HC1072 Economics & Trade: Analyzing Australia's GDP Growth

This report examines Australia's economic performance over the last five years, focusing on the contributions of key sectors such as service, manufacturing, and agriculture. It highlights the impact of government policies, including deregulation and foreign investment incentives, on the growth of these sectors. The report also analyzes the demand and supply dynamics of the solar power market in Australia, noting the government's initiatives to promote renewable energy and address environmental concerns. Furthermore, the study details the reforms in the agricultural sector and its increasing contribution to the GDP, driven by foreign investment and technological advancements. The analysis concludes that the manufacturing boost and agricultural reforms have been crucial for Australia's consistent economic growth, setting it apart from other developed economies. Desklib offers a range of solved assignments and study resources for students.

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ECONOMICS AND INTERNATIONAL TRADE

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Table of contents
1.0 Introduction..........................................................................................................................3
2.0 GDP and economic growth of Australia in the last five years.............................................3
3.0 Reforms in the agricultural sector of the economy and its contribution..............................4
4.0 Demand and supply of solar power market of Australia......................................................5
5.0 Conclusion............................................................................................................................7
Reference....................................................................................................................................8

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1.0 Introduction
Economic performance is one of the important indicators of the overall wellbeing. However,
there are many of the drivers that make sure that economy is growing from time to time. Few
of the important sectors of the economy that contributes to the GDP of a country include
service, manufacturing, agriculture and many more. In case of Australia which is one of the
consistently developed economies of the world also is driven by the performance of these
sectors. One of the unique achievements of the Australian economy is the continuous steady
GDP growth rate over the years. The objective of this paper is to look into the structure of the
economy and find out how the performances of the respective sectors have contributed
towards the economic growth of the country. In addition to that, the paper also furnishes and
analyses the policies of the government which also has provided the platform for the
economy to grow during the last five years.
2.0 GDP and economic growth of Australia in the last five years
The performance of the economy of Australia in the last five years has been very different
from other five-year performance of the economy. One of the major changes that have been
seen in the economy of the country in this five year is that there have been changes in the
structural composition of the economy (Benn and Perey, 2015). Australian economy in the
year 2012 has been mainly driven by the service sector. As per the data of the year 2017, the
service sector is still the largest sector of the economy that employs most labours of the
labour force of the country. The size of the service sector is around 69.2% which employs
almost 72% of the overall labour force of the country. However, Chubb and Watermeyer
(2017) pointed out that the manufacturing sector of the economy is increasing in size since
the year 2010. Another component of the GDP of the country is the agriculture which exports
most of the products to the eastern Asian trade partners of the country. The eastern Asian
trade partners such as Singapore, Thailand have performed exceptionally in the last few years
in terms of economy and these have repercussions in the economy of Australia as well. The
last five years have seen an immense growth in the personal wealth of the citizen of the
country as well. According to the per capita wealth of the country, it has become the second
largest after Switzerland. The overall wealth of the country stands at $7.39 trillion USD as
per the figure of the year 2017. The estimation suggests that the wealth growth of the
economy will continue in the future that can further stabilise the economic growth of the
economy.

