Economic growth of Australia and US
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Table of ContentsIntroduction......................................................................................................................................3
Economic growth of Australia and US............................................................................................3
Australian economy in the year 2011..........................................................................................3
United States economy in 2011...................................................................................................5
Consumer spending..................................................................................................................5
Economic growth.....................................................................................................................5
Australian economy year 2012....................................................................................................5
The United States in the year 2012..............................................................................................8
Comparison..............................................................................................................................8
Australian economy in 2013........................................................................................................8
US economy in 2013....................................................................................................................9
Comparison..............................................................................................................................9
Australian economy in 2014......................................................................................................10
US economy in 2014..................................................................................................................11
Comparison............................................................................................................................11
Australian and US economy in the year 2015............................................................................11
Australian economy in the year 2016........................................................................................12
Us economy in the year 2016.....................................................................................................12
Comparison of Australian and US economies in last five years................................................12
Unemployment rates...............................................................................................................15
Infrastructural reforms............................................................................................................17
Role of external factors..........................................................................................................17
Comparison of Australia with other developed countries..........................................................18
Concluding Remarks.....................................................................................................................18
Bibliography..................................................................................................................................20
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IntroductionThe economy of Australia is one of the largest mixed economies in the world. It is the 12 th
largest economy in the world with respect to nominal GDP and 19 th largest economy in the world
with respect to purchasing power parity. Australian economy and GDP is dominated by services
sector of the country which contributes up to 68 % of GDP. Australia is a member of different
international trade organizations, for example, OECD, WTO, etc. The country has entered into
several free trade agreement with different other countries, for example, China, Malaysia, New
Zealand, United States, Singapore, and Japan. These steps contribute to various characteristics in
the wellbeing of the Australian economy.
Per capita GDP of Australia is ranked more than many developed countries. Its service sector
contributes in national as well as the international well-being of the economy. Due to the
growing stage of the economy, more people are showing their interest to get employment in
Australia for better employment opportunities. Education sector of Australia is also diverting the
attention of people from other countries due to the attractive and flexible academic facilities
introduced by Australia for international students (Gould, 2013).This paper will further discuss
the economic growth of Australia in last five years and compare the details of this economic
growth with any other developed or developing the country.
Economic growth of Australia and USThis paper will discuss the economic growth of Australia and United States and made a
comparison of their growth condition accordingly.
Australian economy in the year 2011Australian economy was on the slowest pace since 2011. According to the report of financial
review Australian economy was teetering on the brick of domestic recession since 2011.
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Domestic demand in the economy shrank in 2011 by about 0.3 %, and the expansion of the
economy was also worse in last two years. Following graph of Australian financial review depict
this movement of Australian GDP and its slow pace in 2011.
(afr.com, 2017).
It is depicted that after the domestic recession Australian GDP moved in slow pace starting from
2011.
The gap in economic growth of the year 2011 was described by economists of Australia that the
economy of Australia is at the watershed moment because the mining investment is the peak in
the history or about to reach the peak. According to the top economist of Australia, the Reserve
Bank of Australia was at expenditure recession in 2011. Economists suggest that there is need of
more than expected and anticipated growth in the economy to cover this stage of the recession
(afr.com, 2017).
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United States economy in 2011On the other side, the economy of United States was still recovering in 2011 from the 2007-09
recessions. There was different statistics of economic growth in different states of United States.
It was reported that economy of United States continues to recover in 2011, but the growth was
slow and less as compared to the last year 2010. This slow growth was due to the less
contribution than expected (reuters.com, 2017).
Apart from the recovery condition described by different economists of United States most of the
people of United States does not feel that recovery. According to the report by New York Times,
the unemployment rates remain high, and the domestic budget of US was also in deep trouble.
This shows that there were still marks of the recession on the economy of US (nytimes.com,
2017).
Consumer spendingConsumers spending for both of the countries were at the lowest stage in 2011. In the United
States, it just grew 0.1 % since the end of the recession two years ago. The condition of shares
fell sharply for the US.
Economic growthThe US were in the condition of expected recovery, and so does Australia. Both of the
economies were fighting with the slowing down condition of the economy. Despite shown
economic growth figures by the official cited the growth as compared to recent last year and
expected statistics was low.
Australian economy year 2012After facing the slowest pace in 2012 Australian economy showed recovery and better figures in
2012. According to the Reserve Bank of Australia facing the global weaker economic conditions,
the recent data of the economy is mostly positive. Prices of Australian iron ore and coking coal
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fell sharply due to the fall in demand for steel in China. After getting their peak, the terms of
trade of Australia fell sharply in 2012. Household consumption rose strongly, and mining
investment continues to grow (rba.gov.au, 2017).
To tackle this slow growth OECD encouraged Australia to introduce some structural reform with
flexible labor market and improved education and training sector. The economy is strong but
must adapt these reforms to get benefits from Asian economies. The trend in economic condition
could be depicted from following statistics
(economist.com, 2017)
Terms of trade for Australia deteriorated for the year 2012.
