Economics for Management: Current State and Six-Month Forecast for Australia

This paper provides a comprehensive analysis of the current economic stand of Australia, including GDP, inflation rate, unemployment rate, population growth, balance of trade, and foreign exchange rate. It also discusses the key variables that are likely to change in the next six months, including the central bank cash rate. The paper concludes with recommendations for sustained economic growth and development.

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Economics for Management
By (Name)
Course
Instructor’s Name
Institutional Affiliation
The City and State
The Date

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Executive summary
The main focus of this paper is to provide a comprehensive analysis and overview of the
current economic stand of Australia. The paper will also discuss the key variables that are likely
to change in the next six-month including the central bank cash rate. Australia contrary to the last
two decades, its overall growth levels in terms of inflation, GDP, population pressure and
inflation rate have been unstable. Therefore such changes in one way or the other may have an
impact on the overall economic performance both in the short and long run period.

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Table of Contents
Introduction ....................................................................................................................................4
Current State of Australian economy .............................................................................................4
GDP of Australia ............................................................................................................................5
Inflation Rate ..................................................................................................................................6
Unemployment Rate........................................................................................................................7
Population Growth ..........................................................................................................................8
Balance of trade .............................................................................................................................9
Foreign exchange rate....................................................................................................................10
Six month forecast for Australian economy .................................................................................11
Conclusion ....................................................................................................................................12
References ....................................................................................................................................14

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Introduction
In the past two decades, the economy of Australia has been experiencing continuous
growth, very low public debt, contained inflation, stable financial system and low levels of
unemployment. However, at the same time it faces a number of constraints especially the
unpredictability of global prices for important export items (Adam.2012). With the increase in
the level of demand of energy and resources specifically by china, the overall prices of goods
have been hugely affected. The services sector accounts for over seventy percent of the Australia
growth Domestic product (GDP) making it the largest. It also provides seventy five percent of
the jobs. The Australia banking system still remains stronger and stable since it was not impacted
by the financial crisis (Shintani e t al 2013). It should be noted that Australia has been one of the
beneficiaries of the recent year’s trade dramatic surge; however the fall in global commodity
prices has in one way or the other reversed the trend (Bekaert e t al, 2013).
The country is also known for its high levels of food, energy and natural resource exports
(Alex 2017). Moreover, the diverse and abundant natural resources present in the economy have
been one of the attractors of and promoters foreign capital inform of investments. It is predicted
that the US$40 billion Gorgon Liquid Natural Gas Project and other investment series will
obviously encourage the resource sector expansion (Clogg, 2016). Australia is a free or open
economy with little or no restriction on services and goods from other economies (Alex 2017).
This has stimulated the levels of growth, flexibility and productivity. Further, Australia as a
country has a strong influence in the G20, WTO and APEC (Alex. 2017). It also has a number of
free trade agreements with various countries such as china, New Zealand, Singapore, Korean
republic, Malaysia, china, US, Thailand and others. Therefore, in this report focus shall be put on

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the examination of the Australian current economic performance. This will base on a various
sources of data, economic variables and the economic growth trends (Ian 2016). In addition, the
impact of the current economic stand visa-vi future growth will also be discussed. Lastly, the
paper shall also present the next six month economic forecast of Australia (Bekaert e t al, 2013).
Current status of the Australian economy
Early this year, there was an acceleration of the overall Australian economic growth
levels mainly brought about by numerous contributors from the various sects of the economy. In
the first quarter, the economy of Australia performed beyond expectations registering a one
percent growth. This led to annual rise in the growth Domestic product by 3.1 percent. As per the
data from the Australian Bureau of statistics the growth in the March quarter was facilitated by
commodity exports (Adam 2012). Half of the growth in the Gross Domestic product was due to
rise in the level of exports.
The mining sector overall output increased by over 2.9% (Adam 2012). This was due to
increase in LNG production, coal and iron ore. Further, in the March quarter there was an
increase in the levels of the corporate profits to around 6%. The main rationale behind the
increase in the corporate profits was due to rise in the level of mining exports. This has forced
businesses to raise their overall level of equipment and machinery investment. There was also an
overall 1.6 percent increase in the level of Government Consumption ( McGaughey 2018).
The overall performance of the economy of Australia has in the past two decades
registered tremendous growth levels in import, export, employment and gross Domestic product.
Further, in the last twenty five years the economy has not been impacted by a recession (E

