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The three main economic issues facing Australian government include: economic growth, unemployment and inflation. To understand Australian recent performance, the measurement, trends, causes and effects will be analyzed in each issue. Meanwhile, the influence of the global economy and the interaction amongst these three issues will be also discussed. Economic Growth (EG) EG can be defined as the increase in the volume of goods and services (G & S) that an economy can produce over a period of time. It is measured by annual rate of change in real GDP, i.e. the percentage (%) in the value of G & S produce in an economy over one year, adjusted for rate of inflation. Graph By mid 2000 the Australian economy had recorded 9 years of continual growth, averaging around 4% per year, but it tends to slow down, by 2003, EG has slowed to 2.9%. However, it is still well ahead of most industrialized countries. These causes of Australia¡¦s EG trend can be explained by the Aggregate Demand (AD). AD is the total demand for G & S generated by the sum of all spending in the economy. AD = Consumption (C) +Investment (I) + Government Spending (G) + Export (X) ¡V Import (M). Therefore, the change in AD is the result of the change in these components. ¡± Consumer and business expectation about the inflation. Inflation creates uncertainty. If they expect the price to increase, they buy now, and verse-vice. ¡± The level of interest rate (IR). IR is the cost of borrowing. Low IR encourages C and I. ¡± The distribution of income (Y). The more even the distribution of Y the higher the level of spending. ¡± Y levels and C references. It can be explained by using the multiplier process. It occurs when extra spending (e.g. I or G) is injected into the economy.
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