The Performance of Australian Economy

This report compares the macroeconomic indicators of Australian economy like GDP, unemployment rate, inflation rate and trade in 2017 and 2018. It also discusses major economic issues like unemployment, poverty and financial problems.

Running head: THE PERFORMANCE OF AUSTRALIAN ECONOMY
The Performance of Australian Economy
Name of the Student
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Author Note

1THE PERFORMANCE OF AUSTRALIAN ECONOMY
Abstract
The aim of this report is to compare the various macroeconomic indicators like economic
growth (GDP), unemployment rate, inflation rate and trade of the second quarter of 2018 with
that of the third quarter of 2017. The comparison is done using latest figures that are
available in the Australian governmental site for statistics and data. The major economic
target of this report is to find whether there will be an increase in the growth of the gross
domestic product of the country. Whether there will be a reduction in the unemployment rate
as well as the inflation rate and finally whether there will be an expansion of trade in the
future for the Australian Economy. Under trade, various factors like terms of trade, capital
account, foreign debt and exchange of the Australian dollar have been compared with the
previous rates of 2017. An increase in these indicators is very important for the economic
development of the country. The above said indictors would tend to provide stability of the
Australian currency. Further, the full employment scenario will also be maintained in the
economy and there will also be increase in the economic welfare of the citizens of Australia.
These major macroeconomic terms those are discussed in the report.
The major economic problems faced by the Australian economy are unemployment,
poverty, inequality, and various other financial economic problems. These three major
problems are expected to be faced by the Australian economy. Unemployment is obviously
an important scenario in the Australian economy. Majority of the youths in Australia are
unable to find jobs. The gap between the poor and the rich has increased in the recent times.
The rich people are an integral part of the various sectors of the Australian economy. There
the rich are becoming richer and due to negligence of the government, the poor are left with
nothing. The scenario is getting worse for the availability of dwellings in the important cities
of Australia. The housing prices in Australia are very high and it is becoming impossible for
the middle class group to find affordable housing in Australia. Further, inflation has also hit
in many ways, high prices of various day-to-day items has reduced the purchasing power of
the customers. In some cases, buyers are left with no choice but to consume the goods and
services at high prices. The wages have not increased in that proportion.
Finally, in conclusion it has been observed that the Australian economy’s
performance has not been up to the mark. There has been a growth in the nation’s gross
domestic product. The rates of unemployment have decreased significantly. However, prices
have been ever rising in the economy. The terms of trade, capital account, and gross foreign

2THE PERFORMANCE OF AUSTRALIAN ECONOMY
debt have been shown poor figures in the recent years. The exchange rate has also decreased
meaning a lower Australian dollar value in the international market.

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Table of Contents
Introduction................................................................................................................................4
Discussion..................................................................................................................................4
Gross Domestic Product.........................................................................................................4
Unemployment rate................................................................................................................5
Inflation rate...........................................................................................................................6
Terms of Trade.......................................................................................................................7
Current account......................................................................................................................7
External debt..........................................................................................................................8
Value of the Australian Dollar...............................................................................................9
Three Major Economic Issues..................................................................................................10
Unemployment.....................................................................................................................10
Poverty.................................................................................................................................10
Financial, economic and cost of living problems.................................................................11
Conclusion................................................................................................................................11
References................................................................................................................................12

4THE PERFORMANCE OF AUSTRALIAN ECONOMY
Introduction
This report tries to compare the various macroeconomic indicators like economic
growth, unemployment rate, inflation rate and trade, which includes terms of trade, current
account, net foreign debt and the value of the Australian dollar of the year 2018 with the
values of the year 2017. The comparison is made on quarterly basis that that is the third
quarter of 2017 is compared with the second quarter of 2018. Further, three major issues
concerning the Australian economy is described in details in the report.
Discussion
Gross Domestic Product
The Gross Domestic Product (GDP) of the country is the value of the final goods and
services that are produced with in the country. The GDP is a measure for the economic
performance of the country and is generally conducted quarterly or annually (O’Neill 2014).
Therefore, GDP is the major economic indicator for the country. Here in this report the
growth in the GDP has been compared over the described quarterly horizon. The percentage
change in the Gross Domestic Product in the Australian economy was recorded to be 0.9
percent in the March quarter of 2018 to June 2018. While that for the March quarter 2017 to
June quarter of 2017 it was 0.6 percent. The gross domestic product was seasonally adjusted
to get the desired results. From the above data, it can be said that the economy of Australia
grew by 3.4percent from June quarter 2017 to June quarter 2018. The rate of growth in July
2017 was 1.9 percent while that has increased to 3.4 percent in July 2018 (Abs.gov.au 2018).
This is by far the highest as compared to the previous two years. A diagrammatical analysis
to explain the above said events are shown as follows.

