GDP and Economic Growth in Australia: A 5-Year Analysis

HI5003
Economics for Business (Group Assignment)
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Table of Contents
GDP and Economic growth in Australia last 5 years.................................................................4
References................................................................................................................................12
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Essay Topic – “GDP and Economic growth in Australia last 5 years”
The main aim and purpose of this essay are to examine the drivers that lead to the economic
growth and rise in GDP (Gross Domestic Product) within Australia for the past 5 years.
Australia has recorded immense improvements and growth in terms of the international trade.
Many of the Australian industries have been booming and are significantly contributing
towards the development and growth of nation (Foster, 2015). One of such industry is mining
industry and energy exports which have been contributing to a greater extent in the Australian
economy. Australia has exhibited and recorded of strong as well as persistent economic
growth in the past few years instead of having major challenges at the international level and
Oil Crises.
The essay is purposed to identifying all of such factors that lead to creating a significant
impact on the Australian economy and led to its growth and development. It is also observed
from the researches and stats that the Foreign Direct Investment (FDI) also has a great impact
on Australia and boosts the economy a lot (Foster, 2015). The report examines overall all
such factors along with their percentage contribution in the Gross Domestic Product of the
country. For any of the economy, it is significant to have position swing and growth of GDP
as it is connected with many other factors also. It is analysed that the level of foreign
investments in Australia has increased by $ 220.5b i.e. 8% in order to reach $3,024.4b for the
year ending 2015 (Pandya and Sisombat, 2017). These arguments and information have been
supported by valid facts and figures. In the essay, the facts and figures have been evidenced
with the help of stats and graph so that a clear indication of GDP and economic growth of
Australia can be assessed.
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GDP and Economic growth in Australia last 5 years
Growth of Australia
According to the views and thoughts of Pandya and Sisombat (2017), it is believed that the
FDI has a direct role and relationship in the economic growth and development of a country.
FDI refers to as the investment of funds and resources within the enterprise operations of
business outside the economy. Many of the evidence reflected has supported that there is a
strong and positive relationship in between the FDI and economic growth. Australia has a
significant ratio of FDI which helped and contributed a lot to the economic development of
the economy. FDI leads to incoming of the cash inflows into the host country. The raw data
and figures have been presented below in a graphical format which shows the trends in FDI
in Australia.
Figure 1: Total FDI, 2001-2015
Source: (Pandya and Sisombat, 2017)
From the above graph, it is evident that there is an increasing and decreasing trend been
observed in the FDI level of Australia. The total flow of cash has been steadily increased
from $120b in 2001 to $500b in the year 2006 however, in the year 2005 the ratio was
majorly low due to the crisis that the country is suffering from. Due to the global financial
crisis in the year 2008, there are a lot of fluctuations has been made in the FDI level and lead
to decrease in the FDIs. However, this situation has been enhanced in the coming years as the
year’s passes.
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Figure 2: Leading investor countries, 2001-2015
Source: (Pandya and Sisombat, 2017)
On the basis of the above figure, it is reflected that the investors are attracted towards the
Australian economy and is investing funds in the economy. Some of the factors that lead to
contributing to the economic growth are huge market size, stable government, population
growth and many others. Due to all such factors, the investors are attracted towards the
Australian economy. It is observed that the United States of America is one of the major
investor followed by United Kingdom, Belgium, Japan, Singapore, Hong Kong and others
respectively.
Growth of Australia in past 5 years
As per the ideas of Australia Benchmark Report (2017), it is researched that Australia has
provided of the greater economic resilience, record of steady growth and others for doing a
low risk and safe business ventures. It is estimated that on an average each and every year a
percentage of 3.3% growth in the GDP of Australia is measured from stats. Among the other
major economies, it is evident that Australia has highest growth rate (Anderson, 2017).
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Figure 3: Australia GDP Growth Rate
Source: (Trading Economics, 2018)
From the above figure, it is analysed that there have been advancements been observed in the
Australian economy with a percentage of 0.4% in the year 2017. This ratio is expected less
than the market consensus of 0.6% expansion. This shows the 0.2% less growth in the
Australian economy, however, in the last quarter there is an upward movement in the growth
rate i.e. 0.7% is evident. This growth rate has been recorded as the least among the
contraction till September 2016. In addition to this, as compared to the past 25 years it is
evident that GDP growth rate in Australia has been estimated or averaged at 0.85% until year
1959 to 2017. From all these years the GDP growth rate was at the highest peak in the year
1976 recorded to be 4.40%. On the other hand, the lowest growth rate recorded was in the
year 1974 at -2%.
