A. AUSTRALIA AND MALAYSIA ECONOMIES: RESEARCHS AND ANALYSIS 1. Introduction Leading a country is totally not an easy task, thus the initial preferences of most governments are to keep the inflation and unemployment at acceptable rates in order to chase the ultimate goals: raising economic growth and GDP. The next few paragraphs are going to draw the pictures of two economies, Australia and Malaysia, by analyzing and comparing the four economic indicators above in the period from 2006 to 2009. a) Gross Domestic Product (GDP)
The tables below show the sum value of final goods and services produced within two countries each year from 2006 to 2009 in term of current international dollar. GDP of Australia and Malaysia| Year Country| 2006| 2007| 2008| 2009| Australia| Total($ billions)| 737. 128| 793. 944| 830. 182| 851. 17| | Per Capital($ in thousands)| 35. 313| 37. 383| 38. 356| 38. 910| Malaysia| Total($ billions)| 329. 318| 359. 686| 384. 389| 382. 257| | Per Capital($ thousands)| 12. 477| 13. 4| 14. 081| 13. 769| (Source: International Monetary Fund, World Economic Outlook Database, Apr 2010)
General speaking, the table shows the upward trends in GDP of Australia and Malaysia during the global recession period. In details, GDP of Australia from 2006 to 2009 increased moderately from about $737 to $851 billion while Malaysia’s GDP is approximate $329 to $382 billion. Comparatively, Australia’s GDP contributed to the world’s GDP remain over twice as many Malaysia’ GDP did. b) Economic Growth The following table shows the data of economic growth each year of Australia and Malaysia within 2006-2009. Economic Growth of Australia and Malaysia| | 2006| 2007| 2008| 2009| Australia| 5. 9| 7. 7| 4. 6| 2. 5| Malaysia| 9. 3| 9. 2| 6. 9| -0. | (Source: International Monetary Fund, World Economic Outlook Database, Apr 2010) In this period, Malaysia’s economy had performed better than Australia’s in term of speed which it grew at an average rate of 6. 2% while Australia’s was 5. 2%. The trend of economic growth of two countries is illustrated as below. (Source: International Monetary Fund, World Economic Outlook Database, Apr 2010) The trend of economic growth of Australia shows that this economic is mature which a moderately falling to avoid an economic shock for the civilians. In contrast, Malaysia’s economy had performed even worse which was suddenly dropped off from 6. % in 2007 to a negative number, -0. 5%, in 2009. c) Inflation Rate The diagram above illustrates the fluctuations of inflation happened in Australia and Malaysia between 2006 and 2009. In an overview, there was a similarity in the tendencies of inflation of two countries during this time which they fell slightly between 2006 and 2007; suddenly climbed up in 2008 and; rapidly dropped down in 2009. (Source: International Monetary Fund, World Economic Outlook Database, Apr 2010) As shown in the table below, inflation rates of Australia and Malaysia began at 3. 5 and 3. 9% in 2006 respectively; then fell down to approximate 2% in 2007.
Inflation of Australia and Malaysia| | 2006| 2007| 2008| 2009| Australia| 3. 5| 2. 3| 5. 3| 2. 4| Malaysia| 3. 9| 2| 6. 2| 0. 6| (Source: International Monetary Fund, World Economic Outlook Database, Apr 2010) After that, inflation rates in these two countries grew from 2. 3 to 5. 3% and 2 to 6. 2% respectively. Later on, immediate actions were made to curb the rates and stabilize price level. The year 2009 shows the major decreasing of inflation rate of two countries as actions were begun to take effects which the rates were dropped to 2. 4% in Australia and 0. 6% in Malaysia. ) Unemployment Rate The impact of the global recession was clearly shown in the labour markets of many countries which represented the increasing in the number of unemployment in which Australia and Malaysia were not exemptions. Unemployment Rate of Australia and Malaysia| | 2006| 2007| 2008| 2009| Australia| 4. 8| 4. 4| 4. 1| 5. 3| Malaysia| 3. 6| 3. 5| 4. 2| 5. 7| (CIA, The World FactBook) The table above shows the % of unemployment over total labour forces of Australia and Malaysia each year. In general, the unemployment rate of Australia slightly fell during 2006 – 2008 from 4. 8% to 4. % while this rate in Malaysia remained stable in the first half of this duration before moderately grew up to 4. 2% in 2008. After that, resulted from the global economic downturn, the unemployment rates of Australia and Malaysia rapidly climbed to 5. 3% and 5. 7% respectivey. Summary Peak Peak The period 2006 – 2009 was the time when the world fell into recession due to its economic cycle after a long time of growing. The major impact on global economy during this time was the slowdown of all economies. Peak Peak Level of Output Peak Peak Trough Trough Trough Trough Time References 1) CIA, The World FactBook, ) International Monetary Fund, World Economic Outlook Database, Apr 2010 B. GDP AND ITS LIMITATION 1. Definition of GDP GDP, or Gross Domestic Product, is the sum of all final goods and services produced within a country for a given time period (Parkin, 2010, p. 488). Economists use GDP to gauge the health of a country’s economy as well as to compare the standard of livings over times and between countries. Theoretically, there are three approaches to measure the total final goods and services produced within a country in a given period of time: Expenditure Approach, Income Approach, and Value Added Approach. . Limitation of GDP In reality, there are some factors, possibly alter the level of GDP, can not to be put into the GDP’s formulation. The followings are four major elements that imply GDP is not a perfect measure of economic welfare. * Household productions: Households produce goods and services for their own consume. These products increase standard living but not be counted when calculating GDP. For instance, a farmer grows organic vegetables for his own consume increase his family standard living but the products are excluded from GDP calculating. Underground Economic Activities: These activities are business transactions that they are unreported to authorities. For examples, companies hide their business transactions in order to avoid taxes payment; illegal transactions of crime organisations. The benefits generated from these transactions increase the standard living but not be added to GDP as weak information. * Health and Life Expectancy: The increasing of health quality and age of death of human being resulting from economic growth is not being counted to GDP.
For example, medicine which is now better than the past and lesser costed increasing health of people that does not be counted to GDP. * Environmental Quality: The damage of natural environment, where humankind living in, resulting from economic growth which is not deducted in counting GDP. For example, the damage of CO2 to the environment from manufacturing of goods and services which are sold and added to GDP formula does not be deducted when GDP is counted while the costs that nations need to spend to repair the environment are uncountable. References: Parkin. , M. (2010). Economics. Pearson Education, Inc. 9th. P. 488