Economic Growth In Australia Research Articles

Patents, foreign direct investment and economic growth in Australia, 1860–2010

AbstractWe examine the long run relationship between innovation and economic development in Australia, using 150 years of data on patenting activity, and aggregate and sectoral economic indicators. Our initial results point to several important causal relationships, particularly the effects of patents on real GDP and of private capital formation on patents. We delve deeper at the sector level and find important causal relationships of patents with real foreign direct investment (FDI) since World War II. Australia's dependence on FDI for private capital formation served as an important stimulus for knowledge creation in key sectors including manufacturing, agriculture and mining.

Shaping planetary health inequities: the political economy of the Australian growth model

ABSTRACT Planetary health equity – the equitable enjoyment of good health and wellbeing in a sustainable ecosystem – is under threat from anthropogenic climate change and economic and social inequities. Driving these major challenges is the global consumptogenic system that encourages excessive production and consumption goods and services that are harming human and planetary health. Growth models lie at the core of the consumptogenic system. This paper examines the sources of economic growth in Australia, the coalitions that sustain this approach politically, and the implications of these dynamics for planetary health equity. Australia’s consumption-led growth model is underpinned by a combination of rising house prices and a permissive credit regime. This growth model is supported by a dominant growth coalition of producer interests, elements of organised labour, and property owners. The growth coalition has been able to successfully generate growth model policy convergence between the mainstream political parties. In turn this growth model, and associated growth coalition, has undermined the pursuit of planetary health equity in Australia by incentivising and driving excessive consumption, greenhouse gas emissions, and economic inequality.

Diversification in the tourism sector and economic growth in Australia: a disaggregated analysis

AbstractIn most countries inclusive of Australia, tourism policies do not only deal with how to diversify tourism markets but also how to diversify tourism activities. Efforts are often made to increase the inflows of tourists from different source markets and to improve arrivals for various tourism activities. However, the existing literature on the economic impact of the diversification of the sector has not dealt with the economic impact of diversification of tourism markets. This study aims to examine the economic impact of diversification of both tourism markets and tourism activities. Using a newly developed tourism diversification index, the focus of the study is on Australia for the period, 1976–2020. Utilizing a dynamic autoregressive lag simulation approach, the results suggest that diversification of tourism markets and activities generated positive economic growth in Australia in line with the notion of tourism‐led growth hypothesis. Empirical results outline that a 1% increase in diversification of tourism markets and activities generated increases in the gross domestic product by 0.010% and 0.070%, respectively. One of the implications of the results is that policies to diversify tourism markets and activities will be beneficial to the economy in Australia.

A critical review of Australia's China-dominant education supply chain

This study examines whether the expansion of Australia's international education sector has been highly dependent on students from China supported by competitive supply chain management. In 2019, Australia's earnings from international education were A$40.3 billion, of which 30% was contributed by Chinese education visitors. However, researchers and observers have been alluding to the risks of over-reliance on the Chinese market in recent years. Further, the COVID-19 outbreak since early 2020 has severely disrupted the supply chains of the international education sector because Australia imposed travel bans for all international visitors. The econometric results of the study suggest that Chinese students contributed significantly to the education exports and economic growth of Australia. Policy recommendations emphasise on the diversification of the education market and effective supply chain management to recover from the financial hardship experienced by the sector caused by the COVID-19 pandemic along with the recent geopolitical tension between Australia and China.

Between Growth and National Security in Host Countries: FDI Regulation and Chinese Outward Investments in Australia’s Critical Infrastructure

To achieve sustainable growth, China facilitates outward foreign direct investments (FDI) in natural resources and technology through large supportive policies and massive financing, particularly through the expansion of its state-owned companies into foreign markets. This trend has accelerated economic growth in Australia but has also raised national security concerns regarding foreign investments. This paper discusses the problem of balancing foreign investment and national security and aims to stimulate discussion on the extent of regulations necessary for FDI in critical infrastructure. This paper will be interesting for host-country policymakers balancing inward FDI and national security concerns through appropriate screening mechanisms.

