Comprehensive Report: Australian Economic Performance (2015-2019)

This report provides a comprehensive analysis of the Australian economy, examining key economic indicators from 2015 to 2019. It focuses on GDP growth, unemployment rates, inflation trends, and trade performance, including terms of trade and current account data. The report highlights the declining GDP growth rate, fluctuations in inflation, and changes in unemployment. It also discusses the impact of trade factors on the economy. The analysis suggests potential economic challenges, such as a possible recession, increased unemployment, and currency depreciation. The report concludes by summarizing the current economic condition and the potential future issues Australia may face. The report uses data from various sources to support its findings and includes a detailed table of contents and references.

Running head: Economic Issues in Australia
Economic Issues in Australia
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1Economic Issues in Australia
Abstract
This report discussed about the key economic indicators to assess and analyse the economic
condition of Australia. The key economic indicators that are considered for analysis were GDP,
unemployment, inflation and trade. The report further made the analysis that the GDP growth
rate of the country has declined over the years and the case is same for unemployment rate.
However, fall in unemployment is good sign for a country but decline in GDP growth rate is not.
On the other hand, it has been found that the trade factors have improved and the inflation rate
has also grown in the last five years that is from 2015 to 2019. Therefore, increase in trade
parameters namely terms of trade and current account are positive change for the economy of the
country. Conversely, rise in inflation rate is not good indication but in case of Australia it is a
positive change because the inflation is so low that it should rise by 2% or more for a smooth
growth of the economy. The trend showed that inflation might rise in future but currently is not
enough to drive an economy at a faster rate. Therefore, the analysis of the key economic
indicators explained that the economy of Australia might face economic recession, increase in
unemployment rate and currency depreciation in next one year.

2Economic Issues in Australia
Table of Contents
Introduction......................................................................................................................................3
Key economic indicators affecting Australian economy.................................................................3
Inflation rate in Australia.............................................................................................................3
Gross Domestic Product of Australia..........................................................................................4
Trade in Australia........................................................................................................................5
Unemployment in Australia.........................................................................................................7
Major issues affecting economy of Australia..................................................................................8
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

3Economic Issues in Australia
Introduction
The report studies the key economic indicators of Australia. The analysis of indicators are
made and along with trend analysis the report discusses the current scenario of the Australian
economy. Emphasizing on the current economic condition discussion on three major issues that
the country would be facing are being discussed. At first the report discusses and analyzes key
economic indicators and thereby gives description on the major issues. Thus, the report gives a
critical overview of the economy of Australia.
Key economic indicators affecting Australian economy
The key economic indicators that significantly reflect the economic variation of the
Australian economy are gross domestic product, inflation, unemployment and trade. Thus, the
analysis of these indicators are being made using the data of the last five years. The trend of the
considered data are being analysed and the possible associated movement of the economy are
discussed.
Inflation rate in Australia

4Economic Issues in Australia
Inflation rate in Australia has always been low and the reason behind this are the
effective policies that the country implemented over the years. The key policy that the country
implemented to control inflation rate is inflation targeting. The successfulness of the policy can
be seen by observing the historical data of inflation of the country (Bishop and Cassidy 2017). In
figure 1, it can be seen that the inflation rate in Australia in 2015 was at around 1.5%, which is
considerably low. In 2016, it reached 1% level and is the lowest level of inflation recorded in the
last five years. In 2017 and in mid-2018, the rate of inflation reached over 2%. These are the two
instances when inflation rate went over 2% from 2015-2019. From the third quarter of 2018, the
inflation rate started to and currently in 2019 the inflation rate has been recorded at 1.6%. It thus
can be said that the average rate of inflation is lower than 2% and it is not healthy for an
economy because it hampers the wage expectation and causes fall in demand and contraction of
the market.
Figure 1: Inflation in Australia
Source: (Tradingeconomics.com 2019)
Gross Domestic Product of Australia

5Economic Issues in Australia
Figure 2: Growth in GDP
Source: (Tradingeconomies.com 2019)
Gross domestic product is one of the important economic indicators because it reflects the total
output an economy produces in a year. Thus, more is the GDP better is the economic condition
of an economy. It is evident from the GDP high GDP values of developed countries. Although,
the
GDP
should grow over the years because then only an economy will grow or else increasing inflation
will reduce the real GDP (Anwar and Akbar 2018). Therefore, analysis of growth rate of GDP is
the most important thing for an economy. Figure 2 given above depicts that the growth of
Australia in last five years have been significantly sluggish. The highest GDP growth rate of
Australia in the last five years is 1% and the lowest is 0%. The GDP of Australia in 2018 was
$1432 billion and in 2016 it was $1210 billion. Thus, it can be observed that when the GHDP
growth rate was low then the total GDP was low and vice versa.
Figure 3: GDP of Australia
Source: (Fred.stlouisfed.org 2019)

6Economic Issues in Australia
However, from figure 2 it can be said that the GDP growth has a downward trend and
thus it shows that the economy currently is suffering from economic slowdown.
Trade in Australia
Figure 4: Terms of
Trade
Source: (Tradingeconomics.com 2019)
Australia is an open economy and thus it make trade with many countries in the world.
Australia is considered among the largest exporters of agricultural and mining products. Its most
of the export earnings come from the exports made to China, Japan, India, South Korea and
Indonesia. Australia majorly imports from the United States and China. Therefore, the country
hugely depends on trade.
Figure 4 shows the terms of trade data for last five years for Australia. It is observed in
the figure that the terms of trade index has improved for the country over the years and thus the
trend line in the figure is upward sloping (Schmitt‐Grohé and Uribe 2016). The curve might be
skewed but it has moved upward gradually. In 2015, the terms of trade index was just over 80
and it increased to 100 in 2019.

