Economic Analysis of Australia: Recent Trends, Policies, and Growth

This report provides a comprehensive analysis of the Australian economy, focusing on its performance over the last five years. It examines key macroeconomic indicators, including GDP, unemployment rates, inflation, consumption expenditure, and trade dynamics, highlighting fluctuations and trends. The report delves into the economic policy framework, emphasizing employment generation, trade activities, and protection of domestic industries. It also explores the growth of the industrial sector and its contribution to the overall economic prosperity of Australia. The analysis draws on data from various sources, including Tradingeconomics.com, to provide a detailed understanding of the country's economic landscape. The report concludes by assessing the mixed trends of growth, emphasizing strengths in employment, consumption, purchasing power, and inflation while acknowledging challenges in the trade sector. The report is a valuable resource for understanding the Australian economy's trajectory and the factors driving its performance.

Running head: ECONOMY OF AUSTRALIA
Economy of Australia
Name of the Student
Name of the University
Author Note

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Introduction
The global economy has over the years. experienced considerable economic dynamics
and growth with different countries emerging as important and dominant players with time.
However, over the years, several economies have consistently remained as dominant and
influential ones in the global economic framework, with steady development, consistent
prosperity and growth in the economic parameters with time (Dilley 2012). The international
phenomena like that of Globalization, trade liberalization, technological innovations and
infrastructural development have facilitated the growth of these economies even more and
their industries, businesses, trade and commerce activities as well as the overall economic
welfare of the resident populations have increased manifold.
Australia is one of the primary ones of such highly developed and globally dominant
economies, which over the decades have shown impressive growth trends, much of which
can be attributed to the robust development of the industrial, commercial and the international
trade activities, which in turn contributed hugely in the overall economic growth of the
country and economic welfare and a comparatively higher standard of living of its residents.
The country has been performing positively in all the economic indicators and is also known
for its economic stability, a primary reason of which can be the policy framework and
efficient working of the government (Joshi et al. 2013). The prosperity of the economy of
Australia has also made it an attractive place for both the international investors as well as the
immigrant population of different countries across the globe. Australia has experienced huge
inflow of immigrants over the years, most of whom come in search of better economic
prospects and a higher standard of living.
In spite of all its stability and prosperity, the economic conditions of the country have
been subjected to considerable fluctuations and turmoil over the years. In the last five years

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also there have been significant economic activities in the country, having both positive as
well as negative implications, which can be seen from the trends of the different
macroeconomic indicators. In this context, the report analyse and discuss the Australian
economic growth in the last few years, thereby discussing the policies present in this aspect.
Lastly, the report tries to discuss the nature of growth of the industrial sector in the country in
the last few years.
Australia: Economic Profile
As can be seen from the above discussion, Australia is considered among the most
stable and developed economies across the globe over the years and is also the largest mixed
economy existing in the world. The economic indicators of the country also show this
massive economic prosperity of Australia as the same ranks fourth in global Nominal GDP
and is also the second wealthiest nations across the globe in terms of wealth per adult citizen,
ranking only below Switzerland.
Much of this growth and economic prosperity of the country and its residents can be
attributed to the long term industrial development and especially to the high productivity of
the country and too several booms which the country has experienced in its course of
development, which also includes the recent mining boom (Gibson, Carr and Warren 2012).
The trade relations of Australia with almost all the other major economies in the world and
their long-term persistence is also another primary reason behind the economic prosperity of
the country and the government and their policy framework play pivotal roles in sustaining
the economic prosperity and growth of the country over the years.
Economy of Australia (2012-2017)
In the last five years, the economy of Australia has been subjected to considerable
fluctuations and economic activities, much of which and its implications can be seen from the

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performances of the different macroeconomic indicators over this particular period of time.
These macroeconomic indicators primarily include the Gross Domestic Product and its
growth rates, the unemployment rate, the rate of inflation, the investment and consumption
expenditures and others, each having their own significance and implication on the growth of
the economy. These factors, for Australia are studied and analysed as follows:
GDP dynamics of Australia
The Gross Domestic Product of a country is a measure showing the total productivity
and its dynamics in the country, in terms of value of goods and services produced within the
country.
Figure 1: Gross Domestic Product of Australia
(Source: Tradingeconomics.com 2018)
The GDP of the country, which rose from 2012 to 2013, can be seen to be falling to
some extent post 2013. However, in 2017, the GDP rose to 1690 AUD billion, the hike being
quite impressive. The fluctuating GDP trend can be better explained by observing the GDP
growth rate trends in the concerned period, which is as follows:

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Figure 2: Australia: Growth Rate of GDP
(Source: Tradingeconomics.com 2018)
The GDP growth rate of the country can be seen to be subjected to considerable
fluctuations. However, the magnitude of fluctuations can be seen to be increasing with time,
with a huge negative trend in end 2016 and a rapid recovery in 2017, which in turn explains
the fall in the GDP of the country in 2015, 2016 and the more than proportionate increase in
the same in 2017 (Dolman, Gruen and Treasury 2012).
However, the GDP and its trend in the country cannot significantly express the overall
economic welfare of the population of the country as the same depends on the purchasing
power of the people and the amount of income accrued in their hands. For which the PPP
adjusted GDP per-capita has to be taken into account.

