Comprehensive Analysis of the Australian Economy (ECON 101)

This report provides a comprehensive analysis of the Australian economy, focusing on key macroeconomic variables and concepts. It begins with an introduction to economics, highlighting the importance of macroeconomics and its application to the Australian context. The report examines the concept of stable economic equilibrium, exploring the interplay of supply and demand. It then analyzes the stability of the Australian economy, using GDP growth rate as a primary indicator. The role of government intervention in wealth creation and distribution is discussed, along with a critical assessment of the Australian economy's performance. The report concludes that while the Australian economy demonstrates some strengths, such as export growth, there are areas of concern, including unemployment and inflation. The author suggests government intervention through monetary and fiscal policy to address these issues and promote long-term economic stability. The report includes relevant diagrams and references to support its analysis.

ECONOMY ANALYSIS

Table of Contents
INTRODUCTION...........................................................................................................................1
ANALYSIS......................................................................................................................................1
Stable economic equilibrium .................................................................................................1
The stability of the Australian economy................................................................................2
Intervention of government in the creation and distribution of income.................................3
Critical analysis of the Australian economy...........................................................................4
CONCLUSION ...............................................................................................................................4
REFERENCES ...............................................................................................................................6

INTRODUCTION
Economics is wide concept which recognizes manufacturing goods and services, transfer
of wealth and supply and demand in the environment. Economics is a broad study of two
environment, micro and macro. The study in this environment will focus on the macro economic
variables and concepts. The analysis of the Australian economic will be based on the elements of
the macro economic environment (Shahbaz, Shamim and Aamir, 2010). The environment
includes GDP, interest rate, concept of inflation and deflation rates, unemployment rate etc.
Moreover, the assignment will focus on the importance of government intervention in the
distribution and creation of wealth in the country. Also, it will discuss about the different factors
that can be used to evaluate the performance of the economy. A discussion of the concept of
economic equilibrium. Besides that, the prime intent of the assignment is to evaluate the
economic conditions of Australian economy and suggest policies to support the economy.
ANALYSIS
Stable economic equilibrium
A stable equilibrium is considered to achieved when the economy of a country is in
constant growth and experiences positive changes from the previous year. The concept is
dependent on two factors, demand and supply of goods and services. Equilibrium is said to be in
place when these two factors are equal in their value in the economy. Any hike or depletion in
either of the two factors cause a change in the state of equilibrium, and this may have an
affirmative or adverse effect on the growth of the economy. The disturbance in the economic
growth may cause a serious change in the condition of the same economy
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The above diagram depicts the effect of demand and supply on the equilibrium in the
economy. The price and quantity of the goods and services are marked on the X and Y axis of
the graph. The point of intersection of the demand and supply curve is marked as E in the
diagram which depicts the point of Equilibrium (Hatfield, and Et.al, 2013 ). The point AB
depicts the condition of surplus of goods and services in the economy which happens when the
demand and low and the supply is high, this gives rise to upward shift of price. Whereas, when
the demand for the quantity is high and supply is low, it leads to downward shift of price. This
condition is known as deficit which is denoted by CE1.
The stability of the Australian economy
For the analysis of the economic condition of the Australian economic many elements are
considered by the analysts. Gross domestic product rate (GDP) is one of the most precise
element to evaluate the condition of the economy. GDP is the monetary value of the total goods
and services that are produced in the country during the course of one year.
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Illustration 1: GDP growth rate of Australia
(Source: Australian GDP Growth Rate, 2017)
The above chart depicts that GDP growth rate of Australia. It can be seen that there is a
certain fluctuation in every quarter of the year, with positive and negative variances. The GDP
standards decide the GDP rate to be between 2-3 %, and the Australian economic is not able to
reach the bench mark from the last 3 years. Therefore, this situation concludes that the Australian
economy is not stable and deficit or surplus condition is likely in the country.
Intervention of government in the creation and distribution of income
Government intervention refers to interfere of government of a nation in order to make
certain changes in the economy of the country. Monetary and fiscal policy are two tools by
which the government can intervene in the economic activities of the country (Woodford, 2011).
Moreover, there are several causes of government intervention in the distribution of wealth and
the manufacturing of the goods and services. These causes are :
 When there is a critical situation of market failure, the government intervention is
important to resolve the prevailing issue.
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 The government may also intervene in production of goods and services to ensure the
distribution of the created wealth equally among the population of the county. The
economy starts to grow when there is equal distribution (Poynter, 2012).
 The government intervention is significant in order to enhance overall production of the
country.
 In order to reduce the unemployment in the country the government intervenes.
Critical analysis of the Australian economy
Australia has grown its economy widely in the last two decades becoming the wealthiest
nation in the Asia pacific region of the globe. The prime goods and services which are exported
by the nation were mining and agricultural goods. The two mentioned sources are still the
highest contributing elements in the GDP. At the end of the Jan- March quarter the real domestic
product was increased by the rate of 0.8%, recording the highest in the last 25 years. The export
growth rate flourished more than any other country the world and the nominal GDP of the county
has also risen at a better rate from the previous year. Also, the productivity of the labour has
grown with a better rate which depicts that economy of Australia is in a health condition in the
current scenario.
On the contrary part of the unemployment rate of the country is 5.6%, which is
considered to be quite high. Also, the inflation rate is standard to be low for a economy but in the
case of Australia the inflation rate is moderate. In order to bring the situation under control
regarding these two factors, the government is suggested to provide the business with more
resources which will enhance the productivity. Which will lead to demand for human resources
to work in the company, reducing the unemployment in the country. Also, the government needs
to increase the interest rate to control the money flow. This will stabilize the inflation rate in the
economy (Ciccarelli and Mojon, 2010).
CONCLUSION
The assignment concludes that the condition of the Australian economy is not stable. It
has been fluctuating in all the quarters in the last 2 years which. Moreover, the health of the
Australian economy is good but they need to make the suggested changes to control the inflation
rate. Also, the government can intervene through the use of monetary and fiscal policy. The
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issues such as market failure and equal distribution can be fixed with intervention of
government.
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REFERENCES
Books and journals
Ciccarelli, M., & Mojon, B. (2010). Global inflation. The Review of Economics and Statistics.
92(3). 524-535.
Hatfield, & Et.al. (2013). Stability and competitive equilibrium in trading networks. Journal of
Political Economy, 121(5), pp.966-1005.
Poynter, T. A. (2012). Multinational enterprises and government intervention (Vol. 32).
Routledge.
Shahbaz, M., Shamim, S. A., & Aamir, N. (2010). Macroeconomic environment and financial
sector's performance: econometric evidence from three traditional approaches. IUP
Journal of Financial Economics. 8(1/2). 103.
Woodford, M., (2011). Interest and prices: Foundations of a theory of monetary policy.
princeton university press.
Online
Australian GDP Growth Rate, 2017. [Online]. Available through:
<https://tradingeconomics.com/australia/gdp-growth> [Accessed on 25rd September 2017].
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