Australian Economic Performance: GDP, Unemployment, Inflation and Trade

This report analyzes and compares the economic performance of Australia between August 2017 and August 2018. It covers GDP, unemployment, inflation and trade. It also discusses the issues that may affect the economy of Australia over the next twelve months.

Running Head: AUSTRALIAN ECONOMIC PERFORMANCE 1
AUSTRALIAN ECONOMIC PERFORMANCE
Name
Institutional Affiliation

AUSTRALIAN ECONOMIC PERFORMANCE 2
Executive Summary
This objective of preparing this report is to determine the factors that affect the
economic performance of Australia and determine the factors that may affect the
economy of the country in the short term. The report uses data collected between
August 2017 and August 2018 to generate information needed in this report. The
economic performance of Australia is analyzed based on the following four factors;
Economic growth, unemployment, inflation, and trade. The GDP of Australia grew
3.3% by August 2018. Comparing with the same period last year, the GDP of
Australia grew by 0.6%. Between September 2017 and August 2018, household
consumption increased by 3% while government consumption increased by 5.1% over
the year. In August 2018, unemployment in Australia stood at 5.3%. This was the
lowest rate of unemployment in over two years. Between the month of July and
August 2018, employment increased by 26,900 to 12,581,600. Unemployment over
this period of time decreased from 1,300 to 713,000. According to data from the
Australian Bureau of Statistics, consumer price inflation rose to 2.1 % throughout the
year 2018. Between October and December 2017, inflation increased by 1.9%. This
means that consumer price increased by 0.4% every quarter. The issues that may
affect the economy of Australia include; the value of the Australian dollar, Interest
rates, and unemployment.

AUSTRALIAN ECONOMIC PERFORMANCE 3
Introduction
The purpose of this report is to analyze and compare the difference between
Australia`s economic growth in the year 2017 with the growth in 2018. The report
uses the four indicators of economic growth; namely growth in GDP, unemployment
rate, inflation and trade (McLean, 2013). Data concerning the four aspects of
economic growth is collected and analyzed with the aim of predicting the
performance of the Australian economy over the next twelve months. The current
performance of the economy is compared with the performance of the economy in the
year 2017. The body of the report also describes three major issues that are likely to
face the economy of Australia in the next one year. The final section of the report is a
summary of the issues that have been discussed in the body of the report.
Economic growth
The GDP of Australia grew 3.3% by August 2018. This has surpassed
expectations and it's more than 0.4% higher than what was forecast one year ago. This
means that this is the fastest annual growth rate since September 2012. The economy
grew 0.9% higher than it was expected in the previous quarter. The main contributor
to the growth in GDP id the household sector. The sector has been previously
struggling under low growth in wage and falling house prices. This sector accounted
for 0.4 percent growth. Residential construction accounted for 0.2% growth while
domestic consumption increased by 0.5 %. Comparing with the same period last year,
the GDP of Australia grew by 0.6%. Between September 2017 and August 2018,
household consumption increased by 3% while government consumption increased by
5.1% over the year. This growth can be attributed to big infrastructural projects

AUSTRALIAN ECONOMIC PERFORMANCE 4
undertaken by the government. Nominal GDP growth over this period was 4.7%. This
was 1.9% more than the previous year`s forecast.
Unemployment
According to ("Historical Data | RBA", 2018), the unemployment rate stood at
5.3% in August 2018. This is the lowest unemployment rate recorded since 2015.
Between the month of July and August 2018, employment increased by 26,900 to
12,581,600. Unemployment over this period of time decreased from 1,300 to 713,000.
Over the year 2018, the unemployment rate has remained steady at 5.4%. Between the
month of August 2017 and July 2018, unemployment averaged between 5.4% and
5.6%. The fact that the unemployment rate in Australia was steady throughout the
year means that the economy is stable (Taylor & Kukutai, 2016). It means that there is
a balance between the number of people who get employed and those who lose their
job. It also means there is no recession in the economy which could be otherwise
contributing to the massive loss of jobs. It also means that the economy is not
booming. A booming economy would have contributed to an increase in job
opportunities and hence reducing the unemployment rate (Okamoto& Ajia, 2010).
The growth in GDP has therefore not significantly affected the unemployment rate.
Seasonal fluctuations in some particular industries in the economy could also lead to
an increase or decrease in the unemployment rate. Some industries may lay off some
workers in particular periods and hire may in other seasons. The unemployment rate
also increases in the season where there are many graduating students who are
actively seeking employment. From the comparison of the 2017 data and the 2018
unemployment data, it can be concluded that there was no significant change in the
employment rate in the country.

