Analysis of Australian Macroeconomic Performance

The Australian economy is among the largest and richest economies in the world. This report analyzes the macroeconomic performance of Australia based on various indicators such as GDP growth rate, inflation rate, unemployment rate, exchange rates, and net exports.

AUSTRALIAN MACROECONOMIC PERFORMANCE i
AN ANALYSIS OF THE AUSTRALIAN MACROECONOMIC PERFORMANCE
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AUSTRALIAN MACROECONOMIC PERFORMANCE ii
Executive Summary
The Australian economy is among the largest and richest economies in the world. Australian is
situated in the Asia-Pacific which has 43 nations. Australia highly embraces business, trade,
monetary, labor, investment and financial freedom which reflect the level of trade freedom in the
nation (Uy, Yi and Zhang 2013, p.667). Australia occupies position 5 according to the 2019
Index in terms of economic freedom having a score of 80.9. Trade and labor freedom, as well as
government integrity and fiscal health, have highly improved hence maintaining the nation’s
score of economic freedom while its efficiency of the judiciary slightly deteriorated. Australia
has been experiencing economic growth almost for the last decade and also the nation was lucky
enough to record a positive economic growth though at a reduced rate during the 2008 to 2009
global financial crisis (Kenc and Dibooglu 2010, p.3). The nation has a current economic growth
of 2.3 percent which is relatively a good economic growth as compared to many nations. In
terms of economic performance, Australia occupies position 4 out of the 43 nations in the region
of Asia-Pacific. Australian sound macroeconomic goals and policies, as well as highly skilled
labor force, have highly contributed towards the nation’s better economic performance and hence
the nation remains a center of attraction for many investors both domestically and internationally
(McDonald and Morling 2011, p.1). The Australian economic performance is well above that
anticipated both at the regional and world levels. In this report, an analysis of the Australian
macroeconomic performance has been done based on various macroeconomic indicators which
include unemployment, inflation and exchange rates as well as the real gross domestic product
growth rate has been done. The overall macroeconomic performance assists existing businesses,
the government and also the prospective investors to make their goals with great certainty.

AUSTRALIAN MACROECONOMIC PERFORMANCE iii
Table of Contents
Executive Summary....................................................................................................................................ii
Australian macroeconomic data from the year 1995 to 2015.......................................................................1
Australian Real Gross Domestic Product Growth Rates from 1995 to 2015............................................1
Australian Inflation Rates for the period 1995 to 2015............................................................................1
Australian Unemployment Rates for the period 1995 to 2015.................................................................2
Australian Exchange Rates for the period 1995 to 2015..........................................................................3
Australian Net Exports for the period 1995 to 2015................................................................................3
Australian Cash Rates and the Federal Reserve Fund’s Rates for the period 1995 to 2015 monthly data
(%)...........................................................................................................................................................4
Relationship between the Australian Real GDP growth rates and inflation rates.........................................9
Relationship between the Australian Real GDP growth rates and unemployment rates............................12
Relationship between the Australian net exports and the exchange rates..................................................13
The Australian cash rates relationship with the Federal Reserve Fund’s rates...........................................16
Australian Macroeconomic Outlook Prediction.........................................................................................18
Conclusion.................................................................................................................................................19
References.................................................................................................................................................20

AUSTRALIAN MACROECONOMIC PERFORMANCE 1
Australian macroeconomic data from the year 1995 to 2015
This report uses data on various named Australian macroeconomic indicators from the year 1995
to 2015 as shown below.
Australian Real Gross Domestic Product Growth Rates from 1995 to 2015
Year Real GDP Growth Rate (Annual %)
1995 2.8
1996 4.2
1997 4.6
1998 4.7
1999 4.4
2000 3
2001 2.6
2002 4.2
2003 2.7
2004 4.3
2005 2.9
2006 2.8
2007 4.4
2008 2.7
2009 1.9
2010 2.4
2011 2.8
2012 3.9
2013 2.1
2014 2.6
2015 2.5
“Source: International Monetary Fund
(https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD)”
Australian Inflation Rates for the period 1995 to 2015
Year Inflation Rates (Annual %)
1995 4.6
1996 2.7
1997 0.2
1998 0.9
1999 1.4
2000 4.5
2001 4.4

