Detailed Analysis of the Australian Economy: 2015-2019 and Beyond

This report provides a comprehensive analysis of the Australian economy's performance from 2015 to 2019, examining key macroeconomic indicators such as Gross Domestic Product (GDP), unemployment rate, inflation, and trade. The trade analysis further delves into the terms of trade, current account, net foreign debt, and the value of the Australian dollar. The report highlights trends in economic growth, unemployment, and inflation, while also discussing the country's trade performance and the impact of the Australian dollar's devaluation. Furthermore, it identifies and discusses three major issues facing the Australian economy over the next 12 months, including rising inflation, trade protectionism, and government intervention, and explains why these issues are of significant concern. The report concludes with a summary of the key findings and a discussion of the future challenges and prospects for the Australian economy.

Running head: PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
Name of the Student
Name of the University
Author Note

2PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
Abstract
The study aims to overview the performance of the Austraian economy from the year of 2015
onwards. The findings of the study has considered four major economic indicators, such that,
gross domestic product (GDP), level of unemployment, rate of inflation and the trade owing to
do comparative analysis across the concerned period. As per the trade analysis, the terms of
TOT), the current account, net external debt and the value of the Australian currency. The paper
is reported to have the increasing GDP growth over the concerned period. The upward
movement of the GDP is expected to enhance the economic growth as GDP is accountable for
the signficant growth parameter for an economy. However, the rate of GDP growth has been
deteriorating over the period. Meanwhile, the number of employment has declined owing to
international trade dispute between the USA and China, regional political issues and ineffective
governmental policies. In addition to that, the economy has experineced with a significant
progress in TOT. This results in the improvemnet of the export earinings in respect of the import
cost. The growth in the export sector is expected to abate the financial debt. Howevr, the country
has faced upward trend in the foreign debt due to devaluation of the Australian currency. In this
context, the paper attempts to address some economic concerns related to the inadequate trade
protectionism, inappropriate government interventions and rising interest rate. The rising energy
price owing to the trade strife is another major issue for this economy. Moreover, the exorbotant
price charge in the real estate market is assumed to lower the wealth generation for the aspriring
home buyers.

3PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
Table of Contents
Introduction......................................................................................................................................4
Economic Growth............................................................................................................................4
Unemployment rate.........................................................................................................................6
Inflation............................................................................................................................................7
Trade................................................................................................................................................8
Terms of Trade............................................................................................................................8
Current Account...........................................................................................................................9
Net Foreign Debt.......................................................................................................................10
Value of Australian Dollar.........................................................................................................11
Major issues facing the Australian economy.................................................................................11
Conclusion.....................................................................................................................................12
References......................................................................................................................................14

4PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
Introduction
The assignment gives a report about the present (up to August 2019) economic state of
Australia based on four macroeconomic indicators of the country namely Gross Domestic
Product (GDP), Unemployment, Inflation and Trade. For better understanding of the
performance of trade in the economy; the economic indicator, trade is analyzed in respect to
Terms of Trade (TOT), Value of Australian dollar, Current Account and Net Foreign Debt. Each
and every indicator is examined and evaluated carefully over the period ranging from 2015 to
2019 and then the trend exhibited by every single economic indicator is predicted. The study also
forecasts as well as highlights the three prime issues that the nation will be going to face in the
next 12 months, completely depending on the analysis of the indicators for 2015, 2016, 2017,
2018 and 2019. Finally the report talk about why the discussed issues are of great concern for the
country.
Economic Growth
Gross Domestic Product (GDP) is marked as the primary indicator which depicts the
Economy Growth of any country (Panizza and Presbitero 2014). In this section both the GDP as
well as the GDP growth rate of Australia for the years 2015, 2016, 2017, 2018 and 2019 are
considered to study economic growth of the nation. The figure 1 illustrates the same.

5PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
GDP Growth Rate of GDP
Figure 1: GDP and GDP Growth Rate (2015-2019)
Source: (Tradingeconomics.com 2019)
The above demonstration has two graphs. One representing GDP while the other shows
the growth rate of GDP. It is found that even though the GDP has declined to $1210 in 2016
from $1351.5 but in 2018 it rose abruptly to $1432.4, therefore showing an overall upward trend.
On the other side it is revealed that the growth rate of GDP has slowed down over time. From the
study it can be said that although the economic growth has occurred across the selected period
but with time rate of economic growth has slowed down.

6PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
Unemployment rate
Figure 2: Unemployment rate (2015 - 2019)
Source: (Tradingeconomics.com 2019)
When the population of a country unable to secure a job, then it considered as a state of
unemployment. The country witnessed a recent rise in unemployment rate from 5% to 5.3% in
January and August respectively (Carvalho 2015). It was 5.2% in the month July. Although, the
trend of unemployment rate from 2015-2019 is declining. Many initiates taken by the
government to boost the employment generation in the country. It successfully added 41,000
additional jobs in the country approximately. As a result, recent rising trend of unemployment
rate may go down and helps to stabilize the market. The problem in entry level jobs pushed the
youth unemployment rate and created adverse effects on the overall output. Therefore, proper
policies and measures by the government will help the Australian economy.

7PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
Inflation
Inflation is identified as one of the vital indicators which assists in understanding a
country’s economic performances. For instance, Inflation rises during recovery phase of a
business cycle and falls at the time of recession (Galí 2015). The current rate of inflation in
Australia (2018-2019) is 1.90% but it was 1.26% in 2017-2018. This has spiked the medical
costs and fuel prices (ABC News 2019). The inflation rate of the nation is represented in the
following figure 3.
Figure 3: Rate of Inflation Rate (2015-2019)
Source: (Tradingeconomics.com 2019)
According to the left column diagram, illustrated in figure 2, while several ups and downs
are observed in case of the inflation rate of Australia but the right line diagram indicates a
complete upward rising inflation rate trend. This situation might lead to contraction of
Purchasing Power Parity (PPP) of the consumer reflecting lower amount of cumulative demand
which in turn lowers the aggregate supply (Hansen 2016).

8PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
Trade
Terms of Trade
Figure 4: Terms of trade movement (2015- 2019)
Source: (Tradingeconomics.com 2019)
On the account of figure, Australia is reported to exhibit an upward trend in the terms of
trade. The upward movement of the curve assures that there is more export earnings compared to
the import earnings (Qi and Zhang 2018). This impressive outcome leads to the enhancement in
the quality of life.

9PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
Current Account
Figure 5: Current account as % of GDP (2015 – 2019)
Source: (Tradingeconomics.com 2019)
Figure exhibits the nature of growth of the current account as a percentage of GDP in
order to explain the nation’s global financial position (Baker, Merkert and Kamruzzaman 2015).
The ascending trend of the current account completely supports the findings indicating that
Australia’s export sector has been performing better than the import sector.
Net Foreign Debt

10PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
Figure 6: Net foreign debt (2015 – 2019)
Source: (Aph.gov.au 2019)
Referring to the above diagram, Australia exhibits alarming growth in the case of net
foreign debt during the concerned period. The study finds that the country’s borrowing amount
in terms of international financial assistance has been surged up over the last couple of years
(Aichele and Felbermayr 2015). Overall, the country’s GDP is likely to get detrimental impact
owing to exorbitant burden of foreign debt.
Value of Australian Dollar
Figure 7: Change in value of Australian currency (2015 – 2019)
Source: (aph.gov.au 2019)
The Australian currency has faced a diminishing trend with respect to the dollar value in
the exchange market. This results in the augmentation of the import cost compared to the export
earnings (Paramati, Gupta and Roca 2015). The devaluation of the currency acts as a serious
threat to the purchasing capability of the consumers.

11PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
Major issues facing the Australian economy
The main concerns of the Australian economy are inflation, protectionism and
government intervention, which may affect the economy over the next 12 months. To control the
low interest rate of the country the Reserve Bank of Australia (RBA) has cut the interest rate
twice in 2019. The current rate of interest is 1%, which is record low. However, the inflation rate
is well below the 2%-3%. Whereas, the rate of inflation was 0% in March 2019. The low rate of
interest increased the problems such as falling retail figures, slow wage growth and investment
panic (Crabtree 2018). Even, the Australian dollar depreciated because of low interest rate,
which created pressure on the RBA. Recent rising rate of unemployment lowered the wage
growth and resulted in housing prices to fall. Therefore, the economy of Australia suffered due to
weak rate of interest.
To protect the economy from the trade escalation between China and US, government
imposed anti-dumping policy on steel and aluminium and asked to sign free trade agreement
while trading (Bishop and Cassidy 2017). As a result, it increased costs of consumers, less
efficient use of resources and cost of imports. Therefore, higher tariff revenue affected
household’s spending habit and global supply chain. The protectionism policy of federal
government will worse off the economic growth of the country. The intervention of the federal
government created a lot of issues in the country. The increased costs in energy sector due to
monopoly power of the players created uncertainty. Thus, minimum price of power and
disinvestment plan was enforced by the federal government to control the monopoly power of
the energy sector (Sinnott et al. 2015). It enhanced further turmoil in the industry by reducing the
investors’ confidence and creating pressure on smaller firms of energy sector. Therefore, the
government intervention will further create adverse effects on the economy.

12PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
Conclusion
As a concluding note, it is worth mentioning that even if the Australian economy has
experienced growth but the growth rate has diminished over the time period which includes
2015-2019. A downward trend is observed for unemployment rate although the total percent of
unemployed Australians has increased recently in 2019. The country experienced an insignificant
and unstable inflation rate across the years, however the forecasted trend of inflation rate is
found to be incrementing. In the context of trade, it is observed that the TOT has enhanced
resulting the improvement of Current Account as percentage of GDP but the devaluation of the
Australian Currency has intensified Net Foreign Debt of the country. The trend analysis leads to
the prediction that the rising inflation trend, inadequate protectionism and improper government
intervention are the three major concerns of Australia over the coming 12 months which
may generate several complications like intensification of housing problem, energy crisis, global
supply chain problem, and others.

13PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
References
ABC News (2019). Cost of living edges higher with motorists bearing the brunt, but parents get
childcare relief. [online] ABC News. Available at:
https://www.abc.net.au/news/2019-07-31/inflation-cpi-cost-of-living-prices-rise-eases-rate-cut-
pressure/11369224 [Accessed 26 Sep. 2019].
Aichele, R. and Felbermayr, G., 2015. Kyoto and carbon leakage: An empirical analysis of the
carbon content of bilateral trade. Review of Economics and Statistics, 97(1), pp.104-115.
Aph.gov.au (2019). Australia s foreign debt data and trends – Parliament of Australia. [online]
Aph.gov.au. Available at:
https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/
pubs/rp/rp0809/09rp30 [Accessed 26 Sep. 2019].
Baker, D., Merkert, R. and Kamruzzaman, M., 2015. Regional aviation and economic growth:
cointegration and causality analysis in Australia. Journal of Transport Geography, 43, pp.140-
150.
Bishop, J. and Cassidy, N., 2017. Insights into low wage growth in Australia. RBA Bulletin,
March, pp.13-20.
Carvalho, P., 2015. Youth unemployment in Australia. Policy: A Journal of Public Policy and
Ideas, 31(4), p.36.
Crabtree, L., 2018. Self-organised housing in Australia: housing diversity in an age of market
heat. International journal of housing policy, 18(1), pp.15-34.

14PERFORMANCE OF AUSTRALIAN ECONOMY (2015-2019)
Galí, J., 2015. Monetary policy, inflation, and the business cycle: an introduction to the new
Keynesian framework and its applications. Princeton University Press.
Hansen, B., 2016. A Study in the Theory of Inflation. Routledge.
Panizza, U. and Presbitero, A.F., 2014. Public debt and economic growth: is there a causal
effect?. Journal of Macroeconomics, 41, pp.21-41.
Paramati, S.R., Gupta, R. and Roca, E., 2015. Stock market interdependence between Australia
and its trading partners: does trade intensity matter?. Applied Economics, 47(49), pp.5303-5319.
Qi, C. and Zhang, J.X., 2018. The economic impacts of the China-Australia Free Trade
Agreement-A general equilibrium analysis. China Economic Review, 47, pp.1
Sinnott, R.O., Bayliss, C., Bromage, A., Galang, G., Grazioli, G., Greenwood, P., Macaulay, A.,
Morandini, L., Nogoorani, G., Nino Ruiz, M. and Tomko, M., 2015. The Australia urban‐
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