Australian Economy Report

This report analyzes the current state of the Australian economy using four key indicators: GDP growth, unemployment, inflation, and the balance of trade. The analysis reveals a sluggish economic growth rate, partly attributed to a high government debt-to-GDP ratio. While the unemployment rate has shown slight improvement, it remains a concern due to an aging population and technological advancements. Inflation remains relatively stable, contributing to a high cost of living. The balance of trade shows a narrowed surplus. The report identifies three major challenges: a budget deficit and increasing debt, a high cost of living, and a growing unemployment rate. The conclusion emphasizes the need for government intervention and policy implementation, along with a robust monitoring system, to address these long-term economic issues.

Running head: AUSTRALIAN ECONOMY
CURRENT STATE OF AUSTRALIAN ECONOMY
Name of student:
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CURRENT STATE OF AUSTRALIAN ECONOMY
Abstract
The purpose of this study is to provide a clear idea about the current state of
Australian economy. In order to get a clear overview of the study, this study considered four
indicators of economic development and particularly these indicators are considered because
it will show the current state of the economy in a proper manner. Among the indicators of
development- GDP, inflation, unemployment and trade is considered in the current study.
GDP is considered because it gives idea about country’s economic aspect; it is considered as
one of the primary indicator. This indicator mainly shows the value of all goods and services
produced over a period of time. GDP is generally calculated because it shows the health of
economy. Inflation on the other hand gives idea about the standard of living in a country. It
generally shows the level of price of goods and services which are rising, it also shows the
purchasing power. Now unemployment considered in this particular study because it will
provide idea about employment state of the economy. Unemployment within an economy
mainly occurs due to absence of proper job availability for the people who are seeking jobs.
Unemployment is mainly measured considering its rate, which shows unemployed people
divided by the number of people in the total labor participation. However, unemployment
may be of two types voluntary and involuntary. These two types again can be segmented
into- frictional unemployment, cyclical unemployment and structural unemployment. Finally
trade is taken as an indicator because it shows the medium where buying and selling takes
place. It mainly shows the transactions between buyer and seller. Here the buyer refers to
importers and sellers refer to exporters. Thus it shows the financial aspect of the economy.
After analyzing these indicators the three major issues faced by the Australian economy are:
deficit in budget, high standard of living and unemployment. After assessing the four
indicators it was observed that results from GDP shows that the Australian faces a sluggish
growth and the reason behind this sluggish growth is due to deficit in budget of government

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and the reason behind this deficit is the amount of debt which is very high Now the inflation
rate shows that Australian economy over the years faces a slight change with respect to
inflation rate and this is the reason behind high standard of living. This high cost of living
poses threat to the economy as it cannot be bearable for weaker sections of the economy to
maintain such high cost of living. Economy thus currently faces problems and unemployment
is also one of them, the high rate of unemployment is due to growing level aging population
and low availability of jobs for the labor force and this unemployment problem faced by the
economy creates problem in the long run and should be addressed with a proper measures.
Thus Australian economy should adopt policies to address the problems faced by the
economy, and not only implementation will solve this problems, country must set up proper
monitoring system which will surveillance the implementation of these policies.

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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Economic Growth...................................................................................................................4
Unemployment.......................................................................................................................6
Inflation..................................................................................................................................7
Balance of Trade.....................................................................................................................8
Major issues faced by Australian economy...............................................................................9
Budget deficit and increasing debt.........................................................................................9
Cost of living at global highs..................................................................................................9
Growing unemployment rate................................................................................................10
Conclusion................................................................................................................................10
References................................................................................................................................11

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Introduction
Australia comprises the mainland of its continent and many other islands. It is
considered as the thirteenth largest economy over the globe with a relatively low level of
poverty (Lim, Chua and Nguyen, 2013). Over the Australian economy has gone through ups
and downs in its structure of production and this is accredited to reasons like technological
changes, changes in consumption pattern and competition from other countries (Plumb, Kent
and Bishop, 2013).
The aim of this report is to explore the current state of Australian economy. For
exploring the state of the economy, four economic indicators are selected-economic growth,
unemployment, inflation rate and trade. A study on major issues faced by the economy is also
conducted in the study.
Discussion
The economic situation of Australia over the years has changed a lot. With respect to
development economy has shown development of various indicators and these indicators in
turn have shown its impact on countries development process. With globalization, economy
has participated in trade with various countries which again have contributed towards the
growth of the economy. Australian economy comprises of both the positive side and negative
side. The economy shows development in spite of being a diversified one. Most of the
population of the country lives in capital city and this is due to the fact of modernization and
different opportunities with respect to job and other services. 90% of the country’s population
lives within 100 kilometers of the coast and this is due to convenience reason. Although the
country follows equity principle yet there exists poverty, 2.2m people in Australia are
estimated to be living in poverty. Economy mainly comprises of high standard of living and

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high cost of living. Indigenous Australians experience disproportionate levels of educational,
employment and social disadvantage. These are the growing problems faced by the economy.
This study thus aimed at studying Australian economy in depth with respect to
indicators. The analysis of the economy is expected to give a glimpse of the current state of
the economy.
Economic Growth
Per Capita GDP of Australia ranked 18th in the world (Gwartney, 2013) .Service
sector of the economy mainly dominates and it comprises of 61.1% of the GDP. On the other
hand, mining sector comprises of 19% of GDP. Australia is one of the largest exporters of
coal and this is due to its natural resources. Economy heavily depends upon import of crude
oil and petroleum. Australian oil exports are high and comprise of big part of GDP. Now in
order to get an idea of GDP growth of Australia following graph below is observed.
Graph 1: GDP growth rate
Source: (Abs.gov, 2017)

