Australia's GDP Growth Rate in 2017 and its Impact on the Economy

Running Head: FOUNDATION FOR MACROECONOMICS
Foundation for Macroeconomics
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Key highlights of the article
The real GDP of Australia grew at a rate of 0.4 percent over the quarter. However, a
steady decline to 2.4 percent was observed over the year. The accounted growth rate was well
below the forecasted long-term growth rate of 2.9 percent. A significant downfall was
recorded in construction sector and net export. Nevertheless, such adverse impact on GDP
growth rate was offset to some extent by an increase in consumer spending. Wages grew at a
rate of 1.1 percent indicating a strong employment growth. Despite wage growth, the average
earning was remained flat contributing a below average growth rate.
Analysis of the news
Flat lining wage per employee
The labor market has recorded a rise in employee compensation 1.1 percent. This is a
good sign for the economy. The rise in wage is in line with the job growth for the labor force.
The wage price index over the last two quarters has accounted a considerable increase.
However, performance of the labor market worsens in the fourth quarter. Growth rate was
lower than 1.2 percent (abc.net.au, 2018). This was associated with a decline in compensation
to the employee to zero.

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Optimistic outlook of treasurer
Despite slow growth figures in 2017, treasurer Scott Morrison has a positive outlook
for the future. The National account of Australia showed a reliance resulting from the ability
of citizens to support themselves with a high capacity to spend and invest. This provides an
optimistic fiscal and economic outlook. Confidence of the household and domestic spending
is the biggest contributor of economic growth. Since the fourth quarter of 2010, strong
growth in consumer spending is observed (ft.com, 2018). Household consumption being one
of the major component of GDP has made a positive contribution to economic growth rate
(Bernanke, Antonovics & Frank, 2015). The growth in consumer spending was driven by an
increase in average wage rather than total wage bill.
Weak productivity growth
Productivity is an important determinant of economic growth. A higher growth in
productivity determines a higher growth of economy’s output (Heijdra, 2017). Last year,
there was a growth in employment by 2.2 percent. This naturally made the output to grow at a