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Unemployment remains at the almost same level, and there is growth in GDP as compared to the
year 2011 (Plumb, et al., 2013).
The United States in the year 2012GDP growth faced fluctuations in different quarters of 2012. The major contributor to the
expected change of economy was the election of 2012 in the United States. There were far too
many people unemployed in the US, but it was expected that economy would remain in healthy
growth of 2-3 % in GDP. In 2012 the economy of US created approximately 2.17 million jobs to
combat the recession and unemployment problem of the economy.
A number of unemployed people fell from 12.8 million to 12.2 million. Federal Reserve kept
interest rate low to boost economic growth, and inflation was also not a threat to the economy in
2012. Debt to GDP ratio in 2012 was highest than any time since World War 2 in the US. It was
caused by government spending and low tax revenue from government (focus-economics.com,
2017).
Comparison Both the economies showed the position of recovery from the damage done to their economies in
early years. Reforms were expected to be adopted by Australian economy, and the US was
expected to control their budget deficit. Both the economies were making efforts to control their
position on the unemployment problem in the economy.
Australian economy in 2013There was growth in the economic condition of the trading partners of Australia which affect the
commodity prices of trading. The economy of Australia according to the Australian reserve bank
grew below the trend pace in 2013. Mining investment continues to contribute to GDP, and the
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household market grew in 2013 for Australia. The employment rate is expected to be constant
due to indicators of advertisement and job vacancies, but the participation rate declined.
The inflation rates remain lightly unchanged. In this condition of constant pace, it was expected
for the Australian economy to have both sides in growth for future years. According to the world
socialist website, the downturn that hit the Australian economy in 2012 intensified in 2013.
There was the impact of the global market especially china’s export on the economy of Australia
in 2013. Labor market faced a downturn, and despite all government efforts, there was less sign
of recovery in labor market of Australia (wsws.org, 2017).
US economy in 2013According to the white house report of US at the end of 2013, it depicts that economy of USA
strengthens as compare to last year. This strength caused by the creation of new jobs in the
economy and strengthening the middle class. The condition of the economy at the end of the year
was reported better as compare to that at the start of the year. The private sector had added
sufficiently in the growth of GDP, and significant contribution was made by the housing sector.
Business had created several new jobs in the economy. Overall the economy of US was kept
moving, but the slow growth of the economy could develop in chronic stagnation
(obamawhitehouse.archives.gov, 2013).
ComparisonIn the year 2013 both, the countries were headed toward improvement in their economic
conditions. It may be analyzed here that global fall in economies effects more on the economic
condition of Australia as compared to the US. On the other side, US was paying more focus on
the improvement of the internal outlook of its economy.
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Australian economy in 2014According to the expectation of reserve bank of Australia, it was expected that Australian
economy would pick up the pace in the year 2014. The driving factors expected by reserve bank
would be lower exchange rate with the growth of housing and retail sector (theguardian.com,
2017).
2014 was the year which depicted that despite deteriorating global economic condition
Australian economy continues to look good. The year of 2014 was considered as accommodative
for financial condition outlook of the economy. Resources export continued to grow strongly,
and due to this export it was expected that in 2015 Australian economy will share a significant
part of world economy
(habc.gr, 2017).
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In 2014 household condition was improving moderately but labor market remains subdued. The
outlook for domestic growth continued to remain low as compared to the expected figures, but it
was forested to improve till next year. One of the other contributions for this improving
condition was infrastructure reforms by Australia and its exports (rba.gov.au, 2017).
US economy in 20142014 was considered as the year for a breakthrough for employment creation of the country.
Since the year 1999, this was considered as the strongest year as the monthly creation of jobs for
the labor market. The unemployment rate came down to 5.8 % lowest since the recovery of past
five years (usnews.com, 2017). GDP growth of US reported as 2.4 % as compared to the last
year of 2013. These figures were best since 2010 recovery of US economy. According to the
Economist analysis for US economy following years would be expected as better for the
economy (forbes.com, 2015).
ComparisonIt could be compared that for recovery of both economies internal factors were vital for US
economy as job creation was considered as a milestone to combat the recession. For Australia
increase in export was vital for the better outlook of the economy along with infrastructural
reforms.
Australian and US economy in the year 2015The recoveries for the US and euro region continue to flow for this year as well. In the United
States, the year 2015 was there was a recovery in domestic final demand and improvement in the
labor market with a slight moderation in GDP growth of the country.
In Australia, there was a slight change in terms of trade of the economy due to the changing
commodity prices of economy’s global trading partners’ labor market continue to improve the
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economy. Interest rate cut was also considered as the main factor for rebalancing of the
Australian economy. The forecast for both the economies was same as they were expected to
grow in coming years. On the other hand for Australia employment market was also expected to
move in coming years due to increase participation rate (rba.gov.au, 2017).