AUSTRALIAN ECONOMIC PERFORMANCE 5
Inflation
Inflation is a very important measure of economic growth. Inflation is the rate at
which the general prices of goods and services is increasing in an economy. Increase
in inflation reduces the purchasing power of the currency (Griffrs,2011). According
to data from the Australian Bureau of Statistics, consumer price inflation rose to 2.1
% throughout the year 2018. Between October and December 2017, inflation
increased by 1.9%. This means that consumer price increased by 0.4% every quarter.
This is slightly below the forecast 0.5%. Between June and August 2018, transport
cost increased by 5.2%. This was a rise compared to a 2.9% increase recorded in the
previous three months. During the period under review, inflation on food and non-
alcoholic beverages reduced by 3%. Between Jan and March 2018, consumer prices in
Australia rose by 1.9% throughout the three months. As at August 2017, the inflation
rate was at 1.9%. Currently, the inflation rate is at 2.1%("Historical Data |RBA",
2018) This indicates a 0.2% increase in the rate of inflation over the 12 months.
During this period, the price of automotive fuel, medical supplies, health services, and
tobacco increased. Food prices reduced over this period of time.
Trade
Trade is a very important indicator of economic growth. Australia is heavily
dependent on trade for its economic growth. The countries` exports amount to one-
fifth of the GDP (Butlin, 2010). The terms of trade of a country are calculated as the
ratio of export prices to import prices (Beer,2015). In August 2018, the import price
of Australia was 110 index points. Between January and August 2018, the import
price increased by 6.0%. Between August and December 2017, the price increased by
2.3%. This, therefore, indicates an overall increase of 8.3%. The increase in import

AUSTRALIAN ECONOMIC PERFORMANCE 6
prices over this period was mainly driven by higher prices for oil products. The
increase in import price indicates that Australia is receiving more for exports. A
decrease in import price means that the country is receiving less for its exports as
compared to imports (Podger & Trewin, 2013). Australia`s exports are more valuable
than its imports. This indicates a positive balance of trade on the part of Australia and
hence a sign of economic growth over the period (Meredith & Dyster, 2012).
The value of the Australian dollar is a crucial indicator of economic growth. Most
of the goods in the international market are bought and sold using the US dollar.
Currently, the value of the Australian dollar versus the US dollar stands at 0.7188.
The value of the currency keeps changing on a daily basis depending on the demand
of the currency. In August 2017, the average value of the Australian dollar was 0.688
(Jakobson,2017). This shows that the value of the currency has increased and its an
indication of positive economic growth. Australia`s foreign debt currently stands at
$1.25 trillion. This is equivalent to 60% of Australia`s annual GDP. In August 2017,
the foreign debt stood at 1.17 trillion.
Issues that may affect the economy of Australia over the next 12 months
Value of Australian dollar
Since the beginning of the year, the currency has been down by 1.76 %. The
Australian dollar has been performing poorly throughout the year. This can mainly be
attributed to the increase in commodity price and interest rates. Commodity price has
a significant effect on the value of the currency. Australia is a major exporter of
minerals whose prices have been recently declining in the international market. This
affects the demand of the Australian dollar and hence making it weaker. The prices of
mineral resources are not expected to increase for the next twelve months. This,

