Macroeconomic Performance of Australia and USA

Running head: MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Macroeconomic Performance of Australia and USA
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MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Executive Summary
The paper intends to analyze economic performance of two of the most developed nations – USA
and Australia. In the world economy, USA though has a dominating global power, the fast growth of
Australia make Australian economy comparable to that of USA. The report compares economic
performance of Australia to that of USA from 1995 to 2015. There are several indicators those are
considered to analyze economic conditions of both nations. These include rate of growth in real
GDP, rate of inflation, unemployment rate, interest rate, growth of net export and exchange rate.
Each of these indicators are related with economic growth rate either directly or indirectly. Design of
macroeconomic policy is crucial in ensuring a stable economic growth. Two main policy measures in
this regard are fiscal policy and monetary policy. Government may take various other policies to
sustain steady economic performance.

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MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Table of Contents
Introduction...........................................................................................................................................3
Macroeconomic performance of Australia and USA.............................................................................3
Australia............................................................................................................................................4
USA....................................................................................................................................................7
Relation between GDP and other economic indicators.......................................................................10
Australia..........................................................................................................................................10
USA..................................................................................................................................................12
Macroeconomic policies undertaken in Australia and USA.................................................................14
Australia..........................................................................................................................................15
USA..................................................................................................................................................15
Economic outlook for Australia...........................................................................................................15
Conclusion...........................................................................................................................................16
Reference list.......................................................................................................................................17

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MACROECONOMIC PERFORMANCE OF AUSTRALIA AND USA
Introduction
Australia when compared in terms of GDP, ranked second in the world. The economy stands
just behind USA. In the past two decades, Australia successfully maintained a steady growth along
with low inflation and low unemployment. Service sector constitutes a dominating share in the
Australian economy with the share being 70 percent in GDP ad 75 percent in employment. The
steady banking and financial sector has helped the economy to escape from global economic crisis
(Nielsen, 2017) Australia is largely benefitted by a dramatic increase in terms of trade in recent
years. Australia is a leading exporter of energy, natural resource and agricultural commodities.
The USA economy is considered as the highly developed mixed economy. The economy
account world’s largest nominal GDP and second highest purchasing power parity. The economy has
a highly developed and diversified industrial sector. The huge stock of natural resources,
infrastructural facilities and high productivity fueled economic growth of the economy. The great
recession in 2008 caused a huge economic downturn in USA (Reinhart, C.M. and Rogoff, 2015) The
economy took a considerably long time to recover attack of crisis and return to previous growth rate.
The paper prepares a brief report on economic performance of Australia and USA for a
period of twenty-one years from 1995 to 2015.
Macroeconomic performance of Australia and USA
Macroeconomic performances of a nation are evaluated based on some key economic
indicators. Growth of aggregate output is a primary indicator of economic performance. Aggregate
output of a nation is measured in terms of GDP of the nation. Gross Domestic Product or GDP is a
standard measure for computing value of produced in an accounting year. Changes in GDP from one
year to the next is known is growth rate of GDP (Goodwin, et al., 2015). Growth in the aggregate
output is considered as economic growth. GDP growth becomes more accurate measure of
economic growth when aggregate output is valued using market price of a base year. This is then
called real GDP growth rate. The movement of price level is next important determinant of economic
stability. This is examined by observing the trend in inflation rate. Rate of inflation is the percentage
change in the consumer price index which include a certain basket of goods and service necessary
for sustaining everyday life. Steady economic growth and stability in the price level have implication
for labor market (Uribe and Schmitt-Grohe, 2017) State of labor market in an economy is
determined from the trend in unemployment rate. Unemployment refers to an economic condition
of labor where some members of the labor force are unable to find jobs despite active job search.
Real interest rate has implication for investment in the economy. To understand trend in real
interest rate, the paper considers interest rate determined by the central banks of the respective
nations. Two indicator related to degree of openness of a country are exchange rate and net export.
Net export refers to the trade balance in the current account of balance of payment and it obtained
by subtracting values of import from that of export. Higher the value of net export higher is the
economic growth and vice versa (Heijdra, 2017). One important determinant of international trade is
exchange rate between nations. It is unit of one country’s currencies exchanged for unit of another
currency.
This section discusses the summary statistics of above mentioned indicators for the selected
time frame for both Australia and USA.