Economic Comparison Between Australia and China and Implication of Civil Engineering

Running head: ECONOMIC COMPARIOSN BETWEEN AUSTRALIA AND CHINA AND
IMPLICATION OF CIVIL ENGINEERING
Economic Comparison between Australia and China and Implication of Civil Engineering
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ECONOMIC COMPARIOSN BETWEEN AUSTRALIA AND CHINA AND
IMPLICATION OF CIVIL ENGINEERING
Table of Contents
Introduction......................................................................................................................................2
GDP growth rate comparison between Australia and China...........................................................2
Policies taken by the countries to increase GDP growth rate..........................................................3
Conclusion and implication of civil engineering.............................................................................6
Reference.........................................................................................................................................8

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ECONOMIC COMPARIOSN BETWEEN AUSTRALIA AND CHINA AND
IMPLICATION OF CIVIL ENGINEERING
Introduction
Australia and China are two large economies in the world. From the perspective of GDP
value China is ahead of Australia but the GDP per capita is higher in Australia. Looking at the
other socio-economic aspects Australia is considered to be a developed economy whereas China
is considered to be an emerging economy. The report compares a macroeconomic factor of both
Australia and China and analyses how different domestic changes and globalization impacted the
concerned factor of both the countries. Furthermore, the report discusses the different measure
staken by the respective countries to impact the factor. The factor that has been selected for
analysis in the report is GDP growth rate. Data for the last 40 years has been collected for the
analysis. The aim of the report is to compare economy of Australia and China and thereby
concluding how civil engineering related industries impact the economy for both the concerned
countries.
GDP growth rate comparison between Australia and China
The GDP growth rate of Australia is currently just above 2% whereas in case of China it
is over 6%. The data that has been retrieved is from 1978 to 2018. The comparison of GDP
growth rate would be done on the basis of the data. From figure 1, it can be seen that China has
recorded a much higher GDP growth rate than Australia continuously in the last 40 years. It is
known from theory of economics of growth that developed economies grow slower than
developing or emerging economies (Karwowski and Stockhammer 2017). Therefore, the
development status of both the countries is one of the reasons for the difference in GDP growth
rate. Apart from domestic policies, international policies has played significant role in improving
economy of the countries. The countries became more economically open and was involved in
international trade, which helped the concerned countries boost their economy significantly. The
China ASEAN FTA (CAFTA) has played major role in improving the international trade of
China. However, the GDP growth rate of Australia has been much more stable than China. The
GDP growth of China started with the economic reform made in the country in 1979 (Chow
2017). However, the impact of the reform started to show from 1981. The economy plunged
during the start of 1990 but after that it revamped its economic reform. The GDP growth of
China occurred majorly due to the contribution from the industry and service sector since both
the sectors combined comprises over 90% of GDP.
Furthermore, the contribution of the industry and the service sector to Australia is the
largest. However, the service sector contributed around 70% of the GDP. The service sector is
increasing in China too but the initial growth rate of the country was due to growth of industrial
sector during 1990s and in the early 2000s. It is evident from the rise in percentage of share of
village industrial output to 46% from 14% of the GDP in the late eighties. This has led to first
industrial revolution in China that started from 1988 and continued till late nineties
(Stloiusfed.org 2020). However, with slowdown in industrial sector the GDP growth rate has
declined for the country. China highly relied on industrial sector for its growth (Wu 2018). For
GDP growth in Australia, mining industry played a crucial role. The country flourished after the
mining boom in the 19th century and again after 2010 due to the second mining boom in
Australia.

