Question

Discuss and EXPLAIN in great details with tables and graphs the main macroeconomic indicators for the Australian economy. (i) conduct research on the current trend in economic growth, GDP, inflation rate, unemployment rate, exchange rate, government debt and other macroeconomic indicators using multiple sources. (ii) Define and draw the four stage of business cycle and explain when expansionary or contractionary fiscal and monetary policies are applied.

Answer 1

i. Australia is one of the developed nation in the world. It has tenth place in terms of nominal GDP. Current GDP of Australia expected to reach $1320.00 billion. Australian economy is highly developed market economy. GDP was estimated at A$1.89 trillion as of 2019. GDP of Australia has recorded steady gains in recent years. Due to the outbreak of Covid 19 pandemic, growth rate has declined due global financial crisis. Australian inflation rate for 2019 was 1.6.1% a 0.3 % decline from 2018.Current inflation rate is estimated to be 1.43%. As of 2019 . unemployment rate in Australia was about 5.3%. Due to huge job losses due to Covid 19 pandemic, unemployment rate was increased to 7.5% in 2020. Exchange rate of Australian in terms of US dollar , 1 Australian dollar =0.72 United States dollar. In 2018, Australian public debt was around 41.37% of its GDP. In 2019, it was decreased to 34.7% of its GDP. ii.There are four phases for business cycle 1. Prosperity or peak period : Expansion period is characterized by high rate of employment, economic growth, and upward pressure on prices. As a result national income will be increasing above full employment level. During this period government should implement contractionary fiscal policy and central bank has to apply contractionary monetary policy 2. Recessionary period : During this period economic growth slows ,employment declines and downward pressure on prices. As a result national income is falling up to full employment 3. Depression : During this period ,economy would be hit at its bottom. There would be very high unemployment rate and slow economic growth. National income would be falling below full employment. Government has to implement expansionary fiscal policy by increasing government spending and lowering tax rates and central bank has to implement expansionary monetary policy by reducing interest rate. 4. Recovery period. Economy will start to recover from depression phase due to increase in government spending and lowering taxes up to full employment