Economic Indicators

Economic Indicators

And the Business Cycle

The Business Cycle

All economies have a common goal: they all wish to increase the quantity of goods and services available to their members. The total level of production of goods and services in an economy in a specified period of time is called its Gross Domestic Product.

Increases in the amount of production over time are called economic growth.

Economic growth leads to higher incomes and greater levels of employment; two key goals of all governments. However, an analysis of our economic history has shown that economic growth is uneven. In some years, economic growth has been greater than in other years. This is shown in the graph above, which shows the rate of growth of production is a mythical nation over time.

In Years 1 to 7, economic growth in increased; in Years 8 to 12, the rate of economic growth fell. This does not mean that in Years 8 to 12, the total quantity of goods and services produced fell; it simply means that, compared to the previous year, the rate of increase of production fell.

If the level of production in one year was less than the previous year, the rate of economic growth would be a negative number.

Governments want economic growth to be positive, because the size of most nations’ populations is growing each year. We need more goods and services to be produced, because there are more of us each year. If a nation's rate of economic growth was negative, and its rate of population growth was positive, then there would be less goods and services available per person. This would cause a marked fall in our standard of living.

Most economic commentators in Australia agree that Australia's economy should grow at a minimum of 2% per annum, in real terms (that is, adjusted for the effects of inflation). Our population is growing; we must have economic growth, just to maintain our current ''standard of living''.

A History of Australia's Economic Growth

In the 20th Century

As the...