Economic Analysis of Australia and USA

This assignment delves into an economic analysis of both Australia and the USA, focusing on how various macroeconomic factors influence their respective economies. It explores challenges faced by these nations, including falling commodity prices and the global financial crisis, while highlighting their remarkable recovery and growth rates. The role of central banks like the Reserve Bank of Australia and the Federal Reserve in setting cash rates is also examined. The report emphasizes the interconnected nature of macroeconomic variables, demonstrating how changes in one factor can ripple through the entire economic system.

Business Economics

Table of Contents
INTRODUCTION...........................................................................................................................1
(1)Data on key macroeconomic indicators of Australia and USA from 1995 to 2015................1
(2)Summary of change in Australia's and USA macroeconomic factors.................................11
3.pair wise graphs of Australia and USA from 1995 to 2015....................................................14
P4.paulisable economic explanation including Govt. policies..................................................19
P4(b): short prediction macroeconomic outlook of Australia......................................................2
CONCLUSION................................................................................................................................4

INTRODUCTION
Macroeconomic factors refers to that factors which related to the broad economy at
regional or national level. These factors effect a large population rather than a few selected
individuals. These factors includes various factors such as unemployment, inflation, savings ,
economic output and many more others. This report is going to analysis of the performance on
the basis of these various economic factors in the country of Australia and USA from 1995 to
2015. the report also includes role of Govt. policy for the relationship between real GDP growth
and other indicators. The performance of a country is analysed through these key indicators,
various graphs and statistical summary clarify relations of these key indicators in this report.
(1)Data on key macroeconomic indicators of Australia and USA from 1995 to 2015.
Data on key macroeconomic indicators: Key macroeconomic Indicators includes real
GDP, interest rates, unemployment rates, CPI, exchange rates, export and import. The data of
these indicators as follows for the year 1995 to 2015 for both the countries Australia as well as
USA.
Macro economics data of Australia
Years
Real
GDP(USD)
(cr.)
Interest
rate(%)
Unemploym
ent rate(%) CPI (%)
Export(
%)
Import(
%)
1995 37088.28 7.5 8.5 65 24 12
1996 40361.91 7.14 8.5 66.7 23.2 12.2
1997 43763.19 5.42 8 66.9 23 32
1998 40121.41 4.98 7.6 67.4 22 12
1999 39031.58 4.79 6.4 68.4 22.7 12.7
2000 41688.75 6 6.3 71.5 22 12
2001 38044.38 4.93 6.9 74.6 23 18
2002 39714.73 4.59 6.2 76.9 23.4 21.4
2003 46841.06 4.82 5.7 79 22.8 12.8
2004 61550.08 5.25 5.2 80.8 24.9 14.9
2005 74980.53 5.48 4.9 83 25.6 15.6
2006 85705.66 5.84 4.5 85.9 24.3 14.3
1

2007 1.66 lakh 6.41 4.4 87.9 23.9 13.9
2008 92644.82 6.64 4.5 91.8 22 12
2009 1.44 lakh 3.18 5.6 93.4 21.5 11.5
2010 1.39 lakh 4.41 5.1 96.1 20.08 0.08
2011 1.54 lakh 4.68 5.2 99.3 17.8 7.8
2012 1.57 lakh 3.64 5.3 101 16 1.6
2013 1.57 lakh 2.71 5.8 103.5 16.5 26.5
2014 1.46 lakh 2.5 6.3 106 17.5 17.5
2015 1.35 lakh 2.07 5.9 107.6 20 10
Monthly exchange rates of AUD with USD
2

3

4

5

Macroeconomic data USA
Years
Real
GDP(USD)
(cr.)
Interest
rate(%)
Unemploym
ent rate(%) CPI (%)
Export(Trilli
on)
import(trilli
on)
1995 7639.8 5.74 5.6 2.5 6.42 6.29
1996 8073.1 5.27 5.4 3.3 6.71 6.6
1997 8577.6 5.5 4.9 1.7 6.96 6.815
6

