The Importance Of Gross Domestic Product (GDP) In Evaluating National Economic Performance

The Significance of GDP

Question:

Compare Australia with any other advanced economy and discuss their GDP last 2 to 5 years and factors affecting their GDP.
 

It is well-known that, at the present time, Gross Domestic Product (GDP) is measured as a powerful tool and techniques that plays a significant role in order to evaluate the economic as well as financial heath and position of a nation. On the other hand, it soul also be noted down that, GDP plays a vital role in order to measure and analyze the economic situation as well as monetary value of all goods  that are produced in the geographic borders of a country within a specific time period (Brezina, 2011). Also, GDP plays a major role in order to estimate and scrutinize the actual and real value of a nation in an effective and an accurate manner.

In addition to this, with the help of GDP, the government becomes able to measure the overall success as well as failure of a nation in an effective way. In this way, GDP plays a central role to agree on the overall economic as well as financial performance of a nation at the global level. Along with this, production approach, income approach, and expenditure approach  are the three major approaches of the GDP that play a critical role in order to assess the GDP annual growth rate of a country in an appropriate way (Hall, and Lieberman, 2007). Consequently, GDP is considered as the most important quantitative technique that is valuable to estimate economic as well as financial health and wealth of a nation.  

Along with this, this research paper would be helpful in order to describe the major concepts related to GDP in the context of Australia. Moreover, this paper would also be beneficial to provide a comparison between the GDP of Australia and Canada in an effective and a powerful manner. Also, this research paper would be helpful to describe the major factors that have an impact on the GDP of the nation.  

On the whole, GDP plays a critical role in order to signify the economic value of the goods/products/services that are produced within the geographical borders of a nation over a particular period of time. In the same way, GDP annual growth rate is an important measure that is helpful to evaluate the economic performance of a nation in a particular period of time. In the end of each and every year, the World Bank publishes the GDP report of the nations (Mirow, 2016). In addition to this, the data and report published by the World Bank are vital in order to evaluate and appraise the economic performance of nation in term of their GDP. Moreover, the report published by the World Bank would also favorable to compare the GDP growth rate of the nations in an accurate way (The World Bank Group. 2016). Apart from this, in the context of Australia, the ABS (Australian Bureau of Statistics) issues GDP report and in the context of Canada, Canada's National Statistical Agency prints GDP report of the nation. These reports are essential in order to measure and calculate the annual GDP growth rate of the nations in an effective and an accurate manner.

The Three Major Approaches to Assessing GDP Annual Growth Rate

Along with this, it should be noted down that, the financial crisis of 2007-2008 was very dangerous for the economy of the nations that influenced and also declined the economy of the nations negatively. This financial crisis is also responsible to turn down the GDP growth rate of the nations for the duration of that time period. In addition to this, after the financial crisis, in 2009, the GDP annual growth rate of Canada was -2.71% even as the GDP annual growth rate of Australia was 1.73% (Thorpe and Leitão, 2014). The GDP of Canada represents negative trends in the economy of the nation. The GDP rate of Australia is a sign of the strong economic position of the nation.  In addition to this, the below given table is helpful to represent the GDP annual growth rate of both nations Australia and Canada in the last five years. 

On the basis of the above table, it can be assumed that, there is a continuous improvement in the GDP annual growth rate of Australia. In other words, it can be said that, the GDP rate of Australia has been increased in the last five year. For case, in 2013 the GDP annual growth rate of Australia was 2.40%, in 2014 2.50%, and in 2015 3.00%. As a consequence, it is believed that there is an increase in the annual GDP growth rate of the nation (McLean. 2013). In contrast, by considering the data of the Canada, it can be understood that, the annual GDP growth rate of the nation has been declined in a continuous manner. In addition, there may be seen a fluctuation in the economy of the nation. As a result, there is an up and down in the economy as well as annual GDP growth rate of the nation and that is dangerous for the overall development of the nation.

In addition to this, it can be also supposed that, the GDP rate of Canada was 3.00% in 2011, 1.90% in 2012, 2.00%            in 2013, 2.40% in 2014, and 1.20% in 2015. So, there is a fluctuation in the GDP rate of Canada. Moreover, on the basis of the data given in the above table, in 2015, there can be seen an enormous decline in the GDP rate of the nation. For case, the GDP rate was 2.40% in 2014, and 1.20% in 2015. It is just half of the previous year. This decline represents negative trends in the economy of the nation that are influencing the economic health as well as wealth of Canada in a negative way (Lin, Edvinsson, Chen, and Beding, 2013).

