Economic Challenges for Australia

This solved assignment delves into the multifaceted economic landscape of Australia, examining key challenges such as the impact of resource booms, persistent income inequality, and an aging population on workforce participation. The analysis explores the implications of these issues for economic growth and proposes potential policy solutions to mitigate risks and foster sustainable development.

Principle of economics

Table of Contents
Growth rates over the period of last ten years............................................................................3
Analysis of reasons of variation in growth rate.........................................................................4
The key drivers of growth rate...............................................................................................4
Reason for difference in growth rate......................................................................................5
Challenges faces in enhancing their growth rate........................................................................8
References................................................................................................................................10

Table of Figures
Figure 1: Australian GDP rate over past ten years.....................................................................4
Figure 2: Performance of various sectors in GDP.....................................................................6
Figure 3: Contribution of net exports in GDP............................................................................8

GROWTH RATES OVER THE PERIOD OF LAST TEN YEARS
Australia, a developed economy. Australia is the largest mixed market economies has a GDP
of AUD$1.69 trillion as of 2017. In terms of wealth per adult, wealthiest nation after
Switzerland is Australia. As of June 2016, the total wealth of Australia was AUD$8.9 trillion.
Australia, by nominal GDP, was the 14th largest national economy, by PPP-adjusted GDP it
had 20th largest position, as good exporter it was 25th-largest and as good importer it was
25th-largest.
In the financial quarter of March 2017, the 103rd quarter and 26 years in the developed world
the record of the longest run of uninterrupted GDP growth was taken by Australia since it had
two consecutive quarters of negative growth or technical recession (Hatfield-Dodds and et al.
2015).
Figure 1: Australian GDP rate over past ten years
Mining investment boom generated massive revenue and income benefits which have made
the economic performance of Australia strongest in the OECD over the last10 years. Now,
there is a need to create new growth sources because the economy is facing new challenges
with the recession in mining (Shahiduzzaman & Alam, 2014). Australian industries need to
manage this transition to thrive in businesses by keeping a check on cost pressures and also
improve their productivity.

They are moving towards a more export and services- oriented economy. The falling
Australian dollar is supporting the exports and the mining sector’s greater production
capacity. In addition to that educational attainment and progress in the technology are
benefiting the services. A vibrant and a modern economy is the next step of transition in
which economic reform will play an important role. Second
GDP of Australia is a most significant measure to consider the performance of the economy
of Australia. The ABS (Australian Bureau of Statistics) issued figures of GDP on the basis of
yearly and quarterly. The table presents the adjusted price of GDP of Australia, classically
defined to an economic growth rate of Australia. A completed a yet understandable
assessment of Australian GDP is enumerated as below:
ANALYSIS OF REASONS OF VARIATION IN GROWTH RATE
The key drivers of growth rate
Increasing demand for raw materials from developing countries in early 2000, this resulted in
a strong increase in the worldwide price of commodities and played a vital role economy of
Australia. Moreover, high trading that leads to a considerable increase in the purchasing
capacity of domestic, increase in prices of commodity caused a spark in the investment of
mining, especially in iron and coal (GDP in Australia, 2017). Thus, mining investments are
one of the key drivers of Australia’s growth in the last ten years. The economy of Australia is
changing from mining investment phase boom to the productivity phase.

Figure 2: Performance of various sectors in GDP.
Development of the production capability of iron and coal had a solid positive impact on the
exports of Australia to the Asian market. The mining division, along with the financial sector
and any other lined specialized and technical services have noticeably improved in
significance in Australia’s GDP in the last ten years. However, manufacturing productivity
seemed gradually shrinking (Australian GDP Growth Rate, 2017). Consequently, about three-
quarters of the economy currently engages production and mining of services instead of
goods, together with the financial sector substituting manufacturing which is the single
industry occupying largest share in the economy.
Reason for difference in growth rate
Increase in household spending
In December, the 0.6 percent growth in GDP, household spending taken into account greater
than three-quarter with the 0.4 percent point. Householder’s spending more than expected