1998 9062.8 4.83 4.5 1.6 6.87 6.76
1999 9630.7 5.1 4.2 2.7 7.12 7.049
2000 10252.4 6.51 4 3.4 7.91 7.049
2001 10581.8 4.8 4.7 1.6 7.67 7.9
2002 10936.5 1.75 5.8 2.4 8.05 7.686
2003 11458.3 1.01 6 1.9 9.34 7.984
2004 12213.7 1.03 5.5 3.3 11.36 9.264
2005 13036.6 3.41 5.1 3.4 12.94 11.233
2006 13814.6 4.56 4.6 2.5 14.86 12.76
2007 14451.9 5.02 4.6 4.1 17.26 14.56
2008 14712.8 1.18 5.8 0.1 19.72 16.878
2009 14448.9 0.13 9.3 2.7 15.89 19.363
2010 14992.1 0.16 9.6 1.5 18.93 15.522
2011 15542.6 0.07 8.9 3 22.47 18.39
2012 16197.1 0.15 8.1 1.7 22.81 21.837
2013 16784.8 0.08 7.4 1.5 23.46 22.138
2014 17521.8 0.04 6.2 0.8 23.86 22.746
2015 18219.3 0.11 5.3 0.7 21.27 23.255
7

Monthly exchange rate of USD with AUD
8

9

10

11

Real GDP: It refers to a macroeconomic measure of the value of economic output
adjusted for price change. For getting the real growth of GDP it must be divided by inflation rate.
Interest rate: This the cash rate which is used in Australia for the bank rate and it is the
rate of interest which is homogeneous central bank charges on loans to commercial banks. It
can't be changed by the transaction of financial institutions. The federal reserve bank of America
decide that rate in USA.
Unemployment rate: It is the measure of joblessness in a country. It is calculate as
percentage divided the unemployed individuals by the all currently worked labour force.
CPI: It is a measure of total weighted average prices of consumers total goods and
services. It is calculated with the help of total price changed with respect in existing determined
prices of consumers basket.
Exchange rate: It refers to the price of a nations currency or can be say that it is the
value of a currency for conversion into another currency.
Export & Import: These two term are differ with the destination such as import for a
country is export for the sending country. Export, import both can be in terms of services and as
well as in goods.
(2)Summary of change in Australia's and USA macroeconomic factors.
Australia's data about changing macroeconomic factors
Years
GDP
growth
rate(%)
Interest
rate(%)
Inflation
rates(%)
Unemploy
ment
rates(%)
Exchange
rates(%)
Rate of
change of
Net
export(%)
1995 2.96 2.5 4.76 0.6 -4.12 8.9
1996 4.298 0.36 2.62 0 6.72 6.37
1997 4.164 1.72 0.3 0.5 -18.01 9.04
1998 4.866 0.44 0.75 0.4 -6.28 4.43
1999 4.244 0.19 1.48 1.2 7.65 4.44
2000 3.086 -1.21 4.53 0.1 -14.97 11.94
2001 2.576 1.07 4.34 -0.6 -8.58 0.46
2002 3.996 0.34 3.08 0.7 9.97 2.94
2003 3.021 -0.23 2.73 0.5 34.07 4.28
12

