Why you should care about your macro(economic goal)s. Part 1: Economic Growth
Very soon you'll be finishing off Microeconomics and heading in to the world of Macroeconomics which will be your bread and butter for the remainder of Units 3 and 4. The work you do in Area of Study 2 will be relevant to the questions you answer on assessments in every single other topic this year (or next year in some cases).
In this topic you'll start out more generally learning about economic activity (the speed/pace of the economy), aggregate demand (the total level of spending) and aggregate supply (the total level of production) which then leads into 3 specific domestic macroeconomic goals set by the government. Today we are going to focus on the first of them.
The Goal of Strong and Sustainable Economic Growth: This is the highest growth rate possible without causing unnecessary inflationary or external pressure. Usually this is when the total real value of production increases by 3 to 3.5% per annum. Therefore we measure Economic Growth via Real GDP Growth. This is important to note that it is real GDP growth as the effects of inflation need to be removed to get an accurate picture. Current Annual GDP Growth Rate
As you can hopefully see from the above graph, GDP growth has taken a massive hit during the pandemic and therefore over the past 12 months we have not been achieving the goal of strong and sustainable economic growth. There are definite signs of recovery however due to the fact you can see that in the last two periods the level of production in the economy actually shrunk we should think about some of the possible impacts of that.
Firstly, unemployment is likely to have increased as firms downsize and lay off workers to maintain their profit margins (or try to prevent a loss. Secondly, inflation is likely to ease as the subsequent call in incomes leads to lessened private consumption spending and decreased levels of aggregate demand and therefore downward pressure on prices as firms are left needed to sell off excess stock. Thirdly, it's likely to hurt the government's financial position as they need to increase outlays on social benefits such as welfare and wage subsidies to business as well as increase spending on infrastructure projects to try and stimulate the economy and recover.
In brighter news for our economic growth, when analysing the quarterly figures we actually grew by 3.3% in the final quarter of 2020 which shows that Australia is bouncing back from the pandemic at a rate faster than much of the developed world.