Economic Growth, Australia: Trends, Challenges and Policy Response

This article explores the trends, challenges and policy response to economic growth in Australia. It covers the impact of the mining boom, global economic crisis, and youth unemployment on the Australian economy. The decline of the mining boom has left negative challenges in its wake, and the Australian economy needs to overcome the fall in commodity prices to boost its economic performance index. The article also discusses the need for the Australian taxation systems to be reformed to provide more investment incentives for local entrepreneurs and foreign investments.

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Principles of Economics
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ECONOMIC GROWTH RATE OF AUSTRALIA (2008-2018)
Predominantly, the Australian Gross domestic product has declined in the recent years. However, prior to the
decline in economic performance, the Australian economy experienced steady growth. However due to global
factors such as fall in commodity prices and the global financial crisis are partly responsible for the variance in the
Australian economy. Particularly, the Australian gross domestic product dropped between the year 2008 and 2009,
from $1.55 trillion to 927.168 million respectively .However, the economy grew from the year 2009 to the year
2010 illustrated by$ 927.168 million to $1.143 trillion. There was steady economic growth between 2010 and
2013.Specifically, as at the year 2011, the Australian gross domestic product stood at 1.391 trillion and 1.538 trillion
in 2012 and 1.567 trillion in the year 2013 respectively. However, Australia’s economic growth has been declining
since the year 2013.In 2014, the Australian economic value was 1.46 trillion,1.345 trillion in the year 2015 and
USD %1.205 trillion in the year 2016(World bank Group 2018).There was a slight growth in the Australian
economy between July 2016 and January 2017 by 0.1% from 0.8 to 0.9 % respectively(Trading
Economics ,2018).Also, between the months of January and July 2017, the Australian gross domestic product
decreased from 0.9% to 0.8% respectively.
In addition, Since January, through July, the Australian economic growth rate have been declining due to
various internal and global reasons. As illustrated in the below figure, economic growth of the Australian economy
decreased from 0.9 percent in the month of January to 0.8 percent in the month of July and 0.4% in the month of
January 2018.This figures go to show there is a decline in the growth of the Australian gross domestic product. The
Australian economy in the year 2018 is yet to experience substantial growth due to the employment, low wage rates,
low commodity prices and the decline of the mining industry which is experiencing low investment rates and low
demand. All these factors have contributed to the decline of the Australian economic performance .However,
economic forecasting are positive on the potential of economic growth.

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(Trading Economics, 2018)(Fig.1).
REASONS FOR THE ECONOMIC GROWTH BETWEEN 2008 -18
Immensely, the growth of the Chinese economy has contributed to the growth and expansion of the
Australian economy. Primarily, China massive demand for raw materials has been fulfilled by the Australia’s
availability of natural resources (Charlton 2015).The Chinese economy is one of Australia’s top trading partners.
Due to the fast growing nature of the Chinese economy, the demand for raw materials is being supplied for by
Australia thus increased exportation volume of raw materials to the Chinese economy resulting into increased
revenue for the Australian economy.Predominantly,Australian major exports to China are Iron and core which are
key to the Chinese economy. There are assertions as to the fast growing economic dominance of the Chinese
economy hanging over the United States of America economic prowess. The fact that the Australian nation is
endowed with abundance of natural resources has made the demand for its raw materials higher thus translating into
huge exportation revenue to China and other Asian economies. Also, due to the large population and emerging
dominance of the Chinese global in international trade, Australia gets to enjoy a wider demand and market for its
natural resources.
MINING BOOM
Undeniably, the positive effects of the mining boom on the Australian economy cannot be overlooked. The
mining boom is responsible for raising the Australian wage rate and reducing the unemployment percentage in the
Australian economy (Downes, Hanslow & Tulip, 2014).Also, the mining fortune is responsible for the appreciation
of the Australian dollar. The foreign exchange rate of the Australian dollar went up thereby leading to increased
revenue due to the growth in the Australian mining industry. In addition, there was an upsurge in the employment

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opportunities due to the increased investment in the mining sector by domestic and foreign investors. The increased
investment opportunities lead to increased economic living standards among the employed Australian population.
The mining surge effects included the appreciation of the Australian dollar which meant higher revenue for tis
exports and foreign exchange transactions. Also, more employment opportunities were created in the sector and
other supporting industries. The high commodity prices boosted the housing and construction sector performance
which lead to a significant growth in the Australian gross domestic product. The effects of the boom on the
Australian economy were mainly positive impacts as compared to negative impacts.
GLOBAL ECONOMIC CRISIS
Notably, the global financial Crisis effects on the Australian economy were less adverse as contrasted with
other economies (ABS, 2010).Primarily, the Australian financial sector is considered resilient due to the fact that
there has been no need for the Australian banks to require financial assistance from its government. The financial
performance of Australian financial institutions has been relatively profitable since the crisis in 2009 as contrasted to
other European nations. Australian banking institutions have enjoyed fixed interest rates despite the global economic
crisis (Debelle,2009). Moreover, Australian banks share pricing reduced as a consequence of the global economic
crisis (Fig 2).However, there was a reduction in the equity pricing (Fig 3).The reduction in equity prices causes a
10% income deduction in Australian household. In addition, the Australian dollar depreciated by 30 % as a
consequence of the global crisis.
Fig.2 (Debelle, 2009)