2004 4.036 -0.43 2.28 0.5 3.61 10.31
2005 3.213 -0.23 2.72 0.3 -6.06 6.93
2006 2.654 -0.36 3.49 0.4 7.66 8.41
2007 4.52 -0.57 2.33 0.1 11.02 6.64
2008 2.675 -0.23 4.44 -0.1 -19.23 2.73
2009 1.565 3.46 1.74 -1.1 26.85 10.15
2010 2.259 -1.23 2.89 0.5 14 11.55
2011 2.721 -0.27 3.33 -0.1 -0.08 6.56
2012 3.6 1.04 1.71 -0.1 1.7 2.87
2013 2.057 0.93 2.48 -0.5 -14.21 2.85
2014 2.709 0.21 2.55 -0.5 -8.47 3.61
2015 2.7 0.43 1.51 0.4 -10.73 3.37
USA data about changing macroeconomic factors
Years
GDP growth
rate(%)
Interest
rate(%)
Inflation
rates(%)
Unemploym
ent rates(%)
Exchange
rates(%)
(AUD-
USD)
Rate of
change of
Net
export(%)
1995 2.7 5.74 2.80% 0.6 4.12 10.2
1996 3.8 5.27 2.73% 0.07% -6.72 8.18
1997 4.5 5.5 3.04% -0.31% 18.01 11.9
1998 4.5 4.83 1.57% 1.47% 6.28 2.33
1999 4.7 5.1 1.67% -0.10% -7.65 2.6
2000 4.1 6.51 2.74% -1.07% 14.97 8.5
2001 4.1 4.8 3.73% -0.99% 8.58 -5.8
2002 1 1.75 1.14% 2.59% -9.97 -1.7
2003 1.8 1.01 2.60% -1.46% -34.07 1.7
2004 2.8 1.03 1.93% 0.67% -3.61 9.7
2005 3.8 3.41 2.97% -1.04% 6.06 6.2
2006 3.3 4.56 3.99% -1.02% -7.66 9.03
13

2007 2.7 5.02 2.08% 1.91% -11.02 9.2
2008 1.8 1.18 4.28% -2.20% 19.23 5.7
2009 -0.3 0.13 0.03% 4.25% -26.85 -8.7
2010 -2.8 0.16 2.63% -2.60% -14 11.8
2011 -2.5 0.07 1.63% 1.00% 0.08 6.8
2012 1.6 0.15 2.93% -1.30% -1.7 3.41
2013 2.2 0.08 1.59% 1.34% 14.21 3.4
2014 1.7 0.04 1.58% 0.01% 8.47 4.2
2015 2.9 0.11 -0.09% 1.67% 10.73 0.41
Comments on the variables
GDP: gross domestic product is a measure of economic performance of a country. As
from the above table the GDP of Australia grew year by year. According to the data produced by
the Australian statistical bureau Australia's GDP grew by 2.7% in recent 10 years and above data
clarify the statement. USA defeated in the period of financial crisis but it recover soon and end of
2015 reaches the GDP growth by 2.9 %. now USA economy near to the targeted GDP growth %.
Inflation rates: It refers to the overall increase rate in the consumers price Index. In
Australia it rises from 1961 to 2015 by 5.1 % approx. the average inflation rate from 1995 to
2015 was 3.22%. economics remains that RBA won't raise interest rates until 2020 at the earliest
and given the weakness in inflation. If the RBA were operating under its historical reaction
function, data of this sort would draw easier policy. But inflation has been tracking this trajectory
for the past 18 months without bringing forth further easing. USA economy also faces a higher
inflation in the period of financial crisis. But apart from that it reaches to targeted inflation rate.
In 2015 it reaches the inflation -0.09%.
Exchange rates: it is the rate of a nations currency in terms of other countries currency.
The higher exchange rate is always better for the country. In Australia economy it was very
strong before the financial crisis but affect by the global financial crisis. But apart from that it is
one of the economy which cover its currency value very rapidly. It is used as strong instrument
regarding monetary policy. Interest dates and countries debts effect the Australian exchange rates
at wide level. Before the recession period the exchange rates are very strong for economy of
Australia but now these goes to down in some recent years. The value of USD be higher than the
14

