American and Australian Economies

The economic problem is the problem of how to satisfy our unlimited wants with our limited resources. Different situations affect different economies. That includes the size of the economy and economic growth, employment and unemployment, quality of life, environmental quality and the role of the government.

Economic growth

Economic growth involves a boost in the quantity of goods and services that an economy can manufacture over a period of time, and is measured as a percentage increase in the value of goods and services produced in a country in one year. There are both positive and negative effects that come out of economic growth, mainly in relation to living standards, unemployment, inflation, external stability, income distribution and the environment. Recently Australia’s economic growth performance has been promising, considerably better than most countries in this unstable time in global affairs.

In the late 1990’s the RBA had successfully maintained a sustainable rate of economic growth. Their target was between 3-5 % in which they achieved. This was mainly due to their responsible and carefully planned monetary policy that the RBA carried out over these years that has prevented large fluctuations in the Business cycle. Though the economy and hence, economic growth has experienced a considerable downturn. This is due to a continuing weakness in the international economy.

In real terms, America’s economy grew by 3.7 percent in the third quarter, faster than most other developed economies around the globe and faster than the historical U.S. growth rate, since 1970, of 3.2 percent. Chart 1 provides a quarter-by-quarter account of U.S. economic growth since 1992.

Economic news reflects the policy choices made years ago by Congress and the President. This year, the choice expressed by the two parties boils down to a Republican party that has delivered on tax cuts and Democrats who promise greater attention to deficits. This paper puts the recent growth of the U.S. economy in perspective and looks forward at how the two parties’ radically different plans may affect future growth and prosperity.

The American economy has grown much faster in recent years than many economists thought possible, especially in the wake of the terror attacks of 9/11. A vigorous public policy response turned the 2001 recession into one of the mildest downturns in modern history dating back to 1947, the year comprehensive official statistics were first recorded by the U.S. Bureau of Economic Analysis (BEA).

Since 1970, GDP growth has averaged 3.16 percent per year, after inflation. During President Bush’s first year in office in 2001, the economy slipped into and pulled out of a recession and yet overall output managed to grow slightly. Since 2001, real output has grown at an average annual rate of 3.47 percent. This rapid expansion has been concentrated in the five quarters following the 2003 Bush tax cuts. Since the third quarter of 2003, growth has averaged 4.62 percent.

Present! Smart tax policy is a key ingredient of economic growth, and the tax policy moves of the last three years have had a marked impact on economic activity. This influence has been particularly evident since mid-2003 when the Bush tax cuts were passed by Congress: these cuts created strong incentives for investment, which in turn spurred the American economic engine.

Investment is one of main components of GDP, and also one of most variable. Many observers believed that the investment boom of the 1990s would cause a long-term surplus of plant and equipment, stifling further expansion. Nevertheless, recent indicators suggest that the information technology revolution was real, and booming orders for computer equipment and software are setting records once again. The average rate of investment growth after the 2003 tax cut has been 14.6 percent, compared to the average since 1970 of 5.9 percent. In real dollars, investment is $774 billion higher per year than it was a decade ago. Investment is a sign of a booming economy, and it is driving the productivity revolution that raises U.S. living standards.

Employment in America

In 2003, 12.9 percent of wage and salary workers were union members, down from 13.3 percent in 2002, the U.S. Department of Labor's Bureau of Labor Statistics reported today. The number of persons belonging to a union fell by 369,000 over the year to 15.8 million in 2003. The union membership rate has steadily declined from a high of 20.1 percent in 1983, the first year for which comparable union data are available. Some highlights from the 2003 data are:

• Men were more likely