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The above graph shows that economy has expanded from 0.8 percent in the June of
2017 and this result is much stronger than 0.3 percent in the first quarter of year. The reason
behind this increase is due to increase in domestic demand and net exports. The second
quarter shows an expansion from 1.7 percent to 1.8 percent. Thus over the years it can be
observed that GDP has followed a discrete pattern and this is due to several factors faced by
the economy. It can also be observed that the current level of economic expansion is an
unsustainable one. The reason behind this negative GDP growth is due to financial crisis
faced by the economy. From the year 2017, GDP again started to grow and this is due to
spending on food, clothing and household furnishings (Abs.gov, 2017). This increase in
consumption is largely due to fall in savings rate. For this reason Australian economy is
facing a sluggish growth and almost became stagnant.
Graph 2: Debt to GDP
Source: (Abs.gov, 2017)
The above graph shows government’s debt to GDP. Graph shows that government
debt is equivalent to 41.1 percent of country’s GDP in 2016. Government debt is mainly used
by investors to measure country’s ability to repay debts which affects in borrowing costs and

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government bond yields. The level of debt has increased from 9.7 percent to 41.1 percent
which is quite high. But In spite of this high debt Australian government’s debt compared to
other countries is much less (Brailsford, Handley & Maheswaran,2012).
Unemployment
Unemployment rate generally reflects country’s development in a wide sense and this
is due to the fact it is measured by dividing the number of unemployed to all employed in
labor force. Thus unemployment rate if high then it is expected that the country is
underperforming and falling in terms of GDP. Now Australian economy’s unemployment
rate can be considered.
Graph 3: Unemployment rate
Source: (Abs.gov, 2017)
The above graph shows that unemployment rate fell to 5.6 percent in July of 2017
from 5.7 percent in a month earlier. The graph shows that unemployment figure is consistent
over the years and it has changed its figure in a less significant way. There is not much
change in unemployment rate and this is due to growing ageing population and the recession

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faced by the economy. This ageing population has increased over the years because of
advancement of technology (Carvalho, 2015). Secondly, during recession period
unemployment rate is always high. Thus unemployment rate shows stagnancy and this is the
reason behind sluggish economic growth.
Inflation
Inflation rate is the rise in price level of goods and services while fall in purchasing
power. Inflation is measured on consumer price index. CPI shows the prices of basket
which consist of goods and services overtime. It mainly affects the fixed wage earners in a
broad sense and also discourages the population in terms of saving, as saving during presence
of inflation rate has no incentive (Chernov and Mueller, 2012). There are mainly three types
of inflation- cost push inflation, demand pull inflation and monetary inflation.
Graph 4: Inflation rate
Source: (Abs.gov, 2017)

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The above graph shows that presently consumer prices in Australia is 1.9
percent and this rate is low than the previous one which is 2.1 percent. This inflation rate is
obtained in the first quarter of 2017. It has been observed that over the year’s inflation rate
remained more or less same. This is the reason behind increasing high cost of living. The
inflation decreased from previous one due to slowdown in cost of housing and transport
(Abs.gov, 2017).
Balance of Trade
Balance of trade shows the difference between country’s imports and exports. It is
regarded as largest component of country’s balance of payment. Balance of trade generally
used as a statistical instrument that helps to understand strength of country’s economy versus
other countries’ economies and the flow of trade between nations. If Australian economy’s
balance of trade is considered then a idea about country’s basket of import export can be
observed.
Graph 5: Balance of trade
Source: (Abs.gov, 2017)

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The Australian economy shows a narrowed trade surplus of 48 percent and this
surplus was a unexpected one as previously it was observed that the balance of trade was
AUD 0.89 billion and the present figure was thus expected to be 0.88 billion. The graph
shows that the present trade surplus is smallest in the last three months. The reason behind
this smallest surplus is due to fall in export and decline in import (Harvie & Van Hoa, 2016).
Major issues faced by Australian economy
Australian economy though has shown growth in terms of several indicators but there
are some issues that may arise in the long run, it is thus desirable for the economy to take
prevention against those issues (Head, Ross and Bellamy, 2016) (Frost,2016). The three
major issues faced by the economy are discussed below.
Budget deficit and increasing debt
It has been observed by conducting the study, over the years Australia’s debt
percentage has increased at a high level and for this reason government is facing budget
deficit. This problem may pose huge threat to the economy in the next twelve years.
Australia’s growth is slow and if this problem of budget deficit not addressed then problem
arised will slowdown growth of the economy more. Thus government must implement
policies that will lower the increasing debt.
Cost of living at global highs
Country’s cost of living is high and this high cost of living may crop up problem
within economy in the long run. The reason behind this cost of living is the inflation rate
which is more or less same over the years. Thus country must adopt policies for lowering the
cost of living (Bloom, 2015).

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Growing unemployment rate
This study shows that unemployment within the country is increasing at a high level
and the reasons are growing aging population and less number of youth in the country. This
problem of aging population is due to advancement in technology. Country must address this
issue with suitable policies as this may pose large threat to country’s development process.
Conclusion
With growth and development Australian economy has faced several issues over the
years. So far country has been able to cope up with the problem. In the next twelve years
several other issues may rise within economy and they may pose huge threat to economy’s
development, so it is very important to address these issues with proper government
intervention and with a proper set up to monitor the implementation of policies adopted by
the government in order to escape problem in the long run.