most of other countries currency. It exchange rates with AUD very attractive. It faces the
downfall in its currency value due to financial crisis but recover from the situation soon.
Interest rates: these rates are decided by the central bank of every economy. In Australia
these rates are decided by Reserve bank of Australia and in USA Federal reserve bank decide
these rates. As per the RBA information unemployment rates are low and economies are growing
over and above the tend. The banks main focus on growth of Australian economy to average bit
above 3 percent in next 5 years target. Unemployment rate has been fallen due to these interest
rate decision according to the RBA statement. There is no reasons to alter the interest rates as per
the experts view and above tabular information. Federal reserve bank decide the cash rate
according to other macroeconomic factors of economy. In 2015 it decides the rate by 0.11%
higher than previous year rates. Which later become beneficial for economy condition.
Unemployment rates: That rate refers to the rate of joblessness in a economy . As well
in Australian economy unemployment rates falls constantly. In USA economy that rate falls to
about 3 % approx. in recent years. If a country has higher unemployment rate then it is a negative
sign for the growth of respective country.
Net export: Australia economy grew by just approx. 0.2% which is below the
expectation. But it can be say that it is the weakest growth for the period of 1995 to 2015. a
higher export shows the higher growth for economy. In Australia it grew 3.37% at the end of
2015 but in USA it was only 0.41%. so Australian economy in better condition then USA from
the exporting point of view.
3.pair wise graphs of Australia and USA from 1995 to 2015.
Real GDP growth and Inflation rates
15

0
1
2
3
4
5
6
7
8
9
Australia
Inflation rates(AU)
(%)
GDP growth
rate(AU)(%)
Real GDP growth and unemployment rates
16

Real GDP and Exchange rates
17
-2
-1
0
1
2
3
4
5
6
GDP growth rate(AU)(%)
Unemployment rates(AU)(%)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-30
-20
-10
0
10
20
30
40
GDP growth rate(AU)(%)
Exchange rates(AU)(%)

GDP growth and Interest rates
Exchange rate and growth of net export
18
Years
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
-2
-1
0
1
2
3
4
5
6
GDP growth rate(AU)(%)
Interest rate(AU)(%)
Years
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
-30
-20
-10
0
10
20
30
40
Exchange rates(AU)(%)
Rate of change of Net
export(AU)(%)

Pair wise graphs of USA from 1995 to 2015
Real GDP growth and Inflation rates
Real GDP growth and unemployment rates
19
Years
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
-4
-3
-2
-1
0
1
2
3
4
5
6
GDP growth rate(US)(%)
Inflation rates(US)(%)

Real GDP and Exchange rates
GDP growth and Interest rates
20
Years
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
-4
-3
-2
-1
0
1
2
3
4
5
6
GDP growth rate(US)(%)
Unemployment rates(US)(%)
Years
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
-40
-30
-20
-10
0
10
20
30
GDP growth rate(US)(%)
Exchange rates(%)(US)

Exchange rate and growth of net export
21
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-4
-2
0
2
4
6
8
GDP growth rate(US)(%)
Interest rate(US)(%)
Years
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
-40
-30
-20
-10
0
10
20
30
40
Rate of change of Net
export(US)(%)
Exchange rates(%)(US)

P4.paulisable economic explanation including Govt. policies.
22

Plausible economy is an action which brings together artistic action and critical thinking to
reclaim the economy. This is considered as new platform for mapping and re-imagining
economic systems in arts and beyond. The economy is science which shows studies of human
behaviour as a relationship between given ends and scarce means have substitute use. Economy
is very important as it allows to know about how the societies, governments, businesses,
households and individual disperses their resources and how the make everyday decisions in life.
A plausible economy is concerned with the optimum utilisation of resources in society. The
plausible economy includes a low level of inequality and unemployment and basic stock
substituting profits as primary incentive of production. The country which has more productions
and similarly more exports is considered as a strong and plausible economy. The government
policies also make huge impact on the country's economy and its operations. There are various
factors which comes under the economical criteria such as GDP, interest rate, unemployment
rate, CPI, exchange rates and imports and exports of country. These are determinants of
economy which shows performance of country's economy. There different policies which are
discussed as below:
Role of government policy:
There are mainly two government policies which make impact on overall economy and
its determinants, these are discussed as below:
Fiscal Policy: The fiscal policy refers to the government adjusting with regards to
spending level and tax rates to evaluate and influence nation's economy. Under the fiscal policy
the governments can make impact on macroeconomics productivity such as by increasing or
decreasing tax levels and spendings. It is considered health when the rate lies between 2 – 3%
which helps in increasing employment and maintaining a healthy value of money. This rate also
leads to a plausible economy. The fiscal policy does not have same impact on the life of
everyone. As per the political conditions and goals of policymakers tax cutting can make impact
only on middle class people. Similarly when government decides to adjust its spendings this may
only affect a specific group.
Monetary policy: The monetary policy refers to the process of drafting, announcing and
executing the plan of actions which is taken by central bank, currency board and other regulatory
authorities. The monetary policy helps in achieving macroeconomics goals such as controlling

