Analysis of Australia’s Macroeconomic Factors: Production Output Performance, Unemployment, Inflation and Price

Running head: ANALYSIS OF AUSTRALIA’S MACROECONOMIC FACTORS 1
ANALYSIS OF AUSTRALIA’S MACROECONOMIC FACTORS: PRODUCTION OUTPUT
PERFORMANCE, UNEMPLOYMENT, INFLATION AND PRICE
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ANALYSIS OF AUSTRALIA’S MACROECONOMIC FACTORS 2
Analysis of Australia’s Macroeconomic Factors: Production Output Performance,
Unemployment, Inflation and Price
Introduction
The service sector of Australia has dominated the economy of Australia constituting of
over 70% of the Gross Domestic Product. Whereas the economic growth is mainly reliant on the
sector of agriculture which comprises 3 percent of the GDP at the farm, and 12% if the value
addition through processing is done beyond the farm (Holton, 2013). The manufacturing
industry, on the other hand, currently contributes to 6% of the country's GDP exporting AUD$96
billion worth of goods. The country is dotted with wine products, agricultural products, minerals,
education-related services, and recreational travel services (Holton, 2013). The top exports of
Australia include iron ore and concentrate, gold, coal, natural gases, and education-related
services. According to Garnaut (2011), the top Australian imports are freight transport, Telco
parts, refined petroleum, cars, and personal travel/tourism. Some of the large companies of
Australia are Commonwealth Bank, Wesfarmers, Telstra, BHP Billiton, and Tinto Group.
Australia's economy, as of 2015, with a GDP of 1.62 trillion Australian Dollars, is one of the
world’s major economies, which are mixed market (Garnaut, 2011). In the past decade, the total
wealth of Australia has amounted to 6.4 trillion Australian Dollars. In 2012, by nominal GDP it
was the twelfth major national economy and measured by PPP-adjusted GDP, it was the
seventeenth-largest national economy, approximately 1.7% of the economy of the world.
Analysis of Australia’s Production Output Performance
The real GDP is a measurement that has been attuned to the inflation rate of a country
hence reflecting the worth of all services and goods produced by the economy of the country in a

ANALYSIS OF AUSTRALIA’S MACROECONOMIC FACTORS 3
given year, stated in the prices of the base year and is frequently regarded to as the “constant
dollar” GDP, “inflation-corrected GDP” or “constant price” GDP (Macdonald, 2010). Real GDP
accounts for the changes in the level of price and offers a more accurate figure of the growth in
the economy.
Computing Real GDP
Real GDP is obtained as nominal GDP divided by a deflator (R):
Nominal GDP = Real GDP
R
GDP Deflator (R) = Nominal GDP * 100
Real GDP
The deflator (R) is the inflation measurement since the base year; apportioning the
nominal GDP number by the deflator eradicates the inflation effects. A large deviation between
the nominal and real GDP shows the substantial inflation or deflation in its economy concerning
the deflator’s base year.
Australia’s Real GDP
Following a 2.1% economy increase in the past ten years, the real GDP of Australia has
grown by 2.9% as to per the latest figures of the national account which were released by the
Australian Bureau of Statistics. Australia has entered its 11th consecutive economic growth year,
and according to International Monetary Fund (IMF) World Economic Outlook April 2018
(IMF, 2019), its production trend has been predicted to outperform every other major advanced
economy. From 2008-09 to 2017-18 the economy of Australia grew by annually by an average
rate of 3.2% in real terms and is now deep into its 11th year of uninterrupted economic growth
annually, a record which has been unequaled by another developed country over this period
(Macdonald, 2010). Below are the ten financial years of real GDP growth from 2009 to 2018.

ANALYSIS OF AUSTRALIA’S MACROECONOMIC FACTORS 4
Figure 1. Growth of Australia’s Real GDP from 2008-2018. (Source: Trading Economics,
2019)
Australia Real GDP Growth Performance during the 2008/09 Recession
In the previous decade (1999 to 2008) before the great recession of 2008/09, the real
GDP of Australia grew on average by 3.4% annually. In 2009, the economic growth of the
country decelerated to 1.6 percent due to the financial turmoil which occurred globally (World
Bank, 2013). Despite 2009 being the most unfortunate year for the economy of Australia since
the recession of 1991, the economy exhibited pronounced pliability to the global crisis. As a
matter of fact, Australia was one of the few advanced nations which had a positive recording in
2009 (World Bank, 2013). The economic performance of the country improved in the years,
which followed with a real GDP growth, which averaged 2.7 percent from 2010-2013.
Australia’s Long Term Productivity Growth
Productivity is described as the proportion of an outputs’ index to an inputs’ index.
Currently, the Australian Bureau of Statistics publishes yearly single and multifactor productivity