Eco help on: Money growth rate in Australia
- Introduction
Australia refers a highly developed country. It is the world’s 13th largest economy & has world’s 6th highest per capita income. The world’s military expenditure has been ranked twelfth largest all across the world. With world’s second highest human development index, Australia has been ranked high on the various international comparisons such as quality of life, education, economic well being of the economy, health, protection against the civil rights, etc. Australia is the member of G20, WTO, APEC, Common Wealth nations, OECD, UN & the Pacific Islands Forum (Reserve Bank of Australia, 2011).
Australia has been estimated to have an economy with one of the highest GDP per capita & with lowest rate of poverty. The Australian dollar is the local currency which is being used all over the nation. In the year 2006, The Australian Stock Exchange was merged with the Sydney Futures Exchange. The Australian Securities Exchange has been ranked 9th largest all across the world.
The Australian economy emphases more on exporting the commodities rather than manufacturing it. The major reason for not manufacturing the goods was the increase in the prices of the commodities. Australia’s balance of payments (BOP) has been estimated to be more than 7% of the negative GDP & also has large deficits in the current account for the past 50 years. Australia has grown with an average rate of 3.6% for the past one & a half decade. Being the member of the OECD, it has been seen that whether Australia was hit by the recession or not in the late 2000’s due to the global down turn. Six of the major Australia’s partners have been hit by the recession & has affected its economic growth in a bad manner (Reserve Bank of Australia, 2011).
- Macroeconomic study:
In order to have an in depth macroeconomic study of a country, the following aspects or indicators should be kept in mind such as The Real GDP Growth Rate, Rate of unemployment & Balance of Payment (BOP).
2.1 Real GDP Growth Rate:
The Gross Domestic Rate (GDP) refers to the rate at which goods & services have been produced in the economy. The GDP rate of Australia has been expanded by 1.2% in the second quarter of this year i.e. 2011 as compared to the previous quarter.
From the year 1959 till 2011, Australia has an average quarterly GDP growth rate of 0.89% reaching a height of 4.6% in the month March 1976 & recorded as low as -2.7% in the year 1974 (June). The Australian economy has been dominated by the services it provides but despite of that, its economic success has been based upon the abundance of mineral & agricultural products (Reserve Bank of Australia, 2011).
Australia’s comparative advantage could be attained due to the levels of exports of the primary products as a reflection of the natural wealth of this continent. Australia has been regarded as one of the major financial centre & a vital component of the entire global regime or a system. The chart below signifies the GDP Growth Rate of the Australian Economy.
2.2 Unemployment Rate:
The rate of unemployment for this continent has been estimated to be approximately 5.2% in the month of October this 2011. From 1978 – 2010, the rate of unemployment for this country has been averagely estimated to be 7.11% touching the highest peak point i.e. 10.90% in the year 2012. The lowest rate of unemployment was marked in the years 2008 & was estimated to be 4% (Reserve Bank of Australia, 2011).
Labour Force has been defined as the number of people who are engrossed or employed plus the number of people who are unemployed & looking for work. A non labour force refers to a force that is not looking for work at the moment & serving the military. The chart below signifies the level of unemployment pertaining to this continent or country i.e. Australia.
2.3 Current Account (Balance of Payments):
In terms of trade, the Australian economy has quite large or significant current account deficits for the past two & a half decades. One of the major reasons for a deficit in the BOP is due to its narrow export base.
Dependent upon the various commodities, the Australian government has led to redevelop the entire manufacturing economy. This has been known as a Microeconomic Reform, which has helped the Australian economy to grow & expand by an approximate figure from 10.1% in the year 1983 – 1984 to 17.8% in the year 2003 – 2004 (Reserve Bank of Australia, 2011).
There are enormous factors which have led to major contribution in the high current account deficit which Australia is practicing today. Absence of competitiveness internationally & reliance upon heavy capital goods from all over the globe has led to an increase in the overall current account deficit of Australia some time in future (Reserve Bank of Australia, 2011).
It must be noted that, the Current Account Deficit (CAD) has been entirely generated from the private sector corporations. Australia has been relying upon the capital all across the globe which would help them in order to fill in the gaps between national savings & investment. This suggests that, Australia has quite a low level of savings & CAD is not a major issue for them. Hence, as long as the investment is being funded by the inflow of capital overseas sufficient levels of returns should be paid in order to pay the services cost & increase the foreign liabilities which could help them to have a sustainable growth in the future years.
- Fiscal Indicators:
31. Ratio of gross fiscal deficit to nominal GDP:
3.2 Levels of government expenditure & their ratio to nominal GDP:
3.3 Levels of revenue & their ratio to nominal GDP:
4. Monetary Indicators:
Monetary indicators refer to the various indicators which would help in order to affect the entire money supply of the Australian economy. Some of the examples of monetary indicators would be the credit market, prices of the stock market, treasury bills, etc. The indicators mentioned above along with the Federal Open Market Committee would help in order to form a structured monetary policy (Reserve Bank of Australia, 2011).