On the other hand, the above table is also helpful to represent an effective comparison between the GDP rate of both nations Australia and Canada. For case, in 2012, the GDP rate of Australia was 3.60% whereas GDP rate of Canada was 1.90%. Furthermore, in 2013, the GDP   rate of Australia was 2.40%, while Canada was only 2.00%. In the same way, in 2014, the GDP   rate of Australia was 2.50% and in 2015 3.00% even as the GDP   rate of Canada was 2.40% and 1.20% respectively. On the basis of the evaluation between the GDP annual growth rate of Australia and Canada, it can be concluded that, the GDP rate of the Australia is higher than the GDP rate of Canada (Martin and Milway, 2012). As a result; it is believed that, in current, the economic position as well as performance of Australia is stronger than Canada. 

Comparison of Australian and Canadian GDP Annual Growth Rates

In addition to this, by considering all the data given in the above table, it can be assumed that, after the financial crisis 2007-2008, the GDP growth rate of the Australia has been improved in a continuous way.  Moreover, the GDP rate of Canada expresses the negative economic trends and market fluctuation in the economy of the nation that have an impact on the annual GDP growth rate of the Canada (Verdun, 2006). In addition to this, it should also be noted down that, there is less fluctuations in the economy of Australia that is beneficial for the strong economic position and high GDP rate of the nation. Moreover, the Average GDP rate of Australia is also higher than Canada and consequently, there can be seen a regular increase in the GDP rate of the Australia. For instance, the Average GDP rate of Canada is 2.4% even as the average GDP annual growth rate of Australian is 3.50% and it indicates that the economic conditions of Australia are strong in comparison to Canada (Patel, Woodward, Feigin, Quah, and Heggenhougen, 2010).

In this way, on the premises of the above table, it should be noted down that, after the financial crisis 2007-2008, the GDP annual growth rate of Australia is increasing continuously. Moreover, there can be seen a fluctuation in the GDP annual growth rate of Canada. Apart from this, it is also observed that, after the financial crisis, the GDP rate of Canada has been declined in last five years. In addition to this, it is also scrutinized that, there is a smaller amount of fluctuation and continuous improvement in the economy of Australia (International Monetary Fund. 2006). In this way, it can be said that, the economic as well as financial performance, situation, health and wealth of Australia is stronger than Canada in the last five years.

In addition to this, the below given graph is also beneficial in order to understand the GDP annual growth rate of both nations Australia and Canada in the last five years. This graph is also helpful to demonstrate that changes in the GDP rate of both nations in the previous years (OECD. 2015). In this graph, the black dotted line stands for the GDP rate of Canada and the blue line indicates the GDP rate of Australia in an effective way.

On the basis of the graph, it should be noted down that, the GDP of Australia has been greater than before in the previous years. The increased GDP rate of Australia signifies positive trends as well as favorable market situations of the nation. As a consequence, it can be thought that, the economy situations and conditions of Australia are favorable for the economic growth as well as success of the. Apart from this, on the premises of the graph, it is also observed that, GDP rate of Canada has been turned down in last five years. The decreased GDP annual growth rate of Canada points out the negative trends in the economy of the nation (TRADING ECONOMICS. 2016).

Impact of the Financial Crisis on GDP Annual Growth Rates

Along with this, it is observed that the GDP rate of Australia has been improved in the previous years. For that reason, it is crucial to comprehend the major causes that play a major role in order to amplify the GDP rate of Australia in previous years. There are numerous causes that improve the GDP rate of Australia in last five to ten years. For case, government support to the business organizations or industries is the major reason that increased the GDP of the nation (Endegnanew, Turner-Jones, and Yartey, 2012). In addition to this, increased households purchasing power, increased commodity prices and the increased demand of raw materials are also the major causes that influence the GDP rate of the nation in a positive way in the previous year. Also, high investment in the mining sector is also considered one of the major causes that has been increased the GDP rate of Australia in an effective and a more comprehensive manner.