AUSTRALIAN MACROECONOMIC PERFORMANCE 2
2002 3
2003 2.7
2004 2.3
2005 2.7
2006 3.6
2007 2.4
2008 4.3
2009 1.8
2010 2.9
2011 3.4
2012 1.7
2013 2.5
2014 2.5
2015 1.5
“Source: International Monetary Fund
(https://www.imf.org/external/datamapper/PCPIPCH@WEO/OEMDC/AUS)”
Australian Unemployment Rates for the period 1995 to 2015
Year Unemployment Rate (Annual %)
1995 8.5
1996 8.5
1997 8.4
1998 7.7
1999 6.9
2000 6.3
2001 6.8
2002 6.4
2003 5.9
2004 5.4
2005 5
2006 4.8
2007 4.4
2008 4.3
2009 5.6
2010 5.2
2011 5.1
2012 5.2
2013 5.7
2014 6.1
2015 6
Source: International Monetary Fund
(https://www.imf.org/external/datamapper/LUR@WEO/OEMDC/ADVEC/WEOWORLD)

AUSTRALIAN MACROECONOMIC PERFORMANCE 3
Australian Exchange Rates for the period 1995 to 2015
Year Exchange Rate
1995 1.35
1996 1.28
1997 1.35
1998 1.59
1999 1.55
2000 1.72
2001 1.93
2002 1.84
2003 1.54
2004 1.36
2005 1.31
2006 1.33
2007 1.20
2008 1.19
2009 1.28
2010 1.09
2011 0.97
2012 0.97
2013 1.04
2014 1.11
2015 1.33
“Source: The World Bank (https://data.worldbank.org/indicator/pa.nus.fcrf)”
Australian Net Exports for the period 1995 to 2015
Year Value ($)
1995 -5240428241
1996 -533267382.7
1997 1646368836
1998 -6467569674
1999 -10082425327
2000 -4278715480
2001 2098010276
2002 -4719220381
2003 -14416671533
2004 -19188702455
2005 -14812982447
2006 -12281113878
2007 -22837087761
2008 -13745224204
2009 -10035658716

AUSTRALIAN MACROECONOMIC PERFORMANCE 4
2010 6185600684
2011 12563182829
2012 -21442502739
2013 -7420878112
2014 -9083612608
2015 -27769803392
“Source: The World Bank (https://data.worldbank.org/indicator/BN.GSR.GNFS.CD?view=chart)”
Australian Cash Rates and the Federal Reserve Fund’s Rates for the period
1995 to 2015 monthly data (%)
Year Australia United States
1995-01-01 7.5 5.53
1995-02-01 7.5 5.92
1995-03-01 7.5 5.98
1995-04-01 7.5 6.05
1995-05-01 7.5 6.01
1995-06-01 7.5 6.00
1995-07-01 7.5 5.85
1995-08-01 7.5 5.74
1995-09-01 7.5 5.80
1995-10-01 7.5 5.76
1995-11-01 7.5 5.80
1995-12-01 7.5 5.60
1996-01-01 7.5 5.56
1996-02-01 7.5 5.22
1996-03-01 7.5 5.31
1996-04-01 7.5 5.22
1996-05-01 7.5 5.24
1996-06-01 7.5 5.27
1996-07-01 7.5 5.40
1996-08-01 7 5.22
1996-09-01 7 5.30
1996-10-01 7 5.24
1996-11-01 6.5 5.31
1996-12-01 6 5.29
1997-01-01 6 5.25
1997-02-01 6 5.19
1997-03-01 6 5.39
1997-04-01 6 5.51
1997-05-01 5.5 5.50
1997-06-01 5.5 5.56
1997-07-01 5 5.52
1997-08-01 5 5.54
1997-09-01 5 5.54
1997-10-01 5 5.50
1997-11-01 5 5.52
1997-12-01 5 5.50