Australian economy in the year 2016The outlook for Chinese economy remains the main factor behind the uncertainty of Australian
economic forecast. There was mixed momentum in Australian labor market. On the export side,
other industries than the mining industries also contribute to the economy.
Us economy in the year 2016US annual growth rate was recorded as 1.6 % in the year 2016. According to the report of
authentic news and reporting authorities, it was less than expected. After 2015 it was expected
that to have an effective recovery year for US economy but 2016 shown worse results as
compared to the year of 2015. In the last four months of 2016, the growth rate was 1.9 % lowest
since 2011. According to different economist economy of America is starving for reforms. US
economy showed significant improvement especially in labor market, but there is low
productivity behind this slow growth of the economy (money.cnn.com, 2017).
Comparison of Australian and US economies in last five yearsThe comparison is on the basis that Australian economy is developing on the other side the size
and technological advancement of US developed economy are much bigger than Australia.
There are certain similarities between Australia and US on the basis of demographics and vast
land area, but there are certain differences in the economies too. It could be analyzed from above
economic details from past five years. The US is far bigger than Australia in term of population,
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GDP, budget, and many other factors. There are also technological differences between these
two countries (theaustralian.com, 2017).
Australia is an open market with abundant natural resources. This opening up of Australian
economy attracts foreign investors, and it also contributes to revenue earning of the economy
through export of different commodities. It could be shown from above analysis that the major
impact on the economy of Australia was due to fluctuation in the commodity prices of its trade
partners like China. Following graph shows that the major export market of Australia is China
(rba.gov.au, 2017).
Due to this, any fluctuation in the commodity prices of Chinese economy affects Australian
economy as well as terms of trade for Australia. According to the world, economic condition
forecast by IMF and Forbes magazine the change in Chinese economy and fluctuations do have
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an impact on world economy. This may slow down the world economy a bit (forbes.com, 2017)
(James, et al., 2013).
For the components of Australian GDP, the main revenue earning is through the private spending
of Australian household market. This could be shown from following pie chart
(obamawhitehouse.archives.gov, 2013).
Consumer spending forms the majority of the part of Australian GDP.
On the other side, US export market has wide coverage to almost all the sectors of the globe. The
basic step took by the US for the recovery of their economy was in the form of labor market
reforms as compared to the improvement in household spending and export in the case of
Australia. Forbes declares that the future forecast for the US will be like most of the last years
but in a different texture.
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US economy will grow with housing and business spending, but the foreign trade will hamper
too much expansion in the growth of the economy (forbes.com, 2017).
Unemployment ratesUnemployment problem was one of the main factors faced by both economies of Australia and
US in these last five years. The analysis of the effectiveness of their policies could be shown
from the following trend in unemployment
(imf.org, 2017).
The US have paid more focus on job creation policies to recover from recession in these years.
The effectiveness of these policies is shown from above diagram. After 2011 there is a constant
reduction in unemployment rate with an almost same percentage (Wilson, et al., 2014).
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As for the case of Australia, it also faced dwindling condition in labor market with no change
and ineffectiveness of employment policies from government. It could be analyzed from the
following trend
(abs.gov.au, 2017).
It could be analyzed from above statistics that Australia has faced fluctuation in the
unemployment rate, but overall the situation for the labor market goes on worsening throughout
these five years. Unlike US-Australia remains unable to control unemployment in its
economy.one reason for this result could be the less focus of government on this macroeconomic
variable of unemployment as compared to other sectors of the economy.
Most unemployment figures are reported in South Australia in 2017 statistics
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(lmip.gov.au, 2017).
Infrastructural reformsIt may also be concluded that infrastructural reforms in Australian education and training
department played an important role for the betterment of the economy. On the other side, US
create value for the economy through labor market improvement which remains subdued in the
case of Australia.
Role of external factorsFor Australian economy, there is a vital role of the global condition in fluctuation of Australian
economic condition. Change in global prices of commodities and trade partners like China affect
the economic condition of Australia, and this factor was absent in fluctuation of US economic
outlook. Export played an important part for recovery of Australian economy from recession.
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Comparison of Australia with other developed countriesDespite its small size Australia is in a better position in the world economy. It could be shown
from the position of Australia in 2012 details
(rba.gov.au, 2017).
Australia has better growth figures in 2012 as compared to other developed countries. This result
is due to using the competitive advantage and by adopting the required reforms in the Australian
economy.
Concluding RemarksIt may be concluded that from the start of this comparison both the countries were in the
condition of economic downturn and recession. These five years depict the recovery stages for
both economies. Australia gained significant value in the world economy by exporting its
competitive advantage and by achieving the economy of scale. Australian economy also worked
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on their internal reforms to adapt the environment of emerging economies. On the other side, US
also worked for internal reforms in labor market as well as sponsoring their budget deficit.
It may be suggested that for recovery of any economy these examples of developing and
developed economies could be taken. Internal reforms may matter and work for a developed
economy like the US but for any developing economy it has to focus on internal as well as
external factors like the example of Australia could be taken here.
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