5THE PERFORMANCE OF AUSTRALIAN ECONOMY
(Source: Tradingeconomics.com 2018)
Unemployment rate
The unemployment rate of a country shows the number of people who are actively
searching for jobs but are unable to get a job in the economy. The unemployment rate is
calculated by dividing the number of people who are unemployed divided by the total amount
of labour force in the economy (Sinclair 2017). The seasonally adjusted rate of
unemployment in Australia was 5.6 percent in August 2017. The rate of unemployment has
decreased to 5.3 percent in July 2018. The country has recorded the lowest rate of
unemployment in the month of July 2018 (Abs.gov.au 2018).. The number of people
unemployed has decreased by 5700. The rate of labour force participation has decreased by
0.1 percent and the employment to population has also decreased by 0.1 percent. The
graphical analysis below shows that rate of growth of unemployment rate in the month of
August 2017 is 5.6 percent and that in July 2018 has decreased to 5.3 percent (Abs.gov.au
2018).

6THE PERFORMANCE OF AUSTRALIAN ECONOMY
(Source: Tradingeconomics.com 2018)
Inflation rate
The definition of inflation rate refers to an increase the prices of the commodities over
a period of time. The comparison made in the report describes rise in the inflation rate as
increase in the Consumer Price Index. The Consumer Price Index is the weighted average of
the prices of various goods that are consumed by the individual and falls in the consumption
basket (Barro 2013).
(Source: Tradingeconomics.com 2018)
From the above graph plotted on the basis of the data from the ABS, the inflation rate
rose to 2.1 percent in the June quarter of 2018. This is by far the highest as compared to that
of the previous two years. In the second quarter of 2017 the inflation rate was 1.9 percent
(Abs.gov.au 2018). The major reason for this high rise in the inflation rates is mainly due to
the increase in the costs of the transportation.
Terms of Trade
Terms of Trade refers to the ratio between the country’s prices of export to that of the
price of imports. The calculation of this ratio is very simple which is obtained by divided the
export prices by the import price and further multiplying it by 100. When the country’s terms
of trade is less than 100 percent then the capital accumulation of the country is less than the
amount of capital that is entering the country. On the other hand if the rates are more than
100 percent then the country’s capital accumulation occurring from exports is more than the
is more than that from the exports. The graphical analysis of the data is provided below.

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(Source: Tradingeconomics.com 2018)
In the third quarter of 2017, the terms of trade are 86 points and that for the second
quarter of 2018 the value is 87.7 points. In the previous quarter of 2018 the value was 89.1
points. The highest value was reaches in the first quarter of 2017 (Wits.worldbank.org 2018).
Thus, there has been a substantial fall in the terms of trade during the last one year.
Current account
Current account refers to the transactions that a country conducts with the rest of the
world. These net transfers included good and services that are traded, the country’s net
earnings and the net transfer payments over a certain period of time (Deardorff 2014). In
context to that of the Australian market, the current account is in deficit. However, the extent
of this deficit has increased from the third quarter of 2017 to second quarter of 2018. In the
third quarter of 2017 the current account deficit was 12453 million Australian dollar and that
in the second quarter of 2018 it was 13472 million Australian dollar (Wits.worldbank.org
2018). The lowest was in the first quarter of 2017. The graphical analysis has been provided
below.
(Source: Tradingeconomics.com 2018)

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External debt
External debt is the money that a country borrows from outside sources. These outside
sources may be International Monetary Funds, Work Bank or other international financial
institutions (Stiglitz 2016). In context to Australia the amount of gross foreign debt has
increased from the third quarter of 2017 to second quarter of 2018. In the second year of 2018
the value recorded was near to 2050000 million Australian dollars where as in 2017 it was
around 1850028 million dollars (Wits.worldbank.org 2018). Therefore, the net foreign debt
has increased during the last one year. The graphical analysis of the ABS data is plotted in the
graph provided and is attached below.
(Source: Tradingeconomics.com 2018)
Value of the Australian Dollar
The value of the Australian Dollar is calculated by the exchange rate. In the analysis
below, value of Australian dollar per US dollar has been taken into account. The
corresponding graph has been provided below.