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McGaughey 2018). The Australian economy is an open economy that trades with other
countries. The overall freedom score of the Australian economy is currently at the level of 80.9
percent. The above standing made the Australian economy freest in for as the index of 2018 is
concerned (Alex 2017). However, the overall index has declined by a point of 0.1. Government
integrity had higher scores and on the sad note declines in property rights and labor freedom
were offset by Government spending indicators. In the Asia pacific region, Australia is currently
in the fourth place with high levels of score above the world and regional averages (Clogg 2016).
The GDP growth rate of Australia
In the March quarter of 2018, there was a one percent advance in the Australian
economy. This was slightly above the 0.9 % market consensus expansion. This was the highest
growth level attained since the 2017 second quarter.
The growth level was mainly facilitated by a rebound in exports. There was a 3.1 growth
in the economy since the year started up to the first quarter (Bekaert e t al 2013). There was a 3.1
percent growth in the economy after in in the prior quarter registering a 2.4 percent expansion.
This was also one of the rapid increases in the level of growth since the second quarter of 2016.
The average level of the Gross domestic product has an average of 0.86% from 1959-2018.The
lower record score of Gross domestic product in the second quarter was registered in 1974 at -2
percent and the highest in 1976 at 4.40 percent (Bekaert e t al 2013).
Table showing the GDP growth rate of Australia (Trading economics.com 2018)

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Australia levels of inflation
The overall levels of consumer price inflation as per the 2018 june quarter stood at 2.1
higher than the 1.9 level registered in the last periods. This is ranked as one of the highest since
the 2017 quarter. Transport costs were the main contributors. Consumer prices rose up to 0.4
percent on the quarterly basis. From the period of 1951- 2018, the levels of inflation were at an
average of 5.02 percent (Shintani e t al, 2013).
Figure 2 showing the inflation rate of Australia

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As clearly indicated in the figure above, the overall levels of inflation in Australia are
unfavourable and thus have a number of consequences on the overall level of economic
performance (Eryk and James 2017).
Un employment rate
As per July 2018 the overall level of seasonally adjusted unemployment rate was at 5.3
percent. Registering a 0.1 decrease from the previous month. This was a below a 5.4 percent
market consensus. The 5.3 level of unemployment was regarded as the least level since 2012
November. The total number of unemployed individuals fell by 5700 and the economy lost a
total of 3900 jobs. However, the overall level of unemployment in the country of Australia from
the year 1978- 2018 stands at 6.87 percent. A record low of unemployment levels was attained in
month of February 2008 and the highest level was in December 1992 and stood at 11.20 percent
(Adam 2012).
Figure 3 showing the level of unemployment in Australia (Trading economics.com 2018)

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Population growth in Australia
As per 2018 the overall population of Australia stands at (24.77 million) making it one of
the largest countries is the world. The overall population density is 7 per square mile or three
people per square kilometre and thus one of the overpopulated nations globally. The coast is the
main area in Australia associated with high levels of population growth especially in the areas of
Melbourne and Sydney. Most of the people in Australia reside in territory capital cities and
states. This accounts for over 67 percent (Alshahrani e t al 2014). The main cause of increase in
population growth in Australia has been the immigrants accounting for over sixty percent and the
natural increase was 38 percent. Most immigrants that come to Australia usually originate from
south Africa, china, India, Britain and Philippines (Alshahrani e t al 2014).
Figure five shows Australian population growth (Trading economics.com 2018)

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Australian balance of trade
There was a 158 percent widening of the overall Australian trade surplus. This was at a
level of AUD 1.87 registering a slight increase from the original AUD 0.73 billion. The above
increase suppressed the market expectations that stood at AUD 0.9 billion. Thus showing an
improvement. This was the largest surplus registered since last year may. Generally the level of
imports declined and exports increased. Important to note is that from 1971-2018 the Australian