Role of financial development in economic growth in the light of asymmetric effects and financial efficiency

AbstractThe growth effects of financial development might be asymmetric and nonlinear according to the level of financialization of countries. As a corollary to this notion, in the subject study, we developed a three‐regime threshold autoregressive distributed lags (TARDL) model, which allows us to accommodate the asymmetric effect of financial development on economic growth in top 10 financially developed countries. We augmented the TARDL model by including trade openness, capital formation and labour as potential determinants of economic growth. The empirical findings revealed the existence of threshold asymmetric co‐integration between variables. In particular, in the upper regime, financial development boosts economic growth in Singapore while it exerts a negative impact on economic growth in Finland. In the middle regime, financial development increases economic growth in Australia and Singapore. However, in the lower regime, financial development hampers economic growth in the US, Malaysia and Singapore. Trade openness has a positive long‐run influence on economic growth in Canada, South Africa, Australia, Malaysia, New Zealand, Singapore, Finland and Norway. Capital formation strengthens economic growth in the US and Malaysia in the long‐run. Labour is found to sustain economic growth in the long‐run for Malaysia and Singapore. The dynamic multipliers which depict the response path of economic growth to a one‐unit shock of financial development in the three regimes highlight the discrepancies in the reaction of economic growth to financial development shocks occurring in different regimes. Important policy implications can be instigated from the empirical results.

Total natural resource rents, trade openness and economic growth in the top mineral-rich countries: New evidence from nonlinear and asymmetric analysis.

This paper investigates the impact of total natural resource rent on economic growth by applying the Nonlinear Autoregressive Distributed Lag (NARDL) developed by Shin et al. (2014) and nonlinear Granger causality proposed by Diks and Panchenko (2006) in the case of top ten mineral-rich countries in the world for the period 1981-2017. Empirically, after testing the stationarity properties of the variables, we applied the Johansen Cointegration approach to examine the cointegration relationship between total natural resource rent, trade openness, and economic growth. The causal relationship between the variables investigated by applying the conventional Granger Causality Test and the nonlinear Granger causality test. We employ the BDS Tests to examine the possibility of nonlinear dependence between the variables. Further, we tested the robustness of the asymmetric short- and long-run nonlinearities through positive and negative partial sum decompositions of the predetermined explanatory variables using NARDL, which exhibits robustness to small sample sizes. The empirical results confirm nonlinear cointegration between the variables in Australia, Brazil, Canada, The Democratic Republic of Congo (DRC), India, and Saudi Arabia. Long-run asymmetric effect results show that total natural resource rent has an adverse effect on economic growth in Australia, DRC, and India, therefore, confirming the "resource curse" phenomenon in these countries. However, we found that natural resource rent has a positive effect on economic growth in Brazil and Canada, which implies that natural resources contribute positively to economic growth and therefore is a blessing in these countries. Our Wald test results reveal a long-run asymmetric effect between total natural resource rent and economic growth in Australia, Canada, the DRC, India, and Saudi Arabia and a short run asymmetric effect in India and Saudi Arabia. The results also indicate a positive shock to trade openness has a positive impact on economic growth in most of the countries. The causality analysis in the nonlinear framework suggests that natural resource rent does not cause economic growth in the majority of the countries assessed. We recommend the implementation of more trade liberalization policies to maximize the benefits from trade openness, especially in the countries where the "natural resource curse phenomenon reported. Important policy implications can be learned from the empirical results.

Nexus between energy consumption, health expenditure and economic growth in Australia

Focussing on Australia, we examine the effects of energy consumption and health expenditure on output within the extended neo-classical Solow growth model. We use the ARDL bounds and non-Granger causality procedures for a sample period 1971-2014, to analyse the short-run and long-run effects of energy consumption and health expenditure on economic growth. Additionally, we examine the threshold values of energy and health expenditure. It is noted that in the long-run, energy consumption vis-à-vis output has a U-shaped relationship and the health expenditure has an inverted U-shaped relationship. The minimum energy consumption per capita necessary for growth needs to be at least 4,849 kilograms of oil equivalent, whereas the maximum amount of health expenditure, in real terms, should not exceed AU$ 5,959 per person. In terms of causality, we note a unidirectional causality from income, capital stock (investment) and health expenditure to energy consumption; and bidirectional causality between health expenditure and income. [Received: March 23, 2018; Accepted: November 18, 2018]

Nexus between energy consumption, health expenditure and economic growth in Australia

Focussing on Australia, we examine the effects of energy consumption and health expenditure on output within the extended neo-classical Solow growth model. We use the ARDL bounds and non-Granger causality procedures for a sample period 1971-2014, to analyse the short-run and long-run effects of energy consumption and health expenditure on economic growth. Additionally, we examine the threshold values of energy and health expenditure. It is noted that in the long-run, energy consumption vis-a-vis output has a U-shaped relationship and the health expenditure has an inverted U-shaped relationship. The minimum energy consumption per capita necessary for growth needs to be at least 4,849 kilograms of oil equivalent, whereas the maximum amount of health expenditure, in real terms, should not exceed AU$ 5,959 per person. In terms of causality, we note a unidirectional causality from income, capital stock (investment) and health expenditure to energy consumption; and bidirectional causality between health expenditure and income. [Received: March 23, 2018; Accepted: November 18, 2018]

Does Resource Curse Really Exist in Precious Metal Producer Countries?