AUSTRALIAN ECONOMIC PERFORMANCE 7
therefore, means that the value of the currency may not increase in the near future.
The global trade disputes among major economic superpowers could also make the
value of the Australian dollar to decline further. This will have an effect on the
economy since the country will not benefit much from foreign exchange (Enright &
Petty, 2013).
Interest rates
Over the past one year, interest rates have been stable. The interest rates are
currently low and this situation is likely to continue for the next one year. Low-
interest rates encourage investment and hence resulting in a reduction in
unemployment rates (Anderson, 2009). The fact that credit is cheap means that more
people are willing to take loans to invest. This helps in the growth of the GDP of the
country. Interest rates affect inflation and recession. If the interest rates increase
further for the next one year, it means that there will be an economic recession and
hence affecting economic growth. Further decrease in interest rates will lead to high
levels of inflation and hence affecting people`s disposable income.
Unemployment
Despite the fall in the unemployment rates of the past year, not many full-time
jobs have been created in Australia. This still means that there is a very large number
of Australians out of work. Unemployment rates are expected to increase in the next
one year. Some of the factors that are expected to result to increase in unemployment
are the current trade wars between China and the US. This will affect Australia since
it has close trade relations with both countries. Protectionism actions of the US and
other countries will also result to increase in unemployment.

AUSTRALIAN ECONOMIC PERFORMANCE 8
Conclusion
The report analyzes and compares the economic performance of Australia
between August 2017 and August 2018. from the report, the Australia economy grew
by 0.6 %. The growth is mainly attributed to growth in the construction sector as well
as in domestic consumption. The rate of unemployment has been relatively steady
over the past one year. This is an indication of a stable economy. From the report, it
can also be concluded that the economy is relatively stable since the rate of inflation
over the period has not been high. The three factors that are likely to affect the
economy of Australia over the next twelve months include a decline in the value of
the Australian dollar, interest rates, and unemployment.

AUSTRALIAN ECONOMIC PERFORMANCE 9
Referencing
Anderson, K. (2009). Australia's Economy in its International Context: The Joseph
Fisher Lectures (vol. 2). S.L: University of Adelaide Press.
Beer, A. (2015). Structural adjustment programmes and regional development in
Australia. Local Economy, 30(1), 21-40. doi: 10.1177/0269094214562171
Butlin, N. (2010). Forming a Colonial Economy. Cambridge, GBR: Cambridge
University Press.
Enright, M. J., & Petty, R. (2013). Australia's Competitiveness: From Lucky Country
to Competitive Country. Hoboken: Wiley.
Griffrs, M. (2011). Economics indicators for dummies. John Wiley.
Historical Data | RBA. (2018). Retrieved from
https://www.rba.gov.au/statistics/historical-data.html
Historical Data | RBA. (2018). Retrieved from
https://www.rba.gov.au/statistics/historical-data.html
Jakobson, l. I. N. D. A. G. I. L. L. B. A. T. E. S. (2017). CHINA MATTERS: Getting it
right for Australia. S.l.: BLACK INC.
McLean, I. W. (2013). Why Australia Prospered: The shifting sources of economic
growth. Princeton, NJ: Princeton University Press.
Meredith, D., & Dyster, B. (2012). Australia in the global economy: Continuity and
change. New York: Cambridge University Press.

AUSTRALIAN ECONOMIC PERFORMANCE 10
Podger, A., & Trewin, D. (2013). Measuring and promoting well-being: How
important is economic growth? : essays in honor of Ian Castles AO and a
selection of Castle's papers.
Taylor, J., In Kukutai, T., & Australian National University. (2016). Indigenous data
sovereignty: Toward an agenda.
OECD, P., Organisation for Economic Co-operation and Development, &
Organisation, . E. C.-D. (2010). Oecd Economic Surveys: Australia 2010.
Okamoto, J., Institute of Southeast Asian Studies., & Ajia Keizai Kenkyūjo (Japan).
(2010). Australia's foreign economic policy and ASEAN. Singapore: Institute of
Southeast Asian Studies.