Economic Situation in Australia

Economic Situation in Australia

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Australia falls among the top notch and prosperous economies in the world with its economic growth significantly reflected in the living standards and lifestyle of the Australian citizens. As much as the living conditions of the citizens in the country is comparably higher than the rest of the world countries, the country is still faced with the challenge of disparities among the national living standards. Consequently, the country is a home to many Aboriginals who have encountered the severe face of marginalization by the European settlers. As a result of the marginalization of the Aboriginals who are the indigenous tribes, there has been a massive difference in the living standards of the European settlers and the native tribes.

Apart from the variation regarding the life of the Europeans and the indigenous dwellers, there is also a living standard difference between the city and rural residents. It is established that the People settled in urban areas such as Melbourne, and Sydney has very eclectic and vibrant lifestyle than those people living in other parts of the country most especially in the rural. In 1995, the World Bank pronounced Australia as one if the richest countries in the world and later in the year 2006, the gross domestic product (GDP) of the country were estimated at $1trillion with an annual of economic growth of about 3.3%. With the tremendous economic growth rate, the country has so far successfully maintained a low level of inflation and interests on capitals making it second country after the USA with regards to economic growth (Milbourne, 2010).

Comparisons of social welfare spending

Over the last fifteen years, the Organization for Economic Cooperation and Development of Organization claims that the living standards of Australians have substantially improved enabling it to suppress the eight of the economic super power nations apart from the United States. The living conditions of the country’s citizens are assessed using three indicators; these are resources, the well-being of the nationals, and their living standards. However, Australia is not is not committed to any set standards of measure to appropriately gauge its citizen’s welfare  despite specifications put forward by Australia, European nation have mechanism through which they evaluate the compliance of the European nations compliance with the social welfare provisions(McMahon, Thomson, & Wilson, 2006).

Despite the current overview consideration that Australia is having the highest social welfare considerations, it is noted that with the population ageing at its present rate, the country as the need to ensure a future that it can be able to sustain or otherwise it will find itself in some of the situations some of the European nations are in. Concerns have been raised about the Australian commitment to welfare payment of its citizens in the wake of the global financial crisis that saw a dramatic increase in the payments among the European nations. Consequent to the risen welfare payments, there has been little attention given to the social welfare payment funds prompting speculations whether Australia is also headed down in the same path most Europe nations have taken with regards to weak compliance to welfare pays.

According to the Europe’s social expenditure database on income support payments such as old age pensions and unemployment benefits, Australia is ranking so low in comparison with many of the wealthy European nations it levels with financially. The expenditures on healthcare and aged care services being the elements defining the social welfare expenditure shows that the countries welfare expenditure is 19.5 percent of GDP lower than most other countries. Looking deeper on to the aspect that the social welfare expenditure should cover with regards to services to the citizens, the funds should encompass such operations like age pensions, disability support pensions, veterans’ pensions, unemployment benefits, and study and career allowances.

However with all these under consideration, age pension being the largest single welfare payment in Europe, Australia still is still lagging behind in terms of its age payment to the unemployed and even pensions. Australia public spending on age pension is estimated at 3.5 of the GDP is significantly lower than most of European countries whose expenditures range between 6 to 16 percent of their GDP provisions. Creating further concern on the age pension is that most of the countries that spend much higher on their GDP also have higher populations over 65 than Australia’s aged populations.

The Solow-Swan model

The Solow-swan model as an example of exogenous growth model used to determine long-run economic development that is established within the frameworks of neoclassical economics. The principal purpose of the parameter is to try all possible procrastinations to be able to gauge the long-run economic growth of a nation using the capital accumulations, population growth which eventually translates into the labor force and the increase in productivity. Through this model then the various questions surrounding the wealth, economic status and the welfare of Australian citizens can be answered with a full view of the imminent future the economy of the nation has for its people. Using this model then an economist can use the present data to determine how the economy has so far scaled up and the potential future it holds for the social welfare of the citizens. As such, the Solow model answers the question: how are we doing right now, how have we managed to come this far and what is next or rather how will tomorrow be.

To answer the question “how Australia is currently doing” with regards to other nations, possibly swimming within the same depths of economic stability and social well-being, a comparison would be made of several nations. To estimate the welfare expenditure of Australia with other great nations in the West, the country’s spending of about $9.55 billion, which is rated at 2.4% of the total budget, was considered to be a meager amount. At the point of the statistical release in the year 2013, other countries seemed to have better performed than Australia. Among the countries whose performances were exemplary was France, which had a spending of 33%, Sweden at 28.6% and the United Kingdom at 23.8% of the total budget of the year. However much these disparities significantly shoot down the perception of Australia as the best country to be in; there are many explanations offered to give some added credits its discomforting provisions.

The disparities in welfare expenditures

The disparities in welfare expenditures
The disparities in welfare expenditures

In a report on how the country had managed to secure its current status as at the year 2013, it is explained that Australia had adopted a fair go policy. As a result of the policy, by the end of the 19th century, the country had offered great opportunities for its entire people and not only to the most privileged members of the society. The country is praised for its excellent performance at the early stage consequent to its adoption of the primary wage bill that offered a decent living to a man and his household in 1908, a step that signaled a social contract aimed at a fair go. However, with the introduction of neoliberal policy models in the minimalist states, the social contract became significantly undermined as a result of the displacement of more socially driven policy priorities. The interruptions caused a shift on the aims of the fair go and reshaping it from the original focus on social change to economic growth (Ferns, 1989).

