Macroeconomic Performance of Australia

Running Head: MACROECONOMIC PERFORMANCE OF AUSTRALIA
Macroeconomic Performance of Australia
Name of the Student
Name of the University
Author note

1MACROECONOMIC PERFORMANCE OF AUSTRALIA
Executive Summary
The paper visited Australian economic performance for period ranging from 1990 to 2016. The main
performance indicators considered here include real GDP growth, inflation., cash rate, export, import,
and unemployment rate. The analysis also involves pairwise evaluation of GDP growth, inflation and
unemployment to look into interrelationship between these indicative measures. GDP growth through
expansion of employment reduces unemployment. Inflation is recorded to be highly volatile during the
decade of 1990s. Price level gradually stabilized thereafter. A positive association has found between
exchange rate between USA and Australia and that of net export. The paper finally incorporates
simultaneous movement of cash rate and fund rate to find whether any association exists between the
two. Data though find a strong positive association between cash rate and fund rate but it is more of the
status of domestic economy that influence cash rate decision.

2MACROECONOMIC PERFORMANCE OF AUSTRALIA
Table of Contents
Introduction.................................................................................................................................................3
Real GDP growth, inflation and unemployment..........................................................................................3
Growth history and Business cycle..............................................................................................................5
Trade and exchange rate.............................................................................................................................6
Cash rate, fund rate and policy implication.................................................................................................8
Australian economic outlook.....................................................................................................................10
Conclusion.................................................................................................................................................10
References list...........................................................................................................................................11

3MACROECONOMIC PERFORMANCE OF AUSTRALIA
Introduction
Analysis of economic performance requires evaluation in several dimension. Long term growth
of a is represented by the trend growth in real GDP. The economic growth is again related with
unemployment and price level movement. Evaluation of external account involves analysis of net export
and exchange rate. Strong interdependence exists between volume of trade and exchange rate.
Government policy intervention contributes to improve growth performance of the economy
(Williamson, 2014). RBA uses cash rate to control credit supply and hence, economic growth. Cash rate
decision is often influenced by fund rate in USA. Evaluation of all these indicators together provides an
understanding of economic performance of Australia in the over a considerably long period.
Real GDP growth, inflation and unemployment
GDP growth, inflation and unemployment are three vital indicators of performance of an
economy. GDP growth reflects the overall growth of the economy. Inflation and unemployment on the
hand other hand are related with dynamic movement of price level and labor market performance. GDP
growth generally fosters production opportunity (Mankiw,2014). The goods market expansion has a
direct effect on factor market. The increased demand for labor reduces hurdles of finding jobs in the
labor market. This contributes to a significant reduction in unemployment level. Additionally, economic
growth usually comes with an increased demand through boosting average income and reduction in
unemployment. The demand side pressure transforms to a higher price level or inflation (Cioran, 2014).
The above explained theoretical relationship can be verified through analyzing simultaneous
movement of GDP growth along with inflation and unemployment over time. Before making graphical
analysis of the trend movement of GDP and inflation, a brief statistical analysis is done using summary
statistics and correlation.
Table 1: Summary Statistics of real GDP growth, inflation and unemployment
Real GDP growth rate Inflation Unemployment
Mean 3.10 Mean 2.68 Mean 6.73
Standard Error 0.23 Standard Error 0.28 Standard Error 0.36
Median 3.53 Median 2.49 Median 6.10
Mode #N/A Mode #N/A Mode 6.90
Standard Deviation 1.21 Standard Deviation 1.46 Standard Deviation 1.89
Sample Variance 1.46 Sample Variance 2.14 Sample Variance 3.58
Kurtosis 1.74 Kurtosis 2.47 Kurtosis -0.18
Skewness -1.21 Skewness 1.15 Skewness 0.88
Range 5.38 Range 7.02 Range 6.70
Minimum -0.38 Minimum 0.25 Minimum 4.20
Maximum 5.01 Maximum 7.27 Maximum 10.90
Sum 83.6
2
Sum 72.3
3
Sum 181.6
0
Count 27 Count 27 Count 27