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One of the important events in the history of the economic performance of the country is the
mining boom that it experienced in the year 2004. The effect of the boom is still being used
by the government as a force to grow the economy. The government of the country removed
the foreign investment cap in the year 2010 in the manufacturing sector. Coupled up with the
expansion of the mining sector this removal of cap brought more investment in the
manufacturing sector of the economy leading to an unprecedented expansion of the economy
as a whole (Findlay and Garnaut, 2017). However, since the year 2012, the government of the
country has started to reduce the interest rates of the country in order to increase liquidity in
the market of the country. The interest rates have fallen from 3.5% in the year 2012 to 1% in
the year 2017. Despite the decrease in the interest rate, the expansion of the manufacturing
sector has not dropped. In the year, the manufacturing sector of the country contributed 6% to
the GDP of the country. Compared to that, the contributions have increased in the year 2017
which is not around 16% of the overall GDP of the country.
Again, the economy has also changed in terms of the job opportunity that is provided to the
people of the country. The expansion of the manufacturing sector, accompanied by a huge
amount of tax cut for the commercial organisation resulted in a huge number of job creation
in the economy. In addition to that, the average wage rate of the labours has also been good
during the last five years which have in turn influenced the aggregate demand for the goods
and the services of the market. According to Christensen (2016), the service sector of the
economy is becoming saturated and hence the structural unemployment in the economy was
increasing steadily. A nontechnical form of job offers from the manufacturing side absorbed
most of the structural unemployment of the economy and hence the overall production of the
economy rose during the last five years. According to the data of the economy, the
manufacturing sector of the economy employed 13% of the labours of the labour force of the
country. This increased due to the performance of the manufacturing sector to 19% in the
year 2017 (Murray, 2017).
Again, although the recent interest rate level of the economy is dropping, the higher interest
rate before that had increased the savings rate of the economy of the country that is resulting
in high level if the home investment (Schneider, 2018). Investment in machinery and
equipment in the manufacturing sector has therefore increased the productivity of the unit
labour. This has added to the performance of the manufacturing sector of the economy in the
last five years. Therefore, manufacturing boost of the economy has been the key for the

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consistent economic growth of the Australian economy that helped it to set itself apart from
the other developed economies of the world (Hajkowicz et al. 2016).
3.0 Reforms in the agricultural sector of the economy and its contribution
Although Australia has been agricultural product exporter in the international market
especially in the eastern Asian market, its contribution to the GDP has been low throughout.
The agriculture sector of the economy has still grown from a 6% in the year 2012 to 12% in
the year 2017. In addition to that, the number of products which are exported from Australia
has also increased over the years. However, the credit of expansion needs to be given to the
policies of the government to deregulate the sector in the year 2010. De Wit (2015)
highlighted that the foreign investment cap in the agriculture sector was reduced in the year
2010 and the investment inflow that followed intrigued a lot of new businesses to start its
journey in the agricultural sector of the Australian economy. Diary and the beef production
industry of the sector received the highest amount of foreign investment in the last five years.
One of the important changes in the operation of the agricultural companies was in terms of
the technology used (Abbas et al. 2016). Therefore, the productivity of the labours has
increased manifold in the agriculture sector of the country. There have been many of the
policies which the government has taken in order to assist the performance of the small and
medium-sized businesses in the agriculture sector of the Australian economy. Apart from that
subsidy and the tax rates for the small-sized agriculture companies have also been changed in
order to provide a boost to the sector.
The deregulation and the sector as a whole have contributed positively towards the
exceptional performances of the Australian economy (Pecotich and Shultz, 2016). With the
rise in the foreign investment inflow and the credits from the government, the small
organisations are taking big projects in order to meet both the domestic and international
demand for the agriculture products. The volume of export since the year 2012 has increased
manifold. Hilbrink, Berle, and Steel (2016) pointed out that the growth has been mainly due
to the export growth in the eastern Asian countries. In this context, it is important to know
that the policies of the target countries and their economic performances have also helped the
agricultural sector of the country to grow. Apart from that, lowered corporate taxes on the
exporting companies and small businesses in the agricultural sector have also paved the way
for innovation in order to fight other agricultural exporters of the world such as the US.

