Economic Performance of Australia: A Comparative Analysis (2015-2019)

This report presents a comparative analysis of the Australian economy's performance between 2015 and 2019. It examines key macroeconomic indicators, including GDP growth, unemployment rate, and inflation, highlighting trends and changes over the period. The analysis reveals a slowdown in economic growth, a decrease in unemployment, and relatively stable inflation, though with shifts in inflationary pressures. The report also explores Australia's trade performance, including terms of trade and current account balance. Furthermore, it identifies and discusses critical issues facing the Australian economy, such as the decline in growth, the cooling housing market, and slow wage growth, providing insights into the challenges and developments in the Australian economic landscape. The report concludes by summarizing the key findings and implications of the analysis.

Running head: ECONOMICS
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Executive Summary
Objective of the report is to make a comparative analysis of performance trend of Australian
economy between 2015 and 2019. This has done by making a trend analysis of some important
economic variables since 2015. The different economic variables measure economic
performance in different areas. The first aspect to be considered is the movement of aggregate
output. This is measured by the trend movement of Gross Domestic Product of the country. Rate
of change in GDP is an indicative measure of economic growth. Evaluation of GDP growth trend
in Australia suggested that growth has slowed down in recent year relative to that in 2015. In
2015 economic growth was strengthened gaining support from housing boom and higher
consumer spending. These factors however are longer in force due to changing economic
condition leading to a slower growth. An import aspect indicating overall state of the economy is
the performance of labor market. This is measured by trend in unemployment rate. Currently
unemployment rate is at a low level compared to that in 2015. Low unemployment is mainly due
to the increase in part time employment which offset the loss in full time employment.
Movement of price level is another important measure to be considered when assessing
economic health of a country. Measure tracing movement of price level is termed as inflation
rate. Reserve Bank of Australia develops monetary policy measure to control the movement of
price level. RBA targets to keep the inflation rate within the limit ranging between 2 to 3 percent.
The inflation rate since 2015 though remain within the targeted range inflation rate is
comparatively lower in 2019 than accounted inflation in 2015. Factors adding some inflationary
pressure currently include food and transport prices. Price have lowered significantly for
financial service, education, health and household equipment. Australia being a highly open
economy, performance of trade greatly influences state of the economy. Aspects related to trade

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include movement of terms of trade, state of current account balance, movement of exchange
rate and external debt of the nation. Terms of trade of Australia has improved since 2015.
Balance of trade for Australia though remains at a deficit but with an increase in net export there
is a notable improvement in current account balance. Because of weak domestic and global
economic condition Australian dollar has depreciated in recent years which further support
export growth. Finally, examination of net foreign liabilities shows that debt in the external
sector has increased sharply.
Besides discussing current economic state of Australia, the paper investigates hurdles that
economies of Australia is currently undergoing. First, economic growth has declined to below
average level. With this the nation reached to the slowest ever growth rate. Second, sudden
cooling down of property market is currently creating tensions in the economy. House price has
declined sharply in capital cities like Melbourne and Sydney putting the economy at risk. Third,
both nominal and real wage in the country are recording a notably slow growth.

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Table of Contents
Introduction......................................................................................................................................4
Economic performance of Australia................................................................................................4
Three major issues concerning Australian economy.......................................................................9
Conclusion.....................................................................................................................................10
References list................................................................................................................................11

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Introduction
Different macroeconomic indicators determine state of an economy. In order to
understand state of an economy it is necessary to evaluate performance of these indicators. In
this report, current state of Australian economy has been analyzed using some selective
macroeconomic indicators. The objective is to make a comparative analysis between current
state of the economy and state of the economy in 2015. The comparative analysis of economic
performance in two different years actually measure economic progress that the nation made in
the interim range (Agenor and Montiel 2015). Apart from analyzing Australia’s economic state
at present, the paper also sheds light on three major issues concerning the economy.
Economic performance of Australia
Figure 1: Performance trend in economic growth of Australia
(Source: Tradingeconomics.com. 2019)
As observed from the above figure there is an overall declining trend in economic growth
of Australia since 2015. The accounted economic growth in Australia till the second quarter of

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2019 was 1.4 percent. In contrast, growth figure for the economy in 2015 was close to 2 percent.
The economic growth in 2015 was the result of a number of different factors. These include
household spending, boom in the housing sector and expansion of mining export (Jericho 2016).
Economic growth however began to fall after 2016. Since the third quarter of 2018, Australian
economy grew at a below average growth rate. Factors that are currently driving growth
performance of Australia include net export and government spending.
Figure 2: Performance trend in unemployment in Australia
(Source: Tradingeconomics.com. 2019)
So far as unemployment is concerned, Australian economy has shown improvement in
the labor market performance. The unemployment rate in December 2015 was 5.7 percent. In
contrast to unemployment rate in 2015, the last recorded unemployment figure in August 2019 is
5.3 percent. Besides this, there is an overtime downward trend in the rate of unemployment. The
decline in unemployment rate in Australia is mostly contributed from an increase in part time
employment.