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balance of trade stood at an average of -535.43 million. The lowest was in April 2015 standing at
-4210 and the highest was 4537 million in 2016 December.
Figure six shows Australian balance of trade (Trading economics.com 2018)
Australian foreign exchange rate
As per Monday September the AUD USD rose to 0.7213 (0.46 percent 0.46 percent).
This was higher when compared to 0.7180 in the previous one. A record low of Australian dollar
was attained in the year 2001 at a rate of 0.48 and the highest was attained in the year 2011 July
at a rate of 1.10.
Figure seven showing Australian foreign exchange rate (Trading economics.com 2018)

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Six month economic forecast
In the next six month the Australian economy is expecting to be growing at a rate of 3
percent meaning that higher growth levels are expected . Exports will continue to increase and
the level of business investment will also pickup. The growth will be supported by investment in
public infrastructure. Inflation and private consumption will be sustained by rising household
incomes and a relatively stronger labour market. There will be a gradual rise in wages (Adam
2012).
By the end of the year, the central bank will have tightened the monitory policy or
increase the cash rate due to the expected rise in prices and wages. The strict monetary policy

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will be aimed at reducing the overall levels of purchasing power and at the same time protect the
most vulnerable consumers and also encourage economic activity (Alshahrani e t al 2014).
Conclusion
Conclusively, the overall economic variables are stable except in some few cases where
stronger improvement is needed for purposes of attaining the country’s economic objectives.
From the above analysis it is clear that Australia has been experiencing a tremendous growth rate
for the past decade. It is also listed among the top growing economies. However, it still faces
serious issues in terms of population growth levels. The population growth rate in Australia is
one of the fastest growing in the whole world. It has been created by the ever increasing influx
of immigrants. This creates a lot of pressure on the existing economic infrastructure and other
services. Therefore there is need to streamline population control mechanisms for purposes of
encouraging sustained economic growth and development.
Further the monetary policy should also be tightened to curb cases of inflation emanating
from rise in incomes and wages. It should be noted that inflation has various consequences on
the economy both in the short and long run period. Therefore, it is important to be effectively
managed. Lastly, more investments should be undertaken in productive ventures in order to
create more employment opportunities, raise the growth domestic product and at the same time
improve the balance of payments performance in the short and long run period.

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References
Alshahrani, M.S.A. and Alsadiq, M.A.J., 2014. Economic growth and government
spending in Saudi Arabia: An empirical investigation. International Monetary Fund.
Bekaert, G., Hoerova, M. and Duca, M.L. 2013. Risk, uncertainty and monetary policy.
Journal of Monetary Economics, 60(7), pp.771-788.
Clogg, C.C., 2016. Measuring underemployment: Demographic indicators for the United
States. Academic Press. Retrieved from https://content.iospress.com/articles/journal-of-
economic-and-social-measurement/jem426
Creighton, Adam.2012. "Reserve Bank governor says Australia has long had a two-speed
economy". The Australian.
E McGaughey. 2018.'Will Robots Automate Your Job Away?. Full Employment, Basic
Income, and Economic Democracy' SSRN, part 2(1), on 'Three views on unemployment's
causes'. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3119589
McLean, Ian W. 2016. Why Australia Prospered: The Shifting Sources of Economic
Growth, Princeton U.P. Retrieved from https://www.amazon.com/Why-Australia-Prospered-
Shifting-Princeton/dp/0691171335
Millmow, Alex. 2017. A History of Australasian Economic Thought (Routledge ), 250 pp.
reviewed from https://onlinelibrary.wiley.com/doi/full/10.1111/1475-4932.12387

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Shintani, M., Terada-Hagiwara, A. and Yabu, T., 2013. Exchange rate pass-through and
inflation: A nonlinear time series analysis. Journal of International Money and Finance, 32,
pp.512-527.
Trading economics.com. 2018. Australian Dollar 1993-2018 | Data | Chart | Calendar |
Forecast | News. Retrieved from https://tradingeconomics.com/australia/currency