Question

In: Economics

How did the Australian economy fare in the last 12 months in terms of output growth,...

How did the Australian economy fare in the last 12 months in terms of output growth, inflation and unemployment? Describe in detail the movements/trends observed for these variables.

Solutions

Expert Solution

Australian economy:

Output growth: The Australian economy grew at 2.2% YoY in the fourth quarter of 2019, following 1.8% YoY growth in the third quarter, 1.6% YoY growth in the second quarter and 1.7% YoY growth in the first quarter. Private consumption has been relatively week as households have been adjusting to low income growth. Also the housing market is facing deflation. The demand is expected to pick up in second half of 2020. Investment growth have been subdued. Mining activity also have been going through a slow pace and is expected to pick up towards end 2020. Agriculture sector growth has also been subdued due to drought and bushfires. Bushfires affected the air quality which inturn affected sales at restaurants and cafes. COVID-19 is expected to weigh on the growth outlook in near term. Consumer confidence has dipped amid the epidemic

Unemployment: Unemployment rate moderated in 2019, averaging around 5.2% for the entire year. Employment grew stronger than the GDP growth. However, wage growth has remained subdued. So even though the number of people employed has increased in recent times, but wage growth has decreased. Particulary, increase in health care employment has been observed which can be attributed to ongoing COVID-19 pandemic. Employment in construction sector have declined

Inflation: Consumer Price inflation, CPI grew at 1.8% YoY in the fourth quarter of 2019, higher than 1.7% YoY in the third quarter, 1.6% YoY in the second quarter and 1.3% YoY in the first quarter of 2019. Even though the inflation has marginally increased over 2019, but overall the levels are low and stable. Year end increase in inflation was due to increase in fuel and vegetable prices.Depreciating exchange rate and bushfires impacting supply chains led to this increase. Housing inflation have declined to historical lows in 2019. Prices of cigarettes/tobacco increase towards end 2019, because of increase in excise. Electricity and other utility prices declined over 2019. Also, services inflation have remained subdued over last 1 year.

Kindly note: YoY- Year over Year change


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