Question

In: Economics

“Some economists, like, Former Treasury Secretary – Mr. Martin Parkinson - have argued that the Australia’s...

“Some economists, like, Former Treasury Secretary – Mr. Martin Parkinson - have argued that the Australia’s economy was already weak before the coronavirus forced the economy into a lockdown. Productivity growth and income growth was very weak while economic growth was quite anaemic”. Evaluate the statement and observation made by Josh and Martin by plotting the data on the major macroeconomic indicators of the Australian economy - GDP growth rates, Inflation and Unemployment - for the past 10 years.

Solutions

Expert Solution

The data for the Australian economy is extracted from the World Bank website.

Real Economic Growth Rate is the rate at which a nation's Gross Domestic product (GDP) changes/grows from one year to another. GDP is the market value of all the goods and services produced in a country in a particular time period.

The most frequent measure of unemployment is the unemployment rate, which is the number of unemployed people divided by the number of people in the labor force.

Inflation measures the average price change in a basket of commodities and services over time.

Together, the three macroeconomic variables can paint a picture of the economic performance of a country.

Year GDP Growth Rate Unemployment Rate Inflation Rate
2009                        1.94                              5.56                 1.77
2010                        2.07                              5.21                 2.92
2011                        2.46                              5.08                 3.30
2012                        3.92                              5.22                 1.76
2013                        2.58                              5.66                 2.45
2014                        2.53                              6.08                 2.49
2015                        2.19                              6.05                 1.51
2016                        2.77                              5.71                 1.28
2017                        2.37                              5.59                 1.95
2018                        2.94                              5.30                 1.91
2019                        1.90                              5.27                 1.61
2020                              5.33

The table above shows the rates of change for the past ten years, i.e. since 2009. We can plot each of these in graphs to better gauge the movement of the variables.

The graph above relatively backs up the Former Treasury Secretary, Mr. Martin Parkinson's claims. As can be seen, the Australian GDP growth rate was relatively stagnant after reaching a 4% peak in 2012, and fell below the 2% mark in 2019. The unemployment rate was also relatively high, averaging around 6% and climbing back upwards in 2020. The inflation rate has further been fluctuating since 2009, reaching a prak in 2011 and then proving relatively unstable since.

Hence, we can agree with the statements made. The Australian economy was was already weak before the coronavirus forced the economy into a lockdown.

Rahul Sunny answered 1 year ago
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