Some of the monetary indicators in regards to the Australian economy have been mentioned in the report. They are rate of growth of money supply, money supply measures, rate of inflation, etc.
4.1 Rate of growth of money supply:
Australia has a decimal system of currency. The unit being an Australian Dollar which could be divided amongst 100 cents. The Australian notes would be denominated as follows $5, $10, $20, $50, $100 & the coins would be denominated as follows such as 5c, 10c, 50c, $1, $2. In the year 1984 & 1988, the 1c & 2c coins were ceased. The table below shows the value of notes which were being issued in last June (Macfarlane, 1998).
Money Supply Measures:
The money supply measures have been published in Reserve Bank & have been referred to the amount of cash which is being held by the public along with the deposits in financial institutions.
The various measures which have been used in this money supply measures have been discussed as under:
Money Base: This measure of money supply would comprise of the various notes & coins by the private sector, deposits with the Reserve Bank & the liabilities to the various private sector (Macfarlane, 1998).
M3: M3 has been defined as a currency along with the bank deposits of the private non bank sector.
Broad Money: Broad Money has been defined as M3 plus the various borrowings from the private sector as well as bank financial intermediary’s subtracting the holdings
5.1 Openness index: Trade refers to one of the most essential components for any economy. Australia has been referred to as one of the major continents which is quite an open economy in terms of trade with other economies. The countries openness regarding the level of trade could be influenced by many factors such as the locations of the continent, geographical factors, etc.
5.2 Level of exports & rate of growth of exports: The level of exports & the rate of exports in Australia have been estimated to be 13% of the entire GDP of the economy. This percentage has increased up to 20% & has a relative importance on mining, manufacturing as well as the service sector.
5.3 Level of imports & rate of growth of imports: The level of imports & rate of growth of imports in Australia have been estimated to be approximately between 13-14% of the entire demand. The levels of imports have been expected to rise some where about 15% & also reach 18% of the total demand in the years to come .
6. Critical Problems:
As mentioned earlier that, the Australian economy is the 19th largest exporter of the world. It majorly exports the various agricultural products such as Wheat, Wool & minerals as well.
The various problems which would be faced by the Australian Wheat industry & affect the Australian industry would be discussed in the following section. Food safety would refer to one of the major issue which might challenge the farmers & the agribusiness in the years ahead (Johnson, Jilek & Taplin, 1993). This would put extreme pressure over the community & educate the consumers regarding the safety of the food items. Food safety would also create major issues in case of the export market. Food safety would also concern the producers in long run & insure that all the products would be safe while they would leave the farm land. The agribusiness need to be very careful while processing & handling of the food products. Grain quality would also be regarded as one of the major issues in the wheat or grain market situated in Australia (Macfarlane, 1998). Quality problem might also begin the process directly. Change could be dealt in the several ways such as provide monetary incentives, changes in the market, legislations, etc. Foreign investment would also help to contribute towards the growth of employment as well as income of the host country.
- Future Prospects:
The future prospect of Australian Economy could be seen with the help of the following indicators. These indicators would help in order to see the future growth of any business with might start up in Australia.
6.1 Mergers & Acquisitions: From the year 1991 till 2010, approximately 31, 131 mergers have taken place. This depicts that, more & more organizations are clubbing together to expand their business. This would give a positive impact for the Australian economy & might also increase the revenue of the same (Australian Bureau of Statistics, 2006).
6.2 Trade & Economic Performance: In the second half of the 20th century, the Australian trade shifted from Europe till the East Asian Markets. This has led to strengthen the Australian economy as compared to the rest of the world. With a consistent rise in the GDP has led to an increase in the business opportunity for the same (Johnson, Jilek & Taplin, 1993). The past performance of Australian economy has been influenced by the performance at US. This has also led to an increase in the growth opportunities of the business which might be set up in the Australian economy.
6.3 Trade Agreements: The various trade agreements have been taken place in the Australian economy which has made it one of the biggest hubs to set up any business. The various trade agreements have helped in order to establish business from different parts of the world.
Þ Free Trade Agreement with China
Þ Free Trade Agreement with USA
Þ Free Trade Agreement with New Zealand
Þ Free Trade Agreement with Chile
Þ Free Trade Agreement with Thailand
Þ Free Trade Agreement with Malaysia
- Conclusion:
After the detailed report on Australia, it could be visualised that this continent is one of the most developed nations all across the world. Ranked 19th largest importer & exporter amongst the various nations the GDP rate of Australia has been expanded by 1.2% in the second quarter of this year i.e. 2011 as compared to the previous quarter (Australian Bureau of Statistics, 2006).
From the year 1959 till 2011, Australia has an average quarterly GDP growth rate of 0.89% reaching a height of 4.6% in the month March 1976 & recorded as low as -2.7% in the year 1974 (June).
The various monetary indicators also signify that the money growth rate in Australia has been rising consistently for the past many years. This also signifies that, Australia would refer to one of the continents which have bright future in the years to come. Mergers & Acquisitions, free trade agreements & the trade, economic performance refers to the three main indicators which would help them to grow (Australian Bureau of Statistics, 2006).
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