AUSTRALIAN MACROECONOMIC PERFORMANCE 5
1998-01-01 5 5.56
1998-02-01 5 5.51
1998-03-01 5 5.49
1998-04-01 5 5.45
1998-05-01 5 5.49
1998-06-01 5 5.56
1998-07-01 5 5.54
1998-08-01 5 5.55
1998-09-01 5 5.51
1998-10-01 5 5.07
1998-11-01 5 4.83
1998-12-01 4.75 4.68
1999-01-01 4.75 4.63
1999-02-01 4.75 4.76
1999-03-01 4.75 4.81
1999-04-01 4.75 4.74
1999-05-01 4.75 4.74
1999-06-01 4.75 4.76
1999-07-01 4.75 4.99
1999-08-01 4.75 5.07
1999-09-01 4.75 5.22
1999-10-01 4.75 5.20
1999-11-01 5 5.42
1999-12-01 5 5.30
2000-01-01 5 5.45
2000-02-01 5.5 5.73
2000-03-01 5.5 5.85
2000-04-01 5.75 6.02
2000-05-01 6 6.27
2000-06-01 6 6.53
2000-07-01 6 6.54
2000-08-01 6.25 6.50
2000-09-01 6.25 6.52
2000-10-01 6.25 6.51
2000-11-01 6.25 6.51
2000-12-01 6.25 6.40
2001-01-01 6.25 5.98
2001-02-01 5.75 5.49
2001-03-01 5.5 5.31
2001-04-01 5 4.80
2001-05-01 5 4.21
2001-06-01 5 3.97
2001-07-01 5 3.77
2001-08-01 5 3.65
2001-09-01 4.75 3.07
2001-10-01 4.5 2.49
2001-11-01 4.5 2.09
2001-12-01 4.25 1.82
2002-01-01 4.25 1.73
2002-02-01 4.25 1.74

AUSTRALIAN MACROECONOMIC PERFORMANCE 6
2002-03-01 4.25 1.73
2002-04-01 4.25 1.75
2002-05-01 4.5 1.75
2002-06-01 4.75 1.75
2002-07-01 4.75 1.73
2002-08-01 4.75 1.74
2002-09-01 4.75 1.75
2002-10-01 4.75 1.75
2002-11-01 4.75 1.34
2002-12-01 4.75 1.24
2003-01-01 4.75 1.24
2003-02-01 4.75 1.26
2003-03-01 4.75 1.25
2003-04-01 4.75 1.26
2003-05-01 4.75 1.26
2003-06-01 4.75 1.22
2003-07-01 4.75 1.01
2003-08-01 4.75 1.03
2003-09-01 4.75 1.01
2003-10-01 4.75 1.01
2003-11-01 5 1.00
2003-12-01 5.25 0.98
2004-01-01 5.25 1.00
2004-02-01 5.25 1.01
2004-03-01 5.25 1.00
2004-04-01 5.25 1.00
2004-05-01 5.25 1.00
2004-06-01 5.25 1.03
2004-07-01 5.25 1.26
2004-08-01 5.25 1.43
2004-09-01 5.25 1.61
2004-10-01 5.25 1.76
2004-11-01 5.25 1.93
2004-12-01 5.25 2.16
2005-01-01 5.25 2.28
2005-02-01 5.25 2.50
2005-03-01 5.5 2.63
2005-04-01 5.5 2.79
2005-05-01 5.5 3.00
2005-06-01 5.5 3.04
2005-07-01 5.5 3.26
2005-08-01 5.5 3.50
2005-09-01 5.5 3.62
2005-10-01 5.5 3.78
2005-11-01 5.5 4.00
2005-12-01 5.5 4.16
2006-01-01 5.5 4.29
2006-02-01 5.5 4.49
2006-03-01 5.5 4.59
2006-04-01 5.5 4.79

AUSTRALIAN MACROECONOMIC PERFORMANCE 7
2006-05-01 5.75 4.94
2006-06-01 5.75 4.99
2006-07-01 5.75 5.24
2006-08-01 6 5.25
2006-09-01 6 5.25
2006-10-01 6 5.25
2006-11-01 6.25 5.25
2006-12-01 6.25 5.24
2007-01-01 6.25 5.25
2007-02-01 6.25 5.26
2007-03-01 6.25 5.26
2007-04-01 6.25 5.25
2007-05-01 6.25 5.25
2007-06-01 6.25 5.25
2007-07-01 6.25 5.26
2007-08-01 6.5 5.02
2007-09-01 6.5 4.94
2007-10-01 6.5 4.76
2007-11-01 6.75 4.49
2007-12-01 6.75 4.24
2008-01-01 6.75 3.94
2008-02-01 7 2.98
2008-03-01 7.25 2.61
2008-04-01 7.25 2.28
2008-05-01 7.25 1.98
2008-06-01 7.25 2.00
2008-07-01 7.25 2.01
2008-08-01 7.25 2.00
2008-09-01 7 1.81
2008-10-01 6 0.97
2008-11-01 5.25 0.39
2008-12-01 4.25 0.16
2009-01-01 4.25 0.15
2009-02-01 3.25 0.22
2009-03-01 3.25 0.18
2009-04-01 3 0.15
2009-05-01 3 0.18
2009-06-01 3 0.21
2009-07-01 3 0.16
2009-08-01 3 0.16
2009-09-01 3 0.15
2009-10-01 3.25 0.12
2009-11-01 3.5 0.12
2009-12-01 3.75 0.12
2010-01-01 3.75 0.11
2010-02-01 3.75 0.13
2010-03-01 4 0.16
2010-04-01 4.25 0.20
2010-05-01 4.5 0.20
2010-06-01 4.5 0.18

AUSTRALIAN MACROECONOMIC PERFORMANCE 8
2010-07-01 4.5 0.18
2010-08-01 4.5 0.19
2010-09-01 4.5 0.19
2010-10-01 4.5 0.19
2010-11-01 4.75 0.19
2010-12-01 4.75 0.18
2011-01-01 4.75 0.17
2011-02-01 4.75 0.16
2011-03-01 4.75 0.14
2011-04-01 4.75 0.10
2011-05-01 4.75 0.09
2011-06-01 4.75 0.09
2011-07-01 4.75 0.07
2011-08-01 4.75 0.10
2011-09-01 4.75 0.08
2011-10-01 4.75 0.07
2011-11-01 4.5 0.08
2011-12-01 4.25 0.07
2012-01-01 4.25 0.08
2012-02-01 4.25 0.10
2012-03-01 4.25 0.13
2012-04-01 4.25 0.14
2012-05-01 3.75 0.16
2012-06-01 3.5 0.16
2012-07-01 3.5 0.16
2012-08-01 3.5 0.13
2012-09-01 3.5 0.14
2012-10-01 3.25 0.16
2012-11-01 3.25 0.16
2012-12-01 3 0.16
2013-01-01 3 0.14
2013-02-01 3 0.15
2013-03-01 3 0.14
2013-04-01 3 0.15
2013-05-01 2.75 0.11
2013-06-01 2.75 0.09
2013-07-01 2.75 0.09
2013-08-01 2.5 0.08
2013-09-01 2.5 0.08
2013-10-01 2.5 0.09
2013-11-01 2.5 0.08
2013-12-01 2.5 0.09
2014-01-01 2.5 0.07
2014-02-01 2.5 0.07
2014-03-01 2.5 0.08
2014-04-01 2.5 0.09
2014-05-01 2.5 0.09
2014-06-01 2.5 0.10
2014-07-01 2.5 0.09
2014-08-01 2.5 0.09

AUSTRALIAN MACROECONOMIC PERFORMANCE 9
2014-09-01 2.5 0.09
2014-10-01 2.5 0.09
2014-11-01 2.5 0.09
2014-12-01 2.5 0.12
2015-01-01 2.5 0.11
2015-02-01 2.25 0.11
2015-03-01 2.25 0.11
2015-04-01 2.25 0.12
2015-05-01 2 0.12
2015-06-01 2 0.13
2015-07-01 2 0.13
2015-08-01 2 0.14
2015-09-01 2 0.14
2015-10-01 2 0.12
2015-11-01 2 0.12
2015-12-01 2 0.24
Source: FRED Economic Data (https://fred.stlouisfed.org/series/FEDFUNDS) and the Reserve Bank
of Australia (https://www.rba.gov.au/statistics/cash-rate/)
Relationship between the Australian Real GDP growth rates and
inflation rates
The real gross domestic product is a reflection of the total output value of a given nation during a
given year having been expressed in prices for the base year and is adjusted for the year’s
inflation. It is also referred to as inflation-corrected or constant-price gross domestic product
(Aastveit et al 2014, p.48). It is mostly used when analyzing a nation’s economic performance
since it gives more accurate figures of a nation’s economic growth since it accommodates the
nation’s price alterations, unlike the nominal gross domestic product.
Inflation exhibits a positive relationship with a nation’s economic growth (Bick 2010, p.126).
This, therefore, means that a nation’s gross domestic growth rate may be high when inflation
rates are high and low when inflation rates are low (Ahmed et al 2011, p.68). However, inflation
rates sometimes tend to have an inverse proportionality relationship with a nation’s real gross

