Performance Trend of Australian Economy: Analysis of GDP Growth, Inflation, Unemployment, Net Export, and Exchange Rate

Running Head: ECONOMICS ASSIGNMENT
Economics Assignment
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1ECONOMICS ASSIGNMENT
Executive Summary
The report summarizes performance trend of Australian economy for a period extending from 1990 to
2016. In addition to narrates the trend in basic performance indicator, the paper explores the relation
between economic growth, inflation and unemployment. A relation also has also attempted to framed
between exchange rate and net export. Policy interconnectedness has been observed from trend
movement in cash rate and fund rate. Findings can be summarized as follows. Firstly, the paper finds an
inverse association of GDP growth both with unemployment and inflation. Second, net export also
constitutes an inverse association exchange rate. Thirdly, cash rate and funds rates have a positive
association.

2ECONOMICS ASSIGNMENT
Table of Contents
Introduction.................................................................................................................................................3
Growth performance of Australia along with inflation and unemployment................................................3
Business Cycle in Australia...........................................................................................................................6
Association between net export and exchange rate...................................................................................7
Fund rate and cash rate...............................................................................................................................9
Forecasting economic outlook...................................................................................................................10
Conclusion.................................................................................................................................................11
Reference list.............................................................................................................................................12
Data source............................................................................................................................................12

3ECONOMICS ASSIGNMENT
Introduction
Australia having a mixed market economy is in the list fastest developed nation of the world.
The nation has made rapid progress by exploring its huge reserves of minerals. Production and export of
minerals fueled economic growth of Australia. The nation however is dominated by its service sector
(Azad et al., 2014). Financial, travel and tourism and professional services of Australia are of particular
interest. Economic performance of a nation is attributed from performance of the economy in several
aspects. Some important aspects in performance evaluation of a nation are GDP, magnitude of
unemployment, inflation, trade balance, exchange rate and net export. Change in any one of the
variables has a direct or indirect effect on another (Fontana and Setterfield, 2016). Objective of current
research report is portrait macro level performance of Australian economy from 1990 to 2016. In the
process of analysis relation between GDO growth, inflation and unemployment has been analyzed. The
economic interdependence between USA and Australia has explored with movement in fund rate and
cash rate. Lastly economic prediction has made about the future state of Australian economy.
Growth performance of Australia along with inflation and unemployment
Real GDP is an indicative measure of total produced output in terms of a fixed base year prices.
As real GDP takes into consideration price of a fixed base year it by providing a price adjusted measure
of output signifies actual performance of the economy. Expansion and contraction of real GDP has
association with other related macroeconomic variable (Ravenhill, 2017). Unemployment and inflation
are the two such variable that likely to change as GDP changes. Unemployment is a symbolic measure of
labor market condition. Growth is GDP indicate a growth in overall output through more productive
activities. As labor is the primary input in the production process this generally increases demand for
labor causing a low rate of unemployment. Change in the price of consumption basket is captured by
the rate of inflation. A growth in real GDP implies high labor demand which by leads to a growth of
wages and hence, increases inflation through demand expansion. GDP growth of a nation thus increases
the price level. However, because of government policy intervention high growth might be associated
with a stable price level indicating a negative influence of GDP growth and price level (Goodwin et al.,
2015).
The proposed theoretical relation between real GDP and that of unemployment and inflation is
empirically tested by collecting data on GDP growth, inflation and unemployment. From the collected
data summary statistics of real GDP, inflation and unemployment is obtained as follows.
Table 1: Descriptive statistics of real GDP, unemployment and inflation
GDP UMEMPLOYEMENT RATE INFLATION RATE
Mean
0.75833333
3 Mean
6.72288757
7 Mean
0.64215
9
Standard Error
0.05920210
5 Standard Error
0.18124897
7 Standard Error
0.05632
2
Median 0.7 Median
6.16256126
7 Median
0.58962
8
Mode 0.7 Mode #N/A Mode 0
Standard
Deviation
0.61524632
3
Standard
Deviation
1.88359461
7
Standard
Deviation
0.58531
1
Sample
Variance
0.37852803
7
Sample
Variance
3.54792868
1
Sample
Variance
0.34258
9