Responses to articles - Article 1

Page 1 of 7
NAME:
ID NO:
Tutor’s name:
ATMC BUS502 principles of economics for Accountants – Semester One 2018
Assessment task 2 – Responses to articles - Article 1
DUE via Safe Assign 9pm Sunday 15th April
“Sydney powers the nation, accounting for almost half of Australia’s economic growth.” By Peter
Martin from The Sydney Morning Herald 4th December 2017 is available at:
https://www.smh.com.au/business/the-economy/sydney-powers-the-nation-accounting-for-
almost-half-of-australias-economic-growth-20171204-gzyj04.html
Access the article at the URL given above and read it carefully. Based on your reading, answer the
questions in the spaces below. Use full sentences and show all necessary working. Other references
are not necessary but, if you do use any (for example, online economics glossaries) please list at
least the URL of your source. Marks are shown and total [15].
(1) Real GDP and real GDP per capita for Sydney are different. Define the two terms in italics
and explain carefully why they differ.
[3]
Real GDP
Real Gross Domestic Product is a measure of aggregate output in an economy that is
adjusted for inflation or deflation (Agénor and Montiel 2015). Gross Domestic Product represents
the market value goods and services produced within the economy. GDP is computed using either
current market price or market price of a fixed base year. GDP obtained using market price of fixed
base year is called real GDP.
Real GDP per capita
Real GDP per capita is the measure for average income of a nation. It is obtained by dividing
real GDP by population of the country (Bernanke, Antonovics and Frank 2015). Unlike real GDP, it
represents output per person and thus indicates living standard.
In 2015-16, the GDP of Sydney was $400.9 billion. When divided by total population per
capita real GDP is obtained as $81,000 (sgsep.com.au 2017). Real GDP in Sydney has increased
significantly in recent years. The largest contributor to real GDP are professional services, wholesale
trade and financial and insurance service. The real estate, health care, manufacturing and
telecommunication contributed nearly 0.2 to 0.3 percentage point in GDP growth. Population

Page 2 of 7
growth plays an important role in driving economic growth. In order to eliminate this impact per
capita GDP is computed. Since 2004-05, per capita GDP of Sydney remain higher than national
average. A higher real GDP does not imply a higher per capita GDP. This in turn depends on the
extend of population growth. The population in Sydney has grown at a faster rate in the last few
years (smh.com.au 2018). The real GDP growth however offset the population growth causing per
capita GDP in Sydney to grow continuously.
(2) Martin notes two very significantly different growth rates in regional NSW and regional
Victoria. Compare the effect of these two different growth rates on GDP if they were
sustained over a period of 20 years.
[3]
The growth rate in New South Wales and Victoria can be computed using the cumulative growth rate
formula
GDP growth= GDPt −GDPt−1
GDPt
× 100
NSW
Year GDP Growth rate
2000 385355
2001 391974 1.72%
2002 398374 1.63%
2003 406115 1.94%
2004 419334 3.25%
2005 426343 1.67%
2006 432164 1.37%
2007 439358 1.66%
2008 450673 2.58%
2009 455673 1.11%
2010 464576 1.95%
2011 476617 2.59%
2012 488610 2.52%
2013 498183 1.96%
2014 507960 1.96%
2015 522164 2.80%
2016 542281 3.85%
2017 557861 2.87%
(Source: abs.gov.au 2018)

Page 3 of 7
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
0
0.005
0.01
0.015
0.02
0.025
0.03
0.035
0.04
0.045
New South Wales
Growth rate
Year
Growth rate
Figure 1: Growth in New South Wales
As suggested from growth statistics, it is observed that during 2013-14, the regional New
South Wales has recorded a contraction in growth rate. The growth rate fell to 1.96%. In the next
year this during 2014-15, slow growth has slightly improved and the economy accounted a growth of
2.80 percent. The slow growth in New South Wales has resulted from a decline in manufacturing
sector. In the last two years, the economic growth has recovered and the region recorded a growth
relatively strong growth rate of 3.85 percent and 2.87 percent.
Victoria
Year GDP Growth rate
2000 252417
2001 256258 1.52%
2002 267677 4.46%
2003 277476 3.66%
2004 286863 3.38%
2005 298641 4.11%
2006 305063 2.15%
2007 314260 3.01%
2008 324801 3.35%
2009 330367 1.71%
2010 335546 1.57%
2011 345395 2.94%
2012 351586 1.79%
2013 355317 1.06%
2014 362564 2.04%
2015 373055 2.89%
2016 386140 3.51%
2017 399009 3.33%
(Source: abs.gov.au 2018)