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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(economist.com, 2017).

(economist.com, 2017).

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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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