Inflation, employment, economic growth and external balance in Australia

Inflation , Employment , Economic Growth and External Balance in Australia

2005

The Australian economy is considered relatively small , as its GDP is just 5 percent of that of the United States . Practically , it means that the economy is significantly exposed to the rise and fall of the global economy and the major world trends as in the case of energy prices increases . As a small economy on the edge of the world , a country of vast distances and small population , Australia still develops according to common macroeconomic laws . From macroeconomic perspective , there are

br several important indicators which reveal the status of Australian economy , namely economic growth , employment , inflation and external balance

In regard to measurement of economic growth , in this particular Australian GDP indicators and disposable income (DI ) will be used . From 1950 to 1987 , real GDP increased 450 percent and the population doubled so GDP per capita grew by 2 .24 times . By way of contrast , real GDP growth was virtually static from 1902 to 1939 (OECD Economic Surveys 1998 . According to Australian Bureau of Statistics (ABS , between 1993-94 and 2003-04 , real net national disposable income per capita grew by an average annual rate of 3 .1 a year (ABS , 2005 . As ABS notes , from 1994-95 to 2002-03 the real income of low income Australians rose by 12 (ABS , 2005b . From the critical standpoint , in Australian context investment (I ) as integral part of GDP should be mentioned . ike many aspiring industrialized nations , Australia developed a general strategy of protecting industry , encouraging foreign direct investment to enjoy the associated excess profits , and directing a significant part of its work force to the protected sector . It was hoped that the larger population would allow these infant industries to outgrow their protection as they took advantage of the economies of larger scale . The focus was inward , but the policy was not unsophisticated .The strategy was effective , up to a certain point . Direct investment was forthcoming Tariff profits were shared with foreigners who maintained the manufacturing sector at about the same share of the economy that it had been in 1950 . With rapid growth of GDP this implied a substantial inflow of capital . The domestic industry , however , has never been able to take advantage of scale economies , since the optimal size of industrial output continued to expand beyond the capabilities of an inward-looking manufacturing sector . Australia had greater success in the development of its financial sector . As it can be seen from statistics provided by ABS , Net International Investment amounted 516 ,827 million (ABS 2005a . By the June 2005 , according to ABS , Australian GDP constituted 209 ,648 million . As ABS explains the trends in National GDP , GDP increased 0 .7 in the June quarter . GDP per capita grew by 0 .4 , GDP per hour worked in the market sector increased by 0 .1 and real net national disposable income grew by 1 .8 (ABS , 2005a . Real GDP growth rate is between 2 .3 -2 .4 annually

The Australian labor force has grown rapidly...