Austrialia´s Economic Growth

Economic Growth

Economic growth involves an increase in the value of goods & services that an economy produces over a period of time caused by changes in the level of aggregate supply & demand, measured by the annual rate of change in real GDP.

Since Australia’s 1991 recession characterised by negative -0.2% growth, continuous growth stabilised over the past two decades averaging 3.5% per annum but slowed to 3.1% during the 2000s.

As the engine of global growth shifted from USA to China during the 2000s, demand for Australian mineral resources such as coal & iron ore increased by 50% & 80% respectively underpinning growth since 2004 & improving the TOT from 88.6 in 2003 to 153.2 in 2010. Since 2003, commodity prices tripled parallel to increasing commodity demand as 54% of export revenue, thus adding 15% to Australia’s national income & allowing for increased investment of AD.

Average growth fell to 1.6% during the GFC as AD components significantly reduced. Since then, economic activity gradually rose, peaking at 3.5% in 2011 through pickups in the resources boom & consumer confidence. Macroeconomic policies where the RBA lowered interest rates to 45 year lows at 3.25% & the government’s large-scale fiscal $400 stimulus package helped evade recession by increasing consumption & government spending of AD.

Since September 2013, Australia’s economic growth slowed to 2.4% amid drops in global demand for resources, business investment by 5.9% in 2013 & domestic consumption averaging a low 2.2% since 2008. A slight pickup to 2.8 in the fourth quarter of 2013 is attributed to export volume rises by 2.4%, imports declining by 0.6% & household consumption rising by 0.8%. Annually, exports rose by 6.5% with imports declining 4.6%.

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...& indexation set to save $3.15 billion over 4 years.

• Complete deregulation of university fees from 2016 & increase HEC’s interest rates.

• Increased $830 million funding over 3 years to TAFEs & private colleges.

• Gonski school funding scrapped from 2017-18 & indexed to inflation from 2018.

Social welfare

• Taxpayers on a taxable income above $180,000 pay extra 2% tax until June 2017, saving $3.1 billion over 4 years.

• Family tax benefit B limited to families with a combined income less than $100,000 & until their youngest child turns 6.

• 6 month waiting period for unemployed younger than 30 to receive allowances, saving $1.2 billion over 4 years.

• Age pension age at 70 by July 1, 2035 - indexed to inflation rather than wages from September 2017.

Defence

• $122.7 billion over four years on defence spending with fast-tracking of $1.5 billion for new hardware.