Online Tutoring 2

Due:                         11pm Friday, 25 September, 2020 (Week 12)

Length:                    1500 words – (up to 2000 words is permissible)

Weighting:              25%

Requirement:

For Online Tutoring 2 you are required to prepare a report on the current (i.e., August/September 2020) state of the Australian economy and compare its performance with the state of the economy over the period from 2015 to 2020. In completing your report it will be necessary to examine the latest available figures and the comparable figures commencing in 2015 to develop an annualized (2015, 2016, 2017, 2018, 2019, 2020) trend analysis. You should provide a table or graph of these trends. A discussion of the possible causes of the trends you develop is expected.

The following four economic indicators – economic growth (GDP), unemployment, inflation and trade are to be examined in your report. Trade generally includes the terms of trade, the current account, net foreign debt and the value of the Australian dollar however for your report you will just be focusing on the current account for the trade category. In examining the performance of the Australian economy it will also be useful to outline any expected target values that may exist for the economic indicators.

Finally, given your analysis, you are asked to highlight three major issues facing the Australian economy over the next 12 months and why these are of concern and how they may affect the four indicators above.

 

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Presentation of report

The report should be between 1500 and 2000 words. This word limit does not include the abstract, tables, graphs and reference list.

The report should be word processed using Times New Roman font size 12 with 1.5 line spacing.

 

Structure of report

Your report must include:

• an appropriate title
• an abstract summarizing the report
• an introduction in which you briefly explain what you are going to address in the report and why
• the body of the essay broken into sections with appropriate section headings
• a brief conclusion that should summaries your analysis
• appropriate in-text referencing and a reference list at the end of the report.

Although the requirements for presentation and structure may appear pedantic, they are not. In the business world you may often find yourself involved in writing a report – perhaps even for multilateral and government organisations such as the IMF or OECD. We suggest that you devote some time to developing this skill. Your future career can only be enhanced by your ability to communicate effectively in writing.

Marking criteria Online Tutoring 2

Your report will be marked against the following criteria:

• Abstract (2 marks)
• Introduction (1 mark)
• The body of the report providing:
  • An appropriate description and discussion of the current state of the Australian economy as reflected by the four economic indicators – economic growth, unemployment, inflation and the current account in Australia and the economy in 2020. You also need to comment on the trends in these indicators since 2015.(8 marks)
  • A succinct description of three major issues facing the Australian economy over the next 12 months and the possible affects they may have on the four indicators. (6 marks)
• Conclusion (1 mark)
• Evidence in the report of a depth of research (3 marks)
• Accuracy in referencing (Harvard Style) (1 mark)
• Presentation, grammar, structure, etc. (3 marks)

 

TOTAL FOR ASSIGNMENT 2:      25 marks (weighting 25% of total marks for the unit)

Some advice about Online Tutoring 2

Your short “Abstract” needs to describe the aim of the report and provide a brief overview of the economic targets the indicator trends as well as the issues facing the economy. It could be approximately 500 words. The Abstract is worth 2 marks

The “Introduction” is a brief paragraph or two that outlines the aim of the report (i.e., what you are examining) and how the report is structured. The content of your assignment should generally reflect the marking criteria. REMEMBER that an Introduction is different to an Abstract. The Introduction is worth 1 mark.

The “body” of the report is the content of your research and analysis. You may want to consider dividing you report into different sections with appropriate subheadings.

You should begin the body of your report with a discussion and comparison of the trend values you have developed for the four economic indicators under investigation (Economic Growth (GDP), Unemployment, Inflation and the Current Account) in Australia from 2015 to 2020. You should also discuss the government’s targets for these indicators wherever possible. Ensure that you are clear on what you are presenting with regard to the indicators- e.g., do your indicators show GDP, growth in GDP over time or GDP per capita growth? This section is worth 8 marks

Once you have discussed the variables you need to provide your (well thought out) opinions about three major issues facing the Australian economy over the next 12 months and how they may affect the indicator trends. You need to support your opinions with reputable research. This section is worth 6 marks.

