The Comparison of Economic Growth in Terms of GDP for the Economy of A

Question: Compare Australia with any other advanced economy and discuss their GDP last 2 to 5 years and factors affecting their GDP Answer: Introduction: The gross domestic product or GDP is generally known as the measurement of economic growth of a country in terms of quantity (Arnold, 2008). More precisely, it is better known as the value of the commodities that are produced within a country in a specific time period like one year. The GDP is a strong unit of measuring a countrys economic condition. Every small and big nation emphasizes the GDP value while examining its economic circumstances (Hubbard O'Brien, 2013). The assignment needs to compare the growth of Australia in terms of GDP growth with any other giant nation. Australia is one of the biggest and wealthiest nation across the world. It stands at 12th position in the economy (Green, 2015). However, United Kingdom possessed 5th rank in the world and can be marked as more developed. It is observed while undertaking the research that the Australia has developed itself in terms of HDI whereas United Kingdom acquires the 9th position in terms of purchasing power parity. Besides, there is a huge difference between both the countries according to their GDP count. Australias per capita GDP is $47,318 trillion whereas the per capita GDP in UK is $41,159 trillion in the year 2015 (Trading Economics, 2016). There some major differences exist between the two countrys GDP per capita and in many other economic units. This report will highlight those major gaps which differentiate one country to another. Now, in order to identify those gaps, the report has provided a brief overview of the concept of GDP. Besides it has delivered some attractive analysis that has brought different shades of comparison between the two economies. Finally, providing the conclusion the report fulfils the aim of this research which is to identify what are the difference between the GDP growth of two major economies like UK and Australia. The main components that have affected the economy and as well as GDP growth to a certain level have been elaborated here with proper justifications. GDP; the Concept: It is already explained that GDP can be measured by the total value of the s and service produced in an economy for a certain time period. GDP generally measured, GDP = Consumption + Investment + Government + Net Export (Welch Welch, 2009). Consumption consists of all non-durable and durable products. The investment actually contains all investment spending no matter they are residential or non-residential along with all business inventories. The government expenditure or GI includes all types of government investments such that roads, defences or schools etc. Finally, one of the important factors is net exports which are calculated by subtracting all imports from the total exports. It can be measured both in terms of current and constant dollars (Arnold, 2008). Former one includes all present economic activities in terms of dollar value while the later one calculates after removing all the inflationary effects in an economy. This is an important unit of measuring an economys growth (Krugman Wells, 2013). Most of the developed economy identify whether their economic condition is running well or not based on the measurement of gross domestic products. Comparison of GDP growth between UK and Australia: It is already stated that there is hell and heaven differences exist between these two giant economies. There are many degrees of measuring GDP for an economy and those measurements easily clarify some major differences if there exist any (Jha, 2008). Following the comparison, this is to be kept in mind that, being two major developed countries in the world, both of them hold some major economic similarities two. The only gap might arise in term of their sharpness of affecting those economies (Wetzstein, 2013). For instance, the recent inflation of 2014 has affected both countries but the difference arises when the effect on Australia was very light compared to UK (Jordi, 2015). However, data provided in Trading economies, world banks and much more elaborates regarding many reality related to these two giant nations. The data has been accumulated in some secondary sources and the analysis based on the data will unfold some key dissimilarities. Table 1: Market price of GDP in Australia It shows that GDP market price in Australia in 2011 was lower compared to other years and it has increased in due courses. However, there is a nominal fluctuation existed during 2013 to 2014. The following graphical elaboration will clarify the measurement properly. It shows that the orange line was upward sloping till 2012 and again starts fluctuating after 2013 (The World Bank, 2016). Graph 1: Market Price of GDP in Australia Again the same measurement can be done for the UK in order to understand in a better manner that where exactly UK is standing presently. The data has been taken from the same sources and analysis has been done following the same procedure. Table 2: Market price in terms of GDP in UK Now, the data according to the above table shows that the GDP market price in UK has been increasing. Its value of market price in terms of GDP was lower in 2011 and has increased in 2012. Compared to 2012, it has increased in next year and it was highest in 2014. Again the line diagram below shows trend properly (The World Bank, 2016). Graph 2: Market price in terms of GDP in UK Now, the above two analysis has fetched diverse shades of dissimilarities. First of all from the perspective of the value of GDP market price, UKs GDP market price is much higher compared to the Australias GDP market price (Higgins, 2014). Even during the inflation it is seen that the UK has achieved a good GDP market price. In this context, this is to be kept in mind that the market size in UK is much higher than that of Australia. If the comparison can be brought forward from this viewpoint than it can be said that both countries have achieved their expected level. The comparison can be done more specifically to understand