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Comprehensive Explanation Of Australian Economy

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Introduction

In recent years, researchers have become interested in Australia’s economy. It is evident that Australia’s economy is respected as one of the biggest mixed-market economies worldwide which are predominated in the services sector. Consequently, the services sector accounted for 61.1 per cent of the country’s GDP and employing nearly 80 per cent of the labor force in 2016. In addition, oil along with gas and mining accounts for approximately 10 per cent of Australia’s GDP and accounts for more than 60 per cent of export, construction accounts for 8.1 per cent, agriculture accounts for 2.2 per cent and production accounts for 6.0 per cent. In 2017, Australia’s GDP was AU$1.69 trillion which is discoursed as the second-richest nation in terms of wealth per adult after Switzerland. By 2017, Australia’s inflation rate stood at 1.8 per cent. South Korea, Japan, China, United States and European Union are Australia’s major export terminus (with 6.70%, 13.90%, 31.60%, 4.60% and 7.50% respectively between 2015 and 2017) while ASEAN along with Japan, China, European Union and the United States becomes Australia’s main import partners, accounting for approximately 68 per cent of total exports of the country. Wesfarmers Limited – one of the largest grossing retailers in Australia, is headquartered in Perth, Western Australia and has over 100 years of proficiency in this industry. Wesfarmers was formed in 1914 and has grown into one of among the world’s top retailers with a combined revenue of more than $US100 billion ($111 billion).

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David White (1967) states that Wesfarmers is very sensitive to customer needs and committed to creating a brand that will deliver affordable price and quality products. The company offers a wide range of products ranging from supermarkets, department stores, office supplies and home improvement. Including coal mining, chemicals, energy and insurance. Apart from that, there are also business operations of safety products, fertilizers and industrial. Nowadays, the company operates 810 liquor outlets, 756 full-service supermarkets, 92 hotels, 636 fuel and convenience stores. Australia and New Zealand are the major areas of operations for the company while the United Kingdom, Bangladesh and Ireland become the main areas for the subsidiary.

Production output performance analysis

The Gross Domestic Product in Australia was worth 1323.42 USD billion in 2017 and in 2013, Australia was worth the highest between 2008 and 2017 which was 1573.7 USD billion. As seen in the chart, the increase in Australian GDP from 2008 to 2013 was 521 USD billion. The GDP of Australia depreciated by about 250 USD billion between 2013 and 2017. The country recorded a rise continuously in GDP between 2008 and 2013 and has slowly declined from 2013 to 2017. Furthermore, it was considered Australia’s GDP grew significantly compared to the previous year in 2011 (from 1144.3 to 1394.3 USD billion). Moreover, the country recorded an increased value of GDP which was estimated at 1543.4 USD billion in 2012.

Understandably, the Australian government has made the large efforts in dealing with difficult times during the recession of 1991. As a result, Australia ranks 13th out of 196 countries in recent years and demonstrated one of the few developed countries to record global recession. Moreover, the economy has grown considerably with a GDP growth rate of 2.7 per cent between 2009 and 2013 and the economic performance improved in the next year with steady growth. On the other hand, the country faces the challenge of reversing commodity prices, declining housing markets and low wage growth.

Real GDP growth rate

Australia’s real GDP growth rate has been uncertain from 2008 to 2014. Thus, Australia’s GDP growth rate in 2008 was at 1.2 per cent and the highest growth rate from 2008 to 2017 was in 2011 (1.3%). Furthermore, 2008 and 2011 were the years recording the lowest GDP growth rate of Australia with -0,5 per cent and -0.35 per cent respectively. However, between the last quarter of 2008 and the first quarter of 2009, Australia experienced the highest growth rate from -0.5 per cent to 1.15 per cent. In the past decade, Australia’s GDP growth rate averages 0.9%. The information also shows that Australia has been one of the few developed countries that continues a positive growth rate during the global recession. The major logic for the positive economy is the recovery of exports and the emphasis on the service sector. The improved performance of the Australian economy reflexes the performance of the government’s economic and monetary stimulus measures that support the country’s response to the recession and a strong recovery compared to another country in the worldwide.

Real GDP per capita

The GDP per capita in Australia in 2008 was recorded at 51770.9072 USD. From 2008 to 2017, the GDP per capita in Australia rises steadily from 51770.9072 USD to 55925.93 USD (an increase of more than 4100 USD). According to Tradingeconomics (n.d), the GDP per capita in Australia is “equivalent to 443 per cent of the world’s average” and averaged 36318.25 USD between 1960 and 2017. If inflation is considered and taken into account, real GDP Australia has risen 6% since 2012. The country has a remarkable performance compared to the UK decline of 6% over the same duration.

Government policies aiming to achieve production output performance Understandably, Australia’s government have adopted best practices and policies to avoid Australia’s risk in the recession by making a new economic plan and a long-term financial sustainability plan. Consequently, the economic plan was developed by Australia’s government to create a broader economy by increasing the resilience of the economy and increasing employment in the industrial sector. Australia’s government is focused on transforming towards broadening the growth to other sectors, especially the more employment-intensive service sectors. It is clear that over the years, the largest employment growth has been in the household sectors and business services including retail trade and health. In 2015, there were approximately 300,000 jobs created mainly in business services, goods-related and household services with about 150,000 jobs, 60,000 jobs and 200,000 jobs respectively.

