State of Australian Economy for Stable Equilibrium - myassignmenthelp

Question: Discuss about theState of Australian Economy for Stable Equilibrium. Answer: Introduction The economic analysis below seeks to understand the health of Australian economy and the need for Australian government intervention by using economic principles and theory. A diagram will be used in the explanation if the concept of a stable economic equilibrium based on the assessment of whether or not the economy of Australia is presently at a stable equilibrium. The phrase equilibrium is drawn from 2 Latin words called acqui and libra. Acqui implies equal while libra means to balance. Therefore, equilibrium implies equal balance. The equilibrium has been applied vitally in economics hence the equilibrium economics. Equilibrium in economics explains a state at which two opposite forces cannot influence each other. Simply put, equilibrium is a position whereby no further change is feasible. Three types of equilibrium include stable, neutral and unstable equilibrium. Concept of Stable Equilibrium We deal with stable equilibrium which can simply be understood by having a ball resting at the bottom of a bowl. The ball is comfort at the bowls base and remains in stable equilibrium and any disturbance still leaves this ball at its original position. The figure below illustrates a stable equilibrium: In the above figure, DD denotes a negatively slopped demand curve and SS represents a positively demand curve. The equilibrium takes place at point E. At this juncture, the demand and supply remain in balance; the equilibrium quantity and price OQ; OP are determined respectively. This is a typical instance of stable equilibrium in economics. What takes place at price above level of equilibrium? Assuming that market price is OP1. At such a price, P1B is quantity supplied whereas the quantity demand is solely P1A. Therefore, quantity supplied remains more than quantity demanded. The surplus quantity in market is to extent of AB. This establishes a downward pressure on price (Plumb, Kent Bishop, 2013). The downward pressure will apply till price hits equilibrium level at which supplied quantity equals demanded quantity. What happens at prices beneath equilibrium level? In the above figure, let us assume the price OP2. At this level of price, supplied quantity is less than demanded quantity. CE1 represents volume of commodity shortage. As a result of excess demand, an upward pressure on price is applied. Such a pressure pushes up price to equilibrium level that supplied quantity equals demanded quantity. Health of Australian Economy Australian economy has enjoyed unprecedented GDP growth since 1991 December. The economy has avoided both the Asian financial crisis (1998) and global financial crisis (2008) without a recession. Contrasted to many other OECD economies who have suffered rises in unemployment and long-run unemployment since then, Australia has persistently powered ahead (Turgeon Simeon, 2015). It remains true that as the GFC hit and tax revenue dropped, Australia ushered in a series of stimulus measures for tackling crisis which moved its economy to deficits in budget from surplus budget. The rating agencies have provided Australia with a triple AAA rating for what they are worth. This implies that they are never concerned about Australian budget deficits or debt. The economy of Australia has slowed down as the boom on commodity come to the end, however, Australia has not gone into the recession. The economy is certainly not in the crisis. The Australian economy has had the stellar performance on the basis of OECD. On the basis of macroeconomic indicators such as GDP, inflation, debt, current account balance, unemployment, Australia has compared favorably. The GDP of Australia has been consistently growing, and the rate of unemployment has been lower consistently contrasted to many other OECD countries since the global financial crisis. The economy enjoys the lowest debt according to Gross Financial Liabilities measures in OECD. In the year 2013, the Debt to GDP ratio of Australia stood at 34.40% and the OECD average stood at 112%. Debt crisis? Whereas other OECD are increasingly concerened with deflation, Australia has managed to go via crisis with negligible inflation. The economy has had current account deficit (CAD) for over a 100 yeears with an exception for each brief spells of surplus. Nevertheless, since GFC, solely Italy and Germany had had lower CADs. It has been argued by Coaliation government in the year 2014 that Australian economy stands in dire straits and is heading to collapse due to enormous budget deficits alongside a ballonning governmet debt (Reid Botterill, 2013). This is threatening to slice welfare, education, health alongside public service. Such mirror austerity measures which have been unable to get most OECD economies back to growth. The government simultenously wanted to abolish mining tax and carbon tax to hit poor and assist rich in 2014. Is Australia Economy Stable/Unstable The Australian economy is developed and remains one of enormous mixed market economies globally with about 1.690 trillion Australian dollars. The economy recorded the lengthiest undisturbed growth in GDP run in developed economies with 2017 March financial quarter. It can be categoricaly stated that Australian economy is a huge, stable and diverse one and even set to continued expansion via its strong trade links to various diverse makets (Downes, Hanslow Tulip, 2014). The economy has demonstrated economic adaptability, resilience, as welll as record of stable and steady economic growth thereby providing a safe and low-risk environmnet that favor busieness. Australian economy is in its twenty-sixth year of consecutuve yearly growth in economy, its economy is underpined by strong insttutions, an extradordinary service sector as well as an ability to efective global changes response. The economy remains the thirteenth global largest and rated AAA by each of the 3 international rating agencies. The economy forecast to realizing averagae yearly real GDP growth of 2.90% over the coming 5 years-the highest among main advanced economies (Bean, McAllister, Pietsch Gibson, 2014). The economy is characterized by high levels of productivity, with fiteen out of twenty industiries rating beyomd global averages. Conclusion The economy of Australia has enjoyed substantial success in the latest decades. This is a manifestation of a strong macroecomic policy, long boom in commodity, and structural reform. The standards of living alongside wellbeing in Australia remain high in general, though certain challenges are inevitabilities with respect to gender gaps and emission of greenhouse gase, as well as challenges emerging from ageing population. Nonetheless, Australia economy remains a classical case of stable equilibrium. References Bean, C., McAllister, I., Pietsch, J., Gibson, R. K. (2014). Australian election study, 2013. Computer file]. Canberra: Australian Data Archive. Downes, P. M., Hanslow, K., Tulip, P. (2014). The effect of the mining boom on the Australian economy. Plumb, M., Kent, C., Bishop, J. (2013). Implications for the Australian economy of strong growth in Asia. Reserve Bank of Australia. Reid, R., Botterill, L. C. (2013). The multiple meanings of resilience: An overview of the literature. Australian Journal of Public Administration, 72(1), 31-40. Turgeon, L., Simeon, R. (2015). Ideology, Political Economy and Federalism: The Welfare State and the Evolution of the Australian and Canadian Federations. Understanding Federalism and Federation, 125.