GDP Economics Assignment (pdf)

1
ECONOMICS ASSIGNMENT
GDP AND THE ECONOMIC GROWTH OF AUSTRALIA IN
THE LAST 5 YEARS

2
Table of contents
1.0 Introduction..........................................................................................................................3
2.0 The GDP and the economic growth of Australia in the last five years................................3
2.1 The service sector of the economy and its contribution to the growth................................3
2.2 The manufacturing sector of the economy...........................................................................5
2.3 The agricultural sector..........................................................................................................6
2.4 Recent reforms in the overall policies of the government...................................................7
3.0 Conclusion............................................................................................................................8
Reference..................................................................................................................................10

3
1.0 Introduction
Gross Domestic Product (GDP) is the most important economic indicator when it comes to
the case of performance of an economy. The GDP of an economy is the final value of all the
goods and services which are produced within the boundary of the economy for a specified
period of time. The GDP is also used for comparison between the performances of two
economies as well. One of the important features of GDP is that it is influenced by the
population of an economy and hence GDP per capita is also used by an economist in order to
get a good insight regarding an economy (Hosseinzadeh et al. 2016). There are few of the
components of GDP which contributes to the overall final goods and services of the
economy. In terms of the sector, the contribution can also be categorised into different
sectors. These involve the service sector, manufacturing sector, agricultural sector and many
more. The performance of these sectors creates the difference among the economic
performance of different countries. The objective of this paper is to shed light on the
economic performance and GDP of Australia in the last five years.
Australia is one of wealthiest economies in the world with a total wealth of 8.9 trillion US
dollars. The per capita wealth of the country is second largest standing just after Switzerland.
One of the interesting feats of the Australian economy is that it is the only developed
economy in the world which has maintained a positive growth rate for a long period of time.
One of the recent events that have assisted the economy is the mining boom that it
experienced in the year 2004 (Manalo, Perera and Rees, 2015). The economy of Australia is
also a favourable destination for new businesses due to the policies of the government and the
tax structures.
2.0 The GDP and the economic growth of Australia in the last five years
2.1 The service sector of the economy and its contribution to the growth
The service sector of the Australian economy is the largest sector both in terms of the
production and the employment that it generates for the people of the economy. In the year,
the service sector of the economy accounted for around 70% of the overall GDP of the
country. In addition to that this sector employed more than 73% of the labours of the market.
Although the figures have changed in the year 2017, the influence on service sector on the
GDP and the economic growth of the economy is still immense (Peeling et al. 2015).

4
According to the figure of the year 2017, the service sector of the economy has reduced to
69% and the employment in the sector has become 67% of the overall employment of them in
the economy. Rees, Smith, and Hall (2016) commented that, despite the shrink in the service
sector of the economy, its productivity has increased over the years. Therefore, the
contribution of the service sector has remained almost the same compared to its contribution
5 years ago.
Australia provides a range of quality services both to the economy of Australia and other
economies of the world. Burke et al. (2017) pointed out that Australia provides IT services
for the other economies of the world. The other effective service sector of the economy is the
education, tourism, financial services and many more. It is important to note that, since the
year 2014, the inflow of investment in Australian economy has increased manifold.
Muhammad et al. (2015) pointed out that, this is due to the liberal policies of the government
that followed after the mining boom that it experienced. During the mining boom, the central
bank of Australia drastically reduced the interest rates of the country which reduced the
attractiveness of Australian economy as an FDI destination.
2011 2012 2013 2014 2015 2016 2017
0
10000000000
20000000000
30000000000
40000000000
50000000000
60000000000
70000000000
FDI Inflow
FDI Inflow
Figure 1: The FDI inflow in the Australian economy
(Source: Hartigan and Morley, 2018)
Another important factor that can explain the growth of Australian economy is the sector-
wise growth in the services. For example, the educational service provision of the economy
has grown from $17 billion USD to $21 billion USD in the year 2016 (Cummings, 2016). In

