Economics Assignment: GDP Growth
Added on 2020-05-28
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Running head: MASTER OF PROFESSIONAL ACCOUNTINGMaster of professional accountingName o the studentName of the UniversityAuthor note
1MASTER OF PROFESSIONAL ACCOUNTINGExecutive summary:This report is economic interpretation of Real GDP growth of the Australia with the five keyeconomic indicators that influence the economy. Report has used data for the year of 1990 to2015, in order to analyze the economic performance of the country. Besides analyzing the keyindicators of the economy, the report has analyzed relationship between the unemployment rateand inflation of the country. Along with these, it provides probable economic explanations thataffect the monetary policy of the country and comments on the same. In Addition to this, thereport has evaluated the monetary policy of the country during the period of 1990 to 2015 andportrays which decade had the tighter monetary policy. To conclude the report has mentionedeconomic forecast of the country and has provided a summarized overview of the report.
2MASTER OF PROFESSIONAL ACCOUNTINGTable of ContentsIntroduction:....................................................................................................................................3Relationship between Real GDP growth and Interest Rate:............................................................3Relationship between Real GDP growth and Unemployment Rate:...............................................5Relationship between Real GDP growth and Inflation Rate:..........................................................7Relationship between Real GDP growth and Exchange Rate:........................................................9Relationship between Real GDP growth and Net Export:.............................................................11Relationship between Inflation and Unemployment rate:.............................................................13Monetary Policy evaluation of Australia for 1990 to 2015:..........................................................15Macroeconomic outlook for Australia’s economy for next 2 years:.............................................15Conclusion:....................................................................................................................................16Reference:......................................................................................................................................17
3MASTER OF PROFESSIONAL ACCOUNTINGIntroduction:Australia is one of the largest developed nations with Gross Domestic Product (GDP) of1.2 trillion US$. Owing to its hugeness, it has mixed economy structure with a strong regulatoryframework and governmental conditionof public goods (Barraket et al., 2017). Growth ofAustralian GDP shows a stable structure of the economy making it the second largest nationaccording to the adult disposable income (Markovic et al., 2016). This report is meant to analyzethe Real GDP growth of the country with the five key economic indicators that influence theeconomy. Moreover, it will analyze the relationship between the unemployment rate andinflation of the country and provide probable economic explanations that affect the fiscal andmonetary policy of the country. In Addition to this, the report will evaluate the monetary policyof the country during the period of 1990 to 2015 and portray which decade had the tightermonetary policy. To conclude, the report will analyze the macroeconomic outlook of theAustralian economy for the next 2 years and it will provide a summarized overview of thenation. Relationship between Real GDP growth and Interest Rate:According to the economic theories, there is a positive relation between the Real GDPgrowth rate and interest rate (Lee & Werner, 2018). With rise in GDP, there will be a rise ininterest and the reverse is same also feasible. Considering the Australian economic framework, itcan be seen that the economy has grown over the years to become a sustainable economy and ithas correlation of 0.997693 validates the case. Australia GDPgrowthInterestrateAustralia GDP growth1
4MASTER OF PROFESSIONAL ACCOUNTINGInterest rate0.9976931Table 1: Australian Real GDP Growth v/s Interest RateSource: (Created by Author)Table 2 states that the mean interest rate is 5.54 during the period of 1990 to 2015.During the same period, maximum interest of the Australian economy is as high as 13.4 and theminimum rate are 2.11 annually. The descriptive statistics of Australian interest rate highlightthat, the economy has grown over the year and with rise in GDP, interest fell gradually. Interest rateMean5.54Standard Error0.461865Median5.2Mode#N/AStandard Deviation2.355058Sample Variance5.546296Kurtosis4.514549Skewness1.69695Range11.29Minimum2.11Maximum13.4Sum144.04Count26Table 2: Australian Interest Rate Descriptive StatisticsSource: (Created by Author)Figure 1 portrays the GDP growth rate of Australia with interest rate. According to thediagram, it can be seen that as the economy has grown, there was a rise in interest rate and withdecrease in GDP it has decreased too, which satisfies the common relation with the interest rateand GDP growth.
5MASTER OF PROFESSIONAL ACCOUNTING-20246810121416Australian Real GDP Growth v/s Interest RateAustralia GDP growthInterest rateFigure 1: Australian Real GDP Growth v/s Interest RateSource: (Created by Author)Figure 1 highlights, there were various shocks in the interest rate during the 1990 and2015. Highest change in the interest rate can be seen in 2008, during the Global Financial Crisis.In order to save the market from breakdown, government took expansionary monetary policy andit provided a drop in interest rate (Gali, 2015). Relationship between Real GDP growth and Unemployment Rate:According to the Okun’s Law, there is a positive relationship between GDP and theemployment level (Ball, Jalles & Loungani, 2015). GDP is the total goods and services producedby an economy in a financial year and employment is one of the main factors that influence theGDP (Agenor & Montiel, 2015). With rise in GDP, there is a decrease in unemployment and it isestimated that there is a 1% decrease in employment due to 2% rise in GDP growth (Patton,2018). However, in case of Australian economy, there is a positive relation between theAustralian economy and GDP growth rate. This has been caused due to subsequent wage riseover the 1990 to 2015 and rise in total labours in the economy.
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