GDP and Economic growth in Australia last 5 years
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Economic Overview of Australia
Economic growth of a country is a crucial component for the overall development and welfare of the country as a whole and of its residents in particular. Over the years, the global economy has experienced huge dynamics and modifications in its growth pattern, much of which can be attributed to the diversities in the nature and type of growth of the different countries under its domain (Cohn 2016). While some of the countries developed significantly and emerged as globally dominating economies with impressive economic performances, over the years, some other experienced negative growth patterns and decline in the welfare over time, owing to exogenous as well as endogenous factors.
In this context, one of the primary economies, which have over the years dominated the global scenario and considerably influenced the global economic framework is that of the economy of Australia. The country, known for its immense stability, has prospered over the last few decades and has one of the largest and most influential mixed economies in the world, showing impressive dynamics in almost all the economic parameters of growth and welfare of the residents (Bishop et al. 2016). Much of the economic prosperity of the country comes from the steady and flourishing industrial sectors, high volumes of trade and commerce and technological and infrastructural developments, which together contribute in the comparatively higher than global average standard of living of the major share of the population of the country.
Australia, has however, faced its share of fluctuations and dynamics in the path of growth of its economy and not all the parameters show smooth progress at all the times. In the last few years especially, the economy of Australia has faced considerable fluctuations, both positive as well as negative, in its different economic indicators of growth, owing to internal as well as external factors. Keeping this into consideration, the concerned essay tries to analyse and discuss the growth trends in the GDP and the overall economy of Australia, exhibited over the last five years.
Australia: Economic Overview
As discussed above, the economy of Australia is one of the largest mixed economies as well as the highly developed countries in the international framework, with gradual and steady development over the decades. The country ranks second in terms of the wealth of the adult population, just after that of Switzerland and also ranks fourteenth in terms of Nominal GDP across the global scenario. The economy of the Australia also has the record of the longest uninterrupted growth spanning 26 years, which indicates towards the presence of a steady economy in the country (Rees, Smith and Hall 2016). The country has also built robust trade relationships with all the other major economies of the globe and is currently the 23rd largest exporter and 20th largest importer in the world. Dominated by an increasing service sector, the economy of Australia has been generating immense economic prosperity and employment scopes across the years, which in turn has attracted huge numbers of immigrant from all parts of the world, many of whom come down to the country in search of greater economic scopes and higher standard of living (Lowe 2012).
GDP and its dynamics in Australia in the last five years
The Australian economy has however experienced considerable fluctuations and dynamics in the last five years, which can be observed by studying the performance of the country in terms of the major economic indicators like the growth of the GDP, inflation, unemployment, consumption, investment, trade and others, which is discussed in the following sections.
GDP and its dynamics in Australia in the last five years
One of the primary indicators of the economic growth and overall economic health and wellbeing of any country, at a point of time, is the Gross Domestic Product of the country at that concerned point of time. The Gross Domestic Product measures the value of the final commodities as well as services which are produced within the concerned country’s geographical boundary within a particular period of time, which is usually an economic year and is thus an indicator of the dynamics of the total productivity and income of the nation, which in turn gives a broad overview of the economic welfare of the residents of the concerned country. Keeping this into consideration, the GDP of Australia, in the last five years, can be seen to be as follows:
Figure 1: Australian GDP in the last five years
(Source: Tradingeconomics.com 2018)
As can be seen from the above figure, the GDP of Australia, which used to be nearly 1538.19 billion USD in 2012, increased to 1567.18 billion USD in 2013, but however started declining post 2013 till 2016, hitting as low as 1204 billion USD in the concerned year. This decline seems to be short-term as in 2017, the GDP of the country can be seen to increase to some extent (to 1379.55 billion USD) (Dyster and Meredith 2012).