5
this case, the IT services have growth by 34%, becoming the largest service growth for
Australia between the year 2012 and the year 2017. In this context, it is important to note the
changes in the policies of the government as well. Prior to the year 2013, the bureaucracy,
corporate tax, and discriminatory activities were huge. The foreign investors were not
interested to invest in the service sector of the Australian economy. However, the policy
reform in the sector has allowed more investment. New foreign organisations have also
started operating in Australia as well. Prasad and Green (2015) stated that this again
amplified the knowledge transfer and the domestic organisations benefited.
The credit for the impressive performance of Australian service sector in the last five years
also goes to the Department of foreign affairs and trade as well. Through the DFAT, in the
year 2012, the country has managed to engage itself in a service trade agreement with Europe
and the USA which has helped in the productivity of the service sector of the economy.
Therefore,
2.2 The manufacturing sector of the economy
Although the service sector is the lion’s share of the Australian economy, the recent growth
rate of the manufacturing sector also has contributed positively towards the GDP and the
economic growth rate of the country in the recent years. According to Pan et al. (2015), the
growth rate of the manufacturing sector of the economy in the year 2016 has been the highest
in the last 15 years. One of the biggest evidence of growth is the increase in the
Manufacturing Purchasing Manager Index, which increased 7.8 points in the year 2014. The
PMI index shows the increase in the activity in case of the manufacturing index of an
economy. In addition to that, the operating conditions of the manufacturing sector have
improved since the year 2013 as well. This is due to the fact that, the government, after the
mining boom started spending hugely on the manufacturing sector of the economy.
The policies of the government in order to improve the performance have also been
impressive (Findlay and Garnaut, 2017). The action of the government had the focus to
expand the inventory structure of the economy rather than increasing sales. The
manufacturing sector has reformed over the years from being a fast delivery of products to a
stockpile. The capacity of the manufacturing sector has improved a lot in the last five years.
Barnes et al. (2015) noted that the export in case of the manufacturing sector has also helped
the economy of Australia to grow in the last few years. The performances of the trade
partners especially in the East Asian countries have ensured high demand for the Australian

6
manufactured goods as well. However, in this context, it needs to be noted that the expansion
of the manufacturing industry has not been at its potential level due to the devaluation of the
currency in the recent years. The exchange rate of the Australian dollar has started to fall
after an increase till the year 2014.
2010 2011 2012 2013 2014 2015 2016 2017
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Exchange rate of australian currency
Exchange rate of australian
currency
Figure: the real exchange rate of Australian currency in the last few years.
(Source: Baroutsis and Lingard, 2017)
However, the real exchange rate is still steady which intrigued the foreign investors to invest
more in the Australian economy. Van Vu et al. (2016) highlighted that paper, food
manufacturing and non metallic mineral production have expanded the most the last few
years. The expansion can be attributed to the increase in the demand for the Australian
produced foods and papers since the year 2013. One of the positive points regarding the
manufacturing industry and its contribution towards the GDP is that, the manufacturing
growth rate have increased due to the high demand both in domestic and international
market. The domestic demand for chemicals, machinery equipment increased manifold
during this year following the mining boom that the economy experienced. Furthermore,
government played an active role in attracting foreign investment in the mining sector
manufacturing of the Australian economy. Hatfield-Dodds et al. (2015) highlighted that the
FDI inflow in the manufacturing sector of the economy has increased more than 38% since
the year 2014. The estimation also shows that, there is a good future of the manufacturing
sector of the economy and it will contribute more for the GDP and the economic growth of
the Australian economy.