AUSTRALIAN MACROECONOMIC PERFORMANCE 10
domestic product. The summary statistics for the real GDP and the inflation rates for Australia
from the year 1995 to 2015 are shown below.
Inflation Rates (Annual %)
Real GDP Growth Rate (Annual
%)
Mean 2.67 3.26
Standard Error 0.26 0.20
Median 2.70 2.80
Mode 2.70 2.80
Standard Deviation 1.19 0.91
Sample Variance 1.42 0.83
Skewness -0.05 0.36
Range 4.40 2.80
Minimum 0.20 1.90
Maximum 4.60 4.70
Sum 56 68.5
Count 21 21
From the data, the minimum inflation rate 0.20 percent matches with a relatively higher real
gross domestic product growth rate of 4.6 percent during the year 1997 while the highest
inflation rate 4.6 percent matches with a relatively lower real GDP growth of 2.8 percent for the
year 1995. These values in a way indicate an inverse relationship between the two variables.
Inflation rates are negatively skewed meaning that their mean is less than their mode and their
left curve tail is longer than the right curve tail. Real GDP growth rates are positively skewed
meaning that their mean exceeds their mode and that their right curve tail is longer than their left
curve tail. The graph for the data is as shown below.
Inflation and Real GDP Growth Rates (Annual %)

AUSTRALIAN MACROECONOMIC PERFORMANCE 11
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Inflation Rates (Annual %)
Real GDP Growth Rate (Annual
%)
Year
Inflation and Real GDP growth Rates
From the graph, the negative relationship between the Australian inflation and real GDP growth
rates is clear (Brandenberger 2017, p.1740002) in that for instance during the years 1997 and
1998 when inflation rates were lower at 0.2 percent and 0.9 percent respectively, the real GDP
growth rates were higher at 4.6 percent and 4.7 percent respectively. From the real GDP and
inflation rates comparison, there is evidence of the business cycle. For instance, during the year
2008, a higher inflation rate of 4.3 percent was accompanied by a lower real GDP growth rate of
2.7 percent. It can be seen that inflation rates were lowered to 1.8 percent to counter the
economic recession during the year 2009 when Australia recorded a real GDP growth rate of 1.9
percent (Shahrokhi 2011, p.193). Also, during the years 1997 and 1998 when inflation rates were
lower at 0.2 percent and 0.9 percent respectively, the Australian economy was at its economic
boom with the real GDP growth rates being high at 4.6 percent and 4.7 percent respectively

AUSTRALIAN MACROECONOMIC PERFORMANCE 12
Relationship between the Australian Real GDP growth rates and
unemployment rates
Unemployment refers to a situation whereby an individual who is willing and able to participate
in the labor market actively seeks for a job without finding it (Shimer 2012, p.127). Real GDP
growth and unemployment rates have an inverse relationship in that an increase in the real GDP
leads to a decline in the Unemployment rates (Christiano, Eichenbaum and Trabandt 2016,
p.1523). This is due to the fact an increase in real GDP shows an economic expansion and hence
job opportunities are availed to unemployed individuals in a given nation. The summary statistics
for the Australian Real GDP growth rates and unemployment rates are shown below.
Unemployment Rate (Annual %) Real GDP Growth Rate (Annual %)
Mean 6.10 3.26
Standard Error 0.28 0.20
Median 5.90 2.80
Mode 8.50 2.80
Standard Deviation 1.29 0.91
Sample Variance 1.66 0.83
Skewness 0.70 0.36
Range 4.20 2.80
Minimum 4.30 1.90
Maximum 8.50 4.70
Sum 128.2 68.5
Count 21 21
The graph for the data is shown below.
Unemployment and Real GDP growth rates (Annual %)