made up tine drops of investment in the sector of mining or any other industry. The domestic
increase also assisted in the keeping the economy runs slowing in neutral. During 2015,
construction of private dwelling gave 0.49% points to the growth of GDP. However, the
growth in the housing and apartment building is not sufficient to offset the fall, as
construction of non-dwelling decreased GDP growth during 2015 by the point of 1.1%
Growth in net exports
Australian export growth became poorer that had to be likely to be in the last ten years all
around these main categories which are services, rural resources and manufactures. Whereas
huge exports of commodities and LNG (liquefied natural gas) rise highly with regards to high
demand from Asian markets (Fleming & Measham, 2015). This was partially balanced by
declining oil and metal exports. Exports of non-resources were adversely impacted by
exchange rate appreciation and constant increase in the share of worldwide productivity,
taking place in developing countries. Looking forward to, the growth in mining based
investment in mid 2000 is likely to give rise to strong growth in exports of resource in the
next 5 years. Income growing faster in emerging Asia needs for exports of Australia of food
commodities, expertise producers and services are also predicted to rise. Increasing income in
up-and-coming Asia also produces a rapid increase in demand for the non-resource exports of
Australia.
With regards to the growth in Chinese demand regarding resources and prices of export
considerably increased, while improving the exporter’s profitability of Australia. However,
the additional exchange rate appreciation has put sliding force on the prices of non-resource
export regarding the household cost suffering (Grafton & Lambie, 2014). This is apparent for
the produced export prices with fall in global prices particularly for high technological
electronic commodities and contribution as well.
In seasonal terms, in December, imports raise by 0.6% in further the net exports growth
(deduct export from import) was in effect nil, and thus they made no addition to growth. But
comparing to the trend term figures things seems to be different. The chief contributor was
net exports a for the growth in trend term in the quarter period of December- making the
addition of 0.45% points in the overall .7 % increase in GDP.
By considering the variable nature of exports, the best way is not to give attention on the
seasonal term adjusted-data rather give more focus on trend term. More satisfactory, just keep

aside the quarterly growths rather focus on annual growth. Further, it can be concluded that
net export is providing an appropriate contribution in annual growth rate.
Figure 3: Contribution of net exports in GDP
Collapse of investment in mining sector
The investment failure in the mining sector continued to check the demand and need in the
Western Australia completely crashed down. During the trend terms, last demand in Western
Australia currently fall down two years or more than that and will be reversed as it was in
2011 September. Further, the export phase of mining sector continues to be booming its
variable yet considerable contribution the economy of Australia.
Mining export of Australia global price was thrice over the ten years to 2012, mining sector’s
investment spending increased from 2% to 8% of GDP. The mining boom shows gave a
major blow to the economy of Australia. In this article, it is all about the estimate of its
consequences, by making use of a macro-econometric model of economy of Australia. It
reviews the total research paper that is inclusive of additional discussions and facts of the
effect. The model measures and recommends that mining boom developed the living

standards considerably in Australia (Downes, Hanslow, & Tulip, 2014). By 2013, the mining
boom is predicted to increase the actual per capita domestic disposable income by about 13%,
increased actual wages by 6% and reduced the rate of unemployment by approx 1¼% point.
Although, not every element of the economy was appeared as beneficial. This boom resulted
in a big appreciation of Australia’s dollar, which was evaluated on several other sectors
available to trade like producing and agriculture.
This boom is summarised as a convergence several events which ultimately improved
commodity prices of mineral, resources manufacture and mining investment. This merge of
changes has improved purchasing capacity and Australian output quantity (Fleming &
Measham, 2015). Consequently, there were immense changes in specified rates, markedly on
exchange rate appreciation.
The merge of shocks in the manufacture, investment, income and relative price became an
immense change in the dynamics of economic activity. At the same time, it boomed
construction, importing and mining.
CHALLENGES FACES IN ENHANCING THEIR GROWTH
RATE
Low-wage growth
The penalty rate decision has been explained as a cut in pay which will decrease the living
standard for "millions" of Australians and has been seized by labour. “People who work in
retail and hospitality and pharmacy and fast food will get a wage cut”, said Opposition
Leader Bill Shorten (Bouis, Christensen & Cournède, 2013).
“Pay packet has no increase in wages in any other part”.
The announcement of plans for the introduction of legislation to prevent the commission's
decision from taking effect has been made by the Labour's shadow employment minister
Brendan O 'Connor. In terms of wage growth, Australians were struggling to make ends
meet, and some were also going backwards.
Australia’s growing population
Currently, population growth in Australia is predictable to have increase from 22 million
presently to 35.9 million by 2050.42, but it is slowing down. In this aspect; net overseas
migration and natural increase (the fertility rate exceeding the mortality rate) are the two