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Figure 3: PPP adjusted GDP per-capita
(Source: Tradingeconomics.com 2018)
This indicator has been increasing steadily which is opposite to that of the previous
ones.
However, apart from GDP and its variants there are also many other significant
macroeconomic indicators in a country and concentrating only on GDP, may yield biased
interpretations and assertions as the economic growth of a country is a much broader
phenomenon than only the growth in the GDP of the same. Taking this into consideration, the
other economic welfare indicators and their performance in Australia in the last five years are
as analysed as follows:
Consumption expenditure, 2012-2017
The amount of money spent on personal consumption of the population of the country also
highlights the economic welfare of the people residing in the country, which, in case of
Australia can be seen as follows:

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Figure 4: Spending on consumption in Australia
(Source: Tradingeconomics.com 2018)
This indicator of economic wellbeing can also be showing only positive trends
consistently over the specified duration. However, the increase in consumption expenditure
may also be due to increase in the overall price levels, which if true, may indicate towards a
fall in the economic welfare of the residents (Hatfield-Dodds et al. 2015). Thus, to see if the
increase in the consumption expenditure in Australia is due to increase in economic welfare
or due to increase in the overall price levels, the rate of inflation of the country needs to be
observed.

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Inflation Dynamics in the country
Figure 5: Inflation in Australia
(Source: Tradingeconomics.com 2018)
The inflation rate in the country, can be seen to be nearly 3% in 2014. However, post
2014 the same can be see to have decreased considerably to 1% in end 2016, with a following
increase in the last year. However, the rate is still at a moderate level near 2.1%. This in turn
indicates that the increase in the consumption expenditure in the county may not have been
due to increase in the inflation but may be due to the increase in the actual purchasing power
if the overall population of the country, which is also asserted by the PPP adjusted per-capita
GDP and its growth in Australia, in the last five years (Marston and McDonald 2013).
Unemployment dynamics
The economic welfare of the population of the country and the overall economic
health of the country itself also depends on the level of job creation and employment
generation in the country. This is because, with increase in employment generation, the

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economic abundance of a greater share of the population of the country increases, which in
turn increases their aggregate demand which in its turn results in an increase in the aggregate
supply, thereby increasing the overall productivity of in the country.
Figure 6: Unemployment in Australia
(Source: Tradingeconomics.com 2018)
As is evident from the above figure, the rate of unemployment, which increased
considerably from nearly 5.2% in 2012 to as high as 6.3% in the beginning of 2016, has
fallen to a considerably low level of 5.6% in the last year, thereby indicating that new jobs
are being created in the economy in the last few years (Marston and McDonald 2013). This to
some extent may also explain the GDP traits of the country in the last five years, which
showing considerable decline till 2016, started increasing visibly in 2017.
Trade dynamics, 2012-2017
Much of the economic prosperity of Australia also depends on the amount of exports,
imports and the trade balance of the country as a positive trade balance indicates towards
income inflow in the country and vice-versa. Keeping this into consideration, the export
growth in the country, in the concerned period can be seen as follows:

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Figure 7: Australia: Export volume, 2012-2017
(Source: Tradingeconomics.com 2018)
The export volume of the country can be seen to be showing a more or less positive trend in
the last five years, with a significant increase in the last year.
Figure 8: Australia: Balance of Trade, 2012-2017
(Source: Tradingeconomics.com 2018)
However, as is evident from the above figure, the trade balance of the country has
been mostly low and negative over the last five years, which in turn indicates that the import

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of the country is also high enough to sometimes even surpass the volume of exports (Plumb,
Kent and Bishop 2013).
From the above discussion, it can thus be concluded that the economy of Australia has
been experiencing mixed trends of growth, with impressive performance in the employment,
consumption, purchasing power and inflation sector and to some extent disappointing
performances in the trade sector. The GDP dynamics, however, show short term ups and
downs which can be explained by the other economic indicators.
Economic Policy Framework
Much of the economic performance of Australia and the overall economic welfare of
the residents in general, in the country, in spite of the negative performances in some aspects
can be attributed to the robust and efficient policy framework of the government of the
country. The primary components of this framework, which contributes towards the inherent
stability of the economy of the country are as follows:
 Employment generation- The economic policy framework of the country has been
pro-employment generation and the employment generation of the country has
increased considerably in the last couple of years with nearly 300,000 jobs being
created in the country in the last year itself, which to a considerable extent, explains
the purchasing power as well as the consumption expenditure in the country (Lim,
Chua and Nguyen 2013).
 Trade activities- Australia is a highly open economy and its economic policy
framework supports trade and commerce activities highly. This in turn has helped the
country to draw huge foreign investor’s attraction in terms of considerable Foreign
Direct Inflow in the country, which can be seen as follows:

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Figure 9: Australia: FDI inflow, 2012-2017
(Source: Tradingeconomics.com 2018)
The inflow, although decreased considerably in 2015, however can be seen to be
increasing considerably over the last couple of years, contributing to the increase in
the GDP of the country in the last year. This in turn is one of the reasons behind the
considerable increase in the economic prosperity and commercial aspects of the
country.
 Protection of domestic industries- In spite of being a highly open economy and
encouraging bilateral trade, the economic policy framework of Australia has
provisions of protection and financial support to the small and medium businesses
within the country, which in turn helps these businesses to face the stiff competitions
from the cost efficient big foreign multinationals and to grow and make themselves
sustainable (Lim, Chua and Nguyen 2013). This in turn also contributes in the
economic growth of the country, which in spite of being considerably fluctuating in
the recent years, is still comparatively higher than many other significant economies,
which can be seen from the following figure: