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Introduction:
The successive developments that are noted in the economic growth in Australia have been realized for 25 successful years. The prominent concerns for a fast developing economy are observed in the prospects for long-term sustainability. Thereafter the formidable improvements in the pricing of key commodity exports in the last five years have earmarked the long-term goals for productivity.
The profound outcome that could be observed from the economic development in the recent half of the last decade was reflected in the substantial spike in growth of investment in the mining sector. The investments in the mining sector led to substantial growth in employment as well as wages which was also reflected in the other industries across the country. One of the notable implications that could be perceived in the case of Australia’s requirements to accomplish sustainability is in the choices between increasing labor force participation and increasing productivity (Borland, 2001).
An overview of the economic growth rates in Australia over the last 3 to 5 years with a comprehensive interpretation of facts and figures pertaining to microeconomic and macroeconomic reforms in the recent times.
The observation of economic activity in different countries is usually perceived from the annual percentage change in GDP. The understanding of the trends in economic growth rates in Australia has to be supported by a comprehensive interpretation of the individual phases of the business cycle. Expansion phase or recovery is associated with considerable levels of growth in GDP alongside rapid growth rates (Wiley, 2014).
The peak phase is associated with the accomplishment of maximum GDP that usually leads to stagnation of growth rate. Contraction or slowdown phase is recognized for the slow rate of growth in production or GDP wherein the notable characteristics such as depreciation of national spending levels and improvement of the unemployment rates. The recession stage involves negative trends in the economic growth rates due to the lowest level of production.
Generally, a recession stage can be observed if the GDP has faced depreciation in two consecutive quarters thereby slowing down inflation and increasing unemployment (Borland, 2001). The exceptional cases of a considerable drop in the production could lead to a deeper curve leading to depression. Domestic economic stability phase is characterized as the unique and ideal position for an economy which involves moderate rates of economic growth and national spending. The observation of the quarterly rate of GDP change in the years between 2002-03 and 2013-14 depicts the behaviour of the economic growth in a cyclical fashion (Wiley, 2014).
The economic growth rates have been associated with distinct phases of an economic cycle as observed in the case of Australia thereby leading to the identification of specific economic situations. One of the generic outcomes that can be associated with the economic growth in Australia in the last 3 to 5 years is the increasing size of the economy over a large span of 11 years. Another noticeable factor that can be associated as a strength of the Australian economy is its particular depiction of positive rates of growth in the aftermath of the global financial crisis as compared to other economies in North America, Europe, and Asia.
The limited hunches in the first and second quarters of 2008-09 were covered by the gradual economic improvement indicated by the strengthening of annualized rates of growth. Another considerable fact to be noted here is the impact of natural calamities such as the Queensland floods in January 2011 and the cyclone Qasi on production. Therefore the consequences were observed in the form of reduced mining output as well as the destruction of significant infrastructure. The natural calamities in other countries such as the nuclear meltdown in Japan at Fukushima also led to the reduction in exports (Borland, 2001).
Unemployment rates continued to escalate over the years ranging from 2012 to 2014 due to the slower rates of economic growth. At an average rate of 3% GDP growth every year as compared to the annual population increase rate of 1.3%, Australian economy also indicates substantial shares of the production for each person (Australia GDP Growth Rate | 1959-2017 | Data | Chart | Calendar | Forecast. 2017). Therefore the accessibility of larger shares of production enables the strengthening of material living standards. Industrial contributions have also played a cognizable role in the enhancement of the economic growth rate especially from the sectors of finance and insurance, construction, health and retail, mining, property and business services which indicated higher levels of production as compared to sectors such as agriculture.
The importance of the aggregate demand-side and aggregate supply side factors in the determination of the rate of economic growth is highly noticed. The supply-side factors are responsible for altering the resources accessible for production, the potential of GDP growth or the economy’s productive capacity and the changes in the business costs and profits.
On the other hand, the aggregate demand side factors are responsible for changes in the levels of national expenditure on GDP as well as the integration of the economy’s potential for productive capacity in short-term applications (Wiley, 2014). The aggregate supply factors refer to the concerns for limitations in terms of access to natural, capital and labor resources. The efficient use of these resources is considered responsible for determining the productive capacity of a country.
An increase in the volume of resources or the favourability of aggregate supply side factors is responsible for validating the sustainability of economic growth due to the higher productive capacity of the country. Productive capacity is generally used to explain the economic sustainability of GDP growth rate in certain countries. In case of China, the GDP growth is 8-10 percent annually while in case of Australia the estimated growth rate ranges from 3-3.5% annually. Furthermore, the cases of low-income economies in Africa are associated with 1-2 percent growth rate of GDP that dictates the significance of productive capacity and the favorable response of supply-side factors that inhibit economic growth (Borland, 2001).
The annual GDP growth over the period of 2010-11 to 2012-13 was noticed from 2.2% to 2.6% with an intermediate estimation of 3.6% in the 2011-12 fiscal years. The labour force growth rate was averaged at 1.8% annual growth rate while indicating an average labour force participation rate of 64.9% (Australia GDP Growth Rate | 1959-2017 | Data | Chart | Calendar | Forecast. 2017). Thereafter it is imperative to notice the average labour productivity rate of 1.2% that imposes noticeable concerns for sustaining the economic growth rates despite favourable labour participation rates. The interpretations of the factors that affect the trends in Australia’s economic growth over the course of the last 3 to 5 years could be supported by a critical reflection on the profound reforms in the microeconomic and macroeconomic dimensions of the Australian economic environment (Australia GDP Growth Rate | 1959-2017 | Data | Chart | Calendar | Forecast. 2017).
The cognizable requirement of sustainable growth of economic development in Australia could be addressed effectively through increasing the labour resources. Expansion of labour resources leads to effective improvement of productive capacity as well as the potential for realizing higher economic growth (Wiley, 2014).
The growth in labour productivity is a mandatory implication for the higher production of GDP with every hour of work. Australia has faced cognizable reduction in labour productivity that leads to concerns for initiatives to induce microeconomic reforms. The factors which are responsible for characterising the size and efficacy of the labour resources include increase in retirement age, rise in labour force participation, improving levels of immigration and the federal government measures to improve education (OECD, 2017). Australia faces a considerable gap falling way below countries such as Ireland, US and Norway.
Microeconomic reforms have been introduced in the Australian economic environment to modify the structure and operation of Australian economy. With a primary emphasis on improving productivity, the microeconomic reforms are known for altering the incentives received by public and private sector producers. Generally, microeconomic reforms are noticed in the changes in government policies which are commissioned for enhancing the productivity of labour force.
First of all, reforms in the government sector regulation through the privatization of government business enterprises such as Australia Post suggest major microeconomic reform in government sector. Deregulation of entry into markets for government businesses as well as provision of contracts to facilitate the products and services of government sector businesses to private sector providers could also be perceived as major highlights of the Australian economy growth rate in the last 3 to five years.
Changes in regulation of labour markets alongside the reforms of labour and product markets are also reflective of microeconomic reforms (Borland, 2001). For example, the reduction of tariffs on certain agricultural products as well as the reforms in market structures such as removal of controls on production and pricing could be considered as major highlights that promote economic growth in Australia.
The reforms in the tax and welfare systems are indicative of potential changes in the taxation systems of individuals as well as businesses. The prominent microeconomic reforms in the context of taxation system have been noticed in the introduction of capital gains tax, reduction in company tax rates as well as the introduction of Goods and Service tax in July 2000. With respect to the welfare system, Australian economy favored especially from the changes in eligibility conditions and requirements for recipients to acquire the payments.
The Australian economy recorded a positive percentage change in the March quarter of 2017 at 0.3% in contrast to the predicted expansion of 0.2% (OECD, 2017). The considerable depreciation in the GDP growth rate could be ascertained from the inability of reforms in inventories and the positive contributions drawn from final domestic demand to minimize the impacts of a reduction in dwelling investment as well as the lower performance of net trade.
Australia is one of the countries which have depicted considerable performance in terms of economic growth without registering two successive quarters of negative economic growth. Some of the important facts that can be drawn from the first quarter of the year 2017 refer to the increase in final consumption expenditure by 0.6% and household expenditure depicting 0.5% rise. The factors which could be considered responsible for this increase are noticed in the increase of rent, insurance and financial services, vehicle operations and the domain of electricity, gas and fuel consumption.
The contribution of the increase in spending in these sectors also led to the final consumption expenditure of Australia found to be increased by 1%. The other highlights that could be perceived in the economic growth in the first quarter of this fiscal year refer to the decrease in the formation of gross fixed capital by 0.6% which was attributed to the contraction of public investment from commonwealth public corporations and the state and local public corporations by a rate of 2.7%. Private investment was considerably stagnant after a depreciation in the total dwellings by 4.4% which was able to offset the total non-dwelling construction. On an overall basis, the total gross fixed capital formation was depreciated by a percentage share of 0.1% from the GDP growth (OECD, 2017).