inflation, consumption, growth and liquidity. These are achieved by actions such as alteration in
interest rates, buying and selling of government bonds and regulation of foreign exchange rates.
2

The different key macroeconomic indicators and there relation with GDP is discussed as
below:
GDP: Gross domestic products is refers to monetary value of all finished goods and
services produced within a nation boundaries in a particular year. This involves all private and
public consumption, private stocks and the foreign balance of trade. Real GDP is calculated
using GDP price deflator that is variance in price between the current and base year. It is related
with different other macroeconomics variables. As the enhancement of gross domestic product is
affected by the other macroeconomic variables such as interest rate, unemployment rate and
exchange rate etc.
Interest rate: Interest rate is rate at which lender charged on borrower for the use of its
assets. The assets borrowed includes the cash, consumer goods and large assets. It is considered
that a rise in GDP leads to rise in interest rates.
Unemployment rate: Unemployment rate shows the number of unemployed people in a
nation. As when the economy is healthy than there is usually low unemployment and GDP will
also rise at good rate.
Exchange rate: Exchange rate is the rate at which one currency is exchanged for
another. As when one country's currency value is higher than other than it shows a increasing
GDP.
CPI: The CPI shows average changes over time in priced paid by the urban customers in
market. When CPI increases wages gets increases and similarly unemployment gets decreases
and GPD also gets stable or increases.
Export and Import: These are directly related with real GDP as because when there is
more exports than it will have more inflow of foreign currency and growth rate will be increases
and vice versa.
P4(b): short prediction macroeconomic outlook of Australia.
After observing above statistical summary, it is clearly stated that there is a situation in
which country will experience the recession. Due to there is no continuation of robust economic
growth. There is a requirement of new capacity which should be coming in the resource sector
to support exports and so that business investment will pick up but, there is no such things
happen while the unemployment rate will increases. Output growth will moderate slightly in
3

2020 as capacity constraints tighten, export-market growth slows and households become less
willing to draw down savings to fuel consumption.
Monetary policy will be required liberal as to pick-up in wages and prices gathers pace.
Risks from the housing market and high household indebtedness warrant continued lower growth
rate of economy. The government is projected to reach a budget surplus in 2019, but there is no
hope that it will done in future. There is a requirement of giving sufficient room to support
activity and protect the incomes of vulnerable groups in the event of an unexpected downturn.
There are some factors and trends which shows that Australia is moving towards a
recession period. Slow growth of household income and high level of debt is main indicator of
such event. In Australia near decade-long economic expansion is exceptional. Falling prices, the
slowing the process of people making, selling, and buying things in China and concerns about
rising domestic house prices, though these may be offset somewhat by the falling Australian
dollar. Australia’s GDP growth was approx 0.2 per cent and it is forecasted that the breakdown
in commodity prices and the end of the excavating boom would cause the economy to slow.
Falling commodity prices creates difficulties for producers such as Australia and Canada, the
overall impact is that for the rest of the world commodities become more affordable and because
of that, demand starts to increase.
4