An Analysis of the Growth of the Australian Economy Essay

Introduction

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                One of the most vibrant economies in the world, Australia emerged to be one of the most powerful economies in the world after decades of lagging behind (“Australia: A Competitive Economy”, 2007). The country’s outstanding performing open economy is rooted primarily from an efficient handling of resources as well as the continuing reforms on the economy (“Australia: A Competitive Economy”, 2007). This is coupled by the growing competency of the Australian labor force which is likewise one of the most dynamic mixtures of cultures and diversity in the world supported by a flexible private sector.

                The Australian economy in the fiscal year 2004 alone posted a budget surplus of $8 billion, equivalent to a fraction of the Australian gross domestic product. Likewise, the Australian Government recorded a decline in net debts by $6.2 billion in the same fiscal year to $23.4 billion, the highest in 26 years (“Key National Indicators, 2007”, 2007).

Aggregate Supply and Demand on the Australian Context

                The Keynesian AD-AS structure separates the Australian economy into two divisions: the ‘demand side’ and the ‘supply side’ which thereby analyzes such relations using Australian equilibrium conditions, accounting identities, and behavioral and other relevant institutional equations (Dutt, 2005). The ‘demand side’ of the Australian economy classically analyzes significant aspects that are associated to the demand for consumer goods as well as the demand and supply of assets (Dutt, 2005). On the other hand, the ‘supply side’ typically analyzes the significance of the factors that are interrelated to the Australian output in recent years especially in the 1990s (“Economic Factors Affecting Exchange Rates”, 2007). This can also be said of the Australian Government’s decisional policies for producers as well as the Australian factor markets (Mitchell, 2001). The Keynesian macroeconomic framework guarantees that neither the Australian demand nor supply side factors are disregarded in the study. Also, Australian macroeconomic results depend heavily upon the relationship between various international markets (Dutt, 2005). The specific separation of definition into ‘aggregate demand’ and ‘aggregate supply’ alongside with the use of context of terminology in the Australian case could give the academic comparative advantage of making macroeconomic analyses possible in the Australian economy (Jean, 2005). Furthermore, the terms of the same tools can be utilized as the basic microeconomic model of the marketplace yet such advantage comes at a high cost. The aggregate demand and supply curves represent composite relationships that are basically different with the microeconomic curves which constitute a limited view of the Australian economy (Dutt, 2005).

Australian Economic Structure

                The country has an existing complete economic policy framework in place since the 1980s that spurred in economic growth for the next decade (“Improving Australia’s Long-term Economic Growth Prospects”, 2006). Currently, the Australian economy is internationally competitive and continues on to be a viable place for direct foreign investments. Australia right now has evolved to have an economy that has a reasonable, constant and a contemporary economic environment that ensures profitability to businesses (Dutt, 2005).

                Australia has ardent prudential regulation policies in place alongside with other related regulations of business-related corporate and liquidation regimes. Industry competition is extensive in certain vital areas such as in the communications, transportation, and power industries (Dutt, 2005).

                The country also has a liberal open economy with a corporate-friendly tax collection system. This is coupled by the strict implementation of low barriers to foreign trade and investment. The Australian labor market is a mixture of highly flexible and exceedingly skilled workers which comes from various countries which migrated into the country. This was spurred by the stable economic growth in the early 1990s until today. The existence of reasonable wage and price policies that restricted exploitation supported the sustenance of employment growth (Dutt, 2005). The consumer goods and tax from rendered services or common known as GST is measured to be as Australia’s value-added tax on a broad-based basis. This form of tax levy is derived at 10 per cent that applies to every goods sold and services rendered in the country.

                In 2003–04, attributed mostly due to the existence of smaller interest rates, as well as the reinforced Australian business sector company profits coupled with positive international business sentiment, new business investments grew by 8.3 per cent in 2003–04 (Dutt, 2005).

Macroeconomic Scenario

The Australian economy that is likely to emerge over the next 12 months will soon bloom as indicated by its undetectable asymmetries in the business cycle (Ryan, 2003). It also implies that its economy is very strong and resilient. Its economic growth is also shown by falling unemployment rates and better economic access to other countries (“Economic Indicators on the Internet”, 2006). Due to its lowest levels of general government net debt in the OECD, Australian economy further builds up its progress. Looking ahead, Australia will become a country of progress and development. Its economic structure also totes up carry a strong competitive market and provides services and labor to its citizens (Macfarlane, 1998).

