Drought in Australia: Impact on Macroeconomic Variables and Agriculture
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Added on  2023/04/24
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This article discusses the impact of drought in Australia on macroeconomic variables such as GDP, inflation, and unemployment, as well as on the agricultural sector. It also explores the different types of drought and their effects on the ecosystem.
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Running head: ECONOMICS Economics Name of the student Name of the university Author note
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1 ECONOMICS DROUGHT IN AUSTRALIA Introduction The natural disaster which generally takes place as a result of below average precipitation on any kind of region which also resulted in the shortage of the water supply is termed as drought.Farmers have known to face a lot of troubles in various places of Queensland and New South Wales. Huge areas of Australia have been suffering from droughts which took place for several years with dry conditions which will be comprising of both federal and state states. Thekeymacroeconomicvariablesarethegrossdomesticproduct,rateof unemployment, inflation and rate of interest. The macroeconomic equilibrium is a condition in the economy where the quantity of the aggregate demand will be equal to the quantity of the aggregate supply. Drought in most of the cases result to supply shock which results to sudden decrease in the supply of commodities with the rise in price (Krugman, Obstfeld, & Melitz, 2015). During the short run, the negative supply shock will be shifting the aggregate supply curve to the left.
2 P2 P1 Q2Q1 AS1 AS2 ECONOMICS Analysis Figure1Negative supply shock as a result of drought Thee supply curve shifts left as a result of the supply shock were the curve AS1 to AS2. For this reason the price goes up to from P1 to P2. The quantity supplied also becomes less an moves from Q1 to Q2. The drought had been comparatively drier compared to the other years.According to the research the areas which are now to experience severe impacts of drought are especially on the regions of South Australia, New South Wales as well as North West Victoria. The effect of rain over the past few years in the western parts of Australia. In the previous year the dry conditions are known to spread in most of the parts of Australia. However, rain in most parts of Australia had made the conditions quite bearable for few months (Recent Australian droughts may be the worst in 800 years.,2019).Many parts of Albany in the south know to remain dry. After the drought of 1902, Australia had known to suffer severe drought.One of the reason behind this kind of dry drought is because of the absence of rain. Many parts of Illawarra and Albany had been suffering from the dry drought
3 ECONOMICS over past few months. The rain in Newcastle although did not bring any moisture no effect on the parts of Australia.The winter also had been quite severe and harsh.Over the past fifty years there had been decline in the rainfall. Some of the places in the south east are known to have experienced some of the driest months. One of the reason of the dry weather is the high pressure which existed on the eastern Australia. When there is presence of drought, the agricultural sector is known to experience a huge loss in the economy (Krugman, Obstfeld & Melitz, 2015).As the agricultural sector gets highly affected during drought the supply of the agricultural commodities declines because of the rise in the barren lands as a result of droughts. The supply curve is known to shift left as a result of decrease in the supply of the agricultural products and therefore the quantity supplied also decreases. This results to increase in the price. The point of equilibrium also changes from e to e1. For this reason the agricultural goods will be becoming quite expensive in nature. Drought can cost both people and money.Sometimes farmers will be losing huge amount of money when droughts are known to destroy crops. When the supply of water will be sufficient, farmers need to spend a lot money for water irrigation. Drought in Australia known to result in financial losses, environmental damage, dying of crops, declining of water quality, huge amount of dust storms and personal deprivations. Some of the droughts in Australia are long lived while some of them are short and intense in nature. However, all types drought are known to cause huge amount of damage to the ecosystem. In some cases thee east coast of Australia might be in drought while the west coast experience huge amount of rainfall.The agricultural ecosystem, during drought also known to suffer huge amount of damage. There will be huge loss in the livestock where the growth of crops are known to be disrupted (Recent Australian droughtsmaybetheworstin800years.,2019).Thedecliningoftheagricultural productivity affects both the national and rural economy.The impact of drought are felt for many years.
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4 ECONOMICS Droughts are known of degrade water quality and land and also affects the way the land is used. 2018 had been one of the driest years in Australia with o rain.In some of the parts of southern Australia, drought of the 21stcentury had been the worst in the past hundred year. Droughts in Australia are also expected to become more prevalent in future. There are four maintypesof drought thataremeteorological,agricultural,socioeconomicand hydrological in nature. Australia is also known to become one of the second driest continent in the world.One of the reason of the dryness is Australia is under the subtropical high pressure belt is known to push the air down which will be preventing the lift required for rain (Recent Australian droughts may be the worst in 800 years.2019). As a result of drought since drought is termed as the supply shock, there had been decrease in the gross domestic product of Australia, there had been rise in the food prices which lead to inflation along with huge rate of unemployment in the economy. Conclusion The government of Australia in the year 2018, signed a new National Drought Agreement which sets out a joint approach for drought preparedness, recovery and responses. The national Drought policy aims to encourage the primary producers of the rural Australia for adopting various approaches to manage climate variability. It also aims to facilitate for early recovery of agricultural and rural industries which are also known to be consistent with long term sustainable levels.
5 ECONOMICS Reference list Krugman, P., Obstfeld, M., & Melitz, M. (2015).International Trade: Theory and Policy: Global Edition. Pearson Higher Ed. RecentAustraliandroughtsmaybetheworstin800years.(2019).Retrievedfrom https://theconversation.com/recent-australian-droughts-may-be-the-worst-in-800- years-94292