Current State Of Growth Australian Economy â€Myassignmenthelp.Com

Question: Discuss About The Current State Of Growth Australian Economy? Answer: Introduction The aim of this report is to highlight on the present economic state of Australia. The Australian economy has shown a higher growth in recent decades, highlighting sturdy macroeconomic policies and structural development. The living standards of this economy improved though challenges occur from ageing population and greenhouse gas emissions. It is predicted that non-mining sector will support economic growth of about 3% in the year 2018 with further decrease in rate of unemployment (Tonts et al. 2012). Low rates of interest have also contributed aggregate demand and also sloping up risk taken by the investors and thus increasing prices of housing and mortgage lending. Currently, the nation ranks 12th largest as accounted by nominal GDP and 19th biggest in terms of purchasing power parity in the globe. The report also analyzes on the comparison of the current state (Q1 of 2017) of the economy with respect to August (Q2 of 2016) based on the macroeconomic indicators that includes- GDP , unemployment rate, inflation rate and terms of trade (Baumohl 2012) . In addition, the major issues that the economy might face over the next 12 months are also discussed in this study. Current State of the Australian Economy The economic growth of Australia reflects healthy in relation to many of their trading partners. The Reserve bank of Australia (RBA) forecasted that the nation would continue to grow up to 3.0% at the end of this year. The current condition of the Australian economy replicates that transition of this nation to post mining protract to be slow. This nation has slowed down in the first quarter (Q1) of 2017 after bouncing back from the second quarter (Q2) of 2016. The GDP of the nation has been unpredictable and has shown high growth in this quarter as compared to Q2 of 2016. However, sturdy macroeconomic as well as financial sector policies improve economic growth and high standards of living (Shahiduzzaman and Alam 2014). Moreover, expanding income inequalities and indigenous population ensures evenhanded opportunities for employing in labor market by implementing active policies of labor market. In addition, inflation rate, wage growth and unemployment rate remain subdued in the curre nt period. However, rate of employment has risen in this current year by around 61.4%. Therefore, inflation expectations and growth of nominal edge have slowed down in this quarter of 2017. Wage growth records to be quite low in this period due to continuing slack in labor market. Thus, it has been noted that labor market of this nation remains mixed in this year. GDP- Australias Gross domestic product (GDP) refers o the final value of commodities and services that are manufactured within the economy in a certain time period. GDP is measured in two ways that is in terms of current prices as well as in real terms, which is also termed as chain volume measures (Wakeel and Ullah 2013). The dollar GDP value of the economy reflects the size of the nation that is running at USD 1343.6 billion. The economic growth of this nation picks up owing to increase in consumer spending. This expenditure is based on decline in overall savings rate from 5.3% to 4.6% in Q1 of 2017. Therefore, rise in household consumption by 0.5% adds up to 0.3% GDP growth rate in 2017. Total investment contributes to 0.4% in the nations GDP while household savings decreases to 4.7%. Rate of Unemployment- Australias unemployment rate is defined as the number of unemployed persons in respect of total population of Australia. The unemployment rate of this nation reduced to 5.6% in Q1 of 2017. Recent data highlights that the total employment increases with the creation of 239,373 jobs this year. In addition, the rate of participation in labor market rises to 65.1% due to change in tax policy adopted by RBA (Kubiszewski et al. 2013). According to ABS, the nation records falling growth in wages for the workers in private sector. In essence, increase in employment growth in Q1 was due to rise in participation rate by 0.1% to 65.1% since Q1 of 2016. Rate of Inflation- Inflation is defined as sustained rise in price of the products within the economy over a certain time period. It also highlights on the decrease in purchasing power for each money unit. The ABS measures inflation rate of the country by using Consumer Price Index (CPI). Australias CPI rises to 2.1% in Q1 of 2017 owing to rise in prices of medical, tobacco and housing prices . Thus, RBA targets to decrease rates of interest for stabilizing inflation rate. Balance of trade- Balance of Trade in Australia estimates the difference between import as well as export value of products and services (Dijkstra, et al. 2013). Positive value indicates export of commodities is greater than imports (Surplus of trade) while negative value signifies export of fewer goods than imports (Deficit of trade). In Q1of 2017, the balance of trade in Australia is 888, which reflects increase of both exports as well as imports. Comparing economic performance of Australia of 2016 with 2017 Recent statistics highlights that the current condition of Australia improves from the Q2 of 2016. The GDP of this nation rises to 0.3% in Q1 of the year 2017 as compared to Q2 of the year 2016, which recorded to about 0.5%. The mining sector of Australia contributes to about 29393 AUD million in the Q1 of 2017 (Delgado et al. 2014). Moreover, finance, medical and social services hugely contributes to the growth of the nation. In addition, household