The Economy of Australia | Assignment

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

1ECONOMICS ASSIGNMENT
Executive Summary
The economy of Australia can be considered one of the highly developed and stable
economies of the world, characterized by the presence of productive and efficient industrial
sectors, robust external relationships with other countries and an inherently stable policy
framework in the country, which contributes to the economic growth of the country over the
years. The economy has however been subjected to several fluctuations and unanticipated
phenomena, domestic as well as global, which has contributed considerably in shaping up the
economy of the country. Taking this into consideration, the paper collects and analyzes the data
on different economic indicators which has considerable effects on the growth of the economy. It
also tries to interpret the dynamics in those indicators and their inter-relationships, using the
existing economic theoretical and conceptual framework.

2ECONOMICS ASSIGNMENT
Table of Contents
Introduction......................................................................................................................................3
a) Evaluation of the economy of Australia......................................................................................3
Relationship between the Real GDP and other variables............................................................3
Relationship between Real GDP growth and the rate of unemployment....................................4
Relationship between the Real GDP and the Cash rate of Australia...........................................5
Relationship between the Real GDP and the rate of inflation.....................................................6
Relationship between the Real GDP growth rate and the net exports.........................................7
Relationship between the Real GDP and the exchange rate in Australia....................................8
b) Relationship between inflation and unemployment rate.............................................................9
c) Tight Monetary Policies............................................................................................................11
d) Australian Economy: Future Forecast.......................................................................................11
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

3ECONOMICS ASSIGNMENT
Introduction
Over the last few decades, the economy of Australia has emerged as one of the strongest
economies in the global framework and is currently one of the largest mixed economies in the
world. Much of this can economic prosperity of the country can be attributed to the consistent
economic growth of the country, stable employment scenes and striking growth in the industrial
and commercial sectors (Plumb, Kent and Bishop, 2013). In the recent periods, the country has
developed a robust service sector, which contributes more than 60% in the GDP of the country
and makes provision of employment for more than 70% of the total labor force. Among the other
significant industries of the country, are mining and gas industry, which contribute significantly
in the economic prosperity of the country. The export sector of the country has also grown
impressively over the years (Rees, Smith and Hall, 2016).
Keeping this aspect in consideration, the concerned assignment tries to evaluate the
performance of the country’s economy between the time period of 1990-2015. To evaluate the
same, the report tries to take into account the dynamics of the real GDP, unemployment rate, and
rate of interest, net exports and the exchange rate in the country over the concerned period. The
report also tries to analyze the policy implications and tries to predict the outlook of the economy
of the country in future.
a) Evaluation of the economy of Australia
The primary indicator of economic dynamics in a country is the movements in the Gross
Domestic Product of the country, which is the sum of the value of all the goods and services that
are produced within the geographical domain of that particular country within one economic
year. The GDP, being one of the primary growth indicators of the economy of any country, is
itself dependant on several exogenous as well as endogenous factors and their dynamics in the
concerned economy. Of these factors, the ones of primary implications are the cash rate (interest
rate), unemployment, exchange rate, inflation rate and the value of the net exports of the
concerned country. This section of the assignment tries to analyze the relation of the GDP of
Australia with the above-mentioned determining factors in the economy of the country (Butlin,
2013).
For the purpose of estimating the same, the value of the Real GDP is obtained for the
time period of 1990-2015. Real GDP is an inflation-adjusted measure of the economic growth,
which is calculated by considering a fixed year or a base year of less economic turmoil. The
average growth of the Real GDP in the country is seen to be around 3.1%, with the highest
accounted growth being 5.01% (1999) and the lowest being -0.38% (1991) (McLean, 2012). The
relation of the Real GDP with the five other economic indicators is shown as follows:
Relationship between the Real GDP and other variables
The relationship of the dynamics of the Real GDP of Australia, over the concerned period
of time, with the other indicators, can be summarized as follows: