Australian Economic Growth Analysis: 2005-2018

This report analyzes the economic growth of Australia from 2005 to 2018 by evaluating the real gross domestic product and the gross domestic product growth rates for the period. It discusses the factors contributing to Australia's economic performance and its position in the Asia-Pacific region. The report also examines the impact of the global financial crisis on Australia's economy and the measures taken to mitigate its effects.

AUSTRALIAN ECONOMIC GROWTH ANALYSIS: 2005-2018 1
Australian Economic Growth Analysis: 2005-2018
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Introduction
The Australian economy is among the best performing economies in the region of Asia-Pacific
and the world at large. It is ranked among the richest nations in the region of Asia-Pacific
(Plumb, Kent and Bishop 2013, p.40). The Australian economy has undergone economic
expansion for a period of approximately more than two decades. The nation’s economic
prosperity has resulted from its adoption of sound macro and microeconomic policies which
highly encourage investment in the nation both domestically and internationally. The main
reason behind its better economic growth is the adoption of free economy policy whereby almost
all its economic sectors are open to foreign competition and readily available highly skilled
labor. The government of Australia has highly reformed its education sector in order to improve
the quality of labor in the nation. Every Australian citizen is at least required to have twelve
years of education. According to the 2018 Index, Australia is ranked position 5 in terms of
economic freedom with a score of 80.9. This is a quite better performance in terms of economic
freedom and has been contributed by the Australian high scores in labor and trade freedom, fiscal
health and government integrity. In terms of economic performance in the Asia-Pacific region,
Australia is ranked position 4 out of the 43 nations in the region.
The Australian economy is anticipated to do better in the future as structural changes are being
done especially due to the nation’s mining sector expansion. The Australian government is doing
its best to improve and maintain its better economic performance by undertaking various reforms
some of which include reduction of corporate taxes, the increment of more free trade agreements
and huge investment in the education sector for production of the highly skilled labor force
(Hatfield-Dodds et.al 2015, p.49). My report analyses the Australian economic growth from the
year 2005 to 2018 by evaluating the real gross domestic product and the gross domestic product

AUSTRALIAN ECONOMIC GROWTH ANALYSIS: 2005-2018 3
growth rates for the period. In a nutshell, the Australian economy has been performing well and
better results are anticipated in the future.
Real Gross Domestic Product Growth for Australia from 2005 to 2017
Real gross domestic product refers to the value of the final output produced in a given nation
over a given period of time considering the prevailing inflation levels over that given year. It is
also referred to as the inflation-adjusted gross domestic product. It is preferred in comparing the
economic growth of a given nation and other nations since it gives a more accurate figure as
compared to the nominal gross domestic product. The nominal gross domestic product involves
the measurement of a nation’s value of final goods and services over a given period of time
inclusive of inflation or rather the current prices. It, therefore, doesn’t give a true reflection of a
nation’s economic growth as it is not adjusted for inflation. The following table shows data on
the Australian percentage change in real gross domestic product from the year 2005 to 2017. The
data has been obtained from the International Monetary Fund dataset containing information on
the real gross domestic product for various nations expressed as the annual percentage change.
The table shows that the Australian real gross domestic product growth rate has been fluctuating
between the years 2005 to 2017. The growth rates have been kept positive meaning that although
there is a fluctuation in growth rates; the real gross domestic product has been improving each
preceding year. This means that the economy of Australia has been growing though at different
rates. The performance of the economy has been improving each preceding year though the
extents of improvements are different (McLean 2012, p.43). No any year posted a lesser amount
in terms of real gross domestic product than the previous year.

