Current Economic Performance of Australia since 2015

This paper contains a report regarding the current economic performance of Australia viz-aviz the performance since the year 2015. The study takes up many indicators of the economy ranging from the GDP growth rate to the terms of trade of the economy. The paper has also provided the challenges or issues that the economy can encounter in the coming months as well.

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ECO10250:
ASSESSMENT DETAILS S2 2019
ASSIGNMENT 2

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Executive summary
This paper contains a report regarding the current economic performance of Australia viz-a-
viz the performance since the year 2015. The study takes up many indicators of the economy
ranging from the GDP growth rate to the terms of trade of the economy. The paper has also
provided the challenges or issues that the economy can encounter in the coming months as
well.

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Contents
Introduction................................................................................................................................4
Discussion..................................................................................................................................4
The current state of the Australian economy versus the state since the year 2015....................4
Three major issues facing the Australian economy in the next 12 months..............................10
Conclusion................................................................................................................................11
Reference..................................................................................................................................12

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Introduction
Economic performance is the utmost concern for any government and one of the ways to
monitor the progress is to compare the current value of indicators with the values in the last
few years. This allows the government and the concerned authorities to understand the slope
of the changes in the value of indicators. This paper aims to compare the current state of the
Australian economy with its performance since the year 2015. In addition to that, the paper
also aims to find out three issues facing the economy in the next 12 years.
Discussion
The current state of the Australian economy versus the state since the year 2015
GDP growth
2015 2016 2017 2018 2019
0
0.5
1
1.5
2
2.5
3 2.3360754810
9676
2.8467549510
8566 2.3425822867
6258
2.8349481329
6824
0.2803546
Annual GDP growth rate
Annual GDP growth rate
Figure 1: Annual GDP growth rate of Australia
(Source: Tradingeconomics.com. 2019)
The current economic growth rate of Australia as per August 2019 is 0.8035% which is
slightly more than the annual growth rate of that year as of now. The performance of the
economy in the last 5 years has been better than the current state of the economic growth rate
of the country. The growth rate of the economy in the year 2019 has been the lowest in the
last 5 years. Before that, the percentage of economic growth amounted to around 2.65% on an
average till the year 2019 (ABC News, 2019). However, the month of august has shown some
signs of retrieval that can bring the economic growth rate near 1% annually for the year 2019-

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20. The expected target value as per the bi-annual goal of the country is to keep the growth
rate as high as 3% in the coming years. Thus, the figure of the month august has shown the
economy is drifting away from the goals.
Unemployment
2015 2016 2017 2018 2019 Aug-19
4.6
4.8
5
5.2
5.4
5.6
5.8
6
6.2 6.0542001724243
2
5.7098999023437
5 5.5911998748779
3 5.5988
5.1254
5.3951
Unemployment rate
Unemployment rate
Figure 2: The annual unemployment rate of Australia in the last few years
(Source: Tradingeconomics.com. 2019)
According to the monthly data of the year 2019, the unemployment rate of Australia in august
is 5.395% which is more than the annual unemployment rate of the year 2019. That means
the downward trend in the last five years in terms of unemployment has been disrupted and
the figure is high again. The department of labour Australia had stated back in the year 2015,
that it has a goal to reduce the annual unemployment rate to 3.5% before the year 2020
(Oecd.org, 2019). However, as the data of the month of august suggests, the trend is broken
and the government needs to undertake additional measures to keep itself in the path of
achieving the goal.
Inflation

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2015 2016 2017 2018 2019 Aug-19
0
0.5
1
1.5
2
2.5
Inflation rate of australia
Inflation rate of australia
Figure 3: The inflation rate of Australia over the years
(Source: Tradingeconomics.com. 2019)
The inflation rate in the economy of Australia is among the indicators that have achieved the
goal set by the government. The government and the treasurer of the central bank of Australia
had pegged the target at 2% on an average. Thus, the value of the indicator for the month of
august which is 1.71% is lower than the target range. Therefore the economy has been able to
keep the inflation in control both over the year since 2015 and in the ongoing financial year
(Pc.gov.au, 2019). However, the government needs to increase the monitoring on the
inflation rate as a low inflation rate can also be the early signs of a slowdown of an economy.
Thus, if the government can maintain these values in the coming months, it can be said that
the performance of the indicator has been in line with the goal of the government.
Terms of trade

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2015 2016 2017 2018 2019 43678
0
20
40
60
80
100
120
82.1
71.7
87 87.4 93.6
102.4
terms of trade
terms of trade
Figure 4: The terms of trade of Australia over the years
(Source: Tradingeconmics.com)
Terms of trade are the ratio of the export prices to the import prices of the products being
imported and exported. Therefore, the goal of the government was to increase the terms of
trade of the economy to at least 110 before the year 2020. The current value of the indicator
of trade is 102.4 which are increased from 93.6, the terms of trade for the year 2018-19
(Wto.org, 2019). That means the price of the products exported to the partners has increased
more than the increase in the price of the export. Thus, Australia is still doing better in terms
of the relative price of the products being traded. This should also reflect in the current
account of the economy of Australia as well.
Current account

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2015 2016 2017 2018 2019 Aug-19
-70000000000
-60000000000
-50000000000
-40000000000
-30000000000
-20000000000
-10000000000
0
Curent account
Curent account
Figure 5: The current account of Australia over the years
(Source: Tradingeconmics.com)
As discussed above, the terms of trade in the economy of Australia has improved over the
years. This also has reflected in the current account of the economy as well. The government
had set a target to reduce the balance of payment of the country which is in its path as per the
recent data (Finance.gov.au, 2019). The current performance of the economy is in line with
the improvement it has been showing over the past few years. The performance of the
indicator is expected to be improved even further in the near future as the demand for the
goods and services exported from the economy of Australia is increasing especially in the
Asian market.
Net foreign debt