what the basic and key differences are. So, in order to analyse more specifically, now the measurement will be done based on the GDP growth rate within the two economies. Table 3: GDP growth in Australia The above chart shows that there was a good hike in GDP growth in Australia during 2011 to 2012 but again in 2013 it has degraded to its level. The following line diagram will clearly explain the trend or the fluctuation in GDP growth. Graph 3: GDP growth in Australia. Now lets take a look the same analysis on the GDP growth of UK based on the data provided in the same source. It shows that the GDP growth of UK has increased during 2013 to 2014 and the change during this session was remarkable. However, this degree of comparison is very effective in nature and it clears the difference in a proper manner. The line diagram will show the trend clearly again. Table 4: GDP growth in UK Graph 4: GDP growth of UK economy Now comparing the last two diagram it is clear that the annual GDP in UK has grown in more increasing rate than that of Australias GDP growth. It is also important to notice that during 2012, the Australian growth has exceeded the growth rate of UK. The main reason behind such a poor growth rate in the economy is economic crisis due to excessive debt in Europe. The most remarkable example that the UK government is responsible for was its tactic recover from that situation. UK has recovered from the situation too quickly and then in 2014, it has exceeded the growth rate achieved by the Australian economy in the same year (Trading Economics, 2016). GDP analysis: Comparison between UK and Australia It is shown from the GDP analysis of Australia that initially the growth rate of the country was not only dissatisfactory but also the capital expenditure in the same year was very insubstantial. According to the viewpoint of the BOP, the countrys achievement from the net export was zero during that period. It was unable to contribute any fruitful outcome to Australians economy. In the same context for UK, it can be said that the growth in terms of GDP in UK was indulgent during the first quarter of 2015 (PWC, 2016). After the sudden downfall during 2012, the government has tactfully managed all the consequences occurred by the debt crisis. Moreover, it has driven its growth in such a way that the country becomes successful to leave any other nation behind it. Now, it can be argued that both of the countries are developed and both of them are a major distributor to the worlds economy. Being two important and major nations, this two country should not have such kind of crisis. One thi ng should be stated here that any economic disturbance, no matter what is it or how impactful is it, it always is enough to affect any small or big economy. The most significant aspect that has been observed during the research is although the UK had been affected for a particular time period but the time that the nation spent to recover was remarkably short. It differs from one nation to another (Gov.UK, 2016). The same thing has happened to China, India and in many developed nations to but it is being a long time they are still trying to solve things. Even in Australia, government, and its people after putting too much of efforts suffering from several economic consequences that prohibit the economy to grow in a better way. The GDP per capita in the UK is being increased day by day whereas, in the case of Australia, some major fluctuation can be noticed. Graph 5: GDP per Capita in UK Graph 6: GDP Per Capita in Australia The above to graph shows that GDP per capita has been increased or recovered in a good manner and presently in an appreciable condition. The difference that both charts has produced is the increasing rate and level of GDP per capita in both the country. One more thing should be stated here that the exchange rate has generated several differences and that were quite impactful in nature. All these vast differences have been created due to this huge differences between the value of Australian dollar and European Pound. See, both the countries here has increased after 2010 and increment were highest during 2010-2012 (Walker, 2016). The rate of increment after the period was lower in Australia but in UK the increasing rate of GDP per head was higher. GDP affecting Factors: The factors that have affected both the economy are not all same and the way they have affected also quite different. It is observed that the term of trade or TOT in Australia has been increasing for the past 10 years. The commodity price of heavy goods in Australia is very high and generally are produced in bulk (Jordi, 2015). Similarly, the China is a huge market where these goods are generally exported in bulk due to the high demand. A massive increment in investment has occurred. This has obviously enhanced the GDP growth in the Australia to the next level. This is the most effective factor behind this recent boom of economic growth within the country. Reversely, in UK the most enhancing for their economic growth was their lower range of interest rate. A lower interest rate encourages people to borrow more and hence investor can now invest more in their business. Investing those borrowing automatically has increased the producing capacity of the country along with the economic gr owth. However, over the years, it is seen that this factor has enhanced the GDP growth of the country. Borrowing and spending by individuals depend on the present economic situation within the country. If people notice that the economy is presently growing at an increasing rate then for the present scenario they create some assumption about the future. Assuming a secured and improved future people earn and spend more freely. The present situation of UK and Australia both are well and hence, it can be assumed that their economic condition will be more enhanced in near future. Assuming this factor the consumption spending and earning of both the country have increased. Hence, GDP growth has increased simultaneously (Nation Master, 2016). Crude steel and steel making export are another major reason behind the enhanced economy of Australia