Growth of Australia’s Gross Domestic Product in 2018

This article discusses the growth of Australia's GDP in 2018, including contributors such as increased consumption and declining savings. It also touches on factors affecting GDP per capita and how GDP growth does not necessarily indicate an increase in household welfare. References are provided.

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GROWTH OF AUSTRALIA’S GROSS DOMESTIC PRODUCT IN 2018
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Growth of Australia’s Gross Domestic Product in 2018
Question 1
The latest available year-on-year GDP growth is 3.4% that was in September
2018(Reserve Bank of Australia,2018). It forecasts the rate to be 3.25 by December 2018. The
actual growth rate could go down a bit if the housing prices keep going down without threatening
the forecast growth rate. However, if the two rates were maintained for 10 years, it is unlikely
that the fluctuation will be large.
Question 2
The main contributors to witnessed in Australia during the quarter include increased
consumption, declining savings, and the contribution of the net exports. Consumption of the
households increased by 0.6% where the households increased consumption of 12 out of 17
consumption categories. This fueled an increase in domestic demand, which accounted for more
than half of the growth, by 0.7%. The income saving ratio declined from 2% at the beginning of
the previous quarter to 1% in June.
Question 3
The GDP is a figure summarizing the monetary value of the total output of the economy
and it is bound to be higher than the GDP per capita as shown on the diagram since GDP per
capita is calculated as a ratio of GDP to the population yielding a lower value. Changes in
population are responsible for the difference in the graphs of growth of both GDP and the GDP
per capita. Illustratively, if the GDP grows by 100%, the upward trend will be definite for the
GDP. However, if there is an increase of population say by 150% that year, then the GDP per
capital will be lower than GDP for that period.

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Question 4
i. Unemployment rates in Australia
The rate of unemployment fell during the quarter. It is evident because the article
notes that the domestic expenditure on consumption increased in 12 out of 17 consumption
areas due to stronger growth in jobs.
ii. The interest rates
Interest rates of Australia declined during the quarter because the income saving ratio
is declining. From the data provided, the increased consumption during the quarter was financed
by savings. The saving ratio decreased from more than 10% in 2008 to 1% during the quarter.
The households find savings more unattractive than before thus reducing savings.
Question 5
Chalmers implies that a growth of GDP does not necessarily mean that the welfare of
individual households has increased. The GDP can show overall growth even when the median
wages of households are low. The growth of the wage rate fell from 1.1% in the preceding
quarter to 0.7% in the then current quarter whereas the average employee compensation declined
to 0.1% in that quarter.

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References
Letts, S. (2018). People are spending their savings and it's boosting the economy. [online] ABC
News. Available at: https://www.abc.net.au/news/2018-09-05/gdp-june-quarter-
2018/10202834 [Accessed 4 Dec. 2018].
Reserve Bank of Australia (2018, September). Statistical Tables. [online] Available at:
https://www.rba.gov.au/statistics/tables/ [Accessed 4 Dec. 2018].