Low Real Wage in Australia

Running head: ECONOMICS
Economics
Name of the Student
Name of the University
Author Note

1LOW REAL WAGE IN AUSTRALIA
Table of Contents
Answer 1....................................................................................................................................2
Introduction............................................................................................................................2
Analysis..................................................................................................................................2
Conclusion..............................................................................................................................6
Answer 2....................................................................................................................................6
Introduction............................................................................................................................6
Analysis..................................................................................................................................6
Conclusion............................................................................................................................11
References................................................................................................................................12

2LOW REAL WAGE IN AUSTRALIA
Answer 1
Introduction
Gross domestic product of a nation is an annual estimate of produced goods and
services within the nation. GDP can be computed using expenditure or income or production
approach. Among these expenditure approach is the most commonly used method for GDP
estimation. Four components of expenditure approach are consumption spending, gross
investment expenditure, government spending and net export. GDP here is estimated as a
sum of four components. This section discusses trend in real capita estimate of different
expenditure components of GDP of Australia from 1987/88 to 2017/18 and provides
economic explanation for the observed pattern in the series.
Analysis
Consumption
Personal consumption expenditure captures monetary values of goods and services
that household and non-profit institutions purchase in an accounting year. Consumption on
different goods and services are classified into durables, non-durables, semi-durables and
services.
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
20000.00
25000.00
30000.00
35000.00
40000.00
45000.00
Real per capita consumption
Year
Consumption

3LOW REAL WAGE IN AUSTRALIA
Figure 1: Real per capita consumption trend in Australia
The figure above represents trend in per capita real consumption for Australian
household for a sample period ranged from 1987 to 2018. The series of real per capita
consumption shows an increasing trend from beginning of the sample period. Per capita
consumption increased continuously from 1987 to 2007 (abs.gov.au, 2019). Consumption
declined slightly during 2008 and 2009. The decline in per capita consumption was the result
of global recession in 2008. Following economic recovery since 2010, income increased
resulting in an increase in consumption expenditure (Deo, Spong & Varua, 2017). In
Australia, consumption is the biggest contributor of gross domestic product. Rate of increases
in consumption expenditure exceeds the rate of increase in income causing per capita
consumption to increase continuously.
Investment
Investment refers to the addition to the stock of physical capital during a period. The
gross private domestic investment component of GDP measures the aggregate value of
addition to stock of capital (Heijdra, 2017). Different types of investment in this regard
include business fixed investment, inventory investment, residential construction investment
and public investment.
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
0.00
5000.00
10000.00
15000.00
20000.00
25000.00
Real per capita investment
Year
Investment