Impact of Drought on Macroeconomic Equilibrium in Australia

Running head: ECONOMICS
Economics
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ECONOMICS
Australian drought
Introduction
Macroeconomic equilibrium in the economy is that state where the supply of the
economy equal the demand of the of tee economy. The changes in the variable of macro
economy will be having an impact on the rate of unemployment, price and also on the rate of
inflation. The variables of macro economy is known to affect a large population and is also
related to the economy at the national level. The variables of the macro economy comprises
of the inflation, savings, output of the economy along with unemployment. The factors of the
macroeconomic equilibrium are known to be the indicators of the performance of the
economy that are known to be monitored by either the government or the consumers. When
the precipitation happens which are below the average level, at that time drought takes place.
Drought takes place when there is a prolonged shortage of water supply. The droughts
usually takes place as a result of deficiency of rain, climatic changes, erosion from various
human activities and dry season of El Nino.
Analysis
Effect on the macroeconomic equilibrium as a result of drought.
According to the Australian Bureau of Methodology, drought takes place in Australia when
the precipitation will be in the lowest docile for over three months when compared to the
previous year. Between the year 2003 and 2012, one of the worst drought takes place. Here
are presence of many regions in Australia, where the low amount of rainfall led to drought. It
has been found out that since the year 1994, the global warming and the changes in climate
are some of the reasons of the drought in Australia. The decrease in the amount of rainfall
started taking place from the year 2013 in Australia, that lead to a huge period of drought in
some of the paces in Queensland. In some cases drought in the region of New South Wales

ECONOMICS
lead to huge amount of crop failure in the year 1838. At the time of Federation, it have been
found out that Australia had suffered a huge amount of drought.
Drought in most of the cases shifts the supply curve to the left which leads to the
negative supply shock in the economy. The supply shock in the economy generally takes
place when there is sudden decrease or increase in the services or goods in the economy.
The sudden change in the supply curve is known to impact the equilibrium price of the goods
and services in the economy. During the short run, the supply curve will be shifting to left
which leads to decline in the quantity for output produced and also will be increasing the
level of price in the economy. A huge rate of unemployment takes place in the economy as a
result of drought. The unemployment was severe in the case of the agricultural sector. A huge
amount of people have known to become jobless mostly in case of agricultural sector. The
unemployment in case of the agricultural sector have known to affect the jobs in case of
manufacturing sectors. Most of the people have known to lose their jobs in the sectors of
food processing industry. The production of agriculture have declined with the decrease in
the amount of mixed farming and growing crops. This above situation takes place when here
is a negative supply shock as a result of drought in the economy. When the supply curve are
known to shift left in the economy, the supply of jobs declined as a result of drought.
Demand of jobs rose sharply compared to the supply of the jobs. For this reason, it can be
said that as a result of drought, employment will be declining in the economy. Drought have
also known to take place because of the crop failure. When the failure of crops takes place it
can lead to inflation, hot summer weathers along with dry summers leading to crop shortfalls
in case of Australia. As a result of the adverse conditions of weather, the production of crops
had been extremely in nature. The decline in the crop production leads to inflation in the
economy. Inflation takes place in the economy when there is an increase in the price of goods
and services in the economy over a long period of time. Inflation is a kind of quantitative