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Figure 1: GDP
growth rate comparison between Australia and China
Source: (Created by the Author)
Policies taken by the countries to increase GDP growth rate
China
It is found that the major reason for GDP growth or economic growth in China are its
huge capital investment and fast rise in productivity growth. It can be seen in figure 3 that the
productivity of China was quite fluctuating before 1990 but with advent of industrial revolution,
the productivity growth of the country became comparative stable and remained high for longer
periods of time. Both these factors are complementary to each other and thus caused significant
rise in economic growth for the country (Buera and Shin 2017). These occurred smoothly due to
the economic reforms of the country which allowed the sectors to attract more investment. The
introduction of the Law of Chinese Foreign Equity Joint Ventures has increased the inflow of
foreign direct investments in the country. Due to this, the GDP growth rate gained significant
boost. This pushed the GDP growth rate from around 6% average to as high as 9.4% post
economic reform period (World Economic Forum 2020). In addition to that, China maintained a
high savings rate that supported the economy to invest in several sectors at once (Song, Coupé
and Reed 2019).With high savings rate China became one of the largest global lenders. The
savings rate of China was 35.9% of the GDP in 1989 and in next 5 years, it increases to 41.7% in
1994. Therefore, there was rise of around 6% in savings rate (Data.worldbank.org 2020). With
increased efficiency of work force and equipment used, the productivity of all the sectors in the
country increased. The country improved its strategy of resource allocation and allowed farmers
to move from agricultural sector to industrial sector (Fas.org 2020). With increased amount of
workforce, the industrial sector of the country expanded and contributed to the overall economic
growth. Investment in technology has helped the country significantly, as it is one of the major
reasons of productivity growth. China developed it as one of the prospective center for
technological progress and innovation. Due to its strategies to develop industries especially in the

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manufacturing field and large investment in technological progress has helped the country to
come out of the trap of middle income and reach to the position of upper middle income. China
has always strived to reduce its reliance on high polluting and energy intensive industries and
thus it gradually moved towards technology based industry mainly in electrical and electronics.
These industries have significantly added to the GDP of the country. The technological progress
made by China attracted foreign electronics giant to establish manufacturing units in China
(Wang, Chen and Song 2018). With rise in information technology, the service sector started to
expand in China and it is currently the largest sector in China. In figure 2, the distribution of
different sectors in the GDP of the country is given. The FDI policies after the economic reform
such as foreign investment liberalization has helped the county to huge amount of FDI and figure
4 shows how the advent of first phase of industrialization in China has encouraged the FDI
causing a steep rise in foreign capital inflow in the country. Like, other countries China had also
faced the global financial crisis (GFC). To recover from its adverse effect, the country had
increased government expenditure by 4 trillion Yuan under expansionary fiscal policy, and
furthermore the People’s Bank of China cut the interest under expansionary monetary policy.
Both the policies worked and boosted the economy of China by increasing its consumption and
thereby the aggregate demand (Die-gdi.de 2020).
Figure 2: Share of economic sectors in GDP of China
Source: (Statista 2020)
Figure 3: Labour productivity growth in China

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Source: (Ceicdata.com 2020)
Figure 4: FDI inflow in China
Source: (Press-files.anu.edu.au 2020)
Australia
Unlike China, Australia mostly focused on the areas of mining industry, housing
industry, dairy industry and banking and finance. Australia is one of the largest exporters of
dairy, agricultural and mining products (rba.gov.au. 2020). Australia exported 2.4% of total
agricultural product exports in the world in 2017 (Knoema.com 2020). Australia is the third
largest mining product exporter of the world. In addition to that, Australia exported 36% of its
dairy production in 2017. The total value of dairy exports that year was $3.4 billion. Therefore, it
is clearly observable that the country earns large amount of revenue from its export sector. Total
export value shares 21.8% of the total GDP of the country (Wits.worldbank.org 2020). The free
trade agreements have allowed the country to extend its trading relations with other countries and
thereby it is trade sector improved and contributed greatly to the GDP of the country. Australia
has signed 13 free trade agreements since 1983. All the sectors in the country has contributed to
the GDP growth of Australia. Construction industry is one of the largest industries in Australia
(Paris 2017). Construction industry contribute 9% to the GDP of Australia in 2017 (National
Industry Insights Report 2017). The major contributor of stable economic growth of Australia are
its financial policies that worked much more effectively to develop industrial or service sector.
The policies are expansionary monetary and fiscal policies and financial aid to these sectors.
These policies helped Australia to pull its economy from the global financial crisis (GFC) of
2008. In response to the GFC Reserve Bank of Australia (RBA) cut interest rate by 100 basis
points initially under expansionary monetary policy. On the other hand, the government
increased its expenditure by providing $10.4 billion stimulus under expansionary fiscal policy.
These polices are used to boost the economy from the demand side. These policies directly
boosted the consumption which further pushed the aggregate demand and thus boosted the
economy and maintained stability (Treasury.gov.au 2009). It can be said that the country is

