Macroeconomics Assignment: Australia Economic Progress Report

This report, prepared for RMIT University's Macroeconomics course, provides a comprehensive analysis of the Australian economy. It begins with an examination of current economic events, specifically the Monetary Policy Committee's stance and concerns regarding global growth and the US-China trade war. The report then delves into GDP highlights, including a graphical representation of GDP per capita and the two consumption categories with the highest growth. It also analyzes the labor market, presenting unemployment data and highlighting occupational trends. Price movements, particularly inflation trends since 1973, are graphically captured. Finally, the report identifies key risk factors, focusing on the potential impact of a slowing Chinese economy on Australia's exports, investment, and overall economic performance, including potential impacts on government revenue and budget deficits.

RMIT University
MACROECONOMICS
STUDENT ID:
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Australia Economic Progress Report
Current Events
A relevant current event with implications for the domestic economy is the policy stance of
the MPC (Monetary Policy Committee) in March 2019. While the cash rate has remained
static at 1.5% over the last year, the key aspect is the rising concerns on global growth
particularly with regards to China. The latest minutes of the MPC highlight the risks posed to
the Australian economic recovery by the slowdown in China. Also, the continuation of trade
war between US-China do not auger well for global commodity trade (RBA, 2019). The net
impact is that the market participants are confident of a future rate cut as early as by the end
of calendar year 2019 so as to give a boost to the ailing domestic economy.
It is expected that reduction of cash rate would lead to reduction of interest rate. This would
trigger an increase in the aggregate demand as there would be higher demand for credit. This
is expected to lead to increased spending by consumers (Arnold, 2015). This in-turn would
lead to uptick of private investment cycle as new capacities would be required to fulfil the
higher demand. Unemployment is also expected to decrease on account of higher economic
activity. However, this might lead to higher rate of inflation in the short run which may
adversely impact the currency rate (Mankiw, 2014).
GDP Highlights
The appropriate graph drawn in Excel depicting GDP per capita trend is illustrated as
follows.
.

The two consumption categories that have registered the highest growth rate in the most
recent quarter are stated below.
 Transport Services
 Insurance & Other Financial Services
Labour Market Highlights
The required graph for unemployment comparison of all population with the two genders is
illustrated below.

 “Community and Personal Services” is the occupation that has shown the highest
percentage change in persons employed in the most recent quarter.
 “Professionals” is the occupation category which has seen a switchover in gender
concentration.
 “Professionals” is the occupation category with the gender difference being the least for
the complete time period of data availability.
 “Clerical and Administrative Workers” is the occupation category with a higher
representation of females than males for the complete time period of data availability.
Price Movements
For the specific groups , the inflation trend since September 1973 has been graphically
captured below.
As per the data provided, during the 1990’s highest variability in inflation was visible for
housing inflation.
Risk Outlook
There are a host of risk factors with regards to Australian economy, However, the most
pivotal risk factor without a doubt is the concern surrounding a slowing Chinese economy.
The performance of the manufacturing sector in the recent period has been quite dismal

which has thee forced the Chinese government to introduce a host of measures to provide
stimulus to economic growth (Laursen, 2019).
The adverse impact of slowdown in China on the Australian economy is indicated through
the following arguments (Chau, 2019).
 Almost one third of all exports from Australia are sent to China. Considering that
most of these are mineral commodities, hence slowing economic growth in China
would lead to reduction in export volumes.
 Further, China is the largest consumer of a host of mineral commodities and hence
slowing growth in China would reduce demand. This would have an adverse impact
on the prices of key export commodities from Australia namely coal and iron ore
which comprise about $ 120 billion annually in exports.
 China is the source of investments in Australian real estate. Further, recent years have
witnessed a significant rise in Chinese tourists visiting Australia. They are estimated
to have spent in excess of $ 10 billion in Australia in 2018. Also, economic
slowdown would also adversely impact inflow of foreign students in Australia.
 The net exports of Australia would be significantly impacted coupled with lower tax
revenue from mining, tourism and higher education for the government. As a result,
the budget deficit may rise.

References
Arnold, A.R. (2015). Microeconomics (9thed.). Sydney: Cengage Learning.
Chau, D. (2019) Australia's fortunes are linked to China's economy — for better or worse,
Retrieved from https://www.abc.net.au/news/2019-01-15/china-economy-slowdown-
will-affect-australia/10716240
Laursen, L. (2019) Why China Just Injected $83 Billion into Its Economy, Retrieved from
http://fortune.com/2019/01/16/china-economy-83-billion-stimulus/
Mankiw, G. (2014) Microeconomics (6thed.). London: Worth Publishers.
RBA (2019) Minutes of the Monetary Policy Meeting of the Reserve Bank Board, Retrieved
from https://www.rba.gov.au/monetary-policy/rba-board-minutes/2019/2019-03-
05.html