AUSTRALIAN MACROECONOMIC PERFORMANCE 13
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
0
1
2
3
4
5
6
7
8
9
Unemployment Rate (Annual %)
Real GDP Growth Rate (Annual %)
Year
Unemployment and Real GDP growth rates
From the summary statistics and the graph, it is clear that unemployment and the real GDP
growth rates have an inverse relationship (Karanassou and Sala 2010, p.185). For example,
during the years 1995 and 1996 when unemployment rates were high at 8.5 percent, the economy
real GDP was low at 2.8 percent and 4.2 respectively. Also from the summary statistics, an
increase in real GDP growth rate from 4.6 percent to 4.7 percent from the year 1997 to 1998 led
to a sharp decline in unemployment rates from 8.4 to 7.7 percent respectively. From the data,
there is an evidence of business cycle in that for instance from the year 2008 to 2009, during the
global financial crisis, the real GDP growth rates declined from 2.7 percent to 1.9 percent and
this led to an increase in unemployment rates from 4.3 percent to 5.6 percent respectively as the
economy was at its recession.
Relationship between the Australian net exports and the exchange
rates
Net exports are obtained by subtracting a nation’s imports from its exports (Costinot, Lorenzoni
and Werning 2014, p.77). It is a reflection of aggregate spending by a nation which embraces an

AUSTRALIAN MACROECONOMIC PERFORMANCE 14
open economy. Net exports can also be termed as the balance of trade or the net trade (Johnson
2013, p.153). If net exports turn out to be positive, then this is an indication of a trade surplus for
the nation and it’s called a favorable balance of trade. On the other hand, if net exports turn out
to be negative, it is an indication that a nation experiences a trade deficit and it’s called
unfavorable balance of trade. Considering the exchange rates, a nation with a strong currency
will always experience an unfavorable balance of trade as the nation’s goods turn out to be
expensive in the international market as compared to others (Johnson 2013, p.153). A nation
with a weak currency will always have a favorable balance of trade as its goods and services are
cheap in the international market as compared to others and hence are purchased in higher
amounts (Ivrendi and Guloglu 2010, p.1144). The net exports and exchange rates for Australia
have been purchased in two different graphs. The following is the summary statistics for the two
Australian macroeconomic indicators.
Exchange Rate Net exports ($)
Mean 1.35 -8660128652.57
Standard Error 0.06 2163585077.29
Median 1.33 -9083612608.35
Standard Deviation 0.27 9914792389.15
Sample Variance 0.07 98303108119864700000.00
Skewness 0.64 0.13
Range 0.97 40332986221.05
Minimum 0.97 -27769803392.14
Maximum 1.93 12563182828.91
Sum 28.33 -181862701703.98
Count 21 21
The graph for the net exports is shown below.

AUSTRALIAN MACROECONOMIC PERFORMANCE 15
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
-30000000000
-25000000000
-20000000000
-15000000000
-10000000000
-5000000000
0
5000000000
10000000000
15000000000
Net ExportsValue ($)
Value ($)
Year
Net export value ($)
The graph for the exchange rates is shown below.
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
0.00
0.50
1.00
1.50
2.00
2.50
Exchange Rate against the US dollar
Exchange Rate
Year
Exchange Rate
Exchange rates show a negative relationship with a nation’s net exports (Zhongcai 2011, p.17).
This is evident from the two graphs plotted. For instance, the depreciation of the Australian

AUSTRALIAN MACROECONOMIC PERFORMANCE 16
currency exchange rates against the US dollar from 1.11 to 1.33 during the years 2014 and 2015
led to a sharp increase in the nation’s trade deficit from $ -9083612608 to $ -27769803392
respectively. From the summary statistics, the Australian currency appreciates showed a
significant appreciation during the year 2011 and 2012 when exchange rates against the US
dollar stood at 0.97 for both years. The appreciation of the Australian currency from the year
2010 to 2011 from 1.09 to 0.97 led to a sharp increase in the nation’s trade surplus from
$6185600684 to $ 12563182829 respectively. Hence, this is a clear indication that a depreciation
of a nation’s currency leads to a favorable balance of trade as the nation experiences a trade
surplus and vice versa.
The Australian cash rates relationship with the Federal Reserve
Fund’s rates
The Australian cash rates are determined by the Reserve Bank of Australia every month
exclusive of January (Lane and Rosewall 2015, p.1). Therefore the cash rates set for December
previous year prevail for January next year. Cash rates indicate the lowest interest rates incurred
by banks in their borrowing activities from each other. They determine the nation’s overall
interest rates. The Federal Reserve funds rates refer to the US interest rates charged by banks as
they lend other their money which is excess of their required reserves. They determine the
nation’s interest rates to be charged on money borrowers (Klomp and De Haan 2010, p.593). The
data for the cash and Federal Reserve funds rates have been obtained on a monthly basis. The
summary statistics for the data are shown below.
Australia United States
Mean 4.91 2.72
Standard Error 0.09 0.15
Median 5.00 2.00
Mode 4.75 0.09
Standard Deviation 1.47 2.37

