Question

Which of the following are major explanations of the sustained economic growth that Australia has achieved over the past 50 years?
(a) A closing of the gap between actual and potential output. Yes/No
(b) Increases in labour productivity. Yes/No
(c) Technological progress. Yes/No
(d) Sustained increases in the capital stock. Yes/No
(e) Reductions in unemployment. Yes/No
(f) Increases in human capital. Yes/No

Answer 1

Major explanations of the sustained economic growth that Australia has achieved
over the past 50 years are:

(a) A closing of the gap between actual and
potential output -No. Over the past 28 years, Australian real-time output-gap
estimates show no apparent bias, when compared with final output-gap estimates
derived with the benefit of hindsight using the latest available data.
Furthermore, the root-mean-square difference between the real-time and final
output-gap series is less than 2 percentage points, and the correlation between
them is over 0.8.

(b) Increases in labour productivity - No. Productivity
growth has been negligible, and well below the rates achieved in the preceding
50 years. Productivity across most segments of the Australian economy is well
below world-best practice. The Business Council of Australia, for example,
estimates that construction costs of Australian hospitals, schools, and oil and
gas plants are 40% or more below US levels.

(c) Technological progress -
Yes. Over last 50 years the great progress was in the telecommunication field,
which is important part of every business today.

(d) Sustained increases
in the capital stock - No. Australia is failing to make the transition towards
sustainable development - a consequence of Australia's inefficiency, its
addiction to growth and its failure to embrace the notions of sufficiency,
equity and natural capital maintenance

(e) Reductions in unemployment -
Yes. In the Australian experience, unemployment has been a nagging,
and sometimes intense, problem for the past 30 years. But a sustained expansion
in the economy lasting, now, 13 years has reduced current unemployment to
unusually low levels. The gains in reducing unemployment are evident even in
the most problematic areas, such as youth unemployment, long-term unemployment
and poor employment opportunities for older workers.

(f) Increases in
human capital - Yes. Human capital is widely accepted as a key driver of
productivity growth. In Australian MFP statistics, the impact of human capital
is captured by accounting for compositional changes in the work force due to
factors such as changes in educational attainment and workforce
experience.