In your “Conclusion” you need to discuss briefly the Australian economy in 2015 comparative to 2020 and what you see as the major issues facing the economy. This section is worth 1 mark.

You are expected to have used a reasonable number of references to enable you to prepare this report. This section is worth 3 marks.

You also need to ensure that you have consistently used correct Harvard referencing throughout the report and that you have correctly formatted your Reference List at the end of the report. Consistent and correct referencing includes correctly referencing all charts and statistics used in compiling your report. Only include the references that you actually used in your report.  This section is worth 1 mark.

Finally but importantly pay careful attention to the structure of your report as well as presentation and grammar. This aspect of your report is worth 3 marks.

You should check your “turnitin” value before submitting your assignment. A value of over 50 per cent should raise some concerns for you. If you are still uncertain about using turnitin refer to the documents in the unit’s MySCU site.

 

Solution:

Introduction:

The economic indicators showcase the overall economic situation of the country and where the country is heading in the future. The economic indicators include GDP, GDP per capita, GDP growth rate, Inflation, CPI, Unemployment Rate, Current Account Balance and many more. The current COVID-19 situation has shaken the world and have impacted every country globally. There have been strict lockdowns in the world as the virus is contagious and can spread easily. The report will demonstrate the economic situation of Australia currently and a comparison would be presented of five years using the four major economic indicators that are GDP growth, Unemployment Rate, Inflation and Current Account Balance. Moreover, a brief prediction would be described regarding the major issues that the country would face in the coming future.

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Four Indicators:

GDP growth:

Fig 1: Australian Bureau of Statistics (2020a)

GDP stands for Gross Domestic Product; this is an economic indicator that shows that how much has the country grew in terms of products or services that are produced in a specific period of time within the geographical boundaries of the country. In case of Australia, there has been immense changes in the GDP growth rate of the country. The above graph shows a trend from 2012 to 2020 that is the period of total eight years, the GDP growth rate was fluctuating but remained in positive values till the year 2020. There can be seen a slight decline in the first quarter of 2020 and then the rate was stagnant but it instantly declined from 0.8 in 2019 to -6.3% in 2020 (marked by an arrow). The decline was due to the novel pandemic virus, COVID-19 as it has impacted the businesses, consumption and trading activities of the country.

Unemployment:

Fig 2: Australian Bureau of Statistics (2020b)

The unemployment rate in Australia has been decreasing throughout the years, the lowest was in the last quarter of 2018 that was below 5.0%. However, it increased gradually in the succeeding year; the constant decrease in the unemployment rate shows that the government has been implementing policies to increase employment in the country. However, since the spread of coronavirus in Australia has forced the government to apply strict lockdowns in the country pressurizing company owners to either fire most of the employees or order them to start working from home. The individuals who were dependent on daily wages have lost their jobs because the virous is contagious so can spread easily. Its been a few months since the country is in lockdown, its not good for the country to be shut for this long because the unemployment rate has been increased and is now more than 7.4% which is a lot.

Inflation:

Fig 3: OECD (2020)

Inflation rate of a country shows the rise in prices of a good and services in a specific amount of period. In the graph above, the black line denotes the inflation rate of all 37 OECD countries whereas the red line denotes the inflation rate of Australia. The rate of inflation in the past years have been fluctuating but it is the first time in the history of the country that the inflation rate in a single year has been the highest and the lowest. This is remarkable as to how the fluctuations in the inflation rate can impact the overall economic situation of the country.

Current Account:

Fig 4: Australian Bureau of Statistics (2020c)

The current account balance indicates the value of imports and exports of goods and services, this term shows the trade sector of the country and is one of the main components of balance of payments. In case of Australia there has been a major rise in the current account balance is due to the increase in the surplus production of goods and services in the country. There was a drop in the imports and a rise in the exports so trade contributed about 1.0% to the growth in the June quarter (Australian Bureau of Statistics, 2020c). The current account deficit has transformed into a surplus during such conditions that the country wouldn’t have expected.