AUSTRALIAN ECONOMIC GROWTH ANALYSIS: 2005-2018 4
From the table, the Australian economy grew significantly during the year 2007 with the year
real gross domestic product growth rate of 4.3 percent. The economy underwent a sluggish
growth during the year 2009 posting the lowest growth rate of 1.9 percent. This was as a result of
the great global financial crisis which occurred during the year 2008 to 2009 (Morgan and
Astolfi 2015, p.7). Many nations during this period posted a negative economic growth but
Australia showed a great adjustment and was able to post positive economic growth. From the
year 2009, Australia recovered from the global financial crisis due to its adoption of sound
expansionary macroeconomic policies and has been able to keep its real gross domestic product
growth rate above 2.0 percent.
Australian Real Gross Domestic Product Growth Rates from 2005 to 2017
(Source: International Monetary Fund Data on Real GDP Growth (Annual Percentage Change))
A graph for the Australian real gross domestic product growth rate from the year 2005 to 2017
has been shown below:
Year Real GDP growth (Annual Percentage Change)
2005 2.2
2006 2.8
2007 4.3
2008 2.7
2009 1.9
2010 2.4
2011 2.7
2012 3.9
2013 2.2
2014 2.6
2015 2.5
2016 2.6
2017 2.2

AUSTRALIAN ECONOMIC GROWTH ANALYSIS: 2005-2018 5
2005 2007 2009 2011 2013 2015 2017
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Real GDP Growth Rate for Australia from
2005 to 2017
Real GDP growth (Annual
Percentage Change)
Year
Real GDP Growth Rtae (%)
From the graph, it is clear that the economic growth of Australia has been fluctuating over the
period 2005 to 2017 with the highest growth rate having been recorded during the year 2007 and
the lowest growth rate having been recorded during the year 2009 due to the great global
financial crisis.
Australian Gross Domestic Product Growth Rates from 2005 to 2017
Gross domestic product indicates the value of all the final commodities produced by a given
nation over a given period of time which is actually a year for many nations (Konchitchki and
Patatoukas 2014, p.76). It is measured in monetary terms. Gross domestic product is a very
crucial indicator of a nation’s level of economic growth. It is used in comparing a nation’s
economic growth with other nations over a given period of time. It also provides crucial
information for investors and businesses within and outside the nation. Businesses determine
whether to expand or contract their future operations considering various sectors information

AUSTRALIAN ECONOMIC GROWTH ANALYSIS: 2005-2018 6
within the economy. Investors can also determine where to invest in various economic sectors in
considering corporate profits information indicated by the gross domestic product.
The Australian gross domestic product has been increasing from the year 2005 to 2017. This,
therefore, means that the nation’s gross domestic product growth rate has been positive for the
years 2005 to 2017 (Beer 2012, p.269). The following table shows data on the Australian growth
rates from the year 2005 to 2017.
Australian Gross Domestic Product Growth Rate (Annual Percentage)
Source: World Bank national accounts data, and OECD National Accounts data files
From the table, the gross domestic product growth rates are positive meaning that the Australian
economy has been improving in terms of economic performance. The lower economic growth of
1.92 was recorded during the year 2009 due to the great global financial crisis but still, Australia
was among the nations which posted positive economic growth (Obstfeld, Shambaugh and
Taylor 2009, p.480).
Year GDP growth rate (Annual Percentage)
2005 3.19
2006 2.83
2007 3.78
2008 3.66
2009 1.92
2010 2.05
2011 2.45
2012 3.89
2013 2.64
2014 2.56
2015 2.35
2016 2.83
2017 1.96

AUSTRALIAN ECONOMIC GROWTH ANALYSIS: 2005-2018 7
The graph for the data is shown below:
2005 2007 2009 2011 2013 2015 2017
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Australian GDP growth rate from 2005-2017
GDP growth rate (Annual
Percentage)
Year
GDP Growth rate (Annual %)
From the graph, the Australian economy has been undergoing growth but at a reduced pace
across the years 2005 to 2017. This is not a bad situation since the economy is still growing but
much needs to be done to foster faster economic growth.
AD-AS Model for Australia 2008-2009
During the year 2008-2009, Australian and the world economy at large was undergoing a global
financial crisis. Various governments tried their best to adjust to the adverse economic
environment. Some used the fiscal policy while others used the monetary policy or a
combination of both. Australia used both policies but the monetary policy had a great impact on
restructuring the economy (Lowe 2012, p.79). This, therefore, means aggregate demand was
highly used. Australian reserve bank lowered the nation’s cash rate from 7.00% to 3.25%. This
reduced the overall interest rates in the economy from 8.30% to 5.74%. This availed money to

