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Australia has recorded more than 24 years uninterrupted annual growth, with low inflation and low unemployment. The high growth rates of 2003-2007 are a result of the mining investment boom, responding to high terms of trade and Chinese and Asian demand for commodities (especially iron ore and coal). Whilst one quarter of negative GDP growth occurred during the GFC, recession was avoided as a result of the Rudd stimulus package (fiscal policy), lowered interest rates (looser monetary policy) and the impact of recovering Asian demand for commodities which supported a continuation of the mining investment boom. The high terms of trade and high currency has impaired non resource sectors, with GDP growth being driven by mining investment expenditures (half of which are spent on imported capital goods and services). Note that the one quarter of negative GDP growth in March 2011, and lower growth rates in the Dec 2011 and June 2011 quarters were a result of extensive flooding in Queensland that negatively impacted econonic activity and coal mining production and export. Since the peak of the mining investment boom in 2013, monetary policy loosened (now at record lows), whilst fiscal policy was mildly contractionary and therfore pro cyclical. Whilsty some rebalancing to housing construction has occurred, growth remains weak as does non mining business investment.

The Labour Years Episode 5 - the last recession 1hr 55 min



Quarterly GDP Growth (2007-2013). Australia

Note the absence of recession (2 consecutive quarters of negative growth) in Australia for more than 20 years. In recent history, one quarter of negative growth occurred during the GFC in March 2008, and the March quarter 2011 which arose because of the economic impact of floods in Queensland both on the general level of economic activity, and especially adverse impact on coal mining production with flooded mines.


Historically, from 1960 until 2012, Australia GDP Annual Growth Rate averaged 3.50 Percent reaching an all time high of 9 Percent in June of 1964 and a record low of -3.40 Percent in June of 1983.

In recent history, recessions were experienced in 1983, and 1991. Following the 1991 recession, Australia has had an unbroken run of over 20 years without a recession. The 1991 recession was part of a global recession following growth through asset price rises, high levels of debt, and then the impact of high interest rates used to combat the inflationary pressures.

The 1983 recession followed a global recession in 1981, resulting in a significant drop in commodities prices. The Australian recession was exacerbated by both a serious drought, which reduced farm output by about one-quarter in 1982/3, and tradeunion- inspired significant rises in real wages which preceded it. The unemployment rate, which had been 5¾ per cent in 1981, rose sharply to 10 per cent in 1983. Coming out of the recession, the economy grew strongly for the remainder of the decade. A ‘Prices and Incomes Accord’ between the then Australian government and the trade union movement generated gradually declining real unit labour costs over this period, with the result that the economic upswing was accompanied by rapid employment growth and an unemployment rate which fell from 10 per cent in 1983 to 6 per cent in 1989.










Unemployment in Australia declined during the mining construction boom prior to the GFC, and then rose following the GFC. The increase in unemployment would have been much larger if not for the fiscal policy and monetary policy responses to the GFC. Recently unemployment has been increasing as a result of lower economic growth (below 3%) as a result of significan reduction in mining investment.


This shows the significant, long term decline in unemployment levels since the last recession (1991), which in the 2000s has been caused by globalisation and the industrialisation of China. The impacts of the GFC, and softening of the global economy, can be seen in the unemployment trends post 2008.

Note also the 2 percentage point increase in the participation rate (labour force / total population), and that prior to the GFC, despite an increase in the participation rate, unemployment continued to decrease.


Note that unemployment rises quickly (in the recession in 1983 and 1991), and then comes down slowly as growth recovers. For example, following the 1983 recession it took 7 years for the uneployment rate to return to the former level.

In recent history, there was a gradual decline in unemployment towards full employment as a result of the mining investment boom, interupted by the GFC. Since passing the peak of the mining investment boom, unemployment has been increasing in Australia.


Since 1993 the RBA has used the cash rate to target inflation betwwen 2-3%, which has been succesful in managing inflation. However, in times of crisis (for example the GFC) monetary policy is not the primary tool to manage the economy as lower interest rates do not increase aggregate demand (and inflation) in circumstances of poor business and consumer confidence. Inflationary pressures were experienced in the economy during the first stage of the mining investment boom (pre GFC), and then when the mining investment boom resumed following the GFC. With contractionary fiscal policy since 2011, inflationary pressures caused by skill and resource shortages eased, and the RBA had scope to reduce interest rates without compromising the inflation target. With passing the peak of the mining investment boom in 2013, monetary policy loosened to encourage economic activity and increase inflation to within the band. This resulted in lowering the cash rate to record low levels.

