GDP and Economic Growth in Australia in the Last Five Years

This article analyzes the trends and growth of GDP in Australia over the last five years. It highlights the contributions of the service and mining sectors to the economy and their impact on the GDP growth rate. The article also discusses the effects of the mining boom and the resilience of the Australian economy in withstanding external shocks.

GDP AND ECONOMIC GROWTH IN AUSTRALIA IN THE LAST FIVE YEARS

Introduction :
The Australian economy is an advanced economy and Australia also ranks within the G10 of the
world countries which is in no small way due to its feats as such a highly developed economy. By
nominal standards it ranks 13th in the world in terms of GDP while in terms of purchasing power
parity it ranks 19th in the world as of 2017 (Data.worldbank.org, 2018). It also has has the second
largest wealth per capita in the world, second only to Switzerland. It also has flourishing trade with
it being one of the highest exporters and importers helping the economy grow. It also has shown
brilliant performance regarding growth and has had a period of continuous growth from the last
recession in July 1991.
The backbone of the Australian economy is the service sector employing the majority of the
workforce and also contributes most highly towards GDP. At the height of the mining boom that
happened in Australia, mining went to contribute about 8.4% of the GDP of Australia. Though it
has since decreased, mining continues to be one of the more labour intensive sectors employing a
large sector of people. Another one of the main sectors of the Australian economy is
manufacturing. Though it has seen a steady decline over the years with many companies such as
Mitsubishi and Ford shutting down there companies down under, it still remains as a major
contributor to the GDP. Another is agriculture which contributes around 3% when taken at just the
production of crop levels but taking into scope the by products and such it has a much larger
contribution to GDP. Lastly there is Financial industry and the tourism industry which also puts in.
Fair share towards the GDP. In the following section, we will have a look at how GDP and then
these components of the contribution to GDP has changed through the last 5 years.
Components of the economy:
The GDP for Australia in nominal terms and when presented as in international dollars has been
steadily increasing in the last 5 years. There is no downturn and the upward trend look robust. The
same is true for the GDP per capita and as has seen a constant upward trend in the last five years.
Due to the population also steadily increasing the last 5 years there might have been a chance that
GDP per capita would have stagnated but what this indicates is that the growth in GDP was higher
than the growth in population. (Scutt, 2018) As for the rate of growth of the Gap which is taken as a
proxy for the rate of growth of the Australian economy it is at present showing an upward trend.
From 2012 to 2013 there was steep decline in the growth rate mainly fostered by the pull back in
capital expediter seen during the year. Also at the time while the manufacturing of the supply side
was real string the people were saving and hence the consumer spending was at an all time low

which weakened the economy. The numbers improved in the next year but again fell in 2015 to the
lowest they had been in quite. Few years. This was mainly due to the collapse of the mining boom
which brought about much pains in the economy. The mining boom in Australia was a once in a
century kind of investment opportunity with investment flowing in from all parts of the world. With
that ending , it hit the Australian economy hard and there was much panic if the Australian
economy could be actually heading for a recession. (Farrer, 2016) Though in the next year the rate
of growth of GDO had risen but not by enough to completely mitigate the fears of the people.
Though it must be highlighted that even if the growth numbers were very bad this was better than
what the economists were expecting, mainly helped by the growth in the final consumption
expenditure. The economy again rose in 2016 and with the 2017 numbers just released it has again
decreased from what it was in 2016. With this there is again talks as to if the country could be
heading into recession again. But there is every reason to believe that this wont be happening. The
investment from mining had been one of the major things that was holding the economy back. The
pull back of investment from mining was negatively affecting the economy as that would be
contributing to the GDP. However that effect is almost over. The mining boom was a positive shock
to the economy and the economy is still even mildly rolling from the effects of that shocks being
over. What is a better news is that there has been a steady increase in the investment in the non
mining sectors and that could really help increase the rate of growth of the GDP in the coming
years. The final household consumption expenditure (per LCU) is also on the rise and could very
well be another major factor that could boost the GDP of the economy. Free trade that is practised
in Australia is another thing in the favour of the country that could be looking to and the net trade
balance would be positive for the country helping boost the economy (Scutt, 2016).
The main components of the Australian economy have already been highlighted below. Australia is
a service providing county at the core and the bulk of the economic weightage goes to that. There
are other industries like manufacturing and mining but their fate has fallen on some hard times in
recent times. Below we will focus on the services sector and the mining sector so as to show how
these two major sectors changed in the last 5 years.
Service sector
The service sector contributes to the majority of the GDP of Australia. It contributes around 70% of
the GDP and imply around 80% of the Australians. This industry also account for the trade with
other countries and made up around 21% of the exports in 2016. There are a variety of things that is
there in the service industry in Australia, such as education, professional services, IT support as
well as environmental services and also financial technological services. Australia being an open
economy encourages more trade through open markets and as such non discriminatory treatment