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Figure 3: Performance trend in inflation rate in Australia
(Source: Tradingeconomics.com. 2019)
Keeping inflation rate within a targeted range is one of the major objective of monetary
policy in Australia. RBA targets to maintain an inflation rate ranged between 2 to 3 percent. The
trend analysis of inflation rate in Australia suggests that there is steady downfall in the
movement of price level. The accounted inflation rate in the fourth quarter of 2015 was close to 3
percent. With a decline in economic growth price level eased as well. The last recorded inflation
rate is 1.6 which is within the targeted range. As the latest figure suggests, food inflation in the
economy has reached to the highest level. In addition to food inflation, the transport price also
constituted a steady increase (Tradingeconomics.com. 2019). The inflationary pressure from
food and transport prices however offset by the sharp decline of health, insurance and financial
service, education and household equipment.

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Figure 4: Performance trend in Australia’s terms of trade
(Source: Abs.gov.au. 2019)
Terms of trade measures price of exported good relative to that of imported good
(Minford and Peel 2019). From the above figure it can asserts that Australian economy has
experienced an increase in terms of trade. The value of terms of trade index in December 2015
was 86.7 which increased to 111.6 in June 2019 indicating relatively strong trade position.

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Figure 5: State of Australia’s current account balance
(Source: Tradingeconomics.com. 2019)
Current account balance that mostly accounts trade balance remains at a deficit in most of
the years. Despite the deficit, current account balance in recent time can said to be improved
because of steady increase in export of Australia.
Figure 6: Net foreign debt of Australia
(Source: Tradingeconomics.com. 2019)
From the above figure it can be stated that Australia bears a considerably high burden of external
debt. The trend above shows a sharp increase in net foreign debt of Australia.

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Figure 7: Trend in value of Australian dollar
(Source: rba.gov.au. 2019)
The above figure measures value of Australian dollar relative to that of US dollar. The
trend suggests a decrease in value of Australian dollar meaning that Australian dollar in recent
year depreciated significantly in comparison to US dollar.
Three major issues concerning Australian economy
Despite a moderately good performance in some areas, Australian economy is currently
experiencing some issues that needs to addressed effectively. Globally, Australia is well
recognized for accounting a steady growth rate for a significantly long time. Since the third
quarter of 2018 however the economy began to slow down recording a growth rate that is below
the average growth. The economy has now reached to the historically lowest level of growth.
The weak growth rate hampered retail turnover in most sectors of the economy. The economy
grew only at 0.5 percentage point in June 2019. If this continue then the economy may head for a

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recessionary pressure (Letts 2019). Another factor concerning the economy is sudden slowdown
of housing market. Housing price in most of the capital cities has recorded sharp increase since
the last decade. After reaching peak in 2017, there is a sudden down fall in housing prices. Prices
in Sydney and Melbourne have dropped at a respective rate of 11.1 percent and 7.2 percent. The
cooling down of housing market in Australia is considered as one of highest 30 risks to the
global economic outlook in 2019 (Khadem 2019). An additional worrying factor for the
economy is the slow growth in wages. Both nominal and real wage growth reached to the lowest
level. The last accounted wage growth was only 0.5 percent. With inflation level remaining at a
steady state, real wage grew only at a rate of 1 percent. Wage is slowing down in both public and
private sector lowering average income of people along with a fall in consumers’ confidence and
associated spending (Bishop and Cassidy 2017). The excess capacity of labor market is one
factor affecting that is pushing wages down.
Conclusion
Comparison of current state of Australia’s economy to that in 2015 has revealed that in
some areas there is considerable improvement in performance while in some areas the
performance. The analysis of economic growth suggests that the economy is now growing at a
slower pace relative to that in 2015. The position of labor market in 2019 is stronger as compared
to 2015 which is reflected from a low level of unemployment. Price level of Australia has
remained relatively steady. Coming to international position of Australia, Australia enjoys a
privileged position as indicated from the favorable position of terms of trade and improvement in
current account balance. Three worrying factors for the economy at present are slow growth,
cooling down of housing market and a low wage growth.

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References list
Abs.gov.au. 2019. Browse Statistics. [online] Available at: https://www.abs.gov.au/browse?
opendocument&ref=topBar [Accessed 20 Sep. 2019].
Agénor, P.R. and Montiel, P.J., 2015. Development macroeconomics. Princeton University Press.
Bishop, J. and Cassidy, N., 2017. Insights into low wage growth in Australia. RBA Bulletin,
March, pp.13-20.
Jericho, G. 2016. Three reasons Australia's economy is so resilient – shopping, housing and, yes,
mining. [online] the Guardian. Available at:
https://www.theguardian.com/business/grogonomics/2016/mar/03/three-reasons-australias-
economy-is-so-resilient-shopping-housing-and-yes-mining [Accessed 24 Sep. 2019].
Khadem, N. 2019. Australia to see world's worst 2019 house price fall. [online] Available at:
https://www.abc.net.au/news/2019-01-16/australia-to-see-worst-fall-in-house-prices/10720406
[Accessed 24 Sep. 2019].
Letts, S. 2019. The economy may be struggling but the federal budget might already be back in
the black. [online] Available at: https://www.abc.net.au/news/2019-09-04/gdp-q2-
2019/11474470 [Accessed 24 Sep. 2019].
Minford, P. and Peel, D., 2019. Advanced macroeconomics: a primer. Edward Elgar Publishing.
rba.gov.au. 2019. Historical Data. [online] Available at:
https://www.rba.gov.au/statistics/historical-data.html#exchange-rates [Accessed 24 Sep. 2019].