BUS102 - Australia's GDP Growth Analysis and Luxembourg Comparison

This assignment provides an analysis of Australia's GDP growth, comparing it with Luxembourg. It examines the latest GDP growth figures for Australia, calculates the time it would take for Australia's GDP to overtake Luxembourg's, and identifies key contributors to Australia's economic growth. The assignment also discusses the differences between GDP and GDP per capita and their implications for a nation's wealth. It concludes with insights into the improved trend in Australia's growth rates and future economic improvements. Desklib offers a wide range of study resources, including similar assignments and past papers, to support students in their academic endeavors.

ECONOMICS RESPONSES 1
INTRODUCTION TO ECONOMICS
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ECONOMICS RESPONSES 2
Question1
The latest figure for the year-to-year GDP growth rate in Australia is 3.4% as at June quarter
(“https://www.abc.net.au/news/2018-09-05/gdp-june-quarter-2018/10202834”).
Luxembourg Australia
GDP growth rate= 1.7 per cent GDP growth rate = 3.4 per cent
(Obtained from “https://tradingeconomics.com/luxembourg/gdp-growth-annual”)
GDP per capita=$105,800 GDP per capita=$53,800
Since their GDP growth rate was sustained for 20 years, then the quarterly rate when the GDP
for Australia will overtake the one for Luxembourg will be given by the equation;
53800* x* y* 3.4 = 105800* y* 1.7
Where X is the rate and Y is the number of years for the GDP growth which is constant.
Solving that, X = (105800*1.7) / (53800* 3.4) = 0.98
Since g(annually) = (1+g (quarterly))4 -1(Kubiszewski, Costanza, Franco, Lawn 2013,p57)
Then g = 1.984 – 1 = 15.47- 1= 14.47
Therefore, Australia’s GDP will take 15 years to overtake the Luxembourg GDP. During the
fifteenth year, the GDP of Australia will be slightly above that of Luxembourg if their actual
growth rate remains constant as 3.4% for Australia and 1.7% for Luxembourg within the 20
years.

ECONOMICS RESPONSES 3
Question2
The household sector is one of the key contributors to the growth despite its previous pullbacks
of low wage growth and reducing house prices by contributing to less than half of the export
sector’s input. Net exports also performed well by contributing with modest 0.2 points which
underpinned the growth. Residential construction was also a main contributor to the growth.
Household saving is said to have fallen sharply and this shows that it trended poorly and hence a
conclusion can be generated that the performance of the sector in saving was really down.
Question3
The Australian economy shows an improved trend in the growth rates and one can foresee a
future improvement in the economy. Strong labor market available in the economy and the
critical move towards maximum employment of the citizens as well as the later increase in
wages and an inflation rate of goods and services promises a rise in the country’s GDP. It is also
consistently viewed that with the reducing net exports as well as the softer spending in the
household, 2018’s real GDP would aim higher to grow up to moderate by the latter half of the
year. The strong start of 2018’s quarter means growth can rise and become larger in the
September and December quarters even with little drops without posing a threat to the RBA
hence hope for higher rates.
Question4
GDP is a metric of the total market values of goods and services by produced by works in a
period (quarterly or yearly) of time (Altig, Christiano, Eichenbaum, and Linde 2011, p225).
GDP per Capita is a metric that comes from the GDP when divided by the size of the country’s
overall population. These two terms differ because, from the diagram, the GDP is greater than

ECONOMICS RESPONSES 4
the GDP per capita in the same year. This implies that the GDP normally increases with increase
in population while GDP per capita may decrease with an increase in population. The pattern
each follows seems to be the same because they are all computed from the same number of the
population. The riches of a nation is determined by the GDP while GDP per capita shows the
well-off in a country.

ECONOMICS RESPONSES 5
References
Altig, D., Christiano, L.J., Eichenbaum, M. and Linde, J., 2011. Firm-specific capital, nominal
rigidities and the business cycle. Review of Economic dynamics, 14(2), pp.225-247.
Kubiszewski, I., Costanza, R., Franco, C., Lawn, P., Talberth, J., Jackson, T. and Aylmer, C.,
2013. Beyond GDP: Measuring and achieving global genuine progress. Ecological Economics,
93, pp.57-68.
Links for articles read
https://tradingeconomics.com/luxembourg/gdp-growth-annual
https://www.abc.net.au/news/2018-09-05/gdp-june-quarter-2018/10202834