Australian Economics

Executive Summary

This paper will argue that no single set of trends provide an accurate outlook for the Australian economy. Looking at commodity trends on their own gives an idea of past performance but does not provide an accurate outlook for the Australian economy and its ability to achieve GDP growth in excess of 3% over the next two years.

The best indicator of the outlook for the Australian economy is a combination of indices. No single index can accurately reflect past performance and therefore no single index is the best indicator for the Australian economy and its ability to achieve GDP growth in excess of 3%. Australia's terms of trade and the share market show that though there are some trends reflected in commodity prices there are other factors at play. Current GDP growth rate is at 3.5% and the expectation for the 2013 and 2014 is to slow down to 3%.

Economic indicators are based on the assumption that sequences repeat themselves and that certain combinations of economic variables underlie these sequences. If leading economic indicators perform well they are able to forecast the economic outlook. (Brischetto & Voss: 2000) Leading indicators, indicators that rise before Gross Domestic Product (GDP) rises and fall before GDP falls, facilitate the ability to predict likely patterns in the Australian economy. However, leading indices are composite and do not look solely at one factor. Such example in the Westpac-Melbourne Institute Leading Index which examines movements in leading and coincidental indicators of economic activity in Australia, with the belief they will give a "more representative picture than any single variable." (Melbourne Institute: 2012)