GFC Report

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In accordance with ‘Australia in the Global Economy’, economic growth is defined as a sustained increase in a country’s productive capacity over time. This is commonly measured by the percentage increase in real Gross Domestic Product (GDP). Economic growth is measured using one particular equation: Real GDP (current year) - real GDP (previous year) x 100 Real GDP (previous year) 1 Economic Growth = Up until the GFC, Australia had held a relatively stable level of economic growth hovering around 3.5%. Although not large growth, Australia was one of the rare economies (besides China) who had been through a period of consistent growth, with between 2%-5% growth between 1994-2007. This large level of consistent growth was largely afflicted to the increasing commodities prices, which had a huge impact on Australia’s exports as Australia is predominantly a exporter of mining materials particularly coal, iron ore and gold. The Global Financial Crisis hit the Australian economy at a lesser intensity as to the rest of the world, largely due to government policy used to reduce the impact. Economic growth during the GFC slumped, with GDP growth falling from 3.7% in 2007/8 to 1% in 2008/2009. This slump in economic growth was linked to increasing unemployment rates, which will be spoken about further into the report. The Global Financial Crisis forced the government to use the entire surplus and more that had been accrued during the Howard years, (which was recorded at $21 billion at the end of the 2007/8 financial year, and -$30 billion by the end of the 2008/9 financial year); however this use of funds was to great effect. Although many have been sceptical of how the government spent its stimulus package, (first injection ... ... middle of paper ... which point Australia had an unemployment rate of 4.3%. Australia’s rate of unemployment has risen to 5.6% in late 2009, with prospects of higher rates of unemployment. This has required expansionary economic policies to raise aggregate demand levels and increase GDP growth. There are a number of causes of unemployment in the economy. Some of these causes are: • Level of economic growth • Stance of macroeconomic policies • Constraints on economic growth • Rising participation rates • Structural change • Technological change • Productivity • Inadequate levels of training and investment • Rapid increase in labour costs, and • Inflexibility in the labour market Works Cited Australian Bureau of Statistics
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