2024 - Australia's Economic Growth and Impact on Quality of Life

Syllabus Topic

HSC Topic Four - Economic Policies and Management

Economic objectives in relation to:

• economic growth and quality of life

Economic growth refers to the increase in the production of goods and services in an economy over a period, measured by the rise in Gross Domestic Product (GDP). Quality of life refers to overall well-being, considering more than just economic factors and measures like the Human Development Index (HDI), which includes life expectancy, education, and income. The RBA’s February Statement on Monetary Policy forecasts that Australia's GDP growth will slow from 1.5% to 1.3% by June 2024, before gradually improving throughout the year and reaching 2.3% by the end of 2025.

Economic Growth and its Significance:

• The theory of economic growth posits that GDP measures the total value of goods and services produced within a country, where increased GDP contributes to improved living standards and economic prosperity.

Reasons behind the trends:

• Australia is experiencing slow economic growth due to various factors across both domestic and global landscapes.
• Domestically, weakened economic activity, characterized by declines in GDP growth and sluggish investment across various sectors including dwelling and business, has contributed to the subdued growth outlook.
• Challenges in household consumption and public demand, coupled with rising unemployment rates, further dampen economic expansion prospects.
• Additionally, persistent inflationary pressures, are indicated by the annual inflation rate having risen to 3.6% in April, despite expectations of slowing down. These pressures pose constraints on consumption and investment decisions, impacting overall economic momentum.
• Globally, while the economy is in recovery mode, inflation remains a sticky issue, influencing monetary policy decisions and exerting downward pressure on global output growth.
• These intertwined domestic and global factors underscore the complexities of Australia's economic environment, highlighting the need for adaptive policy responses and strategic interventions to stimulate growth and mitigate risks in the foreseeable future.

The impacts of slowing economic growth on Quality of Life:

• Employment Concerns: Rising unemployment rates could lead to increased financial strain and job insecurity for individuals and households, where the rate remained at 4% in April 2024.
• Inflationary Pressures: Persistently high inflation rates, especially in essential services like housing, could strain household budgets and limit access to essential goods and services.
• Weak Investment and Consumption: Sluggish growth in investment and consumption may result in reduced business expansion, fewer job opportunities, and slower income growth, hindering social mobility and economic advancement.
• Housing Affordability: Challenges in housing affordability could strain household finances, impacting housing stability and overall quality of life, with significant shortfall in supply and increasing rent prices worsening the situation.
• Impact on Social Services: Weaker growth outlook may affect government revenues, potentially leading to constraints on public spending and investment in social services such as healthcare and education, exacerbating disparities in well-being across socio-economic groups. However, with the 2024 Budget, welfare increases are expected.

Conclusion

In summary, the recent GDP report in Australia offers significant insights into economic growth and its impact on quality of life. By examining how economic indicators such as GDP, interest rates, and productivity influence the overall welfare of a country, we gain a deeper understanding of the complex relationship between economic growth and quality of life.

Sources

Reserve Bank of Australia (RBA): February Statement on Monetary Policy

Investopedia: GDP definition and formula

KPMG: Australia's Economic Outlook 2024

AI Group: Australian Forecasts – Growth To Remain Subdued In the Short Term

The Guardian: Australia’s Annual inflation Rate Rises to 3.6 % in April Contrary to Expectations

ABS: Labour Force Trends

The Guardian: Australia’s Housing Crisis to Worsen with ‘Significant Shortfall in Supply’, Labor’s Expert Council says

ABC News: Treasurer Flags Welfare Increases in Next Week's Budget