The depreciation of goods and services exports by 1.6% was characterized by a mixed response of trends in the export of products and services. On one hand, the exports of services were improved by 2.5% while the exports of goods depreciated by 2.6% which was characterized by the fall in the exports of non-rural goods by 4.1%, rural exports are decreased by 8% while the export of non-monetary gold was slashed down by 10.2%. Imports of goods and services were associated with growth rates of 1.8% and 0.9% respectively which can be attributed to the substantial escalation in consumption goods by 3.4%. Industry developments could also be noted as prominent macroeconomic dimensions of economic growth noticed in Australia since the prominent contributions from the electricity, waste services, water and gas services have depicted considerable improvement of 3.2% which are considerably higher as compared to the fourth quarter of 2009. The increase in water supply and waste services by 3.4% and the electricity supply increase by 3.1% have been assumed as noticeable highlights of the Australian economic growth. The other improvements delivered by the mining and construction services refers to the 1.6% rise in the coal mining sector and the escalation of wholesale trade as well as the sectors of postal, transport and warehousing (Australia GDP Growth Rate | 1959-2017 | Data | Chart | Calendar | Forecast. 2017).
The characteristics trends of the Australian economic environment also refer to the cognizable depreciation in the growth of agriculture domain alongside the limitations in manufacturing which has depreciated by 1% in the food and beverage sector and metal products depreciating by 2.4%. The annual economic growth in the fiscal year 2016-17 for Australia has been characterized by an improvement of 1.7% that is still a disappointment as compared to the 2.4% growth in the previous quarter. Therefore, the observation of macroeconomic changes that have been associated with the growth rate of the economy of Australia in the last three to five years would be a viable source of insights to accomplish a vantage point perspective of sustainability in Australia’s economy (Wiley, 2014).
The economy of Australia has depicted considerable levels of success in the recent years which has been noticed in the commodity boom, strong macroeconomic policies and structural reforms. The positive outcomes of these macroeconomic reforms have led to the realization of rebalancing objectives that are characterized by higher living standards and well-being of individuals. However, the concerns of greenhouse gas emissions as well as the gender gaps and population aging project considerable ambiguities for the realization of economic stability. The projection of non-mining sector’s output growth is estimated to be approximately 3% by 2018 that would be possibly responsible for reducing the unemployment rates (OECD, 2017).
The measures taken particularly for improving the risk-taking competences among investors have been observed in the lower interest rates as well as the improvements in lending of mortgages and house prices. The performance of Australia in response to the global financial crisis that returned the previous statistics of performance from the economic growth rate was possible through the flexible and directed response in the form of macroeconomic policy changes, the resiliency of the financial system and the high commodity prices.
The reductions in resource sector investments on a large scale especially from 9% of GDP to 4% thereby indicating the reduction in employment rates in the resource sector. The decline in global commodity prices since the onset of 2011 especially in the mining sector led to the reforms in investment plans and cost-cutting approaches followed by producers. Therefore the lower labor productivity complemented by the weakening of global trade is responsible for posing substantial threats of low growth in the Australian economy as well as limiting the potential of private sectors for investment (Australia GDP Growth Rate | 1959-2017 | Data | Chart | Calendar | Forecast. 2017).
Orientation towards flexibility in establishing policy settings especially for capital and labor reflect on the support that could be provided for the redeploying of resources by markets and reduction of macroeconomic conflicts. Exchange rate depreciation has been a commendable initiative from the Australian economic sector that characterized the improvement in non-resource sector exports.
Therefore it can be viably concluded that the economic growth rate in Australia over the last three to five years has been characterized by the inclination towards improving labour force participation as observed in the 64.9% average rate of labour force participation. On the contrary, the limitations observed in terms of labour force productivity have to be addressed by the reforms in microeconomic and macroeconomic dimensions.
Australia GDP Growth Rate | 1959-2017 | Data | Chart | Calendar | Forecast. (2017). Tradingeconomics.com. Retrieved 23 June 2017, from https://tradingeconomics.com/australia/gdp-growth
OECD, (2017). OECD Economics Surveys Australia. Retrieved on 23rd June 2017 from: https://www.oecd.org/eco/surveys/Australia-2017-OECD-economic-survey-overview.pdf
Wiley, (2014). Economic growth and sustainable development. Retrieved on 23rd June 2017 from: http://www.wiley.com/legacy/Australia/PageProofs/ECODU/1_2/c02EconomicGrowthAndSustainableDevelopment_WEB.pdf
Borland, J. (2001). Micro-economic Reform in Australia–An Introduction. Department of Economics, University of Melbourne.
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