These fluctuations of the Gross Domestic Product of the country can be understood even more robustly by studying the growth rates of the concerned indicator within the concerned period of time. In general, high fluctuations, both positive as well as negative in the growth rate of the GDP of a country indicates towards higher economic dynamics and turmoil in the country, whereas a stable growth rate indicates steady economic situations. Keeping this into account, the GDP growth rate of Australia can be seen to be as follows:
GDP as a measure of wellbeing
Figure 2: Australian GDP Growth Rate over the last five years
(Source: Tradingeconomics.com 2018)
The GDP growth rate of the country, in the last five years, can be seen to be considerably fluctuating, with the trends showing positive as well as negative trends alternatively. The magnitude as well as frequency of positive and negative fluctuations can also be seen to be increasing in the last couple of years, which in turn indicates towards higher economic activities and dynamics faced by the country in the concerned period of time (Corden 2012). The growth rate can be seen to be reaching as low as -0.4% in 2016, recovering immediately after that, achieving more than 1% growth in 2017, which in turn can be explains the positive trend in the GDP in 2017 after three consecutive years of decline in the same.
GDP as a measure of wellbeing
GDP, although being one of the primary indicators of total productivity in the country, does not to a considerable extent indicates towards the individual economic wellbeing of the residents of the country as the aspects of distribution of economic productivity among the residents is not considered in this parameter. This can however be shown, to some extent, by the per-capita GDP and its growth for the concerned country, as the same measures the per head productivity of the country within a particular period of time. Taking this into consideration, the per-capita GDP of Australia, in the last five years, can be seen to be as follows:
Figure 3: Australian Per-Capita GDP over the last five years
(Source: Tradingeconomics.com 2018)
The above figure shows that the per-capita GDP of Australia has been increasing steadily and more or less linearly in the last five years, which, contradicting to the fluctuating overall GDP and GDP growth rate trends, imply that the per unit income of the residents of the country has been increasing over the concerned period of time.
However, the increase in per-capita GDP can be either due to increase in the productivity or increase in the overall level of prices or both, which in turn imply that this indicator does not efficiently measure the real growth in the purchasing power of the residents of the concerned country (Kubiszewski et al. 2013). This in turn, can be measured, by taking into account the Purchasing Power Parity adjusted per-capita GDP in the country, which highlights the actual economic welfare in terms of real purchasing power of the residents in the concerned country. For Australia, this indicator, over the last five years, can be seen as follows:
Figure 4: Australian per-capita GDP (PPP Adjusted) in the last five years
(Source: Tradingeconomics.com 2018)
The PPP adjusted per-capita GDP of Australia, can also be seen to be maintaining the linear positive trend over the last few years, like that of the per-capita GDP index of the concerned country in the concerned period of time. However, the amount of per-capita GDP (PPP adjusted) of the country can be seen to be less than the amount of per-capita GDP in the country over the years (Reinhart and Rogoff 2014). Nevertheless, the steady growth in this indicator, in case of Australia, implies that the economic welfare of the residents of the country in general, in terms of real purchasing power, has increased over the last five years.
Thus, from the above discussion it can be asserted that the GDP and the dynamics in its growth rate in Australia, has been both positive and negative at different points of time, indicating towards fluctuations in the productivity of the country. However, the economic welfare of the residents of the country can be seen to be increasing over the concerned period of time, as can be seen from the linearly increasing trends of the per-capita GDP (both normal as well as PPP adjusted) within the specified period of time.
GDP, in spite of being one of the major indicators of economic growth of a country, can only indicate towards the dynamics in the productivity aspects of the same. There however remains many other aspects in the overall economic growth of a country, which this indicator and its variant do not take into account. Thus, to measure the overall economic growth of Australia, concentrating only on the GDP can lead to biased and one-dimensional analysis of the same, taking into consideration which, the other aspects of the economic growth of Australia in the last five years are seen in the following section.
Economic growth trend of Australia in the last five years
To analyse and interpret the overall growth trends of the economy of Australia, the other significant macroeconomic indicators like that of the unemployment rate, rate of inflation, trade activities, investment and consumption and similar variables are required to be taken into consideration:
Inflation rate in Australia in the last five years
One of the most significant economic indicators of growth in the generalised framework, is the rate of inflation of the country, which shows the dynamics in the average levels of price in the country over time. This is an indicator of huge significance as very high inflation leads to huge suffering on part of the residents of the country as their real purchasing power decreases (Gerlach and Tillmann 2012). On the other hand, very low inflation indicates towards recessionary situations in the country.