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significantly dependent on its service sector as evident from figure 6. With fall in mining
industry and slowdown in the construction industry country is suffering from economic
slowdown. The slowdown in the construction industry is the recent times can be seen figure
5.The countries dependency on service sector has mostly restricted it from taking any aggressive
and effective decision to boost the economy of the country. The mining industry in the country is
declining due to drying up of mine and hence to revive the mining industry more excavation is
required which is highly expensive (Bakker and Shepherd 2017). However, with effective
economic policies and the country would be able to improve the construction industry and
thereby boost the economy.
Figure 5: Construction Industry Growth
Source: (Tradingeconomics.com 2020)
Figure 6: Share of economic sectors in GDP of Australia

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Source: (Statista 2020)
Conclusion and implication of civil engineering
From the above discussion on the GDP growth of China and Australia, it can be inferred
that both the countries have done greatly to improve their economy. Both the countries have
different types of resources, advantages and disadvantages. Addressing their respective factors
both the countries have played their part to improve the economic condition. During the initial
days, China depended mostly on the manufacturing industry and invested like wise. It has also
invested in technological progress and innovation. Electrical and electronic industries played
crucial role in the development of economy of the country. In addition to that, to enable the
country to support the growth of the industries, it has invested in infrastructure. On the other
hand, Australia reached the development stage much earlier than China, and it has all the
necessities support the economic growth of the country. Further, it depended on the mining
industry, agricultural industry, housing industry and financial industry to have the required
amount of economic growth. Hence, it can be said that both the countries have grown at the
desired level.
Application of civil engineering is mostly done in the field of construction be it
construction of road, bridges or houses. From the above discussion on the GDP growth of both
countries, it is found that for the development the countries dependent on its construction
industry. However, the area of application is different for both the countries. In case of China,
infrastructure plays a crucial role in taking the economy forward. Thus, civil engineering based
construction industry has high prospect. Without improvement in infrastructure, China cannot
move further. Hence, civil engineering is of high value in China. Similarly, Australian
construction industry is of great significance as it is Australia's third largest industry, behind only
mining and finance, producing around 8% of our GDP in value-added terms. According to HIA-
Core Logic Construction 100 Report 2016/17 the construction industry in Australia is a major
driver of economic growth, accounting for 12% of the economy. Every year the top construction
firms in the nation produce billions of dollars in revenue. Victoria-based Probuild was
Australia’s busiest construction company during the 16/17 year, with revenue of $6.115 billion.
This is more than double its total revenue of $2.379 billion in the 15/16 financial year (What
Australia’s Top 5 Construction and Civil Engineering Companies Tell Us About the Economy,
2018). Furthermore, It should be noted that Australia put extra emphasize on the studies of
engineering. Therefore, with proper utilization of the civil engineers the country will be able to
improve the construction industry condition and improve the economic condition of the country.
The construction industry in Australia can be improved by developing better procurement
policies by establishing strong link among all the stakeholders of the supply chain, lowering the
administrative and regulatory burden of the industry, and introducing more technologically
advanced methods in the industry that reduces waste and make the industry more cost effective.
Therefore, conceptualizing policies related to the above matters will improve the condition of the
industry. Hence, it can be said that industries that are related to civil engineering are of great
importance for the GDP growth of a country and it is important to develop those industries
further.

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