In this study, the relationship between precious metal production and economic growth is examined for the countries producing them the most, namely Australia, Canada, Mexico, Philippines, Peru, South Africa and USA, for the period 1963–2016 by using Markov switching-vector error correcting models and impulse–response functions. All economies under examination in this study are well described by Markov switching intercept heteroscedasticity-vector error correction models. We detect both estimated intercepts and variances differ across regimes. According to results, the effect of precious metal production on economic growth is various. As a whole, there is a long-run relationship between each precious metal production and economic growth. In the short run, whereas gold production has a negative effect on USA’s and Canada’s economies, which supports resource curse, it has positive one on South Africa’s. The effect of silver production on economic growth of Australia and Peru is negative, but it is positive for Canada and South Africa. While copper production has a positive effect on the economic growth of Australia and South Africa, we find supporting evidence for resource curse for Canada, Peru and USA. We also find insignificant correlation between any precious metals and economic growth for Mexico and Philippines.

How economic growth in Australia reacts to CO2 emissions, fossil fuels and renewable energy consumption

PurposeAustralia is one of the ten largest emitters of greenhouse gases but stands out from the others due to its economic growth without recession for 26 consecutive years. This paper aims to focus on the energy-growth nexus and the effects of energy consumption on the environment in Australia.Design/methodology/approachThis analysis is performed using annual data from 1965 to 2015 and the autoregressive distributed lag model.FindingsThe paper finds empirical evidence of a trade-off between economic growth and carbon dioxide (CO2) intensity. The results show that increased gross domestic product (GDP) in Australia increased investment in renewable energy sources (RESs), although the renewable technology is limited and has no impact on reducing CO2 intensity in the long run. In contrast to investment in RES, fossil fuels, coal and oil, are decreased by GDP. However, oil consumption increased renewable energy consumption, and this reflects the pervading effect of the growing economy.Originality/valueOverall, this paper contributes to the literature by analysing the behaviour of both energy consumption and the environment on the growing Australian economy. In addition, this paper goes further by studying the impact of economic growth on renewable and non-renewable energy consumption, as well as on CO2 emissions. The study is conducted on a single country for which literature is scarce, using a recent approach and a long time period.

The role of export composition in export-led growth in Australia and its regions

The export-led economic growth hypothesis is explored at the sectoral level for Australia and its regions. The merchandise exports data can be disaggregated into four broad sectors: (i) Agriculture, (ii) Mining and Fuels, (iii) Manufacturing and, (iv) Other. The results reveal that Mining and Fuels exports have played a crucial role in driving economic growth in Australia nationally and in three of its regions, New South Wales, Queensland, and Western Australia, and that the growth path of each region is unique.

Financial Systems and Economic Growth: Empirical Evidence from Australia

This paper has examined the dynamic impact of both bank- and market-based financialdevelopment on economic growth in Australia ? during the period 1980 to 2012. The studyuses the autoregressive distributed lag bounds (ARDL) testing approach to examine thislinkage. Unlike some previous studies, this study uses financial sector development indices tomeasure both bank- and market-based financial development. These indices were computedusing the method of means-removed average. The empirical results of this study show that whilebank-based financial development has a short-run positive impact on economic growth in Australia,market-based financial development has no significant impact on economic growth, both in the shortrun or in the long run. (This abstract was borrowed from another version of this item.)

Biomass energy consumption and economic growth: ARDL analysis

ABSTRACTThis article investigated the causality relation between biomass energy consumption and economic growth in Australia, Canada, Denmark, Finland, France, Japan, the UK and the US by using the autoregressive distributed lag (ARDL) bounds testing method, and Granger causality test. The dataset covers the 1980-2010 period. For Canada, France, the UK and the US, the results of short-run causality determined the evidence that the conservation hypothesis is supported and the evidence of the growth hypothesis for Australia, Belgium, Finland and Japan. Strong causality results found the evidence of feedback hypothesis for the US, UK, and France.

Study on Australian energy policy, socio-economic, and environment issues

This article deals with the Australian total energy consumption related to economic growth and carbon dioxide (CO2) emission in which total energy consumption is sub-divided into renewable and non-renewable energy consumption. The aim of this study is to determine the nexus between all energy elements with gross domestic product and CO2 emission using the Cobb-Douglas equation. The study is based on the Australian panel data over the period from 1976–1977 to 2012–2013. Vector error correction model and generalized method of moments were used to estimate the variables for the relationship between energy variables. The proposed model shows good agreement with the data available on the bioenergy production and consumption in Organization for Economic Co-operation and Development countries. In this model, oil price, oil consumption, carbon tax, renewable energy technology, population growth, urbanization, etc., have been considered as model variables or governing factors. The results show the bidirectional relationship between energy consumption, economic growth, and CO2 emission. The proposed energy economic model is focused on resilient strategic investment decisions on CO2 emission intensive sectors like electricity generation and the transport sector. The model can be used to determine and understand the relationship between reduction of CO2 emission and economic growth in Australia.