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2015 2016 2017 2018 2019 43678
1400000
1450000
1500000
1550000
1600000
1650000
1700000
1750000
1630967
1521458
1646000
1600782
1729658
1689839
Net foreign debt (US mn dollar)
Net foreign debt (US mn dollar)
Figure 6: The net foreign debt of Australia over the years
(Source: Tradingeconmics.com)
The net foreign debt of Australia is one of the economic indicators that have been out of
control of the government of Australia (Hellwig and McAllister, 2016). The government has
failed to reduce the huge amount of national debt over the years. The value of the indicator
for August has also been dissatisfactory for the central bank and the government of Australia.
The foreign net debt for August 2019 is more than the value of the indicator in the past years
(Treasury.gov.au, 2019). There are also influences of business cycle oscillation in the trend of
the data as well. Therefore, both the current performance and the past performance of
Australia in terms of the current account have not been up to the mark and remains to bother
the government.
Value of Australian dollar

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2015 2016 2017 2018 2019 43678
0.6
0.65
0.7
0.75
0.8
0.85 0.82084
0.69704
0.71997
0.78633
0.70419 0.68575
value of australian dollar (in USD)
value of australian dollar (in USD)
Figure 7: the value of the Australian dollar in USD
(Source: Tradingeconmics.com)
The goal of the Australian government is to increase the value of the Australian dollar so that
the increasing burden of national debt can be eased off (Wilson et al. 2018). However, the
current value of the Australian dollar is 0.68 USD which is a 17% reduction from the value of
the Australian dollar in the year 2015. The value of the Australian dollar compared to the
USD has reduced 2.68% since the start of the year 2018-19. Thus, the burden of the
government in terms of national debt remains to be a key concern for the government in
recent times as well. Since the year 2016, the value of the currency was bouncing back until
2018 after which it has started reducing again. Therefore, according to the current value of
the indicator, it is doing worse compared to the last few years.
Three major issues facing the Australian economy in the next 12 months
Given the study of different economic indicators of the economy of Australia, one of the
major problems that will affect the economy is the increasing burden of net foreign debt.
Currently, the value of the Australian currency is reducing compared to the USD. Therefore
the external foreign debt which needs to be paid using USD will further amplify the debt
leading to a huge budget deficit in the next 12 months (Bajada, 2018). The increasing burden
on the government can also reduce expenditure on the infrastructure development of the

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economy. Consequently, indirectly the economic growth rate and other related indicators of
the economy may also get affected in the next 12 months.
Another major issue that maybe there in the Australian economy is the supply side crunch
which may arise due to a huge surge in the demand for the exported products to the Asian
market. Currently, the production capacity of the economy is not capable of meeting the
demand from the Asia Pacific nations (Findlay and Garnaut, 2017). That can, in the next few
months increase the relative price for exports and reduces the export demand leading to a
rising trade deficit again. The inability of the government to fund the development of
infrastructure may further worsen the supply side scenario in the coming months.
Lastly, the inflation rate, unemployment rate and the GDP growth rate for August 2019 have
shown early signs of economic downturn. The aggregate demand for the goods and services
in the domestic market may reduce in the coming years (Rhoades and Smart, 2018). As a
result, the unemployment may increase further and economic growth rate may slump adding
to the concerns of the government in the coming months.
Conclusion
Therefore, the economies of Australia have shown a different level of performance in
different aspects of the economy. While it has achieved the national goals in some of the
indicators such as inflation it has drastically failed in keeping the value of the currency high
as per the data of August 2019. Given the performance of the economy and the trend shown
in the recent month, the economy can face challenges such as increased external debt burden,
economic downturn and supply-side crunch in the next few months.

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Reference
ABC News. (2019). ABC News (Australian Broadcasting Corporation). [online] Available
at: http://www.abc.net.au/news/ [Accessed 21 Sep. 2019].
Bajada, C., 2018. Recent government initiatives in tackling the underground economy in
Australia. In Size, Causes and Consequences of the Underground Economy (pp. 243-274).
Routledge.
Finance.gov.au. (2019). Department of Finance |. [online] Available at:
http://www.finance.gov.au [Accessed 21 Sep. 2019].
Findlay, C. and Garnaut, R., 2017. The political economy of manufacturing protection:
Experiences of ASEAN and Australia. Routledge, pp.12-18.
Hellwig, T. and McAllister, I., 2016. Does the economy matter? Economic perceptions and
the vote in Australia. Australian Journal of Political Science, 51(2), pp.236-254.
Oecd.org. (2019). OECD.org - OECD. [online] Available at: http://www.oecd.org [Accessed
21 Sep. 2019].
Pc.gov.au. (2019). Productivity Commission. [online] Available at: http://www.pc.gov.au
[Accessed 21 Sep. 2019].
Rhoades, G. and Smart, D., 2018. The political economy of entrepreneurial culture in higher
education: Policies toward foreign students in Australia and the United States. In The Social
Role of Higher Education (pp. 125-160). Routledge.
Tradingeconomics.com. (2019). TRADING ECONOMICS | 20 million INDICATORS FROM
196 COUNTRIES. [online] Available at: http://tradingeconomics.com.
Treasury.gov.au. (2019). Treasury.gov.au. [online] Available at: http://www.treasury.gov.au
[Accessed 21 Sep. 2019].
Wilson, M.M., Tatham, P., Payne, J., L’Hermitte, C. and Shapland, M., 2018. Best practice
relief supply for emergency services in a developed economy: Evidence from Queensland
Australia. Journal of Humanitarian Logistics and Supply Chain Management, 8(1), pp.107-
132.

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Wto.org. (2019). World Trade Organization - Global trade. [online] Available at:
http://www.wto.org [Accessed 21 Sep. 2019].