7Economic Issues in Australia
Figure 5: Current account
Source: (Tradingeconomics.com 2019)
Similarly, the trend on current account is same as in the case for terms of trade. Until
beginning of 2019, the current account was below zero. The current account value went above
zero in the first half of 2019 and recently it touched the highest mark in last five years that is
above 5000 mark. Therefore, the terms of trade progress show that the economy of the country is
performing well.

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Unemployment in Australia
Figure 6: Unemployment rate in Australia
Source: (Tradingeconomics.com 2019)
Table 1: State-wise unemployment rate in Australia in 2018
Source: (Lmip.gov.au 2019)
Unemployment is an important concern for any economy and thus Australia has also
made efforts to keep its unemployment rate low. In figure 6, it can be observed that the
unemployment rate in Australia has decreased over the years and thus it is a positive aspect of
the economy of the country (Kroft and Notowidigdo 2016). Unemployment rate was 6.3% in
2015 and with gradual decrease it reached 5.2% in 2019. However, it is important to consider the
state-wise data of unemployment because there is disparity in unemployment rate among the
states in Australia and is evident from Table 1 given above. In South Australia unemployment
rate in 2018 was 6.9% whereas in Australian Capital Territory the rate was 3.5%. Therefore, to

9Economic Issues in Australia
understand economic condition from the perspective of unemployment it is necessary to consider
state-wise unemployment rate.
Major issues affecting economy of Australia
From the above analysis made on the key economic indicators it can be said that the
economic condition of Australia seems good from perspective of unemployment and trade
whereas it is not very promising from the perspective of GDP growth rate and inflation rate. The
analysis show that the inflation rate is very low that it might hamper the growth rate because due
to low inflation rate people expect low increment in low wage rate and thus consumes less and
thus there will be low demand. It further decreases the GDP of the country and is evident from
the declining GDP growth rate. Thus, persisting low inflation rate would lead to economic
recession. Owing to this the economy will face the second issues and that is increase in
unemployment rate. Due to low output the industry will shrink and there will be job cuts leading
to more unemployment(Mols and Jetten 2016). Thus, in this dwindling condition the Australian
dollar will depreciate in the international market and thereby the trade balance of the country
declines. Thus, the three major issues that Australia might face in the next one year are increase
in unemployment, economic recession and currency depreciation.
Conclusion
The discussion made on key economic indicators to analyse the economic condition of
Australia leads to the inference that the economic indicators are important parameters to
understand the economic movements of the country. The trend analysis of the unemployment
rate, inflation rate, GDP growth rate, terms of trade and current account implied that the
condition of Australian economy is dwindling and in near future it may face economic issues like
economic recession, currency depreciation and increase in unemployment rate.

10Economic Issues in Australia
References
Anwar, A.I. and Akbar, A., 2018. The Effect Of Credit To The Inflation Rate Through Gross
Domestic Product In Indonesia. EcceS (Economics, Social, and Development Studies), 5(2),
pp.78-93.
Bishop, J. and Cassidy, N., 2017. Insights into low wage growth in Australia. RBA Bulletin,
March, pp.13-20.
Fred.stlouisfed.org (2019). Gross Domestic Product for Australia. [online] Fred.stlouisfed.org.
Available at: https://fred.stlouisfed.org/series/MKTGDPAUA646NWDB#0.
Kroft, K. and Notowidigdo, M.J., 2016. Should unemployment insurance vary with the
unemployment rate? Theory and evidence. The Review of Economic Studies, 83(3), pp.1092-
1124.
Lmip.gov.au (2019). Welcome to the Labour Market Information Portal.. [online] Lmip.gov.au.
Available at: http://lmip.gov.au/default.aspx?LMIP/LFR_SAFOUR/LFR_UnemploymentRate.
Mols, F. and Jetten, J., 2016. Explaining the appeal of populist right‐wing parties in times of
economic prosperity. Political Psychology, 37(2), pp.275-292.
Schmitt‐Grohé, S. and Uribe, M., 2018. How Important are Terms‐Of‐Trade
Shocks?. International Economic Review, 59(1), pp.85-111.
Tradingeconomics.com (2019). Australia Current Account | 2019 | Data | Chart | Calendar |
Forecast | News. [online] Tradingeconomics.com. Available at:
https://tradingeconomics.com/australia/current-account.
Tradingeconomics.com (2019). Australia GDP Growth Rate | 2019 | Data | Chart | Calendar |
Forecast | News. [online] Tradingeconomics.com. Available at:
https://tradingeconomics.com/australia/gdp-growth.
Tradingeconomics.com (2019). Australia Inflation Rate | 2019 | Data | Chart | Calendar |
Forecast | News. [online] Tradingeconomics.com. Available at:
https://tradingeconomics.com/australia/inflation-cpi.

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Tradingeconomics.com (2019). Australia Terms of Trade | 2019 | Data | Chart | Calendar |
Forecast | News. [online] Tradingeconomics.com. Available at:
https://tradingeconomics.com/australia/terms-of-trade.
Tradingeconomics.com (2019). Australia Unemployment Rate | 2019 | Data | Chart | Calendar |
Forecast. [online] Tradingeconomics.com. Available at:
https://tradingeconomics.com/australia/unemployment-rate