ANSWER ONE :- (300 words)
Before getting into the discussion about the growth rate of Australia in the past 10 years firstly we need to understand what exactly is meant by the growth rate. So Growth Rate means the changes that takes place in the GDP of the nation more specifically it is said to be rate when we compare it with the GDP of previous years as it shows that how the economy is growing, there is no restriction the growth can be positive as well a negative.
Now to easily make everyone understand how the changes went on in Australian Growth in past 10 years I am going to take the help of the line graph which will supplement to my discussion.
Diagram source:- tradingeconomics.com
Now as we can see that in the beginning the GDP was high nearly 1.3, then with the passage of time and due to factors as soon will be described in question two the growth rate fell drastically to 0.25 but soon it again started hiking to around 50% but by 2009 the GDP of Australia reached the lowest trench of -0.5 which signifies that around that period the Australian growth withered. But by the second quarter it shot up back to more than 1.
Then till 2011 there were regular variations (slight ones) and again in the 1st quarter of 2011 Australia faced another depression but after this massive depression during the 3rd quarter Australian economy faced the highest GDP growth of 1.30
The GDP kept on declining bit by bit till 2015 with only one hike in the last quarter of 2013.then again these kind of consecutive changes kept on occurring with one deep fall in 2016’s last quarter. And major lift in 2018’s fist quarter.
All these drastic change shows that how the Australian growth rate was over the period of last 10 years. Now, to represent how and why these changes occurred we soon will be shifting to the next question in which we have to state the reasons for such momentous variations.
ANSWER TWO :- (1200 words)
Now, I am going to discuss about the factors that caused such drastic variations in the growth rate of Australia of the period of time. There are various reasons that caused this and citing them all wouldn’t be feasible for this paper due to the limitation of word count. So, I will be trying to discuss few of the major vindications for the downward trending growth and causes of positive growth.
FOREIGN DIRECT INVESTMENT :- Since the past two decades Australia has faced globalisation more than any other nation and due to increased international business activities Australia not only is getting massive amount in FDI but it it now in competition with other nations to do so. This, nation moulded its policies in such a way which and still continues to do so, so as to get more and more FDI.
To make this point clearer I am giving this live example. Being an international student to this country, I have played a major role in the FDI of Australia. The money being spent on my education is earned in my home country i.e. INDIA and as my father paid for my education what he actually did was poured the money in the Australian economy which can be considered as FDI. Now, due to the increased trend of going abroad for studies and increased standards of education in Australia the growth rate of Australia was affected in the manner depicted in answer one.
POPULATION :-
Now, the population plays a humungous role in the growth of the nation. As the population rises the production of goods so as to fulfil the demand also rises and this increased production of goods and services leads to the increased GDP of the nation. This is because it is natural that as the number of people will rise in a country, the country has to either produce goods to meet the demand or import from other countries. Ether ways it increases the GDP of the nation.
Example I came from my country to Australia now if I were living in my home country I would have been utilising the goods and services from my own country but as I moved to this country I am bound to use 80% of the goods produced in this country out of total goods and services that I utilise. Hence, due to increasing population the production will rise.
INDUSTRIALISATION :- We see all sorts of multinational companies as well as big industries being set up in Australia, these also contributed a major deal in growth of Australia. To clear the confusion how actually it helped I would like to describe that how when industrialisation occurred there was a large scale production of goods and services and the point to take here is that the factor behind industrialisation was the increased population too which forced the government to set up new industries and the increased demand for products induced the investors to pour out their money in the market.
For instance we see COLES, ADIDAS, WOOLWORTHS, etc around us earlier they weren’t there and at that time the GDP was quite low but due to the establishment of such industries and firms all this had changed significantly. Suppose earlier we used to export from other countries but due to the industrialisation all this has led to a lot of massive changes.
INTEREST RATES:- when I arrived Australia and when I opened my bank account I realised that here the interest rate provided the savings is just 2.51% which got me thinking that it was bit low and there was a big question that clung in my mind and I went on surfing the net to find the answer to this question and then I realised that here in Australia they want the money to circulate in the market so low interest rates discouraged the people to save their money and as this money flowed in the market the nation also grew.
If the banks were providing high interest rates the people would have been saving lot more money rather than incurring on various other things but then there would have been significantly lower need of production and if that would have been there the GDP would have been lower. So, the banks are proving lower rates which is making people incur more expenses which keeps the economy going and high demand leads to greater GDP of Australia.
RISE OF CHINA:- China and Australia are going hand in hand and are working as the partners reason being china’s massive demand for iron ore, coal and liquefied natural gas. Australia relies heavily on china.
