Introduction The GDP growth in Australia is measured as.pdf
1. Answer: Introduction The GDP growth in Australia is measured as
Answer:
Introduction
The GDP growth in Australia is measured as per the trends of the participation, productivity
and population. The projections for real GDP growth were seen to be revised down from
2.25% to -0.2% in the first quarter of 2019 along with the reduction of 2.45% in the third
quarter. The inflation rate was also seen to be revised from 2.5% to -0.3% (Ihsmarkit.com
2021). The purpose of this report is to evaluate the different types of macroeconomic data
for Australia from 2000-2019. The main evaluation comprises of understanding the
influence of business cycle on the factors such as fixed investments, interest rates, inflation
rates, unemployment rate and real GDP. The study has used graphs and statistical
summaries for identification of business cycles in Australia, discussed the impact of the
business cycle on the variables such as Interest Rate, Investment Growth rate and interest
rate. In addition to this, some of the other excerpts of the report has also eliminated the
unemployment rate and inflation rate and whether or not there exists the Phillips curve in
Australia. The discourse of the study has further performed a simple regression analysis for
investigating the factors which influence the inflation rate in Australia, thereby estimating
its effects as well. Lastly, an implication of the results has been also explained.
Graphs And Statistical Summaries Of The Data Collected
Identification Of Business Cycles In Australia
The main determinant of the business cycle of Australia, takes into account factors such as
Real GDP Growth Rate, Inflation, consumer prices, Unemployment, Interest Rate and
Foreign direct investment, net inflows. Based on the depiction of the statistical summary,
we are able to understand how the average real GDP growth rate from 2000-2019 was
2.91%. Along with this, the average inflation rate was 2.64%, unemployment rate was
5.48%, interest rate was 3.68% and FDI was 3.45%. The reliability of the sample can be
further ensured with the skewness of close to zero for variables such as real GDP, inflation,
unemployment and interest rate. On the other hand, the skewness of FDI is slightly inclined
more to the right of the bell curve of normal distribution, thereby questioning the reliability
only for this variable.
2. Statistical Summaries
Real GDP Growth Rate%
Inflation, consumer prices (annual %)
Unemployment, total (% of total labor force) (modeled ILO estimate)
Interest Rate % (cash rate)
Foreign direct investment, net inflows (% of GDP)
Mean
2.914853964
2.639855
5.488
9. Count
20
20
20
20
20
Table 1: Statistical Summaries
(Source: Data.worldbank.org. 2022a; Data.worldbank.org. 2022b; Data.worldbank.org.
2022c; Data.worldbank.org. 2022d)
Discussing the impact of business cycle on inflation rate, unemployment rate, interest rate
and investment growth rate
Inflation Rate
Based on the impact of business cycle on inflation rate, we are able to identify how the
inflation has followed an inverse relationship with real GDP during 2002-2006. However,
since 2013 onwards the inflation rate has followed a similar trend like the real GDP.
Impact of Business cycle on inflation rate (2000-2019)
10. Year
Real GDP Growth Rate%
Inflation, consumer prices (annual %)
2000
3.91
4.46
2001
2.04
4.41
2002
16. 2019
2.11
1.61
Table 2: Impact of Business cycle on inflation rate (2000-2019)
(Source: Data.worldbank.org. 2022a; Data.worldbank.org. 2022b)
Figure 1: Impact of Business cycle on inflation rate (2000-2019)
(Source: Data.worldbank.org. 2022a; Data.worldbank.org. 2022b)
Unemployment Rate
As per the impact of business cycle on unemployment rate, we clearly able to observe how
the unemployment rate measured at percentage of total labour follows an inverse
relationship with the Real GDP. In this manner, throughout the year, during most of the
times, whenever the unemployment rate has also declined with the real GDP growth rate
has increased.
