How Does Economic Growth Affect Australian Economy

Economic growth (or GDP Growth) directly affects inflation levels, this is shown within the Australian economy. Australia has seen healthy increases in both economic growth and inflation over the past 5 years. Economic growth is an increase in the amount of goods and services produced per head of the population over certain period of time, usually measured quarterly and yearly. Economic growth is measured by the annual rate of of change in real Gross Domestic Product (GDP), in essence this is the percentage increase in the value of goods and services produced in an economy over a certain amount of time, commonly a year, adjusted for the rate of inflation. Inflation is the rate at which the general level of prices for goods and services is rising

Australia’s Current Headline Rate of Inflation is 1.9%, it is currently below Australia’s wanted 2-3% level of inflation. Central banks regulate a country level of inflation, they attempt to limit a large amount of inflation (> 3% +) and avoid deflation (< 0% -) in order to keep a smooth economy. Low and stable inflation reduces uncertainty in the economy, helps people make saving and investment decision, and is the basis for string and sustainable economic growth. There are many good effects Australia’s current positive economic growth and inflation play on individuals, firms and the government. Increases to economic growth and inflation create higher living standards (Real GNI per capita), as it helps lift people out of extreme poverty and improve development outcomes (e.g. growing HDI). It also creates greater employment opportunities, consistent GDP growth stimulates jobs and contributes to lower unemployment rates, thus reducing income inequality. As firms tend to employ more when there is a good global economic outlook. A reduction in unemployment means the government can invest money back into the economy (e.g. infrastructure, education etc.),this will benefit the economy. High levels of inflation lead to a depreciation in the Australian dollar (AUD), as there is more money flowing within economy. An example of extreme levels of inflation is Germany’s Hyperinflation in the Weimar Republic in 1918 - 1924. The mining sector's output grew 2.9 per cent, thanks to increases in coal, iron ore and LNG production. The rise in profits was consistent with the strong increase in mining exports coupled with a lift in the terms of trade this quarter." Government consumption increased spending rose 1.6 per cent in the quarter and was up 5.1 per cent over the past year, boosting GDP, although public investment spending eased slightly from very high levels. The Reserve Bank