Macroeconomic Analysis of Australia: Key Indicators, Relationships, and Outlook

BUS700 Economics
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Executive Summary
The Report consists of the data collected on the macroeconomic indicators such as the exchange
rates, export, and import, interest rate etc. of Australia. The effect of GDP growth rate and
inflation rate effect has been considered on the basis of various statistical analysis and data
collection. The relationship between the net exports has been studied with the exchange rate of
Australia and USA. The cash rate and Federal Reserve fund rate is also being analysed of USA
and Australia and its impact over the economy of the country. The notes on predictions on the
macroeconomic outlook of Australia are being written and also the chances of any recession or
expansion are there.
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Table of Contents
Executive Summary.........................................................................................................................2
(1) Data on key macroeconomic indicators.....................................................................................4
(2) The relationship between Australia’s real GDP growth rate and the inflation rate...................9
(3) Relationship between net exports (i.e., exports minus imports) and the real exchange rates
between USA and Australia...........................................................................................................11
(4) Relationship between Australia’s cash rates and Federal Reserve Fund rates in USA...........14
(5) Prediction of the macroeconomic outlook of Australia. Is Australia likely to experience a
recession or expansion soon?.........................................................................................................16
Conclusion.....................................................................................................................................17
References:....................................................................................................................................18
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(1) Data on key macroeconomic indicators.
Macroeconomic indicators:
Macroeconomic indicators are those terms which are related to external environment and cover a
wide area of the economy. Factors like Interest rate, exchange rates, CPI and rate of
unemployment are some examples of Macroeconomic factors and affect the complete economy
of a country. Some factors of the macroeconomic environment are as follows;
Real GDP Growth: Real GDP indicates the worth of all services and goods which was
produced in an economy in a particular period.
Australian economy was reported 1% growth in GDP in last quarter ended March 2018. The
growth reported by the economy is based on the export and value addition in natural resources
(Australian Bureau of Statistics, 2018).
Growth reported by different sectors is as follows;
SR No. Name of Sector Reported Growth
1 Mining Industry 2.9%
2 Non-financial Private corporations 6% in march Quarter
3 Government expenditure final consumption Increased by 1.6% which was
5.1% throughout the year
(Australian Bureau of Statistics,
2018)
4 Household consumption Increased by 0.3%
5 the ratio of household savings Fell up to 2:1. (Lowest after Dec.
2017)
(Figure - Australia Real GDP Growth)
(Source - CEIC, 2017)
Interest rates (Cash rate): Cash rate can be defined as the rate of interest which is charged by
the reserve bank of Australia on loan provided to commercial banks. The system of cash rate
impacts the interest rates in the complete economy. RBA uses this tool to control the inflation in
the economy. Currently, cash rate in Australia is 1.50% which is record lower than 17.50% in
1990. As cash rate has a direct impact on the inflation and dollar value, RBA decide to remains it
1.5% (Market Index, 2018).
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