In addition, its foreign trade is becoming strong due to its strategy about trade reform agenda. In financial aspects, the eradication of banking regulations also prosper the access to finance and lead to a higher value of currency. Competition in the market also brought up to the industries and the introduction of telecommunications fetch benefits in the users. Other factors that further the economy development of Australia includes taxation reform, business tax coordination and organization, elimination of barrier in business investment and capital reforms.

Microeconomic Profile

 The Howard administration has been successful to have tried to decrease involvement and union power in public and private workplaces which had benefited the labour market. This was done by the Australian government through the deregulation of the telecommunications sector as well as numerous other industries. For instance, such policies include the privatisation of several pre-existing monopolies in the agricultural industry (Parham, 2002). The benefits of such moves resulted to the absence of the recession factors that happened in the country in the country even after 16 years after. Likewise, the lowest level of Australian unemployment since the 1970s had significantly decreased to a level of 4.6 per cent as of January 2007 (Thornton, 2007). Since the early 1990s, the worth of company shares listed on the Australian Stock Exchange has also grown considerably higher on the annual yearly average.

Major microeconomic policies that any governments consider is the unilateral reduction of high tariff rates and other industry protective barriers (Samuelson, Nordhaus, & Samuelson, 1989). This is supported by floating the Australian dollar exchange rate as well as deregulating the financial services sector. This contains a specific policy in late 1992 to permit free access for foreign bank branches (Kennedy, 1992). The country addressed the situation by further analyzing and lowering the number of trade unions. Furthermore, efforts to restructure the highly centralized system of industrial relations and labour bargaining as well as better integrating the State economies into a national federal system were also done (Samuelson, Diamond, DePaul University. Dept. of Economics., & DePaul University. Dept. of Finance., 1971).  The improvement then and the standardizing of the national infrastructure and privatization of the government-owned services and public utilities were highly prioritized in the same manner (Samuelson & Puttaswamaiah, 2002).

A lot of raw materials, counting those resources known to be present but is yet to be discovered stay mostly untapped (Ostry, International Center for Economic Growth., Australian National University. National Centre for Development Studies., & Economic Development Institute (Washington D.C.), 1991). Economists often refer to Australia as the “world’s farm” as the agriculture and natural resource sectors both contribute significantly to GDP.  Through associated services like road and rail transport networks, here contribution occurs both directly and indirectly. Supporting rural economies which in some areas exist entirely are also based on an industrial need. The Australian government has been emphasizing the opportunities on the advance of the country education, tourism, and technology industries previously (Hewlett, 1996).

In the short span of six years, Australia’s small number of corporate entities has been very important to the restructuring efforts of the economy which accounted for over 58 per cent of growth in employment and the generation of about 30 per cent of Australia’s total economic production. Of more than 1.2 million small businesses in Australia employing almost 3.3 million people, the number of small businesses has grown by an average 3.5 per cent every year over the past decade (Eslake, 2007).

Australian Potato Industry

            The potato as well as the entire Australian crop industry as a whole contributed a large amount in the total gross domestic product output with 15% as of 2006.  The island continent of Australia is blessed with a land area which could be planted with potatoes and other vegetables (“Australian Fresh Potato Industry Strategic Plan”, 2006). This is coupled by a low population which amounts to just 7% of the total U.S. population. The land is naturally suitable for agriculture amidst the existence of the Australia-n outback or the desert part in the middle part of the Australian island. The production therefore of potatoes is well distributed in the country with most of the potato production concentrated in the states of Victoria and Western Australia in mainland and the island of Tasmania (“Australian Processing Potato Industry Strategic Plan”, 2006). Different varieties of potatoes can be grown throughout the country as varying vegetations dictate the suitability of certain potato varieties in the island. Australian potato production is also divided into four particular market segments: fresh potatoes, frozen processed potatoes, crisp processed potatoes, and potato seed production (Eslake, 2007). These segments contribute a significant amount in the overall Australian agricultural output with a percentage of 14% in 2006 (Rich, 2006).

Summary Conclusion

Several economic aspects suggest that asset market short-term macroeconomic markets in Australia. The economic growth that the country experienced in the past decade has well established it further into a growing economy reaching near its peak as with the business cycle. One of its factors is what the so called “financial liberalization.” It directs the Australian economy to a constant augmentation in the stock of monetary assets, and the possession of financial mechanism led in its expansion. The persistence of economic incorporation has augmented the relationship between the asset markets and lowered particularized countries’ range to avoid market shocks. Financial liberalization also emerges to direct to larger credit cycles and to credit expansion and development turn into more recurring. This progress is a key to the attainment of macroeconomic firmness. Modification in taxes, guidelines, strategy and procedure can further play a role in asset price variation and produce employment. In attaining these economy expansions, the dissemination of information from the single individual to government authorities was highly vital and successful in the case of Australia.

