Economics Assignment: Economic Performance of Australia

Added on - 28 May 2020

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Running Head:ECONOMIC PERFORMANCE OF AUSTRALIAEconomic Performance of AustraliaName of the StudentName of the UniversityAuthor note
ECONOMIC PERFORMANCE OF AUSTRALIA1Executive SummaryThe Australian economy is one of the most stable and developed nation in the world.The country has anintensive agriculture, developed manufacturing and industrial sector and a progressive service sector.The economic sectors along with highly supportive government helps the nation to achieve and retain astable growth over time.In this paper, performance of Australia is examined using scale of GDP growth,interest rate, inflation, unemployment and trade performance.The trend of the chosen indicators isanalyzed for a long time framework(from 1990-2015).Special attention is given on monetary policy tool.Drawing references from current status of the economy the paper finally attempts to make a futureoutlook for Australia.
ECONOMIC PERFORMANCE OF AUSTRALIA2Table of ContentsIntroduction..................................................................................................................................................3Performance Analysis..................................................................................................................................3Evaluation of economic relation between GDP and other important variables.........................................3Relationship between inflation and unemployment..................................................................................9Tight Monetary Policy in Australia..........................................................................................................10Economic Outlook..................................................................................................................................11Conclusion.................................................................................................................................................11References................................................................................................................................................12Appendix....................................................................................................................................................14
ECONOMIC PERFORMANCE OF AUSTRALIA3IntroductionAustralia is well known for its mixed economic structure and highly developed nature.It is one ofwealthier nations of world.Both in terms of nominal GDP and PPP-adjusted GDP Australia is ahead ofseveral nations.When compared with per capita GDP, Australia ranks ahead of Canada, Germany, UKand France.Agriculture in Australia constitutes 3%of GDP.The large stock of natural resourcesespecially minerals helps to build a strong mining sector.Despite having several industries, thecontribution of manufacturing in economic growth has declined in recent years.This gap is filled withgrowth of service sectors especially financial services.Four largest banks in Australia are listed among 50safest banks of world.Australia has a comparative advantage over a range of goods and servicesincluding products with high technology like scientific and medical equipment, processed food and highquality wine.The service exports of Australia include tourism and education, financial and professionalservices.Along with domestic sectors, trade has made significant contribution to economic growth ofAustralia.In the current research paper, performance trend of Australia isevaluate using some of the basicindicators.Economic growth is captured from the movement of real GDP which in turn affectsemployment and price level.Cash rate controlled by monetary authority influences investment andgrowth.The performance of external sector depends on the trend exchange rate and balance of trade.Performance AnalysisEvaluation of economic relation between GDP and other important variablesGross Domestic product of a nation is measure of the value of goods and services of a nation inmoney terms.All the produced goods and services are evaluated in terms of their market price.Now,there are two approaches for computing GDP.One is to use market price for the accounting year andother is to consider prices of a fixed based year.The former is called nominal GDP while the latter isknown as real GDP(Baumol and Blinder, 2016).Real GDP being adjusted for inflation is a more accuratemeasure of economic output and hence growth.For this, while evaluating economic growth of Australiareal GDP is used.1990199520002005201020152020-1.000.001.002.003.004.005.006.00Real GDP growth rateYearGrowthrate(%)Figure 1:Trend in real GDP(Data source:data.worldbank.org, 2018)The figure above shows trend in real GDP for the chosen sample period.Mean growth rate inAustralia for the period is 3.1%.The growth rate has constituted a fluctuating trend flowing crisis indomestic and international economies.A steep fall in the growth rate is experienced during 1991.Thegrowth becomes negative.The tight monetary policy undertaken by Reserve bank of Australia is onemajor contributor of negative economic growth during this time.However, the economy graduallyrecovered and attained a maximum growth rate of 5.1%in 1999.Beyond 1999, the growth rate thoughfluctuates and undergone with some upturn and downturn but remain positive and around its average
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