AUSTRALIAN ECONOMIC GROWTH ANALYSIS: 2005-2018 8
Australians and businesses and hence shifted the aggregate demand in the economy from AD0 to
AD1 as shown in the diagram. As a result, the overall economic performance (national output)
increased from Q0 to Q1. The Australian government expenditure rose from $316billion to
$337billion but had no significant effect as compared to the monetary policy. Due to an increase
in aggregate supply, general prices in the economy rose up from E0 to E1. The diagram below
illustrates the concept.
Also, the decrease in interest rates from 8.30% to 5.74%, availed money to producers. As a
result, the producers expanded their productivity and this increased the aggregate supply in the
economy shifting the aggregate supply curve from AS0 to AS1 making the quantity supplied to
increase from Q0 to Q1 as shown below.

AUSTRALIAN ECONOMIC GROWTH ANALYSIS: 2005-2018 9
An increase in government expenditure from $316billion to $337billion availed money to
consumers hence increasing their consumption. As a result, the aggregate demand in the
economy rose and hence the aggregate supply curve shifted to the right from AD0 to AD1 leading
to an increase in quantity demand from Q0 to Q1 as shown.

AUSTRALIAN ECONOMIC GROWTH ANALYSIS: 2005-2018 10
Conclusion
Australia is not only among the best-performing nations in the Asia-Pacific region but also in the
whole world. Its economic performance is above the expected performance averages both at the
regional and world levels. From the year 2005 to 2018, the economic performance for Australia
kept on improving for each preceding year but growth rates fluctuated for each year. The real
GDP and GDP growth rates for Australia were positive across the period 2005-2017. This means
that the nation’s economy has been growing since no year has ever posted a negative result. Even
during the great global financial crisis of the year 2008-2009, Australia was among the nations
which posted a positive economic growth through at a slower growth rate. During the global
financial crisis, Australia used both fiscal and monetary policies to restructure its economy but
the fiscal policy had many impacts. In a nutshell, the Australian economy has been growing
since the year 2005 and the same trend is anticipated in the future.

AUSTRALIAN ECONOMIC GROWTH ANALYSIS: 2005-2018 11
References
Beer, A. (2012). The economic geography of Australia and its analysis: From industrial to post‐
industrial regions. Geographical Research, 50(3), 269-281.
Hatfield-Dodds, S., Schandl, H., Adams, P.D., Baynes, T.M., Brinsmead, T.S., Bryan, B.A.,
Chiew, F.H., Graham, P.W., Grundy, M., Harwood, T. and McCallum, R., 2015. Australia is
‘free to choose’economic growth and falling environmental pressures. Nature, 527(7576), p.49.
Konchitchki, Y. and Patatoukas, P.N., 2014. Accounting earnings and gross domestic
product. Journal of Accounting and Economics, 57(1), pp.76-88.
Lowe, P., 2012. The changing structure of the Australian economy and monetary policy. The
Recent Economic Performance of the States 1 Trends in National Saving and Investment 9 The
Distribution of Household Wealth in Australia: Evidence from the 2010 HILDA Survey 19
India’s Steel Industry 29, p.79.
McLean, I.W., 2012. Why Australia prospered: The shifting sources of economic growth (Vol.
43). Princeton University Press.
Morgan, D. and Astolfi, R., 2015. Financial impact of the GFC: health care spending across the
OECD. Health Economics, Policy and Law, 10(1), pp.7-19.
Obstfeld, M., Shambaugh, J.C. and Taylor, A.M., 2009. Financial instability, reserves, and
central bank swap lines in the panic of 2008. American Economic Review, 99(2), pp.480-86.
Plumb, M., Kent, C. and Bishop, J., 2013. Implications for the Australian economy of strong
growth in Asia. Sydney: Reserve Bank of Australia.