No other country, relatively speaking, has benefited to quite the same extent from China's extraordinary development since it began opening for business to the outside world after the Third Plenary Session of the 11th Central Committee of 1978 of the Chinese Communist Party (CCCP).
In 2017, Australia registered the longest uninterrupted stretch of economic growth in modern history. This surpassed previous record holder the Netherlands with 103 uninterrupted quarters.
That expansion continues. Australia's commodities exports, driven by Chinese demand, sustain unparalleled growth.
This is the context in which Australia might do a better job managing relations with its cornerstone trading partner and, arguably, its most important bilateral relationship.
This latter observation requires a leap beyond assumptions that security ties with the US mean there is no relationship more critical to Australia's wellbeing.
That is changing fast as China's economic might continues to expand and its ability to project military power in the Asia-Pacific grows in leaps and bounds.
None of this is to say that Australia's security arrangements with the US versus China's rise represent a zero-sum game. You could argue that security ties to the US have become more important as a consequence. It is simply to acknowledge the world has changed. It is sprinting ahead of the ability of policymakers to keep up.
Source of above data* :- abc.net.au
MINING :- Australia is primarily dependent on its mining sector as it is the biggest contributor to its GDP. As we can see that in 2008 the production was lowest around 210 metric tons but it increased till 2010 to around 260 metric tons unfortunately again it fell to 250 metric tons by 2012. So, we can see the significant effect it had on the growth rate of Australia.
Australia is a land rich in minerals and other ores and it’s technology is vast enough which lets it to be self reliant and be capable of supplementing the economy of the nation. It need not import the significant minerals rather it can export them and strengthen its GDP more.
And now Australia has become the second wealthiest nation after Switzerland. Despite it is completely correct that there was a decline in the Australian mining sector, but the Australian economy managed to remain resilient and stable.
To put it in a nut shell we can say that Australia has come a long way with various ups and downs which has made Australia what it is today and where it stands. The above discussion made it pretty clear that how various factors were responsible for the changes in the growth rate.
ANSWER THREE :- (500 WORDS)
There are various challenges that Australia faced in enhance the growth rates but before discussing all of them first we need to acknowledge that there were list of these challenges and I would like to specify that I took the help of various articles but my paper is majorly influenced by the articles published on abc.net.au.
As said by then former treasurer of Australia
LOW WAGE GROWTH RATE is the biggest challenge faced by the Australian economy.What has happened is that since the past few years it has been observed that the wage rate growth is stagnant, meaning that Australia is facing no growth in wages which is enraging the labour.
According to him workers wouldn’t be earning more if their workplaces were shut or their employers were struggling to earn a profit.
"You're not going to earn more if the business isn't open, you're not going to earn more if the business isn't earning a profit," he said.( Mr. Morrison)
"So the capacity to earn profit of businesses irrespective of any size is critical to Australians earning more, so, that is the reason we're focussed on that, on investment to drive that profit growth.”
Prime Minister Malcolm Turnbull has previously argued that reducing Sunday rates will enable businesses to employ more Australians, boosting employment across the country.
The workforce stands strongly against the penalty rate decision as they believe that this is nothing but just a thing which will lead to a future which will deteriorate the living standards of millions of Australians
It is observed that growth has been limited to the mining industry over the past three years as discussed in above question due to a downturn in the sector, moving from high wages and pay rises during the boom.
Many economists predicted that there would be a slight hike in the wage growth in recent months and they have observed very unfavourable result which is affecting the consumer expenditure and many more businesses they depend upon.
ECONOMIC ADVANCEMENT:- If we look up into the manufacturing industry we can get some useful information. A 20th century gradual ‘changing of the guard’. It is true that the employment and output did not rise significantly but the composition in the sector changed substantially.Broadly, much advanced manufacturing activities developed at the expense of the more traditional, lower value industries.
Processing industries that were in manual labour faced a long-term relative decline. Major reason for this was that wage costs facing producers in Australia were very high relative to its trading partners.
On the other hand, more advanced, emerging industries like motor vehicles, metals, engineering, drugs and chemicals, were expanding.
The given illustration is taken from the article published by treasurery.govt.au Chart 1 represents the employment in specific manufacturing sub industries as a proportion of total employment in manufacturing between 1908 and 1929. Then there is more employment in the traditional activities after certain period of time. The processing of pastoral products, clothing, etc recorded a major decline In fact, even during the Roaring Twenties, a number of these industries were actually shedding labour, especially those associated with rural exports.
SARTHAK LUTHRA
30355947
BUECO 1509
SEMESTER 1
PRINCIPLES OF ECONOMICS (ATMC)
SUBMITTED TO:- MR. SUSIL RATNASEKARA