in present days. Exporting huge amount of steel for excessive crude steel production in the international market has automatically increased the earning of the country. Countries like USA, UK and much more are importing this two important goods (Alam, 2012). Intake of excessive foreign currency by Australia has improved the growth status of the Australia (Green, 2015). One of the most important factors which have occurred as drawback during the session is Australias lower wage rate. This lower rate of wage cannot stronger the consumption capacity of the country. A survey based on Westpac and Melbourne states that the average wage rate in these two places are average and are not sufficient for enough consumption spending. It is already seen that the present economic scenario of UK is so upgraded that create no issue in the consumption factor of the people (Walker, 2016). Yes, it is co rrect that the people could not effort the luxurious item because it is noticed that the real wage rate in UK is not at all appreciable. This obviously, prohibits people from consuming excess or luxury goods. During the quantitative research, it has revealed that the exchange rate has the strong effective capability to enhance or degrade a countrys growth. The real exchange rate of UK is very effective because the currency value of the company is higher even from the America and many advanced economies. On the same side, the Australian dollar value is much lesser than that of UK (Nation Master, 2016). This stronger exchange rate of UK clarifies the present economic condition and it is to be noted that the value of British pound tends to increase day by day. The present exchange rate between one British pound and US$ is, 1 US$ = 0.68 British Pound and in case of Australia, 1 US$ = 1.38 AUD. The currency exchange value differentiates some important economic gaps within the two countries like the consumption spending, GDP growth, investment capacities etc. An important global factor that influences both the economics in a different way that is global oil price fluctuation. The crude oil price has started falling in past five years and this has not only affected the oil exporting country but some parts of both UK and Australia have been affected in due courses (Leijonhufvud, 2000). Both the countries are two major producers of automobile industry where oil is considered as the main complementary goods. The oil price has been fallen to such a level that occurred as a boom to the Automobile industry in both the countries. It has enhanced the economy. Besides there were some flaws to which lags these countries backwards (IMF, 2015). The last factor that affects the economy for several numbers of time that are a recession. The excessive rate of inflation is the biggest reason behind creating recession and due to recession massive job cuts generally occur. In 2008 the major economic crisis snatched almost every good factor from UK. The Lehman Brothers breakdown was an important breakout point for the country. The nation has suffered through the serious bankruptcy during 2008 to 2012 but again from 2014 it started recovering and achieved its previous status within 2015 (IMF, 2009). The recession has affected the country but the sharpness of it was not so effectual for Australia (Maiden, 2016). During this recession, Australia has not suffered to that extent and hence its economic position was comparatively good. Since the development, any recession or economic fluctuation could not harm Australian economy effectively. Moreover, excessive growth in population rate always goes against a countrys economy. In the time of calculating the per capita GDP, it always provides a dissatisfactory result. So it is seen from the above discussion that the UK economy had been affected GFC more than that of Australia. It addresses the government to take some efficient steps in order to make UK more proactive. Conclusion: In order to complete a comparative analysis of GDP for Australia, an advanced economy has been chosen here that is the United Kingdom. The comparison has highlighted different aspects of GDP. The analysis includes GDP per capita statistical measurement along with annual GDP growth. All the evidence claim that the currency value of United Kingdom is a key benefit for the country which has left every other economy behind it. Whereas it shows that Australia has some strong proactive formulas that always save the country from economic crisis. It proposes that the level GDP can be modified automatically whenever any components of GDP growth such that consumption or spending etc. will change. All this data have been analysed and taken from the World Bank website and trading economics as well. However, it can be analysed that the UK economy has been facing more negative impacts in case of all economic disturbances more than the economy of Australia. This is to be concluded that in due cours es, when the Australia was investing its time in developing its economy, their one of the main motive was to develop in a stronger way. Their key pillar is so strong that the country hardly gets affected in any serious situation. Moreover, the structure of the UK has some economic benefits also. However, this is to be kept in mind that every factor has some basic negative and positive advantages. Avoiding negative consequences need much stronger economic facilities to be existed. Developing a nation should not be the only motive to reach. Every country should have some proper measurement for any economic default along with a strong economic structure. References Alam, A., 2012. Crisis Transmission: Global Financial Crisis.. Journal of Risk Analysis and Crisis Response, 2(3), p. 157. Arnold, R., 2008. Macroeconomics. London: Cengage Learning. Girardi, A., Gayer, C. Reuter, A., 2015. The Role of Survey Data in Nowcasting Euro Area GDP Growth. Journal of Forecasting. Higgins, K., 2014. Economic Growth and Sustainability: Systems Thinking for a Complex World. Academic Press: Cambridge. Hubbard, R. O'Brien, A., 2013. Macroeconomics. Boston: Pearson. Boston: Pearson. IMF, 2009. 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