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Another impact of the reform in the agricultural sector of the country is the increase in the
average wage rates of the labours. De Wit (2015) stated that the labour supply in the
Australian economy, especially for the agricultural purpose, is very low. The government of
the country has in fact accepted migration in the country in order to meet the labour demand
in the agricultural sector. This results in high average wage rates for the agricultural labours
of the country. The private companies are left with high margins even after paying high
wages to the labours. Thus, the innovation practices in the sector continued amplifying the
competition among the private companies of the market.
4.0 Demand and supply of solar power market of Australia
When it comes to the case of natural resources, the most demanded natural resource in the
market of Australian is the solar power. There are a number of reasons for the increase in the
demand for the solar power which the country has experienced in the recent years. First and
the foremost is the pollution level associated with the conventional power production. The
conventional power production is degrading the waters and airs of the environment which is a
great concern not only for the government but also people of the country as well (Stanley,
2016). In relation to that, the demand for the electricity has increased manifold in Australia.
The government of the country, since the year 2009 has been working on the supply side of
the market in order to meet the increasing needs of the economy. Aslani, Rezaee, and
Mortazavi (2017) highlighted that the government has shown clear intent of replacing the
conventional power production with that of the solar power production due to the
environmental friendliness of the process. Currently, the solar power production capability of
the country stands at 7083 MW. Further installation of new PV cells is also in process in
order to increase the volume of solar power conservation. By the year, 2020, the government
of the country has a plan to increase the production by threefold. In the context of demand
generation, the contribution of the Australian government is also important to note
(Masouman and Harvie, 2018). The government started awareness programmes in the
southern parts of the country. As a result, South Australia is the biggest market for the solar
power of the country. As a form of initiative, the government of the country installed a
number of PV cells in most of the administrative building of the south Australian province.
Demand for the solar power is also increasing due to the innovation in automobile and other
products of the market as well. Yiftachel (2016) stated that many companies have come up
with models which will use conserved solar power as a fuel. Additionally, the solar bulb is

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also being developed by the companies in order to replace the conventional bulbs. According
to Katiyar and Cardie (2016), one of the important features of the solar energy is that it
accurately fills the place of conventional powers. The government has also taken the
initiatives to invest in the research and development projects relating to the solar industry of
the economy as well. Technology development in order to produce solar batteries to improve
the portability of the power is one of the missions of the government. Furthermore, the
government of Australia is also providing opportunities for the private investors and research
companies in the field of solar power market as well. According to Tran, L., Marginson et al.
(2016), the government invested $3 Billion USD since the year 2013, for the demand
generation and the supply side strengthening.
The preference of the customers of the market has also changed over the years that have
provided a lot of opportunity for the industry. Lisle (2015) pointed out that, the real income
of the country is one of the highest in the world. This high real income explains the
preferences of the customers for a clean environment. The environmental theory of
economics also justifies the behaviour of the customers of the Australian market. As per the
theory, with the increase in income, the customers prefer a more healthy form of leaving
thereby choosing product alternatives that are more environmentally and human-friendly.
One of the examples can be seen from the increase in the demand for the solar power torch
lights compared to the other torches of the market (Meredith, 2015).
In terms of the economic impact as well, the solar power market has played an important role.
The occupational structure in the energy markets of the country has changed since the last
decade. Employment in the energy market has increased due to the increase in the
employment in the solar power projects in Australia. Furthermore, there have also been
reports of labours who are switching to solar power industry from conventional power
productions. Kane (2016) pointed out that, the estimation that the demand for the solar power
will increase in the future is creating changes in the economy. The support from the
government coupled up with the huge opportunity in the solar market, the investment is
increasing in the economy. The average wage rate of the labours in the sector is also growing
which in turn is having an impact on the overall aggregate demand for the goods and the
services of the market.

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5.0 Conclusion
Thus, Australia is one of the best performers in the world when it comes to the case of
economic performance. The GDP growth rate of the country has been steady due to the
contribution of the service sector. However, the last five years of economic operation of the
country have experienced many changes which have helped the manufacturing sector of the
economy to grow. In this regard, the mining boom of the economy that it experienced in the
year 2004 has also helped. The high amount of foreign investment inflow in the
manufacturing sector resulted in expansion and more job opportunities. Apart from that, the
reforms in the agricultural sector have also been crucial for the Australian economy. Reform
in terms of reduced investment caps and tax rate have allowed the sector to expand the export
in Asian markets. Furthermore, one of the interesting developments in the economy is the
increase in the demand for the solar powers. The government has undertaken a lot of steps in
order to ensure a high demand and supply of the market in line with the mission of the
government to replace the conventional power production. Increased operation due to the
investment has not only allowed this sector to contribute more in the GDP growth of the
economy, but it also helped in the job creation for the people of the country as well.

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