AUSTRALIAN MACROECONOMIC PERFORMANCE 17
Sample Variance 2.16 5.60
Skewness -0.14 0.15
Range 5.5 6.47
Minimum 2 0.07
Maximum 7.5 6.54
Sum 1237 686.58
Count 252 252
The graph for the monthly data is shown below.
1995-01-01
1996-02-01
1997-03-01
1998-04-01
1999-05-01
2000-06-01
2001-07-01
2002-08-01
2003-09-01
2004-10-01
2005-11-01
2006-12-01
2008-01-01
2009-02-01
2010-03-01
2011-04-01
2012-05-01
2013-06-01
2014-07-01
2015-08-01
0
1
2
3
4
5
6
7
8
Australia
United States
From the summary statistics and the graph, it is evident that the highest Australian cash rates
correspond to the highest Federal Reserve funds rates and the lowest Australian cash rates
correspond to the lowest Federal Reserve funds rates. This means that a move taken by the
Federal Reserve funds rates results to a similar move by the Australian cash rates. This means
that a decision to lower the Federal Reserve funds rates results to a decision to lower the
Australian cash rates to keep the economy at pace with that of the United States and avoid
unfavorable trade deficits with the US (Chami and Cosimano 2010, p.161).
Plausible Economic Explanations

AUSTRALIAN MACROECONOMIC PERFORMANCE 18
The dream of every economy is to foster economic growth. Economic principles and policies
adopted by a nation are always focused on spurring the nation’s economic growth (Hutchison,
Noy and Wang 2010, p.973). From the report, it is evident that the fiscal and monetary policies
for Australia always work towards uplifting the economic performance. For instance, during the
2008/2009 global financial crisis, the Australian cash rates were lowered from 7.25 to 3 percent
respectively to encourage investment and consumption in the nation to save the nation from the
economic recession as its real GDP growth rate decreased from 2.7 to 1.9 percent respectively.
The Australian government increased its expenditure over this period and this saw the nation’s
trade deficit decrease from $-13745224204 to $-10035658716 respectively. Due to the
expansionary fiscal and monetary policies adopted by the nation over this period, the nation’s
exchange rates slightly depreciated from 1.19 to 1.28 respectively.
Australian Macroeconomic Outlook Prediction
Based on the summary statistics, graphs and data analysis, the Australian macroeconomic
outlook is likely to be better as the Australian economy is anticipated to continue with its better
economic performance. Cash rates have been kept low meaning that interest rates are low in
order to foster economic growth. The real GDP is expected to increase in the future. Inflation is
likely to increase due to the fiscal and monetary expansionary policies and hence better
Australian economic growth is likely to be coupled with a rise in inflation rates (Castelnuovo and
Surico 2010, p.1262). The Australian unemployment rate is likely to decrease due to the
expansionary policies adopted. In a nutshell, Australia is anticipated to perform better in terms of
economic growth.

AUSTRALIAN MACROECONOMIC PERFORMANCE 19
Conclusion
Australia is among the richest nations in the world and embraces an open mixed economy. This
report has analyzed various macroeconomic indicators for Australia such as real GDP, inflation,
exchange, unemployment and cash rates, and net exports. The results show that the Australian
fiscal and monetary policies have always been tailored towards fostering the nation’s economic
growth. Australia is anticipated to perform better in terms of economic growth in the future as
depicted by the analyzed macroeconomic indicators.

AUSTRALIAN MACROECONOMIC PERFORMANCE 20
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