Figure 5: Australian rate of inflation in the last five years
(Source: Tradingeconomics.com 2018)
From the above figure, it is evident that the rate of inflation in Australia, increased to some extent from 2012 to 2014, reaching its highest peak at 3% in 2014, after which it is found to be declining considerably till 2016, post which however the rate can be seen to be rising a little, up to 2.1% in the last year. However, in spite of the positive and negative fluctuations, the overall dynamics in the rate of inflation in the country, over the last five years, can be seen to be highly moderate (varying between the range of 1% to 3%). This in turn indicates towards overall stability in this indicator, which in turn indicates stability in the economic growth pattern and an overall superior economic health of the concerned country within the concerned period of time (Gerlach and Tillmann 2012).
Unemployment Rate in Australia over the last five years
Another economic indicator of considerable importance in the aspect of measuring the overall economic growth trends of a country over time is the rate of unemployment in the country, which in turn highlights the labour market conditions, job creations, economic welfare, standard of living of the residents, on which the aggregate demand and overall economic productivity and growth of the nation depends.
Figure 6: Australian unemployment rate over the last five years
(Source: Tradingeconomics.com 2018)
The unemployment in the country, rising from 2012 till 2015, can however be seen to be considerably decreasing post 2017, which can be attributed to the increase in the job creation in the country (Kumar, Webber and Perry 2012). Over 300,000 jobs have been created in Australia in 2017 itself, which in turn indicates towards the increasing economic welfare of the residents of the country, which also explains the increase in the purchasing power of the population of the country as discussed above.
Wage growth in Australia over the last five years
Figure 7: Australian average weekly wage over the years
(Source: Tradingeconomics.com 2018)
The weekly average wage of the country can also be seen to be growing over the last five years, although the magnitude of growth of the average wages can be seen to be decreasing with time. This also contributes to the overall economic welfare of the population, in terms of higher purchasing power, the effects of which can be seen in the following discussions (Kumar, Webber and Perry 2012).
Consumption expenditure in Australia over the last five years
The economic welfare of the residents of a country can be gauged from their consumption habits and consumption expenditures. This, in the context of Australia, can be seen as follows:
Figure 8: Australian consumption expenditure over the last five years
(Source: Tradingeconomics.com 2018)
The consumption expenditure of Australia can be seen to be consistently increasing over the last five years, with no trends of declining in the concerned period of time (Bordo and Rousseau 2012). Given the fact that the inflation of the country is at moderate level, this increase in the consumption expenditure can mostly be attributed to the increased purchasing power of the residents, which in turn contributes to the aggregate demand, overall productivity and economic growth of the country positively.
Investment in Australia over the last five years
Another component of aggregate demand of a country is the investment expenditures, the increase in which (shown in terms of capital formation) leads to increase in overall economic productivity and growth in the country:
Figure 9: Australian capital formation over the last five years
(Source: Tradingeconomics.com 2018)
The gross capital formation in Australia, in the last five years, can be seen to be increasing till 2014, post which it decreased to a little extent, the level still remaining considerably high over the years, which in turn also contributes to the increased aggregate demand and overall economic productivity of the country (Kumar, Webber and Perry 2012).
Trade dynamics in Australia over the last five years
The overall economic productivity of an open economy also depends on the level of exports of the country, which in case of Australia, can be seen to be as follows:
Figure 10: Australian export volume over the last five years
(Source: Tradingeconomics.com 2018)
The exports of the country can be seen to be remaining at a moderate level till 2016, before increasing visibly post 2016, in the last year, which in turn indicates towards greater economic productivity, income inflow and overall positive growth dynamics in the country (Bordo and Rousseau 2012). However, the level of imports being consistently higher than that of exports the trade balance in the country can mostly seen to be negative:
Figure 11: Australian Balance of Trade in the last five years
(Source: Tradingeconomics.com 2018)
The trade balance of Australia can be seen to be becoming positive in 2017 after 2014, due to a comparatively higher export volume over import volume (Rahman and Mamun 2016).
Conclusion:
From the above discussion, it can thus be concluded that the highly developed and globally dominant economy of Australia has been subjected to considerable dynamics and fluctuations in the last five years. However, most of these dynamics indicate towards positive growth trends in the country and the negative fluctuations observed in GDP and trade balances can also be seen to be recovering post 2016. Together all these indicators assert towards the positive and increasing economic prosperity of the country, which is expected to increase even more in the coming years.
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