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Fig 3 (Debelle, 2009)
POLICY RESPONSE
Following the global economic crisis it was necessary that the Australian government implement various
fiscal and monetary policies to grow its economy. Noteworthy, the Australian Reserve bank did reduce the interest
rate by a hundred basis points (Kennedy, 2009).In addition, the Australian government guaranteed the deposits in its
banking system at a fee which was the first implementation of such a policy in the Australian history. Also, a
financial injection of USD10.4 billion was injected into the financial sector as a stimulus package to support the
housing sector, pensioners, low income households and training facilities in an effort to stabilize the economy and
the financial sector in Australia. There was implemented discretionary fiscal policies to ensure financial stability in
the country. Additional stimulus package of USD42 billion (Nation building and jobs plan) was introduced to boost
the Australian economic performance. Through the two stimulus packages, there was increased economic activity in
Australia which lead to a substantive reduction in the rates of unemployment (Chhabra, 2009).The fiscal policy is
responsible for stimulating economic activity in Australia following the financial crisis that crippled the global
economy. The fact that the Australian economy wasn’t adversely affected by the global economic crisis is because
of its strong financial structure.

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POST MINING BOOM ERA IN AUSTRALIA
Notably, the decline of the mining boom, has left negative challenges in its wake. The Australian economic
growth rate is likely to slow down as due to the slow mining activity. In addition, there is reduced revenue from
exportation of products to the Chinese economy due to the dwindling demand for minerals. Currently, mining
companies are facing harsh economic times due to reduced investment and low global commodity prices which has
led to massive loss of employment in the industry (Yoemans,2016).The Australian economic performance after the
decline of the mining activity has not been adversely affected(Kent, 2016).There has been reduced investment in the
mining industry which has slightly weakened the growth of the nominal gross domestic product.in addition, there
has been a slight decrease in the labor participation rates in the Australian economy(Fig 4).However, the Victorian
state economic activity has decreased by 0.4%(Uren ,2016).In addition, there is a decline in the employment gap
according to the Australian Bureau Statistics. Despite the declined economic growth in Victoria, Tasmania‘s
economic performance has grown by 1.1. %.Relatively, the Australian trade terms and commodity prices have
declined after the mining boom (Fig 5.).
Primarily, after the boom in the mining sector, various Australian sectors are improving. Specifically, the
housing sectors performance is on the rise due to the increased foreign level of investment in the construction
industry and the previously high commodity prices during the boom (Bramble, 2015).Alongside the rising housing
and construction sectors of the Australian economy, employment rates are slightly improving. After the boom, other
Australian industries such as agriculture, mining and the service industries have increased their economic
contribution to the Australian economy. However, the economic value of the mining industry to the Australian gross
domestic product has greatly decreased. There was increased household income during the mining boom due to the
increased commodity prices and increased employment opportunities in the mining industry. In addition, there was
increased government revenue from taxation of mining proceeds due to the increased rate of foreign and local
investment into the sector and other supporting sectors in the Australian economy.

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(Kent, 2016)
Fig 5 (Bramble 2015)
CHALLENGES FACING ECONOMIC GROWTH IN AUSTRALIA
Notably, there is a youth unemployment challenge facing the Australian economic rate(Carvalho,2015).It
is important that there are low unemployment rates in the country to effectively contribute to the economic growth
of the country. The fact that most of the Australian youths are unemployed means that the economic potential of the
Australian economy is being underutilized. High unemployment rates trigger more government expenditure in
welfare programs which is expensive and burdensome for tax payers. It is imperative that the Australian economy

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overcomes the fall in commodity prices in order to boost its economic performance index (Fraser, 2015).It is
imperative that the value of the Australian dollar appreciated due to its direct impact on the prices for commodities
and services. Typically, low prices equal low revenue for the Australian economy hence the need for the Australian
currency to grow stronger. In addition, there is need for the Australian economy to experience dollar appreciation.
The depreciation of the dollar slows down the rate of economic growth in the long term. Also it is necessary that the
Australian wage growth levels improve to support employment which in terms will lead to increased labor
participation hence increase in revenue and economic livelihoods.
Regarding improving its business environment, it is vital that the Australian taxation systems be reformed
as so to provide more investment incentives for local entrepreneurs and foreign investments. Chances look slimmer
for wage growth in Australia (Clarke, 2018).Through the growth of the wage and salaries rackets, more persons are
likely to seek employment thud boosting the economic performance of the Australian economy and companies.
There is need for creation of more full time employment opportunities so as to increase the level of production
which will in turn lead to revenue increase. Also the fact that most of Australia’s working population is the aging
population raises the labor skill set gap which might slow down the rate of economic growth in Australia. In
addition, the Australian government ought to address climatic changes and their impact on agriculture production
and eco-system conservation (Treasury,2010).Despite the climatic challenges being a global concern issue, it is
important that the Australian government address this concern on a domestic level so as to create real impact on its
agricultural production which impacts on its exportation revenue. Owing to the dependable nature of agricultural
sector on climatic conditions, it is important that the Australian agricultural farming practices be adaptable and
mitigate the harsh weather changes.
In the event that the Australian economy is able to sustain a stronger dollar, the value of its commodities
will increase thereby boosting the revenue for the economy. However, due to the weak Australian dollar, the
economic value of Australian exports are valued lowly thus reduced revenue. In the event that more employment
opportunities are created, there will be increased economic productivity and resource utilization which will boost the
economic growth rate of the Australian economy. Further, the employment of a more youthful population will fill
the aging employment which causes skill set shortages every so often. The Australian economy needs to overcome
the climatic challenges that have curtailed maximum agricultural production due to the harsh weather conditions. All

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in all, the Australian economy performance is likely to pick up a steady growth pace in the event that the challenges
are properly addressed sooner rather than later.

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