The Growth Of The Australian Economy

This report will show an overview of the current state of the Australian economy and its management by the Federal government through examining economic indicators such as economic growth (GDP), unemployment, inflation and trade.

Affordable housing is slowly becoming not that affordable for the poor in Australia over the last decade, and the price is keep raising. It became a significant concern among a lot of Australians.

The figure obviously had not return to pre-crisis level. Moreover, recent commodity prices had fallen significantly which will affect Australia’s short and long term economy.

First of all, from 2008 to 2015, property prices of all capital cities in Australia have increased rapidly. People have had obsession with buying houses. At the same time,

Australia has a long history of large and persistent current account deficits. During the 1960s the current account deficit averaged the equivalent of 2 per cent of gross domestic product. The CAD rose considerably, due to the floating of the Australian dollar and the opening of the capital account in 1980s, and by 1990s CAD has sustained around an average of about 4.5 per cent of GDP. However, in recent years the deficit has been falling and in 2011 it was just 2.25 per cent.

But even if we understand the changes, how can we compare the before and the after? What are the best parameters in doing so? What phenomenon is followed globally? This just summarizes one aspect of the essay which is followed by policy recommendations by the author in the later half. Though with the limited knowledge of the subject and experience the author has suggested a policy recommendation which aims at resolving existing or possible budding economic issues for Australia.

Employment in Australia is on the rise with most people who are willing and able to work now having the opportunity to do so. Economists consider 5% unemployment which was the value in January recorded by the Australian Bureau of Statistics. Greater number of jobs created because of factors such as the mining boom and the recovery effect in Queensland because of the floods will further lower the unemployment rate. This will have the effect of consumers having more disposable income thus requiring an increase in long term interest rates.

Housing affordability is the relationship between household income and burden of housing costs and is an issue when it prevents population groups from accessing appropriate or secure housing. (3, 4) Australia has seen a severe escalation in rent and house prices that have not been matched by growth of household income. This decline in housing affordability is a result of economic growth, tax incentives for owners and investors, more accessible finance and population growths, which consequently result in an increased demand for housing. (3, 5) Moreover, this is further compounded by land and development limitations that restrict increases in housing

Australia and China’s economic growth vary in terms of different increases in their gross domestic product, or GDP, which is measured in US dollars. Economic growth refers to a change in a nation’s output of goods and services over a period of time which is reflected by gross domestic product. During periods of economic boom, GDP is generally high. Similarly, during periods of recession, GDP is generally low. Australia is a mixed market economy, where the government plays a major role in providing collective goods and services while the private sector makes most of the economic decisions. Income is determined by the market but the government controls some private sector behaviour, minimum wage requirements, redistribution of income and other related economic activities. China, on the other hand, is a centrally

It is said that we are living in turbulent times. The Australia’s once-in-a-century commodity boom has reversed, leading many miners to cut back on investments and consolidate; which is expected to generate great social and economic hardship throughout these years. While more hope is casted into the construction sector, a cooling change blows in the housing market. Unemployment is tipped to rise and when it reaches a record high; consumption will continue to grow at a below-average pace, so business sentiment will remain fragile. Rather than fuelling the economy, the fiscal policy keeps straining it whilst the monetary policy will struggle to have an impact – indicating that the Australian economy is slipping downwards.

The Australian economy is reliant on three key sectors: services, housing, and mining. The services sector employs the largest percentages of Australians – around 80 percent – and is responsible for approximately 70 percent of the country’s GDP (Australian Bureau of Statistics, 2010). With jobs in a variety of specific industries, this sector drives the success of the Australian economy. The housing sector is experiencing unprecedented growth leading to concerns over a potential asset bubble. An increase in the amount

Demand for housing, particularly in Sydney and Melbourne, greatly outnumbers the supply available. Simple supply/demand economics tells us that this undersupply of property in the face of overwhelming demand will cause inflation. From March 2014 to March 2015, Sydney saw an average property price increase of 13.1% (ABS: Residential Property Price Indexes 2015). Currently, the RBA’s reaction to this is to play it safe by keeping cash rates at 2% (RBA: Monetary Policy Decision July 2015). The RBA want growth to be sustainable and long term on the Australian economy during a difficult time, but how does this affect the housing market? This lowers the risk of defaulted loans for buyers, particularly on fixed interest rate mortgages. ASIC chariman Greg Hedcraft says that Australia is experiencing a similar housing bubble to the U.S. pre GFC. This was caused by high interest rates and borrowers defaulting loans due to unexpected heightened interest rates, crushing the U.S. (and international) economy. However the RBAs recent interest rate decisions have been heavily criticised, with economists believing that these low interest rates, high consumer incentive to ‘buy now’, and predicted growing unemployment rates – peaking at 6.5% (Federal Budget 2015) could lead to future mortgage defaults and a large debt problem. Australia’s current economic state involving one

A statement about the main economic problems currently in the Australian economy or problems it may face in the future.

Australia is running one of the biggest immigration programs of any developed nation with the population growing at 1.6% per annum much more than the Organisation for Economic Co-operation and Development average of 0.7%. Brisbane is the third most increasing capital city in Australia, meaning more housing will be needed. This leads to demand being higher than supply and therefore the influx of prices in the property market. This affects first home buyers trying to enter the market and also renters trying to get out of the renting cycle. Investors

Current Liberal government is unwilling to use monetary policy in order to increase economic growth due to their over exaggeration of Australia’s government debt.