Australia's inflation rate is often higher than our trading partners, adversely impacting international competitiveness. Inflation averaged 6% in the 1970s, and 10% in the 1980s.

During the 1970s and 1980s inflation averaged between 6.0% and 10.0%. However, from 1992 to 2001 the average level had declined to just over 2.0%. During 2000/01 the inflation rate averaged 6.0% overall, was mainly due to the one-off introduction of the GST which increased prices.


Australia's inflation rate is often higher than our trading partners, adversely impacting international competitiveness. Inflation averaged 6% in the 1970s, and 10% in the 1980s.

During the 1970s and 1980s inflation averaged between 6.0% and 10.0%. However, from 1992 to 2001 the average level had declined to just over 2.0%. During 2000/01 the inflation rate averaged 6.0% overall, was mainly due to the one-off introduction of the GST which increased prices.


By agreement with the government, the RBA targets an inflation range of 2-3% by using Direct Market Operations to target a certain cash rate (the rate in the short term money market) which influences cost of funds for banks. Prior to the GFC, during the first part of the mining construction boom, the RBA was tigthening monetary policy (increasing interest rates) to control inflation. Responding to the GFC, monetary policy was dramatically loosened to encourage growth, and then rates were raised as inflationary pressures returned as the mining construction boom contiuned. With contractionary fiscal policy from 2010/2011, the stance of monetary policy changed, as rates were loosened to encourage growth. In this way, contractionary fiscal policy provided space for interest rate reductions without increasing inflation outside the targetted range.


By agreement with the government, the RBA targets an inflation range of 2-3% by using Direct Market Operations to target a certain cash rate (the rate in the short term money market) which influences cost of funds for banks.

To address high inflation in the 1991 recession, very high interest rates were used to drive down inflation. Prior to the GFC, during the first part of the mining construction boom, the RBA was tigthening monetary policy (increasing interest rates) to control inflation. Responding to the GFC, monetary policy was dramatically loosened to encourage growth, and then rates were raised as inflationary pressures returned as the mining construction boom contiuned. With contractionary fiscal policy from 2010/2011, the stance of monetary policy changed, as rates were loosened to encourage growth. In this way, contractionary fiscal policy provided space for interest rate reductions without increasing inflation outside the targetted range.


By agreement with the government, the RBA targets an inflation range of 2-3% by using Direct Market Operations to target a certain cash rate (the rate in the short term money market) which influences cost of funds for banks.

To address high inflation in the 1991 recession, very high interest rates were used to drive down inflation. Prior to the GFC, during the first part of the mining construction boom, the RBA was tigthening monetary policy (increasing interest rates) to control inflation. Responding to the GFC, monetary policy was dramatically loosened to encourage growth, and then rates were raised as inflationary pressures returned as the mining construction boom contiuned. With contractionary fiscal policy from 2010/2011, the stance of monetary policy changed, as rates were loosened to encourage growth. In this way, contractionary fiscal policy provided space for interest rate reductions without increasing inflation outside the targetted range.







BOGS (2003-2012). Australia

BOGS (1990-2012). Australia



Cth Government Debt as % GDP (2003-2014). Australia

Cth Government Debt as % GDP (1990-2014). Australia



Net Foreign Liabilities. Australia























Structure of the Australian economy (sector % shares of GDP)

The structure of the Australian economy has undergone significant changes over the last 4 decades, with services being the dominant sector, and a long term decline in manufacturing as a share of GDP following the reduction in protection in 1973, followed by trade liberalisation by the Hawke/Keating government. In recent years, the mining investment boom has resulted in significant appreciation of the Australian dollar, placing further pressure on Australian manufacturing, agriculture, and services industries including inbound tourism and education services. Construction services have increased during the mining construction boom, and mining as a contributor to GDP will increase as capacity from mining investment enters production. Other structural changes in the Australian economy include the change in Australia's household saving rate (moving to 10%), and population shifts towards the boom states of WA and Qld. Note the share of GDP and employment of mining, although also note that mining impacts a range of other industries (importantly construction), and has a multiplied impact on GDP.