Unit 1
Unit 3
Economic Growth
Australia's Recent Performance
Since the early 1990’s, Australia has been able to achieve excellent results in regards to annual rates of growth. After the recession of 1990-1991 Australia quickly returned to strong growth figures.
It is important to note that during the period seen in the graph below our opinion about the rate of growth that could be sustained in this country changed. Prior to 1999/2000, many economists believed that a rate of growth of between 3% and 4% per annum was achievable. Between 2000 and 2003 it was widely believed that we could sustain an even higher rate of growth without the negative side effects of inflation or an increasing current account deficit. This assessment changed as more uncertain economic events unfolded between 2007 and 2009.
There is no doubt that the pressure that was created by the global credit crisis in the second half of 2008 had an impact on economic growth in Australia in 2009. The US economy slipped into recession during this period, and this had ramifications for almost every other country in the world. Although the Australian economy avoided a technical recession during this period, economic growth was negative in the December quarter of 2008, and the unemployment rate increased throughout 2009. This suggests that the economy was certainly in a contractionary phase at this time. By the beginning of 2010, the Australian economy had recorded several consecutive quarters of low but positive economic growth. It is for this reason that many international observors have identified Australia as the developed economy that performed best during the global financial crisis.
The twelve months to June 2011 were affected by the natural disasters that affected much of Australia. As is revealed in this image from the federal budget in May 2011, a very large percentage of the country was affected by floods, Cyclone Yasi or (in the case of Perth) bushfires. These events occurred in a very short period of time, and as a result they acted to restrict economic activity during this period. This caused a contraction during the March quarter of 2011, although there was a recovery in the quarter that followed. At the same time the federal government was acting to remove the stimulus that had been necessary during the financial crisis, and the RBA maintained a mildly restrictive monetary policy setting. As a result, the annual rate of growth was recorded at 1.4% for this year.
Concerns about the sovereign debt crisis in Europe at the end of 2011 meant that many people became concerned about the possibility of a "double dip" recession. After initially predicting economic growth of around 4% for 2012 and 2013, the government lowered these forecasts in the final months of the year.
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