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Economics Assignment Question
Prepare a report on the current (i.e., August/September 2019) state of the Australian economy and to compare its performance with the state of the economy over the period from 2015 to 2019?
Economics Assignment Solution
The Australian economy is subject to a scenario of slower growth. This is characterized by a restrained growth of household income which weighs down consumer spending. In comparison, the employment growth is reported to be steady with a stronger labor supply. However, the unemployment rate has risen to 5.2% and remains steadfast during the first half of 2019. It is observed that pressures posted by domestic inflation remain passive. The inflation related to housing is lax in recent months sufficed with the effects of additional labor supply and the reduced rate of labor costs.
The rate of growth of GDP is reduced during the mid of 2019 reaching about 2.5%. This is likely to increase from 2020 to reach 2.75% and around 3% in 2021. Several factors are expected to influence this growth such as lower interest rates and changes in tax policies. Further, there is a turnaround of the housing markets in the Australian cities supporting the spending growth. Additionally, the mining sector is expected to assist the GDP growth in the near future with the recovery of resource exports from supply disruptions and the expected boost in mining investment.
Given the slower development in the output rates, it is anticipated that the unemployment rate will stay at the current level for the next two years before reducing to about 5% in 2021. Therefore, wage growth is expected to remain low and experience a gradual increase over the next 3 years. This causes the unemployment rate to be likely to take longer to increase to 2%. This is related to the mean inflation rate which is expected to remain around 1.5% till the end of 2019 and expected to rise slowly to reach 2% in 2020. A similar growth trajectory is anticipated for the headline inflation rate.
Australia’s financial conditions are stable and favorable. This is evident from the reduced cash rate in June and July 2019 which is passed on to deposit and lending rates. Though equity prices have reduced attributed to the global trade tensions, it is still higher when compared to previous years. There is slow credit growth has continued to slow, but the higher rate of housing loan approvals indicate better housing market conditions. With the changes in lending criteria, the borrowing capacity for customers has increased. The depreciation of the Australian dollar is reported over the recent months which has reached its lowest recently, which is lower in comparison to other foreign markets……………..