On the explanation of the measures to be taken to revamp the social sector of the nation, the country is making significant changes regarding its redefined policy to create at least a framework that would be suitable to its population’s welfare. The country is trying so hard to re-invigorate the concept of public services as tax-funded options that serve all the citizens appropriately most especially in areas where there are no appropriate commercial providers. As much as the welfare finance can be small, it should be ensured that the right people who are needy are the sole beneficiaries of the resources and I this case the old age people are the basic priority with regards to welfare provisions.

On Solow-Swan model projection of Australia welfare sending’s by the year 2050 with all the current circumstances unchanged, the country shall have not made any positive improvements. The government spending on pension and income support payments which was at 6.9 percent of the GDP in the year 2010 is estimated to remain stagnant with minor fluctuation even after forty years. Through the report analysis, Australia is having an increased expenditure on age-related finances and this translates on an extensive expenditure on health and aged care services than on welfare payments. As such the spending on healthcare are projected to increase by between 4 to 7 percent. Aged care financing on the other hand is estimated to rise by about one percent similarly to age-related pensions. However, the number of old aged people eligible to pension payment is estimated to rise by about 150 percent around the same year creating more speculations on the substantiality of  the welfare financing increments.

The report reveals a decline in the number of people who shall be receiving pensions at full age consequent to the increased value of superannuation, private assets and income. Spending on other welfare programs such as unemployment benefits, widow pensions, parenting payments and study allowances are also expected to decrease. As much as aging cost will cause substantial pressure on government expenditure, it is established that a huge amount of this sum up to two thirds shall fall under health.

The Australian government's projected welfare spending(percentage of GDP)
The Australian government’s projected welfare spending(percentage of GDP)

Measures of institutional strengths

Institutional power is the measure of a country’s political, legal, and economic suitability to conform to the intended operation as efficiently and effectively as possible. The bill includes the legal framework of how the various institutions are to be established and the extent to which their activities should affect the citizens they are supposed to serve. Institutional strength assesses whether a country’s institutions are well established and elaborate enough to give a country the support, ability and the willingness to repay its debts. On the other hand, it is very imperative that a county’s institutions have the strength to meet all its operations without the continued dependency on the policy formulations by other sectors (Dixon& Scheurell, 2002).

There are many factors attributed to the defaults of the institution and among the major contributors to the weaknesses of the institutional framework and strength are political instability, weak budget management, and lack of political goodwill. As such there are several ways of measuring institutional strength and the most conventional ways are as follows:

  • Institutional framework

Institutional framework deals with the effectiveness of the government administration and other necessary laws that fight corruption and protects property rights. The institutional framework deals with the quality of governmental beurocracy and government. In addition to the autonomy of the state, it also deals with the policy planning, implementation capabilities of the planned policies and the perceived independence of public services from interference from other forces most predominantly political. In the institutional framework, the aspect of the rule of law is a measurement of contract enforcement, property rights, independence of the judiciary and also trust in the judicial system. On the other hand control of corruption helps the institution understand the extent to which authority is relevant (Fioretos, Falleti, & Sheingate, 2016).

  • Policy credibility

Policy credibility deals with the government and also the financial ability and power that may enable the institution to reduce inflation and to reduce the volatility of inflation. It is necessary that a credible government inspire the goodwill and interest of investors. With this potentiality, the investors are never worried about the government’s ability to repay its debts. As the policy should ensure the stability of prices of various assets and commodities. It is established that inflation performance is an important aspect in ensuring policy credibility and effectiveness as sustainable economic growth is best achieved through stable prices.

  • Other factors

The factors that look at the track records of the institutions and according to this parameter, it is realized that most nations that default in their institutional provisions experience multiple defaults.


The trends of the average societies that form the bulk of the 21st-century country are still low on the social indicators that determine the societal wellbeing of their citizens. Consequent to the weak economy and poor institutional framework and strength, most of these countries provisions about sustaining the well-being of their populations is very meager and almost unidentifiable. The social standards and the existing level of the third world countries most especially are worrying and in such case, a lot need to be done to raise the poor living standards of the nationals of these countries. If in such topmost countries where the living standards are perceived to be highest in the world, and yet there are still some constant humanitarian crisis that occasionally require government provisions, what is there to be thought of in the underdeveloped countries where there is are small budgets occasioned by weak economic capability. How do people in this country especially the poor live, and what are their conditions of life?



Milbourne, P. (2010). Welfare reform in rural places: Comparative perspectives. Bingley: Emerald.

Johnson, D. T. (2006). Poverty, inequality and social welfare in Australia. Heidelberg: Physica-Verlag.

McMahon, A., Thomson, J., & Wilson, J. (2006). The Australian welfare state: Key documents and themes. South Melbourne: Macmillan Education Australia.

Frhr, L. C. (2007). The Solow Model. München: GRIN Verlag.

Dixon, J., & Scheurell, R. P. (2002). The state of social welfare: The twentieth century in cross-national review. Westport, Conn.: Praeger.

Scott, E. (1988). Australia. Cambridge: Cambridge University Press.

Ferns, H. S. (January 01, 1989). Argentina and Canada, 1880-1930: Problems and Solutions in Immigrant Communities.

In Fioretos, K. O., In Falleti, T. G., & In Sheingate, A. D. (2016). The Oxford handbook of historical institutionalism.

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