Macroeconomic Indicators: Australia vs New Zealand

MACROECONOMIC INDICATORS: AUSTRALIA VS NEW ZEALAND 1
MACROECONOMICS INDICATORS: AUSTRALIA VS NEW ZEALAND
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Executive Summary
To determine the economic progress of a country, the key macroeconomic indicators play a very
crucial role. For instance, when the inflation rates of a country are high it’s an indication that the
economy is on a wrong direction. Again, when the unemployment rates are high, the economic
progress is on the wrong direction. To adjust economic progress of a country, different measures
are used. Some of the measures include but not limited to cash rates and official cash rates
(OCR). This paper used the five macroeconomic indicators to compare the two economies of
Australia and New Zealand.
Contents

MACROECONOMIC INDICATORS: AUSTRALIA VS NEW ZEALAND 3
Introduction......................................................................................................................................4
Data on key macroeconomic indicators: Australia vs New Zealand...............................................4
Real GDP Growth Rate................................................................................................................4
Australia...................................................................................................................................4
New Zealand.............................................................................................................................5
Cash Rates & Official Cash Rate (OCR).........................................................................................6
Australia.......................................................................................................................................6
New Zealand................................................................................................................................7
Unemployment Rate........................................................................................................................9
Australia.......................................................................................................................................9
New Zealand..............................................................................................................................10
Inflation Rates................................................................................................................................11
Australia.....................................................................................................................................11
New Zealand..............................................................................................................................12
New Zealand GDP growth rate vs Australia GDP growth rate.....................................................13
New Zealand inflation rate vs Australia inflation rate...................................................................14
New Zealand unemployment rate vs Australia unemployment rate..............................................15
Cash rate vs official cash rate (OCR)............................................................................................16
Prediction of macroeconomic outlook...........................................................................................17
Australia.....................................................................................................................................17
New Zealand..............................................................................................................................18
Conclusions....................................................................................................................................19
Recommendations..........................................................................................................................19
References......................................................................................................................................20
Introduction
Macroeconomic indicators are useful factors when comparing the trends in economic
growth either in one country or different countries. It’s through the consideration of

MACROECONOMIC INDICATORS: AUSTRALIA VS NEW ZEALAND 4
macroeconomic indicators that economists determine whether an economy is advancing,
stagnating or declining. So, these indicators are basically strong tools in the evaluation process of
economy. To be able to compare the economy of Australia and New Zealand, four
macroeconomic indicators were used in this paper, these are: real GDP growth rate of the two
countries, cash rates and official cash rates, unemployment rates and inflation rates.
Data on key macroeconomic indicators: Australia vs New Zealand
Real GDP Growth Rate
Australia
According to the recent statistics in June quarter, the economy of Australia has recorded
an advancement of 0.9% above the market consensus of 0.7% expansion and after an upward
revised growth of 1.1% which had been realized in the previous quarter. Mainly, domestic
demand and the foreign trade were ranked as the top supporters of this growth because fixed
investments had remained flat (Cecchetti and Kharroubi, 2015). An economic growth rate of
3.4% had been recorded through the second quarter following the 3.2% expansion which had
been realized in the prior quarter and exceeding the 2.8% growth expectations. This has become
the fastest annual expansion rate since the third quarter of 2012. Generally, the average GDP
Growth Rate in Australia is 0.86% from 1959 until 2018, with its highest level at 4.40% in the
first quarter of 1976 and a lowest level of -2 percent which has been realized in the second
quarter of 1974 (Bhattacharya, Paramati, Ozturk and Bhattacharya, 2016, p.740).

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The largest contributor towards this high GDP growth rate came from the final
consumption expenditure and which can be categorized into two: household consumption and
government spending. Also, the exports had a contribution of 0.2% while non-dwelling
construction acted as a drawback towards the growth by subtracting 0.1 percentage points off the
growth rate (Ward, Sutton, Werner, Costanza, Mohr and Simmons, 2016).
New Zealand
New Zealand economy on the other hand recorded a slight advancement of 0.5% on the
first quarter of year and which was 0.6% low compared to what had been recorded in the fourth
quarter of 2017 although it matched with the market expectations of the country (Summers,
2014). The slow growth was contributed by sectors like mining which had dropped from 1.4% to
-0.2%, utilities which had dropped from 0.7% to -0.4%, construction which had dropped from
0.8% to -1.0% and services which had dropped from 1.1% to 0.6% (Herndon, Ash and Pollin,
2014, p.260).

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There were however some other sectors which did well. For instance, manufacturing rebounded
from 0.1 to 0.7% while primary activities rebounded 0.6% after the 2.6 contraction which had
been recorded in Q4 of 2017. Generally, the average rate of GDP Growth in New Zealand was
0.64% from 1987 until 2018 and with the highest level of 2.80% in the Q3 of 1999 and the
lowest record -2.40% in the Q1 of 1991 (Petri and Plummer, 2016).
Cash Rates & Official Cash Rate (OCR)
Australia
Reserve bank of Australia has maintained the record of the country’s cash rate at a low
percentage of 1.5% just as it was expected. This has extended its inaction record period beyond
two years, amidst low wage growth and weak inflation. The bank aimed at triggering the
country’s economy growth above 3% in 2018 and 2019 (Fang, Kosev and Wakeling, 2015,
p.30). Following this step, the first half of 2018 has seen the country’s economy grow at an