Impact of Drought on Macroeconomic Equilibrium in Australia

Running head: ECONOMICS
Economics
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Table of Contents
Introduction................................................................................................................................3
Analysis......................................................................................................................................4
Impact of drought on economic growth.................................................................................4
Nonagricultural sectors..........................................................................................................6
conclusion..................................................................................................................................9
Reference list............................................................................................................................11

3ECONOMICS
Impact of drought on macroeconomic equilibrium in Australia.
Introduction
The branch of the economics that deals with the general economic largescale factors
are termed as microeconomics, examples are national productivity, rate of unemployment and
interest rates. The macroeconomic factors comprise of the economic output, inflation rate,
unemployment, investments and savings. The factors of the macroeconomics and its
performance are usually monitored by the business, consumers and the governments.
Therefore, it can be said that the key macroeconomic variables will be the gross domestic
product, unemployment rate, rate of interest and inflation. Measuring the economic output
and monitoring the interest rate is some of the important factors of the macroeconomic
variables. Yes there is a relation between the factors of macroeconomics like for example a
high rate of interest will bring down inflation and also a recession means there will be
unemployment in the economy.
Figure 1Drought affecting GDP in Australia

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Analysis
The climate of Australia is known to be vary a lot and therefore are also prone to
droughts. They are known to affect the agricultural yields and can also contribute to spikes in
retail prices of the food. Australia is subject to extreme climates and therefore droughts and
flooding rains can be a common phenomenon. Droughts are termed to be the specific type of
natural hazard.
Impact of drought on economic growth
The most affected part which results from droughts are caused on agriculture, energy
production a d the water supply in public. The service activities along with the
manufacturing sectors are also indirectly affected by the droughts. In the short-term droughts
however does not affect the production capacity of the economy, however it does in the long
term. Th farming sector of Australia is quite small in areas which can also get affected due to
droughts. The total impact of drought on the employment of agriculture known to have
subtracted to around one percentage point from the growth of employment. The overall
effects are also known to be huge. The farm production which is the proportion of the total
production is known to have declined over time as the economy of Australia is diverse in
nature. With the onset of drought, the share of the gross domestic product of Australia known
to have decreased around three percent. Because of the droughts the rural exports will also
decline and the agricultural products will also go down. For this reason, the fall in the export
of the grains known to have contributed the largest amount of decline in the total rural
exports. The exports of sheepskins, meat and we wool will be declining as a result of