Comparative Analysis of Macroeconomic Performance of Australia and USA

Running head: MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Macroeconomic Performance of Australia and USA
Name of the Student
Name of the University
Course ID

1MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Executive Summary
Australia and USA are two of the leading nations in the global economy. USA though is large
nation compared to Australia, however when viewed in terms of economic progress both the
nations are comparable. The paper makes a comparative analysis of macroeconomic
performance of USA and Australia. The sample period chosen for the analysis ranged from
1995 to 2015. Macroeconomic performance of an economy depends on performance of a
number of indicators. These indicators include GDP growth, inflation rate, unemployment
rate, exchange rate, real interest rate and net export. In addition to analyzing summary
statistics of the chosen indicators, the paper evaluates relationship between GDP growth and
each of these indicators. Government plays an important role in supporting economic activity
through various policy measure. The government policies of respective nations are analyzed
to understand the performance trend of different indicators.

2MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Table of Contents
Introduction................................................................................................................................3
Summary statistics of different Macroeconomic indicators.......................................................3
Real GDP growth rate............................................................................................................3
Inflation rate...........................................................................................................................4
Interest rate.............................................................................................................................7
Net Export..............................................................................................................................8
Exchange rate.........................................................................................................................9
Relation between real GDP growth and other indicators.........................................................10
Real GDP growth and Inflation rate.....................................................................................10
Real GDP growth and unemployment rate..........................................................................11
Real GDP growth and exchange rate...................................................................................12
Real GDP growth and real interest rate................................................................................13
Exchange rate and growth of net export..............................................................................14
Government policies to stimulate economic performance.......................................................14
Macroeconomic policies in Australia...................................................................................15
Macroeconomic policies in United State.............................................................................15
Australian economic outlook...................................................................................................16
Conclusion................................................................................................................................16
References................................................................................................................................17

3MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Introduction
In the world economy, Australia stands as one of the strongest economy in terms of
growth and economic performance. This is a service sector dominating economy with the
sector making highest contribution to the GDP. Agriculture and industries also make
significant contribution to the economy. Australia is an open economy maintaining trade
relation with many of the developed and developing nation (Hatfield-Dodds, et al., 2015).
Several natural disaster and global financial crisis though slowed down economic growth of
Australia but the economy has made a quick recovery.
United State of America on the other hand is considered as the largest economy in the
world. The nominal GDP of US as recorded at the end of 2018 is USD 20513 trillion. USA
is a world leading economy in terms of international trade and foreign investment. In term of
purchasing power parity, USA stands first in the world (dfat.gov.au, 2018). The economy
experienced a severe recession in 2008 resulted from sub-prime mortgage crisis, failure of
investment banks and an economy wide liquidity crisis. It took a considerably long time for
the economy to fully recover the crisis.
The report aims at evaluating macroeconomic performance of Australia and USA for
the period ranging from 1995 to 2015.
Summary statistics of different Macroeconomic indicators
Real GDP growth rate
Gross Domestic Product of a nation measures the monetary values of good and
services that is nation produces in an accounting year. In computing GDP when market price
of a fixed base year is used then it is called real GDP. Now growth in real GDP refers to the
percentage change in real GDP from one year to the next (Issahaku, Abor and Amidu, 2018)
The summary statistics for real GD growth in Australia and USA are described in the
following tables.
Table 1: Real GDP growth in Australia
Real GDP growth rate
Mean 3.29
Standard Error 0.19
Median 3.63
Mode #N/A
Standard Deviation 0.89
Sample Variance 0.79
Kurtosis -0.86
Skewness -0.13
Range 3.19
Minimum 1.81
Maximum 5.01
Sum 69.15
Count 21

4MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
The average real GDP growth rate in Australia is obtained as 3.29 percent. The
obtained standard deviation for the GDP growth is 0.89. As standard deviation of GDP,
growth is relatively smaller than average growth rate, a relatively stable GDP growth for
Australia can be predicted. The maximum and minimum GDP growth for Australia are 5.01
percent and 1.81 percent, recorded in the year 1999 and 2009 respectively.
Table 2: Real GDP growth in United State
Real GDP growth rate
Mean 2.46
Standard Error 0.38
Median 2.67
Mode #N/A
Standard Deviation 1.73
Sample Variance 3.00
Kurtosis 3.14
Skewness -1.40
Range 7.46
Minimum -2.78
Maximum 4.69
Sum 51.57
Count 21
The average real GDP growth rate in United State lower relative to that of Australia
and is obtained as 2.46 percent. The obtained standard deviation for the GDP growth is 1.73.
As standard deviation of growth is relatively smaller than average growth rate, like Australia,
USA also experienced a stable growth. The maximum and minimum GDP growth for
Australia are 4.69 percent and -2.78 percent, recorded in the year 1999 and 2009 respectively.
Inflation rate
Inflation rate measures the rate of change in the general price level over time (Oikawa
and Ueda, 2018) It is computed as a percentage change in the consumer price index between
two years.
Table 3: Inflation rate in Australia
inflation rate
Mean 2.66
Standard Error 0.26
Median 2.61
Mode #N/A
Standard Deviation 1.18
Sample Variance 1.40
Kurtosis -0.30
Skewness 0.00

5MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Range 4.39
Minimum 0.25
Maximum 4.64
Sum
55.8
6
Count 21
For Australia, the average inflation rate is estimated as 2.66 percent. The variability
of inflation rate obtained from the standard deviation is computed as 1.18. This implies a
relatively stable trend in the inflation rate. The highest rate of inflation in the given sample
period is 4.64 and the lowest inflation rate is recorded as 0.25
Table 4: Inflation rate in United State
inflation rate
Mean 2.27
Standard Error 0.23
Median 2.34
Mode #N/A
Standard Deviation 1.05
Sample Variance 1.11
Kurtosis 0.93
Skewness -0.96
Range 4.19
Minimum -0.36
Maximum 3.84
Sum 47.58
Count 21
In case of United State, the average inflation rate is estimated as 2.27percent. The
variability of inflation rate obtained from the standard deviation is computed as 1.05. The
smaller standard deviation in the inflation trend implies inflation is more stable in United
State than that in Australia. The highest rate of inflation in the given sample period is 3.84
and the lowest inflation rate is recorded as -0.36.
Unemployment rate
Unemployment rate of a nation measures the status of labor market. Unemployment
occurs when people in the labor market are actively looking for jobs but are unable to find a
suitable job for them (Kroft and Notowidigdo, 2016)

6MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Table 5: Unemployment rate in Australia
unemployment rate
Mean 6.10
Standard Error 0.28
Median 5.90
Mode 8.50
Standard Deviation 1.29
Sample Variance 1.67
Kurtosis -0.38
Skewness 0.67
Range 4.30
Minimum 4.20
Maximum 8.50
Sum
128.1
0
Count 21
The average unemployment rate in Australia is documented as 6.10 percent. The
highest unemployment rate in Australia is 8.50 percent while the lowest unemployment rate
is recorded to be 4.20 percent. From the summary measures, standard deviation for
unemployment series is obtained as the 1.29. The relatively smaller value of standard
deviation implies that Australia maintained a relatively stable trend in unemployment.
Table 6: Unemployment rate in United State
unemployment rate
Mean 5.98
Standard Error 0.37
Median 5.50
Mode 5.80
Standard Deviation 1.69
Sample Variance 2.85
Kurtosis 0.06
Skewness 1.09
Range 5.60
Minimum 4.00
Maximum 9.60
Sum
125.5
0
Count 21
The average unemployment rate in United State is documented as 5.98 percent. The
highest unemployment rate in United State is 9.60 percent while the lowest unemployment
rate is recorded to be 4.00 percent. From the summary measures, standard deviation for

7MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
unemployment series is obtained as the 1.69. The relatively smaller value of standard
deviation implies that United State maintained a relatively stable trend in unemployment.
Interest rate
An important monetary policy tools for central government of a nation is the bank
rate. In Australia, the bank rate is known as cash rate while in United State bank rate is
termed as federal fund rate (Du, Tepper and Verdelhan, 2018
Table 7: Cash rate in Australia
Interest rate
Mean 4.74
Standard Error 0.31
Median 4.75
Mode 4.75
Standard Deviation 1.44
Sample Variance 2.07
Kurtosis -0.27
Skewness -0.20
Range 5.50
Minimum 2.00
Maximum 7.50
Sum
99.5
0
Count 21
The average cash rate in the Australia economy for the chosen period is 4.74 percent.
The highest and lowest cash rate in Australia are 7.50 percent and 2.00 percent respectively.
Table 8: Fund rate in United State
Interest rate
Mean 2.27
Standard Error 0.23
Median 2.34
Mode #N/A
Standard Deviation 1.05
Sample Variance 1.11
Kurtosis 0.93
Skewness -0.96
Range 4.19
Minimum -0.36
Maximum 3.84
Sum
47.5
8
Count 21

8MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
The average fund rate in the USA is relatively lower as compared to Australia with
average fund rate being 2.27 percent for the chosen period. The highest and lowest fund rate
in United State are 3.84 percent and -0.36 percent respectively.
Net Export
Net export measures trade balance of a nation. It is the difference between the volume
of export and volume of import in a year (Araujo, Mion and Ornelas, 2016)
Table 9: Rate of change in net export of Australia
Net export
Mean -62.16
Standard Error 58.55
Median -13.13
Mode #N/A
Standard
Deviation 268.29
Sample Variance
71981.1
3
Kurtosis 18.73
Skewness -4.20
Range 1401.06
Minimum -1204.18
Maximum 196.88
Sum -1305.37
Count 21
The average net export growth in Australia is negative. This implies on an average,
Australia experienced a decline in the trade balance.
Table 10: Rate of change in net export of United State
Net export
Mean 9.60
Standard Error 4.81
Median 6.47
Mode #N/A
Standard Deviation 22.03
Sample Variance
485.3
7
Kurtosis 2.88
Skewness 1.10
Range
102.9
5
Minimum -28.23
Maximum 74.72
Sum 201.5

9MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
5
Count 21
The average net export growth in United State is 9.60 percent. The positive average
growth in net export implies the nation experienced a better trade position.
Exchange rate
Exchange rate refers to the value of currency of one nation relative to other (Gabaix
and Maggiori, 2015) The summary statistics of monthly exchange rate in Australia and USA
are presented in the following table.
Table 11: Exchange rate in Australia
Exchange rate
Mean 1.10
Standard Error 0.01
Median 1.13
Mode 1.14
Standard Deviation 0.13
Sample Variance 0.02
Kurtosis 0.85
Skewness -1.05
Range 0.63
Minimum 0.70
Maximum 1.34
Sum
277.5
3
Count 252
The monthly average exchange rate between Australian dollar and US dollar is 1.10.
This implies Australia need to give 1.10 to purchase one unit of US dollar. The highest and
lowest exchange rate for the period are 1.34 and 0.70 respectively.
Table 12: Exchange rate in United State
USD/AUD
Mean 0.92
Standard Error 0.01
Median 0.89
Mode 0.87
Standard Deviation 0.13
Sample Variance 0.02
Kurtosis 3.23
Skewness 1.77
Range 0.68
Minimum 0.75

10MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Maximum 1.43
Sum
232.7
2
Count 252
The average monthly exchange rate for US dollar against Australian dollar is 0.92.
This implies USA on an average need to exchange 0.92 USD for one unit of AUD. The
highest and lowest exchange rate for the period are 1.43 and 0.75 respectively.
Relation between real GDP growth and other indicators
Real GDP growth and Inflation rate
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Real GDP growth and Inflation
Real GDP growth rate inflation rate
Figure 1: Pairwise graph between Real GDP growth and Inflation rate in Australia
(Data.worldbank.org, 2018)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Real GDP and Inflation
Real GDP growth rate inflation rate
Figure 2: Pairwise graph between Real GDP growth and Inflation rate in United State
(Data.worldbank.org, 2018)

11MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA

12MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Real GDP growth and unemployment rate
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Real GDP growth and Unemployment
Real GDP growth rate unemployment rate
Figure 3: Pairwise graph between Real GDP growth and unemployment rate in
Australia
(Data.worldbank.org, 2018)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Real GDP and Unemployment rate
Real GDP growth rate unemployment rate
Figure 4: Pairwise graph between Real GDP growth and unemployment rate in United
State
(Data.worldbank.org, 2018)

13MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Real GDP growth and exchange rate
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Real GDP growth and exchange rate
Real GDP growth rate Exchange rate
Figure 5: Pairwise graph between Real GDP growth and exchange rate in Australia
(Data.worldbank.org, 2018)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Real GDP growth and exchange rate
Real GDP growth rate Exchange rate
Figure 6: Pairwise graph between Real GDP growth and exchange rate in United State
(Data.worldbank.org, 2018)

14MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Real GDP growth and real interest rate
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
Real GDP growth and real interest rate
Real GDP growth rate Interest rate
Figure 7: Pairwise graph between Real GDP growth and real interest rate in Australia
(rba.gov.au, 2018)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Real GDP growth and real interest rate
Real GDP growth rate Interest rate
Figure 8: Pairwise graph between Real GDP growth and real interest rate in United
State
(Fred.stlouisfed.org, 2018)

15MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Exchange rate and growth of net export
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
-1400.00
-1200.00
-1000.00
-800.00
-600.00
-400.00
-200.00
0.00
200.00
400.00
Exchange rate and net export growth
Exchange rate Net export
Figure 9: Pairwise graph between exchange rate and growth of net export in Australia
(rba.gov.au, 2018)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
-40.00
-20.00
0.00
20.00
40.00
60.00
80.00
100.00
Exchange rate and net export growth
Exchange rate Net export
Figure 10: Pairwise graph between exchange rate and growth of net export in United
State
(Data.worldbank.org, 2018)
Government policies to stimulate economic performance
Government of a nation takes different policy measures to stimulate macroeconomic
performance. Objective of macroeconomic policy measure is to maintain stability in the
economic environment in order to foster a steady and sustainable growth in the economy
(Cimadomo, 2016).

16MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Macroeconomic policies in Australia
In Australia, the key macroeconomic policy includes fiscal policy, monetary policy
and policy related to exchange rate.
Fiscal policy: Fiscal policy works through different composition of government expenditure
and tax rate. Government can directly influence economic activity by altering current and
capital expenditure. The indirect channels of influencing economic activity are government
spending, taxes and transfer payment, investment and export. Under current scenario of
Australian economy, fiscal policy is the only macroeconomic policy tool that government
controls directly (Fenna, 2016) Government takes discretionary fiscal policy to stimulate
economic growth. An example of discretionary fiscal policy is the stimulatory packages
offered by the government during economic crisis. In times of economic slowdown,
government receives a lower revenue because of a decline in tax revenue collected from
income and corporate tax. On the expenditure side, government spending increase on
unemployment benefit and for other social expenditures. Government uses automatic
stabilizers that makes fiscal policy expansionary in times of economic downturn while fiscal
policy is contractionary in times of upturn in the economic activity (Ryoo and Skott, 2107.
The fiscal pressure arising from higher government expenditure however pose long-term
challenge for the economy. By 2046-47, government expenditure in Australia is projected to
exceed 3.5 percent of the GDP.
Monetary policy: Reserve Bank of Australia guides the monetary policy in the economy.
The policy decision is implemented by altering the prevailing cash rate in the economy.
Monetary policy is used to achieve a targeted level of inflation. When inflation exceeds the
targeted rate then government takes tight monetary policy in terms of reducing the cash rate
(Aph.gov.au, 2018). If inflation is below the targeted rate, then expansionary monetary policy
in terms of increasing cash rate. Using monetary policy RBA, targets to achieve a stability in
currency maintain a full employment and attain economic prosperity and welfare of the
economy. RBA now targets to maintain an inflation rate between 2% and 3%. This help
Australian economy to achieve a higher economic growth along with stability in the price
level.
Exchange rate policy: In addition to fiscal and monetary policy, Australian government uses
exchange rate policy to maintain stability in domestic currency. Since 1983, Australian
maintained a floating exchange rate. Under this policy, the market forces determine exchange
rate. Because of mining boom, there was an appreciation of Australian dollar. This helped to
moderate the inflationary pressure ensuring price signals that were needed to facilitate
resource flow to the mining sector. The appreciation of Australian dollar resulted from
mining boom led to an increase in the purchasing power of Australian household enhancing
economic growth.
Macroeconomic policies in United State
In United State, the roles of government extend beyond its regulatory position in
certain economic activity. In addition to regulatory roles, government also designs policy to
manage overall economic activity, maintains a high employment level and stabilize prices.
The two policy tools used for this purpose are fiscal policy and monetary policy. Since the
great depression of 1930s, government aims to find a mix of monetary and fiscal policy fir
achieving a steady growth along with stability in the price level.
Fiscal policy: The expansion of government in the economy since 1930s was accompanied
by a sharp increase in government expenditure. Fiscal policy in USA was undergone several

17MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
changes. Since late 1990s, policymakers in USA no longer followed the path of their
predecessors to attain targeted economic goals. The focus of policymakers today is to
strengthen the economic activity at the margin (Cashin, et al., 2018). In order to expand
economic activity, expansionary fiscal policy was taken by reducing tax on capital gains.
This increases the value of wealth people have in the form of property or stocks. This policy
by increasing incentive for saving and investment brings economic growth for USA. In order
to address the issue of unemployment government seeks to investment on education and
training program that will develop skills and hence will make the economy more competitive
in the global market.
Monetary policy: Since the late 20th century, the reliance of macroeconomic policies
gradually shifted from fiscal to monetary policy. The Federal Reserve in USA controls
money supply in the economy either through open market operations or through discount rate
or by specifying the reserve ratios (Bhutta and Keys, 2016) The increasing importance of
monetary policy over the fiscal policy for attaining economic stability reflects economic and
political realities of USA. The experience of US economy during 1970s, 1980s and 1990s
reveal the problems faced by the government to manage inflation using fiscal policy. The
political realities favor role of monetary policy in times of inflation
Australian economic outlook
Australian being a globally integrated nation is highly affected by changing condition
in the global economy. There is evidences of strong economic condition in global economy.
GDO growth has increased for a major group of advanced economies with global growth rate
reaches the highest since 2011. The improved economic outlook for the major trading
partners strengthen the economic outlook for Australia. The strong global economic condition
and recovery of domestic economic activity has kept Australian economic outlook positive
(rba.gov.au, 2018). The investment made outside the mining and construction will bring
opportunities for further economic growth. The household income is forecasted to increase
along with increase in consumption. The significantly low cash rate will help to boost
investment and economic growth. The booming export sector and expanding business
community will help the economy to achieve a sustained economic growth. Despite strong
economic growth since the past few years, there is a growing threat arising from high
household debt, rise in interest rate and slow growth in wages (abc.net.au, 2018).
Conclusion
The report compares macroeconomic performance of Australia and USA for a chosen
sample period (1995-2015). The average economic growth in Australia exceeds that of USA.
This indicates resilience of Australian economy. Rate of inflation in Australia and USA are
close to each other with both remain around 2 to 3 percent. The average unemployment in
USA are lower than that of Australia. So far as monetary policy is concerned, it is more
expansionary in USA. The fund rate in USA is relatively lower compared to the cash rate of
Australia. Comparison of trade balance reveals that Australia experienced a trade deficit since
2007. The trade deficit in USA is relatively larger than that for Australia.
For both the nations, active macroeconomic policies play a crucial role in ensuring a
steady economic performance. In Australia, government adapt fiscal, monetary and exchange
rate policy to secure a stable economic growth, higher employment and stable price level.
The government of USA adapt fiscal and monetary policy tools to control overall economic
activity. The strong global and domestic economic condition ensures a positive outlook for
the economy.

18MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA

19MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
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