Impact of Business cycle on Unemployment rate (2000-2019)
Year
Real GDP Growth Rate%
17. Unemployment, total (% of total labor force) (modeled ILO estimate)
2000
3.91
6.28
2001
2.04
6.74
2002
4.01
6.37
23. 5.16
Table 3: Impact of Business cycle on Unemployment rate (2000-2019)
(Source: Data.worldbank.org. 2022a; Data.worldbank.org. 2022d)
Figure 2: Impact of Business cycle on Unemployment rate (2000-2019)
(Source: Data.worldbank.org. 2022a; Data.worldbank.org. 2022d)
Investment Growth Rate
Based on the investment growth rate computed using the foreign direct investment, which
is the net flows of percentage of the GDP from 2000-2019, we are able to identify how it has
followed a similar trend with the real GDP growth rate. However, the only exception can be
seen during 2005-2006, when there was a sudden decrease in the trend of foreign direct
investment.
Foreign direct investment, net inflows (% of GDP) (2000-2019)
Year
Real GDP Growth Rate%
Foreign direct investment, net inflows (% of GDP)
2000
3.91
30. (Source: Data.worldbank.org. 2022a; Data.worldbank.org. 2022c)
Rate Of Inflation
As per the depiction of rate of inflation, we are able to recognise how both rate of inflation
and real GDP growth rate followed a similar trend from 2000 to 2008. Due to the global
financial crisis, we can clearly observe the increase in the interest rate despite of decreasing
real GDP growth rate. Similarly, there has been some inconsistent patterns observed from
2012 to 2017, where we cannot infer a direct relationship between the two variables based
on the analysis of business cycles. On a similar note, from 2018 onwards, both real GDP
growth rate and interest rate has followed the exact same pattern.
Impact of Business cycle on inflation rate (2000-2019)
Year
Real GDP Growth Rate%
Interest Rate % (cash rate)
2000
3.91
5.03
36. 1.45
2018
2.87
3.37
2019
2.11
1.63
Table 5: Impact of Business cycle on inflation rate (2000-2019)
(Source: Data.worldbank.org. 2022a; Data.worldbank.org. 2022b)
Figure 4: Impact of Business cycle on inflation rate (2000-2019)
(Source: Data.worldbank.org. 2022a; Data.worldbank.org. 2022b)
Discussing the relationship between inflation rate and unemployment rate and commenting
whether there exists a Phillips curve in Australia
Based on the interpretation of the relationship between inflation rate and unemployment
rate, it can be identified how there exists an inverse relationship between the
aforementioned variables. In this context, whenever there is an increase in the
37. unemployment rate, the inflation rate has decreased and vice versa. On a similar note, the
Phillips curve in economics also refers to an inverse relationship that exists between
unemployment rate and inflation. Therefore, we can arrive at a conclusion that there exists
a Phillips curve in Australia.
Relationship Between Inflation Rate and Unemployment Rate
Year
Unemployment, total (% of total labor force) (modeled ILO estimate)
Inflation, consumer prices (annual %)
2000
6.28
4.46
2001
6.74
43. 5.3
1.91
2019
5.16
1.61
Table 6: Relationship Between Inflation Rate and Unemployment Rate (2000-2019)
(Source: Data.worldbank.org. 2022b; Data.worldbank.org. 2022d)
Figure 5: Relationship Between Inflation Rate and Unemployment Rate
(Source: Data.worldbank.org. 2022a; Data.worldbank.org. 2022b)
Conducting linear regression for investigating the factors influencing inflation rate in
Australia and estimating the effects of the same
In general, the factors affecting the inflation rate in Australia is identified with increasing
incidence of supply of money, consumer spending, disposable income, public expenditure,
monetary policy, deficit financing, repayment of public debt, expansion of private sector and
increase in exports. However, for simplicity the linear regression has considered the two
independent variables as public expenditure and increase in exports.
Year
44. Inflation, consumer prices (annual %)
General government final consumption expenditure (% of GDP)
Exports of goods and services (% of GDP)
2000
4.46
17.91598284
19.41812
2001
4.41
17.89675602
22.18422
52. 19.47289834
24.16973
Table 7: Factors impacting the inflation rate in Australia
(Source: Data.worldbank.org. 2022b; Data.worldbank.org. 2022e; Data.worldbank.org
2022f)
The summary output enumerates how the independent variables such as government
expenditure and export of goods and services influence the dependent variable inflation
rate by up to 34.6%.