7
2.3 The agricultural sector
The agriculture sector of Australia is also strong as this sector contributes 12% of the overall
GDP of the country. The sector, as per the figure of 2017 employs more than 350000 labours.
The agriculture and the related industry of Australia have grown significantly in the last few
years. The contribution of the sector towards to the GDP has increased from 9% contrition in
the year 2012. According to Bennett (2016) the agriculture industry currently earns 155
billion USD annually, whereas it earned 127 Billion USD in the year 2012. Another
important fact that shows the growth of the agricultural sector of the Australian economy is
the landmass under the farming. In the year the landmass that was used for the farming was
50% of the overall landmass. However, since the year 2013 the land mass for the farming
have increased. (Vafaei Ahmed and Mather, 2015) highlighted that the contribution of the
government in this case needs to be acknowledged due to the fact that, government had taken
initiative in the year 2010 to convert few of the commercial lands to farming lands in order to
boost the agricultural production of the country. This has enabled this sector to provide a
push to the GDP and the economic growth of the country.
In the year 2012, the government of the country also reformed few of the regulations related
to the operation of the agricultural sector of the economy. The whole sector was de
regularised and private players were invited to operate. This had some negative and some
positive impacts on the sector and its contribution towards the GDP growth of the country.
The new private players attracted a lot of foreign investment and hence the use of technology
in the agriculture sector increased significantly. Bennett (2016) noted that beef and the dairy
industry are the sectors which used most upgraded technology as well. However, interestingly
the employment opportunity in the agriculture did not reduce over the time. While this sector
employed 4% of the overall population of the country in the year 2012, it increased to 8% in
the year 2016. The overall production of the agricultural industry has also been influenced by
the use of technology which can be easily seen from the annual sale of the agricultural
product. Nevertheless, the government kept on supporting the small players of the market
which also have been crucial for the constant growth of the sector. Credit availability was
increased after the deregulation in order to extend support to the small private players.
2.4 Recent reforms in the overall policies of the government
Apart from the sector-wise performance and the sector-wise growth of the economy, the
policies of the government and the reforms have also enabled the Australian economy in last

8
few years. The event of mining boom increased the wage growth in the economy; however,
the government post the year 2010, increased the interest rate in order to increase the savings
rate and the domestic investment in the economy. Apart from that, the higher savings rate of
the economy also gave rise to the investment from the board as well. Baroutsis and Lingard,
(2017) stated that investors look for the interest rate of the target market among the other
variables.
Furthermore, the government of Australia also have undertaken liberalised economic policies
as well. The foreign investment cap for most of the sector has been reduced during the last
few years allowing the foreign companies and the investors to engage in the operation of the
Australian economy. Van Vu et al. (2016) stated that, mining, agriculture is two of the most
important sector that have experienced most of the changes. The government of Australia, in
order to have more benefit out of the mining boom, also have made sure to reduce the taxes
of the corporate operating in Australia. Although, critics highlight that these actions should
have been taken by the government earlier, they had already provided by the economy its
boost in order for Australia to become one of the best growing developed economy of the
world. The increased growth rate of income of the consumer of the market led to high
aggregate demand and inflation in the market. Furthermore, the government also undertook
policies to remove bureaucracy from the system of the administration as well. In the year
2011, few of the foreign organisations faced problem regarding the operation in the mining
sector of the economy. However, due to high degree of bureaucracy the cost of operation for
the organisations went so high that they decided to shut down the initiative. These changes
have also helped the economy of Australia to achieve a steady economic growth.
3.0 Conclusion
Therefore, Australia is one of the well-performing developed economies of the world. The
different sectors of the country have performed impressively in the last few years. Although
the mining boom of the economy provided a lot of support, the actions from the side of the
government has also have provided the necessary support. The deregulation of the
manufacturing sector of the industry has not only increased the productivity of the sector but
also has increased the employment opportunities as well. The government brought about
changes in terms of ways to do business in the country during the last few years. The interest
rates of the country are increasing giving rise to the domestic as well as the foreign
investment into the economy of Australia. Continuous support from the government and the

9
investment from the foreign investors helped all the sectors of the industry to grow
significantly during the last five years. Furthermore the performance of the trade partners also
needs to be acknowledged for the steady economic growth of the country. With the help of
DFAT the economy of Australia gained a lot of positive support from the other countries of
the world leading to an increase in the export volume of the country. Lastly, the use of
technology in many important sectors and industry of the company also have made to sure to
contribute positively towards the economic growth of the country. The estimation says, the
collective expansion of the manufacturing and the service sector will further boost the
economic performance of the country in the future.