Social expenditure and economic growth: Evidence from Australia and New Zealand using cointegration and causality tests

Developed nations, especially Nordic countries such as Iceland, Sweden, Norway, Denmark and Finland allocate a sizeable portion of their budget for social welfare. On the contrary, developing counties’ allocation for social welfare has been negligible. The question is: can state intervention through social welfare provisions ensure sustained economic growth? In other words, do social expenditures promote economic growth? This study seeks to answer this question by establishing links between social expenditures and economic growth in Australia and New Zealand, and draw lessons for fast developing ASEAN economies as they aspire to be developed nations soon. Using annual data from 1980 to 2012, we deploy cointegration and error correction methods for establishing long-run relationship between social expenditures and economic growth. We conduct Granger causality tests for testing short-term direction of causality among the variables. For Australia, economic growth is found to have three main determinants- education, health and social expenditures. For New Zealand, health and social expenditures have been found as the main determinants of growth. However, no long-run relationship could be established among the variables when we included budget deficit in our model. The Granger causality tests indicate that one way causality running from economic growth to health expenditure, and social expenditure to economic growth in Australia. In case of New Zealand, on the other hand, one-way causality runs from education expenditure to economic growth, health expenditure to education expenditure, economic growth to health expenditure, and education expenditure to budget deficit. Social welfare expenditures also Granger cause economic growth. Our findings suggest that social expenditures promoted growth in Australia and New Zealand. The fast developing economies such as Singapore and Malaysia, which aim to achieve the developed country status by 2020 and usually do not allocate sizeable portion of their budget for social welfare, should adopt more ‘generous’ social policies for the sake of a balanced development.

The Australian growth miracle: an evolutionary macroeconomic explanation

An evolutionary macroeconomic approach is applied to explain economic growth in Australia from 1901 to 2008. Support is found for the hypothesis that there were two distinct developmental phases: before and after World War II. The evidence suggests that, in each phase, growth followed an innovation diffusion trajectory made possible by a growing capital stock. In the first phase, capital equipment seems to have augmented labour while, in the second, it reduced labour inputs, replaced by cheap fossil fuel inputs. This allowed significant transfers of labour into an expanding service sector. Strong economies of scale were operative in both phases, with labour hour inputs dominating in the first phase and fossil fuel consumption in the second. The results indicate that the Australian economy currently has very strong growth potential over the coming decade, although its heavy reliance on fossil fuels is viewed as a threat in the medium term.

‘Dog Days’ Full Employment without Depreciation: Can It Be Done?

‘Dog Days’ Full Employment without Depreciation: Can It Be Done?

Internet usage, electricity consumption and economic growth in Australia: A time series evidence

This study estimates the short- and long-run effects of the Internet usage and economic growth on electricity consumption using annual time series macro data for Australia for the period 1985–2012. ARDL bounds test for cointegration and Granger causality test for causal link are applied. Results from ARDL estimates indicate that the Internet use and economic growth stimulate electricity consumption in Australia. Internet usage and economic growth have no significant short-run relationship with electricity consumption. Multivariate Granger causality test confirms unidirectional causal link running from Internet usage to economic growth and electricity consumption. The findings are robust across different econometric specifications. The findings imply that Australia is yet to achieve electricity efficiency gains from ICT expansion and that it may pursue energy conservation policy without any adverse effect on its economy. Australia needs to promote its existing carbon capture and storage facilities, significantly boost investment in the renewable energy sector, in particular, in solar energy and build nuclear power plants for electricity generation to reduce CO2 emissions. Also promoting green IT and IT for green might be potential means to curb environmental damage from Internet usage. A coordination between ICT policy, energy policy and growth policy is also recommended.

Financial Development, International Trade, and Economic Growth in Australia: New Evidence From Multivariate Framework Analysis

This study investigates the relationship between financial development, international trade and economic growth for Australia over the period of 1965 to 2010. The autoregressive distributed lag (ARDL) bounds testing approach to cointegration is applied to examine the long-run relationship among the series, whereas stationarity properties of the variables are tested by applying two structural break tests. Results confirm the long-run relationship among the variables. Financial development, international trade, and capital appear as the drivers of economic growth in short and long runs. The feedback effect exists between international trade and economic growth. Financial development Granger causes economic growth validating supply-side hypothesis.