Determinants of Economic Growth

Determinants of Economic Growth

Distinguishing:

  • Determinants of actual economic growth:

    • Level of consumption, investment and government spending.

Population Growth

Australias population should reach 27 million by 2025 - annual growth has been approximately 1.4% over the past 4 decades.

  • 40% natural increase (approximately)

  • Number of births > number of deaths

  • Average - 145000 per annum

  • 60% migration (net overseas migration) (approximately)

  • Immigration is greater then emigration

  • average - 220 000 per annum

Participation

Participation rate:

  • proportion of people over 15 who are in paid work or actively looking for work

  • 2000: 63.5% —- 2023: 67%

A high participation rate = more use of the available stock of human resources.

Trends in male participation:

•Men 24-54 - 1980: 95% --- 2023: 90%

•Men 65+ - 1980: 12% --- 2023: 20%

•Why?

•Changing social attitudes of older workers

•Less physical nature of employment

•Greater availability of part-time work

•Cost of living challenges (e.g., the pension not being enough).

Trends in female participation:

•Risen for all age groups – particularly 25-64 – 1980: 52% --- 2023: 76%

•Why?

•Lower barriers to female work participation

•Changing attitudes to work and family

•Increasing equality of workplace opportunities

•Two incomes can better meet cost of living challenges

Participation

Contributes to growth because:

  • Greater participation = higher proportion producing goods and services = higher incomes for people to spend

  • Participation of women = financial security and higher levels of aggregate demand

  • Participation of older males = higher levels of experience and knowledge

Result:

  • PPF outwards

  • Along the PPF

Productivity

Is the efficiency in which firms, organisations, industries, and the economy as a whole convert factor inputs into output

Productivity grows when output grows faster than inputs - inputs are more ‘productively efficent’.

Productivity will rise if the economy has acces to better quality resources, better management an better resource allocation.