consumption contributes hugely in Q1of 2017 despite weak spending in retail industries and is driven up by increasing cost in non- discretionary sector that includes gas and electricity sector. Furthermore, inventories changes also increases to AUD 2069 million, which is driven by both the retail as well as mining sector. Diagram 1: Comparison of Australias GDP Growth rate of 2016 and 2017 Source: (As created by author) The unemployment rate in Australia slows down to 5.6% in Q1 of 2017 in comparison with Q2 of 2016 that recorded to 5.7% ( Borio 2014). Fall in unemployment rate was mainly due to flow in part-time work. On the contrary, full time jobs in this nation declines to about 44800 in 2017 as compared to the year 2016. Moreover, the participation rate of the workers also increases in this quarter as compared to 2016. Still unemployment rate increases above the target level of 5%. Few causes that raises the nations unemployment rate includes: Decrease in infrastructure spending during poor economic condition shifts the laborers from this economy Some laborers quit jobs Owing to adoption of new technology, Global financial crisis during the period 2008-2009 also contributed to reduction in unemployment rate in Australia (Boons et al. 2013). Diagram 2: Comparison of unemployment rate in Australia in Q2 of 2016 and Q1 of 2017 Source: (Authors creation) The rate of inflation in Q1 of 2017 records to 2.1%, which is quite high as compared to Q2 of 2016 that accounted to 1.0%. Therefore, CPI of this economy increases due to rise in commodity prices, transport and education segment. Hence, this affects GDP and standard of living of the people in Australia. Diagram 3: Comparison of inflation rate in Australia of Q2 of 2016 and Q1 of 2017 Source: (Authors creation) Balance of trade of this nation rises to 888 billion in Q1 of 2017 due to rise in export as well as imports of commodities and services. Exports of products contribute to $24.21 billion while import of commodities adds to $6.27 billion in this year. However, Australian trade reflected negative value of -1576, which was lower as compared to Q1 of 2017. Diagram 4: Comparison of Australian trade in Q2 of 2016 and Q1 of 2017 Source: (Authors creation) Three key issues facing the Australian economy over the next 12 months Stagnating growth in wage will led to increase in underemployment that will adversely impact the growth of the Australian economy (Baker et al. 2015). It has also vital implications for underutilizations level in Australian labor market. This also adversely affects the living standards of the people in Australia. The tax system adopted by RBA will also affect overall productivity and competitiveness of the nation. Settings of taxation also affect the incentives for acquiring jobs and hence variation of tax system in Australia influences the nations living standards and participation rate. Expanding population of the nation also puts pressures on the consumers expenditure in few areas that include health care industry. However, rise in health cost associated with the adoption of new technologies for manufacturing medicines rises fiscal pressures (Angelini et al. 2015). Conclusion All these macroeconomic indicators highlights that current condition of Australia enhances in Q1 of 2017 in comparison with Q2 of 2016. Economist predicts that GDP growth rate of Australia will rise to 3% in the year 2018. Moreover, RBAs supportive monetary policy rate will improve the growth of the nation at faster rate. Thus, expansionary policy rate will also help the economy to face the challenges or economic issues that will come in the next 12 months. References Angelini, P., Clerc, L., Crdia, V., Gambacorta, L., Gerali, A., Locarno, A., Motto, R., Roeger, W., Van den Heuvel, S. and Vl?ek, J., 2015. Basel III: Long?term Impact on Economic Performance and Fluctuations. The Manchester School, 83(2), pp.217-251. Baker, D., Merkert, R. and Kamruzzaman, M., 2015. Regional aviation and economic growth: cointegration and causality analysis in Australia. Journal of Transport Geography, 43, pp.140-150. Boons, F., Montalvo, C., Quist, J. and Wagner, M., 2013. Sustainable innovation, business models and economic performance: an overview.Journal of Cleaner Production,45, pp.1-8. Borio, C., 2014. The financial cycle and macroeconomics: What have we learnt?.Journal of Banking Finance,45, pp.182-198. Delgado, M., Porter, M.E. and Stern, S., 2014. Clusters, convergence, and economic performance. Research Policy, 43(10), pp.1785-1799. Dijkstra, L., Garcilazo, E. and McCann, P., 2013. The economic performance of European cities and city regions: Myths and realities. European Planning Studies, 21(3), pp.334-354. Hatfield-Dodds, S., Schandl, H., Adams, P.D., Baynes, T.M., Brinsmead, T.S., Bryan, B.A., Chiew, F.H., Graham, P.W., Grundy, M., Harwood, T. and McCallum, R., 2015. Australia is' free to choose'economic growth and falling environmental pressures.Nature,527(7576), p.49. 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. Shahiduzzaman, M. and Alam, K., 2014. Information technology and its changing roles to economic growth and productivity in Australia. Telecommunications Policy, 38(2), pp.125-135. Shimer, R., 2012. Reassessing the ins and outs of unemployment. Review of Economic Dynamics, 15(2), pp.127-148. Tonts, M., Plummer, P. and Lawrie, M., 2012. Socio-economic wellbeing in Australian mining towns: A comparative analysis.Journal of Rural Studies,28(3), pp.288-301. Wakeel, I. and Ullah, K., 2013. Impacts of budget deficit on output, inflation and balance of trade. Journal of global and scientific issues, 1(1), pp.40-52.