9THE PERFORMANCE OF AUSTRALIAN ECONOMY
(Source: Tradingeconomics.com 2018)
The rate in the third quarter of 2017 was around 0.78 and that in the second quarter of
2018 it was 0.74 (Wits.worldbank.org 2018). Therefore, the exchange rates have decreased
thus the Australian Dollar has become less valuable. This is the present scenario in context to
the exchange rate of Australia.
Three Major Economic Issues
The major economic and financial issues that may might be a major problem for the
Australian economy are Unemployment, Poverty and the gap between the rich and the poor
and financial, economic and cost of living problems. A detailed discussion is provided in this
section regarding these problems.
Unemployment
The present unemployment rate in Australia 5.3 percent and one might argue that the
rate is low as compared to the other years. However, the scenario is quite different. The
immigrants who come to Australia in order to pursue higher studies play an important role in
the job market. Most of the Australian youths are unable find jobs. The young person of
Australia is deprived from jobs. The immigrants are given lots of support by the Australian
government even financially, thus the native Australians are struggling (Collins 2013).
Another important factor that can be indicated is that the Chinese are buying less from the

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Australians and thus employment is down in major sectors like that of the agriculture and
minerals.
Poverty
Another important factor is the poverty and widening of the gap between the rich and
the poor. As seen from the studies conducted by Leigh 2013 the rich are getting richer
whereas the poor are becoming poorer. These rich people include big business men who are
effectively controlling various sectors of the country. On the other hand, the poor people are
getting no such benefits from the government.
Financial, economic and cost of living problems
Finally yet importantly, this is one of the major problems faced by the Australians.
The factors that are included in this segment are housing affordability, inflation and financial
problems. The housing crisis has been a long problem with respect to the Australian
economy. People are unable to find dwellings. Again, the arrival of immigrants and the lack
in supply of housing are important factors for the rise of this problem (Yates 2016). Prices of
electricity has been rising tremendously in Australia which a major concern (Simshauser and
Nelson 2013). Again, the financial debt of the government has also been increasing which is
another problem for the Australian economy. There exists economic instability in the
Australian economy, which needs to be removes for the maximization of social welfare for
the residents.
Conclusion
From the above analysis, it can be concluded that there has been a growth in the
annual GDP of the Australian economy and by far have reached the highest in 2018. The
unemployment rates have decreased significantly. However, the inflation rates have increased
indicating a price rise in some specific goods and services. The terms of trade have
decreased, the current account and the external debt of the economy have increased
significantly. The values of Australian dollar have also decreased in the present year. This
shows that the Australian economy is operating poorly in the international market. One might
argue that the increase in the GDP or the growth in the Australian Sector is a good thing.
However, this is not the phenomenon as GDP is never a good measure of social welfare.
Therefore, the Australian government needs to rethink the policies and implement efficient
policies in order to mitigate these problems.

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References
Abs.gov.au. (2018). 5206.0 - Australian National Accounts: National Income, Expenditure
and Product, Jun 2018. [online] Available at:
http://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0 [Accessed 9 Sep. 2018].
Abs.gov.au. (2018). 6401.0 - Consumer Price Index, Australia, Jun 2018. [online] Available
at: http://www.abs.gov.au/ausstats/abs@.nsf/0/938DA570A34A8EDACA2568A900139350?
Opendocument [Accessed 9 Sep. 2018].
Barro, R.J., 2013. Inflation and economic growth. Annals of Economics & Finance, 14(1).
Collins, J., 2013. Rethinking Australian immigration and immigrant settlement
policy. Journal of Intercultural Studies, 34(2), pp.160-177.
Deardorff, A.V., 2014. Terms of trade: glossary of international economics. World Scientific.
Furceri, D., 2015. Capital account liberalization and inequality. International Monetary
Fund.
Leigh, A., 2013. Battlers and billionaires: The story of inequality in Australia (Vol. 1). Black
Inc..
O’Neill, D., 2014. Gross domestic product. Degrowth: A vocabulary for a new era, 103.
Simshauser, P. and Nelson, T., 2013. The outlook for residential electricity prices in
Australia's national electricity market in 2020. The Electricity Journal, 26(4), pp.66-83.
Sinclair, S., 2017. Urbanisation and labour markets in developing countries. Routledge.
Stiglitz, J.E., 2016. Euro. Publica.
Wits.worldbank.org. (2018). Australia Trade Statistics | WITS. [online] Available at:
https://wits.worldbank.org/CountryProfile/en/AUS [Accessed 9 Sep. 2018].
Yates, J., 2016. Why does Australia have an affordable housing problem and what can be
done about it?. Australian Economic Review, 49(3), pp.328-339.