Australia is among the top developed countries that contributes significantly to the world economy. With the population representing

Part 2 Part A The line chart of Australia’s imports and exports from 1986 to 2018 represents that the overall import is higher compared to the export.. Indeed, mean is the best measure t

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Location & Campus: RMIT SGS Vietnam

Title of Assignment: Case Study analysis

File (s) Submitted: ECON1193A – Dang Thi Thao An – S3915087 - Assignment 1

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Part 1 3

Part 1

Australia is among the top developed countries that contributes significantly to the world economy With the population representing 0.3% of the world’s population, Australia’s GDP accounts for 1.7% of the world’s GDP (Resilient economy, 2021) Compared to its peers, Australia follows a different economic strategy The country prospered through the utilisation

of diverse natural resources and effective immigration policy rather than radical technology innovations (Mcdonald, 2020) Nevertheless, Australia has been achieving remarkable economic achievement throughout its contemporary history

Australia recorded a positive GDP growth rate for approximately three decades immediately after its 1991 recession In 2020, the inevitable negative impact of the Covid-19 pandemic ended Australia’s admirable streak of 28 consecutive years of economic growth (Mcdonald, 2020) However, the country managed to become the world’s 12th largest economy in 2021, climbing up two ranks compared to 2019 (Austrade.gov.au 2021)

Figure 1

Figure 2

Figure 3

The Australia currency statistic from 1980 to 2020 from figure 1 illustrates that the overall trend of Australia currency is downward which emphasizes the depreciation of the Australian dollar The depreciation firmly affects the import and export, and the whole economy in general Australia’s produced goods and services become cheaper which might result in the rise of international competitiveness of Australia exported goods and services (Reserve bank

of Australia) Furthermore, the depreciation also draws the Australian resident to prefer Australia produced goods and service instead of foreign produced goods and service (Kramer, 2021) Consequently, since the demand of Australia produced goods and services increases,

the firms tend to hire more employees which prompt the rise of Australia's employment as presented in figure 2

Additionally, the depreciation also leads to inflation Excessively low or high inflation is harmful to an economy A healthy economy should have an annual inflation rate around 2% (Fernando, 2021) The figure 3 represents that from 1995 to 2020 the average inflation rate of Australia is around 2% which is low and stable

Part 2

Part A

The line chart of Australia’s imports and exports from 1986 to 2018 represents that the overall import is higher compared to the export Even though there were a few months where exports and imports went down, the general direction was upward In comparison, Australia exports fluctuate more than imports as it experienced exponential growth in 2001, then plunged significantly in 2004, and followed by reaching its peak in 2009 In the meantime, the distribution of imports is quite stable which illustrates its steady growth

Part B

If there are no outliers, mean can be perceived as the best measure of central tendency to describe the centre of the data set as it considers every value in the set of numbers Indeed, mean is the best measure that represents the average imports and exports of goods and

services in Australia as percentage of GDP since both of the data sets do not contain any outliers

Australia exports have an average of 18.95% of GDP and imports have an average of 20.02%

of GDP Hence, imports are 1.07% greater than exports In other words, over this period of time, Australia has a trade deficit as their average value of imported goods and services exceeds the value of exported goods and services which create a negative trade balance

Part C

Since imports and exports data sets have similar mean and not containing outliers, standard deviation is the best measure of variation to compare the spread out of two data sets based on the average amount of dispersion from the mean

The below table has shown that the standard deviation of Export is greater than Import (2.20 > 1.97) which indicates that the Exports data set spread more than Imports data set Specifically, the standard deviation demonstrates that the Australia export has slightly higher fluctuation compared to the import

Part D

The distribution of both export and import data sets are skewed left which illustrate that during this period of time the percentage of export and import in Australia increased overall The range of export distribution is wider than imports (8>7) which suggests that the Australia exports vary more than their imports Besides, the median of import data is a little higher than the export which means the Australia imports from 1986 to 2018 is relatively higher than the exports on average

Part E

Based on the Box and Whisker plot above, it is clear that the import data set is skewed left

as /Q1,Q2/ > /Q2,Q3/ ; /Xmin,Q1/ > /Q3,Xmax/ The export data set has

/Q1,Q2/ > /Q2,Q3/ ; /Xmin,Q1/ < /Q3,Xmas/ ; /Xmin,Q2/ >/Q2,Xmas/ , therefore the export data set is also skewed left The export has a higher range compared to the import which indicates that the dispersion of the whole data set is larger than the imports (7.99>6.6) In short, Australia exports are more fluctuating On the contrary, the IQR of export is lower than import which shows that the middle half of the export data set has wider distribution

(2.63<2.99) Moreover, the median of import is higher than export demonstrates that the import in Australia is higher than export on average

Part 3

Based upon the line chart description, although there are a few drops, both import and export have an upward direction overall which can be interpreted as the growth of export and import

in Australia over time According to the research conducted by Velnampy, the increase of import and export have positive correlation with the economic growth (Velnampy and

