to get a wholesome insight about the overall growth and performance of a country. Keeping this into consideration, the other important economic indicators of Australia and their performance and contribution to the growth of the economy of the country over the last five years, can be seen from the following section.

The rate of inflation in an economy shows the change in the overall price levels prevailing in the country with time. Thus, the presence of excessively high inflation rate in an economy can be considerably detrimental for the economic well being of its population in terms of their purchasing power and consumption patterns. On the other hand, the presence of extremely low inflation can also mean decrease in the economic activities and stagnation of the economy.

Figure 6: Rate of inflation (2012-2017)

(Source: Tradingeconomics.com 2018)

As is evident from the above figure, the rate of inflation, which had been considerably high in the country, till 2014, started decreasing considerably post 2014 and is currently at a moderate level (a little higher than 2%) in 2017. This is, in its turn a positive aspect of the economic growth of the country and the steady increase in the PPP adjusted per-capita GDP can be attributed to this moderate rate of inflation in the current period (Australia 2014). This in turn, can be one of the primary reasons behind the steady growth of another growth indicator of the economy, which is the consumer expenditure over the years.

In general, the amount of consumption expenditure in the country and its dynamics shows the economic well being of the residents of the country which in turn also reflects towards the dynamics in the overall productivity in the economy of the country. 

Figure 7: Consumption expenditure (2012-2017) in Australia

(Source: Tradingeconomics.com 2018)

The steady increase in the consumption expenditure in Australia over the last five years indicates towards the presence of considerable economic well-being of the overall population of the country and also towards the increase in the industrial and commercial prospects of the country due to the induced increase in the productivity of the country, due to an increasing aggregate demand over the years (Australia 2014).

The economic growth of a country is also measure by the number of jobs present and the scopes of creation of new jobs in the economy as higher job scopes indicates towards more employment in the country, which in turn indicates towards higher economic productivity of the country.

Other Economic Indicators of Australia

Figure 8: Unemployment rate (2012-2017) in Australia

(Source: Tradingeconomics.com 2018)

As is evident from the above figure, the unemployment rate, which increased considerably till 2015, has decreased post 2015, which in turn indicates towards the creation of new jobs in the Australian economy, which in turn can be considered as one of the positive aspects of the growth dynamics of the economy of the country.

Thus, from the above discussion, it can be asserted that the economy of Australia experienced mixed dynamics in its different economic indicators, with a negative performance of the GDP and GDP growth rate indicators but a comparatively impressive performance in other economic indicators.

The policy frameworks and the strategies taken by the government of any country play significant roles in the aspect of influencing the growth and development of the economy of the country over time. In this context, given that in spite of all odds, the economic growth of Australia is much higher than most of the other developed countries (as can be seen from the following figure), much of this can be attributed to the policy framework adopted by the government of the country over the last few years.

Figure 9: Growth rate of major economies (2016-2017)

(Source: Budget.gov.au 2018)

The primary components of the economic policy framework of the country are as follows:

• A pro-industry and pro-commerce outlook, which makes the business and commerce environment more favourable for growth and expansion of new industries.
• The infant industries and SMEs receive considerable aid and financial support as well as protection from the government which ensures their growth over time (Butlin 2013).
• The fiscal stimuli and automatic stabilizers present in the fiscal policy framework of the country are seen to be considerably efficient as can be seen from the way the government managed to keep the economy of the country afloat even in the times of the Global Financial Crisis.
• The deficit exit strategy of the government is one of the primary positive and efficient components and the government maintains the concerned framework by holding the real growth of spending to 2% per year till budget surplus is created and also by varying the nature of tax receipts naturally, which in turn helps the government to keep the economy afloat during the times of turmoil through deficit financing.
• The policy framework of the government of Australia, also focusses on increasing the employment in the economy in order to increase the economic prospects of the country, which can be expected to be one of the primary reason behind the fall in the unemployment of the country in the last few years. This can be seen from the following figure which shows the sector-wise creation of jobs in the last year:
  
  

Figure 10: Creation of jobs in different sectors of Australia (2017)

(Source: Budget.gov.au 2018)

As is evident from the above figure, that apart from the loss of mining jobs (attributed to the withering out of mining boom) and manufacturing jobs, the country saw creation of almost 300,000 jobs in different sectors in the last year, which in turn can be attributed to the job creation policies of the economy of the country (Groenewegen and McFarlane 2014).

• The government of the country also has provisions for the average full-time workers in terms of prolonged low-tax periods, which clubbed with their supports to small businesses contribute in increasing the per-capita GDP and the purchasing power as well as the aggregated demand in the country as can be seen from the above discussion.
• Australian policy framework invests significantly in quality infrastructural and communication channel which in turn helps in industrial and service sector development of the country.

Thus, from the above discussion, it can be asserted that the policy framework of Australia is considerably robust and contributes significantly in its economic growth and overall development of the country and also helps in maintaining the stability of the economy to a considerable extent, especially at times of economic turmoil.

In the recent years, the economy of Australia has been experiencing a highly visible shift in the patterns of job creation as well as in the pattern of the type of industries which have been expanding. The country, which was previously known for its highly developed and expanding manufacturing and mining industries, in the recent period has been experiencing a fall in the share and size of those industries (Budget.gov.au 2018). On the other hand, different service related industries can be observed to be growing impressively as can be seen from the following figure:

Figure 12: Industry growth by skill type

(Source: Rba.gov.au 2018)

From the above figures, it is evident that the different service sector industries, primarily health care services, education, professional and technological services as well as transport, mining and financial service industries have been expanding in the country while the manufacturing industry has been shrinking.

The primary reason behind the above-mentioned shift of the economy from manufacturing industries to service sector industries can be attributed to the huge technological innovations in the country and also to the movement of the industrial sector of the economy to capital-intensive industries from the labour-intensive ones (Clerkin and Coggburn 2012). Apart from the development of industrial capital, the skill levels of the workers in the economy are also increasing as a whole, thereby empowering them to engage in the different high-skilled service sector jobs, which in turn is seen to result in the development of the different capital-intensive service sector industries and a parallel shrinkage in the basic agricultural and manufacturing industries in the country in recent periods.

Conclusion

From the above discussion, it is evident that the economy of Australia, in the contemporary periods, has been experiencing mixed dynamics in its different economic growth indicators. While the GDP and the growth rate of the same do not show much optimism, the per-capita GDP (both normal and PPP adjusted), the inflation rate, consumption expenditures as well as unemployment rates are showing favourable dynamics in the current period, thereby indicating towards a robust growth trend in the economy as a whole. Much of these dynamics in the economic growth of the country can be asserted to a robust policy framework of the government, which has developed impressively over the years. The industrial sector of the country has also been experiencing a major shift, in the sense that that the service sector of the country has been developing immensely while the basic manufacturing and subsistence agricultural sector have been reducing, owing to the increase in the capital investments and overall skill development of the labour force as a whole in the country in the contemporary period.

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