can lead to higher income levels, improved standard of living and higher employment levels for all.
Having open markets also helps increase competition and thus provides better quality services and
also leads to innovation so as to provide a market edge. The service sector obviously does not exist
in isolation and this innovation here has a feedback effect where that also majorly helps the other
sectors of the Australian economy.
After the comeback of sectors like retail and also of employment in general which has been
humming along greatly, finally it might be the chance of service decor which is howling signs of
life in the recent times and moving past the stagnation it had fell into. In March 2018, the sector
showed improved activity levels thus invigorating the country. Inventory is at a high in the sector
which signals that the consumers feel that there is an increase chance of greater demands coming
their way. Improvements in the service sector has sadly been noticed only for the higher skilled
Labour such as business oriented or finance oriented jobs while the demand for low skilled jobs
such as retail remain low. But due to the service sector which provides jobs to most Australians is
being revived, the unemployment rate may fall in the coming months. Business oriented sectors
have been perming largely well but the activity levels of the consumer facing services have not been
up to par.
Encouraging more trade in services through open markets and non-discriminatory treatment can
lead to higher employment levels, improved incomes and better standards of living.Opening up
some service sectors to competition gives Australian consumers access to a wider range of services
and more national and international expertise (Department of Foreign Affairs and Trade, 2018).The
increased competition that free trade brings also encourages local service providers to become more
innovative and efficient in the way they deliver their services. This has benefits for other areas of
the Australian economy that rely on the services sector.What remains to be seen is how much the
former can overcome the latter and bring in happy days for the service industry in the country.
Mining sector :
Australia had been the focus of one of the largest mining booms in its history and it was huge even
by global standards having an impact on the overall economy of the country as well as on the
country’s trade relations with the rest of the world. Thus it also did have an impact globally. Over
about 15 years it changed the landscape of the Australian society and changed the economy and the
ways of employment in the country like no other event since the gold rush of the 1800s. Though
started in the iron ore mines of Pilbara and the coal mine of the Bowen Basin it had far reaching
consequences. This began with the increase in the prices of iron and coal mainly due to the demand
from countries like China in 203 but then people found that there was under investment in this

sector. Across the board, the prices of everything went up and stayed there. The biggest
beneficiaries of this were the workers some of whom like truck drivers were paid around 150,000
AUD. However this does not mean that the big corporations in no way profited from the boom. Big
corporations as well as small Australian companies were the ones who made enormous profits
during this time. These mining operation were decreasing cost industries with the infrastructure
needing to be set up once but the profits increasing by multiples every quarter.This mining boom
also helped Australia as a whole and helped it not fall prey to the Global Financial Crisis (Farrer,
2015).
However , government failed to save the income that was generated by this boom. There was almost
a feeling in the air that this boom might be going on forever but that was obviously not the case. By
2013, the mining boom was almost over. There was no way for the government to come out of this
without falling commodity prices due to decrease f demand from its main markets like China and
also with the loss of jobs and thus rising unemployment int he sector. As of 2018, the boom has
finally ended and so have its effects. The boom might be over but it has left the Australian economy
stronger than before with more resilience to withstand external shocks that might lead to more panic
in other parts of the world.
Conclusion:
Australia is one of the strongest economies in the world and in its current stage it looks like it will
continue to be so in the coming future. Even with the decrease in the GDP growth rate , there is
very good reason to feel optimistic about Australia’s future and that is the tenacity of the country’s
economy as well as its ability to withstand global shocks while also being integrated into the trading
systems. The fallout from the end of the mining might finally be over and the Australian economy
has stood string and continued to grow. Now with the end of the mining boom, which was once in
lifetime kind of event, Australia might go back to relying on its states and wont find any major
shocks there. With the fall of the mining investment in recent times it has also been hampering the
GDP of the country and that comment might now finally come to standstill where it stops being a
major player for a slowed economic growth. Also non-mining investment in Australia is on the rise
thus providing proof to the thought hat the correct infrastructure is in place to provide the needed
help for the Australian economic growth rate t be on the rise again.

References
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importance-of-services-trade-to-australia.aspx [Accessed 25 May 2018].
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economy-unemployment-china-coal [Accessed 25 May 2018].
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