References:

Australia: A Competitive Economy. (2007).   Retrieved April 14, 2007, from http://www.dfat.gov.au/aib/competitive_economy.html

Australian Fresh Potato Industry Strategic Plan. (2006).   Retrieved April 13, 2007, from http://www.ausveg.com.au/assets/contentitems/public/5453/FreshPotatoIndustryStrategicPlan27112006.pdf

Australian Processing Potato Industry Strategic Plan. (2006).   Retrieved April 13, 2007, from http://www.growcom.com.au/pdf/ProcessingPotatoDRAFTPLan.pdf

Dutt, A. K. (2005). Keynesian Theory and the AD-AS Framework: A Reconsideration.   Retrieved April 14, 2007, from http://www.umass.edu/economics/publications/2005-11.pdf

Economic Factors Affecting Exchange Rates. (2007).   Retrieved April 14, 2007, from http://www.consensuseconomics.com/Foreign_Exchange_Consensus_Forecasts/Economic_Factors_Affecting_Exchange_Rates.htm

Economic Indicators on the Internet. (2006).   Retrieved April 14, 2007, from http://www.aph.gov.au/library/intguide/STATS/ecindicators.htm

Eslake, S. (2007). Economic Factors Affecting the Housing Market.   Retrieved April 14, 2007, from http://www.onlineopinion.com.au/view.asp?article=5626

Hewlett, J. G. (1996). Economic and Regulatory Factors Affecting the Maintenance of Nuclear Power Plants in Australia.   Retrieved April 14, 2007, from http://www.iaee.org/documents/vol17(4).pdf

Improving Australia’s Long-term Economic Growth Prospects. (2006).   Retrieved April 13, 2007, from http://www.treasury.gov.au/documents/1239/PDF/05_Part_4.pdf

Jean, O. (2005). Monopolistic Competition and the Effects of Aggregate Demand.   Retrieved April 14, 2007, from http://ideas.repec.org/r/aea/aecrev/v77y1987i4p647-66.html

Kennedy, I. G. (1992). Economic, Regional, and Industrial Factors Affecting Calls.   Retrieved April 14, 2007, from http://ieeexplore.ieee.org/Xplore/login.jsp?url=/iel3/4933/13603/00624480.pdf?arnumber=624480

Key National Indicators, 2007. (2007).   Retrieved April 14, 2007, from http://www.abs.gov.au/AUSSTATS/[email protected]/ProductsbyCatalogue/D5B5CF81909801FFCA2572A50016FEA7?OpenDocument#National%20Accounts

Macfarlane, I. J. (1998). Australian Monetary Policy in the Last Quarter of the Twentieth Century. pp 3-6

Mitchell, W. F. (2001). Aggregate Demand Should Do the Job. pp 8-12.

Ostry, S., International Center for Economic Growth., Australian National University. National Centre for Development Studies., ; Economic Development Institute (Washington D.C.). (1991). Authority and academic scribblers : the role of research in East Asian policy reform. pp. 22-25 San Francisco, Calif.: ICS Press.

Parham, D. (2002). Microeconomic Reforms and the Revival in Australia’s Growth in Productivity and Living Standards. pp 48-56.

Rich, J. (2006). Australian Potato Report.   Retrieved April 13, 2007, from http://www.potatocongress.org/sub.cfm?source=271

Ryan, C. (2003). Factors Affecting Year 12 Retention Across Australian States and Territories in the 1990s.   Retrieved April 14, 2007, from http://econrsss.anu.edu.au/pdf/DP467.pdf

Samuelson, P. A., Diamond, J. J., DePaul University. Dept. of Economics., & DePaul University. Dept. of Finance. (1971). Issues in fiscal and monetary policy: the eclectic economist views the controversy; original and unpublished papers. pp 12-16. [Chicago]: DePaul University.

Samuelson, P. A., Nordhaus, W. D., & Samuelson, P. A. (1989). Microeconomics : a version of Economics (13th ed.). pp 134-157. New York: McGraw-Hill.

Samuelson, P. A., & Puttaswamaiah, K. (2002). Paul Samuelson and the foundations of modern economics. New Brunswick, N.J., U.S.A.: Transaction Publishers.

Thornton, H. (2007). Australian Economy, Q2 2007.   Retrieved April 14, 2007, from http://www.henrythornton.com/article.asp?article_id=4637

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