The Current Trends of Four Indicators:

Fig 5: Reserve Bank of Australia (2020a)

The current rate of unemployment rate shown in Figure 5 is about 7.5% which is unforgiving for a country like Australia because it would have devastating impacts in the coming years. To lower this percent of unemployment rate would be produce employment opportunities for the unemployed and how would it able to provide the opportunities if businesses or companies are not ready to invest in the country due to the negative value of the GDP growth rate which is shown in Figure 1 and 6.

There has been ups and down in the inflation rate of the country but it was highest in the beginning of the year 2020. However, during the current month that is September, the inflation rate has declined to -0.3%. The reason for this rapid reduction is due to the decrease in consumer prices by 1.9% along with other prices like transport (2.2%), education (2.7%) and housing (0.6%) (Trading Economic, 2020).

Fig 6: Australian Bureau of Statistics (2020a)

The Australian economy 2020 has seen a major economic outbreak due to the pandemic that has spread throughout the world. Many of the developed countries have been impacted by the virus including the Australian economy. There has been a significant decrease in consumption by households, private capital formation, exports and the biggest decline is shown in the values of GDP that is almost -7.0% which is the lowest in decades. The growth rate in 2015 (Figure 1) was much higher that was between 0 to 2% which indicates the GDP growth rate was in positive values.

Fig 7: Moody’s Analytics (2020)

The current account has been the highest among all the years, astonishingly there is a current balance surplus since 1975 where the current balance was in deficit. The year 2020 had a current account balance of about 17.7 billion dollars in the June quarter that was mainly because of a surplus in goods and services in the country (Australian Bureau of Statistics, 2020c). The increase in shown as a 29% change (Fig 7).

Three Major Issues the Australian Economy would face in the future:

Lower Global Output:

After this year, there would be a decline in the global output in comparison to the previous years. The economic contraction of the country would be lower as compared to the giants like United Kingdom and Canada. The reason for a lower international demand is that majority of the exports are traded with the East Asian countries, among these countries China was among the major importers of Australian products. However, the host of the virus was China and the spread of the virus was from the Chinese tourists and people who travelled to the country for Chinese New Year. When comparing Australia with Japan and Korea, its contraction in output would be less than Japan and more than Korea Edwards, 2020). This would impact the surplus of the country as there would be less demand of the Australian products from the potential importers like the East Asian countries. The surplus would decrease in the succeeding year as compared to the current year. Not only this the unemployment rate would increase as the factories won’t operate due to the easy spread of virus among the workers of the industry.

Consumer Spending:

The pandemic has impacted the unemployment rate of Australia badly, the discussion above signifies that the rate is 7.5 percent till second quarter and is expected to rise in the year 2021. As many people are unemployed so they aren’t getting the desired income or not income at all due to which the spending of the products and services have been declined (Martin, 2020). This will impact the GDP growth rate of the country as the growth rate includes the consumer spending in an annual year. Not only the GDP growth rate would be impacted but the inflation rate would also be affected. The reason for the lower inflation rate is the decrease in consumer prices as people are unemployed and could not spend a good amount of money on the consumer goods and services.

External Sector:

The pandemic has forced the countries around the world to shut down its airport to avoid tourism and trade. The country either export goods through air or water transportation, both of these are closed as countries are scared of the increase in cases in their own country. The decrease in tourism would impact the GDP of the country as a chunk is earned through the tourism sector (Reserve Bank of Australia, 2020b). The trade sector would impact the current account as there would a decrease in exports indicating a decrease in the surplus of the products in the country. Not only these two sectors would be impacted but also the education sector as majority of the international students are from East Asian countries. China being the host of the virus has been strictly restricted by the country to not send the Chinese students. The education sector also contributes to the GDP increasing the GDP growth rate annually. However, the succeeding year would also hinder the Chinese students to enter the country.

 

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