In addition to this, the strong economic performance, favorable marketing conditions and trends of the nation also helpful to improve the GDP rate of Australia. It is because of the strong economy system of the nation plays a significant role to attract the other countries; so they can invest their money in that nation in order to earn higher returns on their investments. Moreover, boom in coal, iron and financial & banking sector also improved the economic conditions as well as GDP growth rates of the nation in the previous years (Enright, and Petty, 2016). In this way, it can be said that, these are the major factors that influence the economy and GDP rate of Australia positively in the past time period.

On the other hand, in the perspective of Canada, oil sector, banking sector, finance sector, and real estate sector play a significant role in order to improve the economy performance of the nation in last five years. Also, high government as well as private consumption, exports, and heavy demand of the household goods/products has been enhanced the GDP rate of the nation in the previous years (Estevão, and Tsounta, 2010). In this way, with the help of comparison between the GDP of Australia and Canada, it can be thought that, the economic system, performance, health, and wealth of Australia is superior as well as highly developed in comparison to Canada. 

There are a number of factors affect economy and GDP rate of the nations in a positive as well as a negative way. The major factors that influence the GDP of both nations Australia and Canada are expressed as below:

Australia: The key factors that affect the GDP of Australia are articulated as follow:

Interest Rates: Interest rate is a major factor that has an impact on the GDP of the nation. The high interest rates of Australia have influenced the GDP of the nation. For case, it should be noted down that, the interest rates of the nation are higher than other nations that have been generated various challenges as well as serious issues in front of the government of the nation and also influenced the GDP rate of the nation negatively (Focus Economics. 2016).

Evaluation of GDP Annual Growth Rates of Australia and Canada

Inflation: Inflation is a key factor that influences the economy and GDP of a country. It is true that, inflation stays alive in the economy of Australia that is dangerous for the economy growth and success of the nation (Faeth, 2010). Moreover, the below given chart is useful to appreciate the impact of inflation on the economy as well as GDP of Australia. The graph points out that in the past years, the inflation rate of the nation was high that has been influenced the economy performance and GDP annual growth rate of Australia in negative way.

Government Spending and Investment: The government spending and investment is also the other important factor that affects the economy and GDP rate of the nation. But, in the context of Australia, a low government spending as well as investment has been influenced the economy performance as well as GDP rate of the nation in a negative manner (Marthinsen, 2008).

Free Trade Agreement: Free trade agreement is a major factor that has been influenced the economy performance and GDP rate of the nation in a negative way. It is because of the government of nation has made a lot of agreements with other nations that not only decline the profitability but also influenced the GDP rate of the nation in a negative way (Focus Economics. 2016).

Oil Prices: The increased oil prices of nation also affect the GDP rate of Canada negatively. For case, there can be seen a rapid increase in the price of crude oil and this increase has been influenced the economy success, and GDP of the state negatively (Lawn, 2013).

Number of Employees: In the history of Canada, there can be observed a major decline in the numbers of factory workers. This decline has been affected the productivity as well as profitability of the nation in a negative way (Globerman, and Storer, 2008). Moreover, the decline in the productivity has been influenced the economy and GDP of the nation.

Housing Prices: The increased housing prices also influenced the economy and GDP rate of Canada in a negative way. For case, in 2013, the housing price of Canada was 5.2% even as it was 6.8% in 2014 (Martin and Milway, 2012). In this way, it can be said that, these are the major factors that affect the economy of the nations in a negative manner. The governments of the nations must emphasis on these factors and also make efforts to remove these negative factors to improve the economy performance as well as GDP rate of the nation in an effective and a more comprehensive manner. 

Conclusion

On the basis of above conversation, it can be understood that, GDP is a major tool and technique that plays a significant role in order to measure the economic performance of a nation in an effective and a more comprehensive manner. Along with this, it is also observed that, GDP rate of a nation is a symbol of the positive and negative economy of the nation. Moreover, it is also scrutinized that, the GDP rate of Australia is higher than the GDP rate of Canada that points out that the economic system of Australia is superior to Canada. In addition, it is also observed that the economy situations or conditions of Australia are favorable to the nation. In addition to this, it can also be said that, there are numerous factors that have an impact on the economy of the nations in both positive as well as negative manner. For this reason, it is recommended that, the government of both nations should focus on the negative factors or trends and should develop effective policies to take away these factors in order to improve the economic performance and GDP of the nations in an effective and a more comprehensive manner.  

References

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Faeth, I., 2010. Foreign Direct Investment in Australia: Determinants and Consequences. UoM Custom Book Centre.

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Focus Economics. 2016. Canada Economic Forecast.

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