Industry wise economic growth and development of Australia in last 5 years
In case of household spending, it has been increased by 1% where, the people are now more
often exposed to cafes, restaurants, hotels, and others. Moreover, the government spending
has also increased by 1.7% due to the growing of state as well as a local government with a
percentage of 0.7% and national government by 3.1%. On the contrary, the private
investments have been declined in such years with a percentage of 2.2% it is so because of
the non-dwelling construction and the public investments have risen to 2.9% due to the local
and state government. Furthermore, the exports of goods are down by 1.7% that includes of
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both the rural as well as non-rural exports whereas, imports of goods is increased by 1.6%
due to the rise within the household consumption level. This shows that the net exports of the
country are not sound. In context of each and every industry the figures estimated are mining
industry increased by 1.3%, construction 0.3%, information, media and telecommunications
improved by 2.9%, Financial and insurance services raised by 0.1 per cent, healthcare and
social assistance rise by 1.9%, whereas, agriculture, forestry and fishing declined by 2.7%,
manufacturing by 1% and Electricity, gas, water and waste services by 0.8% (Trading
Economics, 2018). All of these increased and decreased in the past 5 years due to their sub-
industries fluctuations that have a great impact on the economic development.
In the economic growth and development, all these sectors contribute to a lot extent.
However, some of the industries and sector have declined in the past 5 years but when
analysing the overall impact of such factors on the Australian economy it is analysed that the
economy is growing steadily and rapidly. This argument has been evidenced and supported
by the above facts and figures drawn (Anderson, 2017).
Figure 4: Australia GDP Annual Growth Rate
Source: (Trading Economics, 2018)
It is reviewed that the Australian economy has been majorly dominated by the service sector
has 65% of share in the total gross domestic product. However, the Australian economic
success is also due to the mining (13.5 % of GDP) as well as agriculture (2 % of GDP). Both
of these industries are the major exporters of the commodities for the Australian market.
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From the historical values and figures, it is observed that there are fluctuations in the gross
domestic product of the country. When, comparing this growth and economic status of
Australian GDP with other advanced economies it is evident that Australia is placed at 13th
position (Australia Benchmark Report, 2017).
In the lights and thoughts of Focus Economics (2018), it is assessed that there has been an
increase in demand for the raw commodities across emerging countries since the year 2000.
This has led to reflecting of a strong rise within the global commodity pricing. The increasing
demand for the goods and commodities had played a crucial and important role in the success
of Australian economy. It is made possible along with the trade relations, spark in the
household expenditure and others. With such success and economic encouragement there are
some factors that have played a tremendous role. For calculating the figures and GDP report
the government and analysts had used various approaches and methods.
Factors that Drives towards success and growth of Australian Economy
The growth and advancements in the past 5 years GDP and economy are due to the various
industries and economies as a whole. But some of the industries and factors have led to
contributing in the GDP to a greater extent.
 ASEAN free trade agreements – This is known as the trade bloc agreement which
has been made by the Association of Southeast Asian Nations with the aim of
supporting local manufactures within all ASEAN countries (Association of Southeast
Asian Nations, 2018). The introduction of such agreement among the countries has
helped in the growth and development of the nation. For Australia, this seems to the
economy success driver that has promoted the trade relations and connections of
Australia with other economies as well. The improved trade agreement has helped in
enhancing the trade relations among the industries and suppliers (Association of
Southeast Asian Nations, 2018).
 Mining Industry – In the words of McHugh (2017), the Australian Mining
industry is on its verge in case of booming the mining technology with so-called
metals. It is evident that the Australia two most significant mineral commodities are
iron ore as well as coals and adds a great value to the manufacturing of different
products for the company. Australia is the largest supplier of minerals, hydrocarbon
and other non-minerals reserves. Due to the increase in demand in such industry it has
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led to providing of the tremendous growth and boost to Australian economy as it is
the core part of Australia from where, the country is able to generate revenues that
add in the gross domestic product (McHugh, 2017).
 And Others – There are some of the factors due to which the Australia economy is
growing and emerging the past few years and is expected to continue the same in
coming years also. Some of them are agricultural sector, political stability, attractive
investment policies and others (Bayarcelik and Taşel, 2012). For any of the company
to establish and operate in the business environment is important to have favourable
and flexible political norms, regulations and others so that it becomes easy for them to
sustain and manage in the complex business environment. Australia has a stable
political environment which encourages the investors to invest their funds and
resources in the Australian economy and gain economic advantage. It is not one sector
or industry that is the reason behind the success and growth of economy but a
combination of them. The foreign investors are attracted towards such political norms
and policies so that they can have a sound investment decision. In Australia, USA is
one of the major investors as recognised from the stats and data (Bayarcelik and
Taşel, 2012).
