AUSTRALIA'S ECONOMIC GROWTH 1
Added on 2020-03-28
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FinanceEconomics
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AUSTRALIA’S ECONOMIC GROWTH1AUSTRALIA’S ECONOMIC GROWTHBy (Name)Name of the class (course)The Course instructor (Professor)The InstitutionThe City and State locationThe Date
AUSTRALIA’S ECONOMIC GROWTH2Table of Contents1.0.Introduction.....................................................................................................................................31.1.Brief overview of Australia.........................................................................................................31.2.Real Gross Domestic Product......................................................................................................31.3.Real GDP Growth Rate................................................................................................................42.0.Australia’s Economic Growth..........................................................................................................42.1.Sources of Economic Growth Rate in Australia...........................................................................52.1.1.Growth in exports................................................................................................................52.1.1.1.Export composition 2015-2016 financial years............................................................62.1.1.2.Strong Performance of Visitor Economy Exports........................................................62.1.1.3.Export of Minerals........................................................................................................72.1.2.Housing Boom.....................................................................................................................92.1.3.Rise in Household Consumption........................................................................................102.1.4.Low and Relatively Stable Inflation...................................................................................122.2.Obstacles to Australian Economic Progress...............................................................................142.2.1.Slow Wage Growth............................................................................................................142.2.2.Business Investments are falling........................................................................................142.2.3.Lagging Business Confidence.............................................................................................162.3.Government Plans to Boost Economic Growth and Development.............................................162.3.1.Reduction of Taxes............................................................................................................172.3.2.Improving Tourism Industry..............................................................................................172.3.3.Infrastructure Development...............................................................................................182.3.4.Enhancing Education and Training....................................................................................19Conclusion.................................................................................................................................................19Bibliography..............................................................................................................................................21
AUSTRALIA’S ECONOMIC GROWTH31.0.Introduction1.1.Brief overview of AustraliaAustralia has experienced a remarkable economic growth untouched by the recession since 1991. This country has an open economy characterized by minimal restrictions on goods and services from the international market. Australia’s diverse and plenteous natural resources have attracted high number of foreign direct investments. This country is a net exporter of food, energy and other natural resources like iron ore. The services are essential to economic progress as they contribute approximately 75% of the employment and 70% of the Gross Domestic Product[ CITATION Cen173 \l 1033 ]. The government of this country allows considerable autonomy in the economy and thus Australia is ranked fifth when it comes to economic freedom.Moreover, Australia undertakes a crucial role in the G-20, Pacific Economic Cooperation (APEC), World Trade Organization (WTO), and other trade agreements. The top trading partnersof this economy incorporate China, Japan, South Korea, United States and India[ CITATION Glo17 \l 1033 ]. Therefore, this report assesses economic growth in Australia from 2012 to 2017. The paper analyzes trends in the real GDP growth rate, factors causing economic growth, headwinds to economic progress and government measures to attain potential Gross Domestic Product. 1.2.Real Gross Domestic ProductReal Gross Domestic Product refers to an economic instrument that appraises the inflation-adjusted market prices of the overall goods and services manufactured in an economy during a particular period. This measure avails a broad estimation of economic expansion, and it is also an important gauge of the health of an economy[ CITATION Arn13 \p 65 \l 1033 ]. Therefore,
AUSTRALIA’S ECONOMIC GROWTH4the government and other policymakers make use of the real GDP to determine if an economy needs a boost or restraint. 1.3.Real GDP Growth RateReal GDP growth rate entails the annual percentage variations in the real Gross DomesticProduct. By assessing the real GDP growth rate, we can tell if an economy is contracting or expanding. Furthermore, the investors usually make use of this measure to make adjustments in their investment portfolios[ CITATION Wil121 \p 72 \l 1033 ]. Those economies with high GDP growth rate are known to attract a large number of investors for their corporate bonds and stocks.2.0.Australia’s Economic GrowthGraph 1: Real GDP growth rate (2012-2016)2012201320142015201600.511.522.533.54Australia's Real GDP growth rateAustralia's Real GDP growth rate%Source: The World BankIn the last five years, Australia has recorded remarkable annual economic growth rates. Between 2012 and 2016, the country’s economic growth has been above 2% which is a sign of a
AUSTRALIA’S ECONOMIC GROWTH5healthy economy. However, it is evident that the economic expansion registered in 2012 was higher than that of the four successive years. In 2012, the country’s economic growth rate was 3.63% while in 2016 the growth rate stood at 2.77%[ CITATION The \l 1033 ]. 2.1.Sources of Economic Growth Rate in Australia2.1.1.Growth in exports2012201320142015201601234567Exports of goods and services (annual % growth)Exports of goods and services (annual % growth)%Graph 2: Source - The World BankAustralia’s exports to the international market contribute significantly to the economic progress of the country. Data from the chart two above shows that the exports of Australia have been growing steadily in last five years. In 2016, the annual expansion in Australia’s exports was6.67 % compared to 5% recorded in 2012[ CITATION The172 \l 1033 ]. The rise in export earnings has helped Australia to maintain a healthy economic development.
AUSTRALIA’S ECONOMIC GROWTH62.1.1.1.Export composition 2015-2016 financial years12.8412.414.37.421.80.3Composition of Australian ExportsFoodMineral and FuelsOther Primary ProductsManufacturesOther goods including goldServicesBOP adjustmentChart 1: Source - Australian Trade and Investment CommissionThe 2015-2016 composition of Australia’s exports exhibits the importance of minerals to economic growth and development of this particular economy. The mineral and fuels contributedthe highest percentage of the exports, that is, 41%. The services came second with 21.8% and manufactures third, contributing 14.3% of the total exports[ CITATION The176 \l 1033 ]. 2.1.1.2.Strong Performance of Visitor Economy ExportsThe visitor economy exports entail the spending within an economy by foreign tourists for both leisure trips and business incorporating transportation expenditure[ CITATION Nil13 \p 69 \l 1033 ]. In recent years, the earnings from Australia’s visitor economy have been on the increaseand thus contributing to economic expansion. For example, in the 2015-2016 trading period, the visitor economy export income stood at 44.8 billion Australian Dollars. This was more than 18%increase from what was received in a 2014-2015 financial year[ CITATION The176 \l 1033 ].
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