10
Reference
Barnes, K.R., Hopkins, W.G., McGuigan, M.R. and Kilding, A.E., 2015. Warm-up with a
weighted vest improves running performance via leg stiffness and running economy. Journal
of science and medicine in sport, 18(1), pp.103-108.
Baroutsis, A. and Lingard, B., 2017. Counting and comparing school performance: an
analysis of media coverage of PISA in Australia, 2000–2014. Journal of Education
Policy, 32(4), pp.432-449.
Bennett, D.E., 2016. Understanding the classical music profession: The past, the present, and
strategies for the future. Routledge.
Burke, L.M., Ross, M.L., Garvican‐Lewis, L.A., Welvaert, M., Heikura, I.A., Forbes, S.G.,
Mirtschin, J.G., Cato, L.E., Strobel, N., Sharma, A.P. and Hawley, J.A., 2017. Low
carbohydrate, high fat diet impairs exercise economy and negates the performance benefit
from intensified training in elite race walkers. The Journal of physiology, 595(9), pp.2785-
2807.
Cummings, J.R., 2016. Effect of fund size on the performance of Australian superannuation
funds. Accounting & Finance, 56(3), pp.695-725.
Findlay, C. and Garnaut, R. eds., 2017. The political economy of manufacturing protection:
Experiences of ASEAN and Australia (Vol. 19). Routledge.
Hartigan, L. and Morley, J., 2018. A Factor Model Analysis of the Effects of Inflation
Targeting on the Australian Economy
Hatfield-Dodds, S., Schandl, H., Adams, P.D., Baynes, T.M., Brinsmead, T.S., Bryan, B.A.,
Chiew, F.H., Graham, P.W., Grundy, M., Harwood, T. and McCallum, R., 2015. Australia is
‘free to choose’economic growth and falling environmental pressures. Nature, 527(7576),
p.49.
Hosseinzadeh, A., Smyth, R., Valadkhani, A., and Le, V., 2016. Analyzing the efficiency
performance of major Australian mining companies using bootstrap data envelopment
analysis. Economic Modelling, 57, pp.26-35.

11
Manalo, J., Perera, D., and Rees, D.M., 2015. Exchange rate movements and the Australian
economy. Economic Modelling, 47, pp.53-62.
Muhammad, N., Scrimgeour, F., Reddy, K. and Abidin, S., 2015. The relationship between
environmental performance and financial performance in periods of growth and contraction:
evidence from Australian publicly listed companies. Journal of Cleaner Production, 102,
pp.324-332.
Pan, S.Y., Du, M.A., Huang, I.T., Liu, I.H., Chang, E.E. and Chiang, P.C., 2015. Strategies
for the implementation of waste-to-energy (WTE) supply chain for the circular economy
system: a review. Journal of Cleaner Production, 108, pp.409-421.
Peeling, P., Cox, G.R., Bullock, N. and Burke, L.M., 2015. Beetroot juice improves on-water
500 m time-trial performance and laboratory-based paddling economy in national and
international-level kayak athletes. International journal of sports nutrition and exercise
metabolism, 25(3), pp.278-284.
Prasad, A. and Green, P., 2015. Organizational competencies and dynamic accounting
information system capability: impact on AIS processes and firm performance. Journal of
Information Systems, 29(3), pp.123-149.
Rees, D.M., Smith, P., and Hall, J., 2016. A Multi‐sector Model of the Australian
Economy. Economic Record, 92(298), pp.374-408.
Vafaei, A., Ahmed, K. and Mather, P., 2015. Board diversity and financial performance in
the top 500 Australian firms. Australian Accounting Review, 25(4), pp.413-427.
Van Vu, H., Tran, T.Q., Van Nguyen, T. and Lim, S., 2016. Corruption, types of corruption
and firm financial performance: New evidence from a transitional economy. Journal of
Business Ethics, pp.1-12.