Summary Output
Regression Statistics
Multiple R
0.587944
R Square
0.345678
53. Adjusted R Square
0.268699
Standard Error
0.827965
Observations
20
Table 8: Regression Summary output
(Source: As created by the author)
The ANOVA summary shows how independent variables namely government expenditure
and export of goods and services directly impacts inflation rate and holds a statistically
significant relationship with a p value of 0.027, which is lesser than 0.05.
Anova
56. Table 9: ANOVA Summary
(Source: As created by the author)
As per the depictions of the coefficient summary as well we can observe how both the
independent variables are statistically significant as the P value of X Variable 1 i.e., General
government final consumption expenditure is 0.003 and X Variable 2 i.e.; Exports of goods
and services is 0.01, which are both lesser than 0.05.
Coefficients
Standard Error
t Stat
P-value
Lower 95%
Upper 95%
60. (Source: As created by the author)
The scatter diagram in figure 7 as well indicates the inverse relationship that exists between
inflation and export of goods and services.
Figure 7: Impact of Exports of goods and services on Inflation
(Source: As created by the author)
Policy Implications Of The Results From The Above Discussions
Based on the results obtained above the policy implication shows that from 2019-2020, the
government should emphasise on increasing the disposable income growth for household.
In addition to this, public demand and business investments should support the growth
forecast in the future as well. As the consumption was weak the during the second half of
2018, the future policy needs to emphasise on stabilisation of growth in activity and
increasing the intercity migration pertaining to the rural-urban development. The emerging
policies should also take into account investment in property market in China and
infrastructure spending for ensuring a stable growth trajectory pertaining to the high
ongoing demand of steel in China.
Conclusion
As per the depictions of the business cycle, we can observe how the inflation has followed
an inverse relationship with real GDP during 2002-2006. However, since 2013 onwards the
inflation rate has followed a similar trend like the real GDP. The FDI has also followed a
similar trend with the real GDP growth rate. The findings in the second section of the study
elaborates how there exists Phillips Curve in Australia. On a concluding note, we are able to
understand how there exists a direct impact of expenditure and export of goods and
services on the inflation rate. Furthermore, the Australian government should emphasise on
increasing the disposable income growth for household as per the observed statistical
implications.
References
Data.worldbank.org. 2022a. GDP growth (annual %) - Australia | Data. Available at:
https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=AU (Accessed: 9
January 2022).
Data.worldbank.org. 2022b. Inflation, consumer prices (annual %) - Australia | Data (2022).
Available at: https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=AU
(Accessed: 9 January 2022).
61. Data.worldbank.org. 2022c. Foreign direct investment, net inflows (% of GDP) - Australia |
Data (2022). Available at:
https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS?locations=AU (Accessed: 9
January 2022).
Data.worldbank.org. 2022d. Unemployment, total (% of total labor force) (modeled ILO
estimate) - Australia | Data (2022). Available at:
https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?locations=AU (Accessed: 9 January
2022).
Data.worldbank.org. 2022e. General government final consumption expenditure (% of GDP)
- Australia | Data (2022). Available at:
https://data.worldbank.org/indicator/NE.CON.GOVT.ZS?locations=AU (Accessed: 10
January 2022).
Data.worldbank.org. 2022e. Real interest rate (%) - Australia | Data (2022). Available at:
https://data.worldbank.org/indicator/FR.INR.RINR?locations=AU (Accessed: 9 January
2022).
Data.worldbank.org. 2022f. Exports of goods and services (% of GDP) - Australia |
Data (2022). Available at:
https://data.worldbank.org/indicator/NE.EXP.GNFS.ZS?locations=AU (Accessed: 10
January 2022).
Ihsmarkit.com. 2021. Australian economy rebounds in early 2021 (2021). Available at:
https://ihsmarkit.com/research-analysis/australian-economy-rebounds-in-early-2021-
apr21.html (Accessed: 10 January 2022).