factors attributing to growth. Public policy for future faces significant challenges (Cingano,
2014). As the Treasury commented: a range of questions have to be thought of like impact on
urban infrastructure and also about the way services government delivers. The quality of the
policy settings which are in place and the quality of the policy decisions already taken, along
with numerous of those taken today will critically decide the answer to those questions.
Productivity Challenge
Now, the need is to understand, mainly by those who are in public sector that available
resources are restricted and will substantiate progressively so over time, operating should be
as efficient in best possible manner without under-providing goods of public. In addition to
that, major productivity challenge and further pressure on infrastructure are placed by the
population growth in cities (Baker, Bloom, & Davis, 2013). Further urban congestion issues
are contributed by the populations is approx. 7 million in Sydney and Melbourne, Brisbane
and Perth. In these cities; figure of population has been twice in comparison to current levels.
The social cost of the avoidable smaller working population has been estimated by the
Bureau of Infrastructure, Transport and Regional Economics. Particular groups are
participating in the workforce it is critical that opportunities are maximised with a smaller
working population. Professor John Quiggin commented this considered as one of the most
prolific contribution towards the society, as with this workforce as well as out of it to provide
people with the kinds of flexibility and enable them.
Issues in education and healthcare sector
Person’s quality of life, as well as participation in the workforce, is affected by health
condition according to ACCI. An additional schooling year can upsurge the rate of workforce
participation by around 0.5 percent for men and 4 percent for women. This was noted by
ACCI PC modelling on education. It is because adverse health conditions of individuals
affects their capacity to work, participation rates can be improved by a high-quality
healthcare system (Ahmed & Zlate, 2014). As per ACCI, more people are in the workforce if
the population is healthier and less number of people rely on government benefits. If the
barriers to the women participation are removed in the workforce, it will improve
productivity meeting underlying social goals.
In this aspect; the challenges that country face in levels of participation with an ageing
population, to make sure that investment by public is in the skills of a big section of
workforce (Bishop and et al. 2013). Participation of groups in the community is continued if

the workforce arrangements are flexible. These arrangements are inclusive of part-time work,
working from home. They might otherwise leave the workforce if arrangements are not
flexible.

REFERENCES
Books and Journal
Ahmed, S., & Zlate, A. (2014). Capital flows to emerging market economies: A brave new
world?. Journal of International Money and Finance, 48, 221-248.
Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. The
Quarterly Journal of Economics, 131(4), 1593-1636.
Bishop, J., Kent, C., Plumb, M. and Rayner, V., 2013. The resources boom and the Australian
economy: a sectoral analysis. RBA Bulletin, pp.39-50.
Bouis, R., Christensen, A. K., & Cournède, B. (2013). Deleveraging: Challenges, progress
and policies.
Cingano, F. (2014). Trends in income inequality and its impact on economic growth.
Downes, P. M., Hanslow, K., & Tulip, P. (2014). The effect of the mining boom on the
Australian economy.
Fleming, D. A., & Measham, T. G. (2015). Local economic impacts of an unconventional
energy boom: the coal seam gas industry in Australia. Australian Journal of
Agricultural and Resource Economics, 59(1), 78-94.
Fleming, D. A., & Measham, T. G. (2015). Local economic impacts of an unconventional
energy boom: the coal seam gas industry in Australia. Australian Journal of
Agricultural and Resource Economics, 59(1), 78-94.
Grafton, R. Q., & Lambie, N. R. (2014). Australia's liquefied natural gas sector: Past
developments, current challenges and ways forward. Australian Economic
Review, 47(4), 509-522.
Hatfield-Dodds, S., Schandl, H., Adams, P. D., Baynes, T. M., Brinsmead, T. S., Bryan, B.
A., ... & McCallum, R. (2015). Australia is' free to choose'economic growth and
falling environmental pressures. Nature, 527(7576), 49.
Shahiduzzaman, M., & Alam, K. (2014). Information technology and its changing roles to
economic growth and productivity in Australia. Telecommunications Policy, 38(2),
125-135.
Online
Australian GDP Growth Rate. (2017). [Online]. Available on <
https://tradingeconomics.com/australia/gdp-growth>. [Accessed on 22nd September
2017]

GDP in Australia. (2017). [Online]. Available on <
https://www.focus-economics.com/country-indicator/australia/gdp>. [Accessed on
22nd September 2017]