Australia's Economy

Australian consumer goods and services prices have increased 0.4% due to more expensive gasoline, increased costs for new homes and travelling (Batchelor, 2005). Australian employment declined in the third quarter of 2005 as manufacturers and banks dismissed workers to cut cost. As Australian currency and stock price fell, consumer lost confidence, thus slowing Australia’s economy growth. In order to boost the economy, government imposed tax cut for top rate from 47 to 45% and second highest rate from 42 to 40% (The Sydney Morning Herald, 2006).

In the second quarter of 2006, Australia’s economy grew at its slowest pace in three years due to higher interest rates and hike in fuel price. This constrained consumer spending thus, leading to decrease in GDP (The New York Times, 2006). According to Gettler (2006), Australia’s GDP rose 0.3% from the second quarter but slowed for a fourth consecutive quarter, dropping to its worst rate since June 2003. It was contributed by the weak output from the agriculture, forestry and fishery sector. Overall growth came in at 2.2% which is below the average Australia growth 3.6% over the last 15 years. Situation was worsened with the drought which decreased cereal crop production by 35%. It was the worst drought in Australia’s recorded history. As the world’s third biggest supplier of grain, Australia has caused a hike in global prices of wheat and wool. Unemployment rate on the one hand fell from 5.2 to 5% in the second quarter of 2006. Commonwealth Games held in Melbourne created more jobs as restaurants and hotels need to hire workers (Leeuwen, Daley, 2006). According to graph, Australia’s unemployment rate was seasonally adjusted 4.6% in the fourth quarter of 2006. Due to drought spur inflation, rose in global oil price and decrease in unemployment rate, Australia’s central bank has raised interest rate to 6% to encounter inflationary pressure (BBC News, 2006).

Real GDP rose in the March quarter of 2007 at the...