Furthermore, More than 50,000 jobs were cut off from manufacturing while mining, construction and agriculture created 20,000 jobs. In addition, the government also focuses on the resilience of the economy by analyzing ageing populations within the region and the growing middle class in Asia to create greater opportunities for service exports. For instance, travellers from developing countries such as India and others countries in Asia are increasing significantly in 2015. In particular, Chinese tourists that travelling to Australia for more than 1 million people for the first time. A national plan for employment and growth is summarized in “driving economic growth through innovation, investor confidence and establishment of new markets through new trade agenda”. The country’s long-term economic plan is supported by infrastructure investment at $50 billion, twenty-year defence industry plan and the youth employment package at $840 million. Moreover, it also supported by the government’s ten-year state-owned enterprise tax plan, the $1.1 billion Science Agenda and National Innovation as well as other government policy frameworks including macroeconomic policies, the regulatory approaches and the microeconomic incentives.

Labor market analysis Unemployment rate In Australia, the unemployment rate is measured by “the number of people actually looking for a job as a percentage of the labor force”. Therefore, the unemployment rate has fallen sharply from 7.5% to 4.2% in 1999 to 2008. Moreover, the unemployment rate historical rise from 4.2% to 5.6% due to the global crisis during 2008 and 2009. In 2013, Australia’s unemployment rate stood at 5.8% and stable over the next three years. This rate seemed to have slightly decreased in 2017 by 0.2%.

Typical types of unemployment

Unemployment can be described as several types. In such genres, the friction structure and the unemployment cycle are the three main genres. Firstly, frictional unemployment reflects the temporary unemployment status of workers because they change their current job to find a better job. This kind of unemployment involves the transition to another career and the change of current skills to a higher level. The main reason is a change of interest, change of position provider or employee change (Maier & Nelson, 2014). Secondly, cyclical unemployment correlates with changes in the business cycle. That means that this category is not related to the natural unemployment rate. Many workers are fired because of the business strategy, the need for business survival, or the pressures associated with the market, causing businesses to cut costs. In simple words, cyclical unemployment reflects the inability of the nation’s economy to work for people who can work. The growth direction of GDP or recession/recession is the main cause of cyclical unemployment. When less production and demands for goods are needed leading to fewer demands in human resources. Finally, structural unemployment is structural problems within the economy, resulting in structural unemployment. Welch & Welch (2009) also shows that structural unemployment reflects the gap in the current labor force. This means that unemployment occurs when there is a discrepancy between the skills the worker holds and the skills that the organization or organization expects in the economy. Natural unemployment rates are rising because of structural unemployment, especially when skill gaps are not fully resolved. Therefore, The main form of unemployment Australia faces is long-term unemployment, structural and cyclical. Hence, Australia faced a high unemployment rate of 22% during the Great Depression in 1929 and 1932. Subsequently, this rate increased to 32% in mid-1932 due to the declining growth rate which was attributed to the decline in growth and spending that can be seen in 2008-2009.

Government policies and measures to eliminate the high level of unemployment In order to deal with these major unemployment patterns, the Australian Government has implemented four main policies, namely, fiscal stimulus through tax cuts; Fiscal policy is expanding by increasing government spending and tax cuts and microeconomic reform policies that focus on increasing productivity and resource allocation. For instance, monetary, fiscal policies and cyclical unemployment have been especially implemented by increasing government spending, tax cuts, and consumption also. Resulting in increased productivity and results in an increase in employment. Training and development are key elements of the policy. Some practices include the establishment of a new training centre, the expansion of the school apprenticeship system, increases in funding for vocational and school education including “the National Education Framework for School and the Australian National Training Authority which focus on raising numeracy standards and the skill development for Australian workers as well as a further $5.9 billion spent on a new program called the Education Revolution”. Inflation rate analysis and government measures to stable price Australia’s inflation rate was at 4.3 in 2008 and is facing uncertainty over the past 10 years. From 1951 to 2014, the inflation rate in Australia averaged 5.02 per cent. Especially, between 2008 and 2017, the inflation rate reached a high rate of 4.3 per cent in 2008 and 3.3 per cent in 2011. Then, since 2013, consumer price inflation is expected to fall to 1.3 per cent in 2016. After that, Australia inflation rate rises to 2.1 per cent through the year 2017.

Studies have shown that the role of the Reserve Bank and Australia’s monetary policy play major roles in stabilizing the flow of money. Therefore, in order to stabilize prices, the Reserve Bank “uses a flexible medium-term inflation target” that focuses on keeping an inflation rate at 2 to 3 per cent per annum. When this goal is set, the bank will take steps to measure the stability. One of the most important practices is to set cash rates to influence economic activity and inflation, which will result in the employment and welfare of Australians. Through setting the cash rate which is the “interest rate on overnight loans in the money market”, the Reserve Bank believes that it affects the behavior of lenders and borrowers as well as other interest rates in the economy.

Conclusion

In conclusion, the research and provided a comprehensive explanation has shown that Australia’s real GDP, real GDP growth rate, per capita GDP, unemployment rate and the inflation rate in order to measure whether the economy is healthy. Therefore, it is obvious from the research that Australian’s government represented its strong endeavors in rising wealthy Australian people, increasing GDP per capita, maintaining stable inflation rate and reducing unemployment. Despite during the global crisis, but Australia’s economics remains healthy and positively, especially the avoidance of recession after the crisis. Thus, the information above indicates that Australia’s growth is slow but still steady and positive. Hence, positive signs in the recent years create a brighter future for Australia’s economy, especially when the knowledge, innovation-based and service-oriented economy has been performed well.

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