Figure 5: Australia: Real gross domestic product (GDP) growth rate from 2012 to 2022
(compared to the previous year)
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Source: (Statista, 2018)
The above statistical graph shows the growth rate of Australia and its real GDP starting from
the past 5 years i.e. 2012 to 2017 and also projected growth rate in the coming years till the
year 2022. This figure represents that the GDP of Australia has been growing by nearly
2.27% at the end of year 2017. This ratio of growth rate is expected to continue and increase
at the same pace for the coming years till 2022. From the comparison of past 5 years data and
estimation of GDP and growth are it is expected that in the near future also, the country will
grow and prosper subsequently. The increasing trend in the coming five years is majorly due
to the foreign direct investment and increasing demand and expenditure in the subsequent
industries. GDP is referred to as the primary indicator that is used to reflect and represent the
state and health of a country’s economy across worldwide. This is so because a majority of
decisions are still dependent on the growth and development of the country in the past five
years and projected five years. GDP is known as the total market value of all the goods and
services that are consumed and produced within the boundaries of an economy during a
specified period of time. The clear statement of GDP helps in knowing the exact position of
the economy in a clear and precise way (Statista, 2018).
On the contrary, according to the mind-sets and ideas of Janda (2017), it has been analysed
that however, the economy of Australia is improving its economic condition but some of the
weak consumers are getting disappointed and is being optimistic (Janda, 2017). Hence, it is
studied that along with the economic growth of Australia there are some areas which still
needed to be improved and require a lot of investments.
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On the basis of the above report study, it has been concluded that the Australian economy has
been growing for the past 5 years. It is also analysed from the study that foreign direct
investment inflows within the Australian economy have a greater impact on the economic
growth and GDP. There is a positive relationship in between the FDI and GDP. Moreover, it
is also revealed that Australian economy has surrounded with various crisis and challenges in
the past few years which has impacted a lot on its economic growth and development.
However, in the current 5 years data and stats it is accessed that there are a slight growth and
development in the economy but in some of its quarter, the ratio was not appropriate and up
to the mark.
The study also concluded that mining and agricultural sector is the one which has majorly
contributed to the growth of Australia. This seems to be the major growth indicators and
driver for the economy. Furthermore, the above drivers mentioned have a perfect correlation
with the GDP and economic growth of Australia in last 5 years. The government of Australia
is taking various steps and initiatives in order to encourage the industries and sub-sector so
that the overall economy can grow and prosper in the coming years with a great percentage.
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References
 Anderson, K., 2017. Sectoral Trends and Shocks in Australia's Economic
Growth. Australian Economic History Review, 57(1), pp.2-21.
 Association of Southeast Asian Nations, 2018. The ASEAN Free Trade Area
(AFTA). [Online] asean. Available at:
http://asean.org/asean-economic-community/asean-free-trade-area-afta-council/
[Accessed: 11 May 2018]
 Australia Benchmark Report, 2017. WHY AUSTRALIA.
 Bayarcelik, E.B. and Taşel, F., 2012. Research and development: source of
economic growth. Procedia-Social and Behavioral Sciences, 58, pp.744-753.
 Focus Economics, 2018. GDP in Australia. [Online] Focus Economics. Available
at: https://www.focus-economics.com/country-indicator/australia/gdp [Accessed: 11
May 2018]
 Foster, J., 2015. The Australian growth miracle: an evolutionary macroeconomic
explanation. Cambridge Journal of Economics, 40(3), pp.871-894.
 Janda, M., 2017. GDP: Australia's economic growth improves but weak
consumers disappoint the optimists. [Online] abc. Available at:
http://www.abc.net.au/news/2017-12-06/economic-growth-gdp-figures-september-
quarter/9231122 [Accessed: 11 May 2018]
 McHugh, B., 2017. Next mining boom in Australia will be driven by tech metals
for renewable energy and technologies. [Online] abc. Available at:
http://www.abc.net.au/news/rural/2017-04-17/next-mining-boom-in-australia-is-tech-
metals/8443172 [Accessed: 11 May 2018]
 Pandya, V. and Sisombat, S., 2017. Impacts of Foreign Direct Investment on
Economic Growth: Empirical Evidence from Australian Economy. International
Journal of Economics and Finance, 9(5), p.121.
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 Statista, 2018. Australia: Real gross domestic product (GDP) growth rate from
2012 to 2022* (compared to the previous year). [Online] statista. Available at:
https://www.statista.com/statistics/263602/gross-domestic-product-gdp-growth-rate-
in-australia/ [Accessed: 11 May 2018]
 Trading Economics, 2018. Australia GDP Annual Growth Rate. [Online] Trading
Economics. Available at: https://tradingeconomics.com/australia/gdp-growth-annual
[Accessed: 11 May 2018]
 Trading Economics, 2018. Australia GDP Growth Rate. [Online] Trading
Economics. Available at: https://tradingeconomics.com/australia/gdp-growth
[Accessed: 11 May 2018]
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