Achchuthan, 2013) For the reason that foreign imports might afford innovation, learning and competitive pressure which indirectly cause economic growth (Kim, Lim and Park, 2009) while the increase of export value can directly boost the country GPD (Yüksel and Zengin, 2021) In short, the overall direction of the line graph implies that Australia might be

experiencing economic growth

However, to be able to give an impartial verdict, it is crucial to consider others' measures such as the average or the dispersion Economic growth can be perceived as the increase in aggregate production in terms of goods and services value Particularly, GDP tends to

income tends to increase when the exports grow steadily and vice versa Relying on the standard deviation of the import and export data, export has a wider distribution compared to import which indicates that it fluctuates more than the import This might lead to the

reduction of stimulated income and consumer spending in Australia As consumer spending contributes significantly to a country’s GDP, Australia might not be experiencing economic growth

In conclusion, the data of Australia’s export and import, when being considered solely, is not sufficient in analysing the growth of its economy There are other factors in the GDP equation that can impact the performance of Australia However, if there is not enough information about the other factors or they remain unchanged, the growth of an economy can be dictated

by the value of exports and imports In that case, Australia is not experiencing economic growth due to its negative net exports and high fluctuation in exports value

Part 4

Based on the actual performance of the Australian economy discussed in part 1, the analysis

in part 3 has been proven to be incorrect This misjudgement was critically caused by the lack

of available information When considered alone, the net export does affect the GDP of a country A negative trade balance will slump a country’s economy However, a country’s GDP does not only consist of net export but also consumer spending, business investments, and government spending Even with a negative trade balance, Australia still managed to gain a positive GDP growth rate Therefore, net export does have a positive correlation to Australia's economic growth but with minor significance

Part 5

As mentioned in part 4, there are four major components to a country’s GDP Besides net export, Australia’s consumer spending, business investment, and government spending will also impact the growth of the Australian economy The most important factor is consumer spending since it contributes more than half of Australia’s GDP (Australia Household

consumption, percent of GDP, 2021) Hence, consumer confidence is crucial for the growth

of any economy Government spending is another important component of Australia’s GDP Despite the lower contribution to the country’s GDP, government spending is a vital stimulus

to Australia's economy when the remaining three factors decrease To add on, business investment comes in third place in terms of impact to Australia’s GDP growth In conclusion, all the mentioned factors were significant to the growth of Australia’s economy since the country managed to secure steady growth even when its trade balance was negative for the majority of time

Austrade.gov.au 2021 Resilient economy [online] Available at:

<https://www.austrade.gov.au/benchmark-report/resilient-economy> [Accessed 17 July 2021]

Fernando, J., 2021 Inflation [online] Investopedia Available at:

<https://www.investopedia.com/terms/i/inflation.asp> [Accessed 17 July 2021] Kim, S., Lim, H and Park, D., 2009 Imports, exports and total factor productivity in Korea Applied Economics, 41(14), pp.1819-1834

Kramer, L., 2021 How Importing and Exporting Impacts the Economy [online]

Investopedia Available at:

<https://www.investopedia.com/articles/investing/100813/interesting-facts-about-imports-and-exports.asp> [Accessed 17 July 2021]

Mcdonald, J., 2021 Australia Enters First Recession Since 1991 [online]

Thediplomat.com Available at: <https://thediplomat.com/2020/09/australia-enters-first-recession-since-1991/> [Accessed 17 July 2021]

Rangarajan, C and Sundararajan, V., 1976 Impact of Export Fluctuations on Income A Cross Country Analysis The Review of Economics and Statistics, [online] 58(3), pp.368-372 Available at:

<https://www.jstor.org/stable/1924960?read-now=1&seq=5#page_scan_tab_contents> [Accessed 17 July 2021]

TheGlobalEconomy.com 2021 Australia Household consumption, percent of GDP -

data, chart | TheGlobalEconomy.com [online] Available at:

<https://www.theglobaleconomy.com/Australia/household_consumption/>

[Accessed 17 July 2021]

Tradingeconomics.com 2021 Australia Employment Rate | 1978-2021 Data | 2022-2023 Forecast | Historical | Chart [online] Available at:

<https://tradingeconomics.com/australia/employment-rate> [Accessed 17 July 2021]

Tradingeconomics.com 2021 Australia Inflation Rate | 1960-2020 Data | 2021-2023

Forecast | Historical | Chart | News [online] Available at:

<https://tradingeconomics.com/australia/gdp> [Accessed 17 July 2021]

Tradingeconomics.com 2021 Australian Dollar | 1971-2021 Data | 2022-2023

Forecast | Quote | Chart | Historical [online] Available at:

<https://tradingeconomics.com/australia/currency> [Accessed 17 July 2021]

Velnampy, T and Achchuthan, S., 2013 export, import and economic growth: Evidence from Sri Lanka Journal of Economics and Sustainable Development, 4(9), pp.144-155

Yüksel, S and Zengin, S., 2021 causality relationship between import, export and

growth rate in developing countries international journal of commerce and finance,

[online] 2(1), pp.147-156 Available at:

<http://acikerisim.ticaret.edu.tr/xmlui/bitstream/handle/11467/1547/M00769.pdf? sequence=1&isAllowed=y> [Accessed 17 July 2021]