QUESTION ONE Australia’s economy is currently described as a “multi-speed” economy. Critically discuss this. [HINT: In your discussion include what has caused this multi-speed economy; any advantages...

Answer to Question1:
The Australian economy is 13
th
largest economy in the world in terms of nominal GDP with
nominal GDP at around 1.6 trillion U.S dollar. The economy although initially started with its
focus on the production of primary products but is cu
ently dominated by service sector with
contribution in domestic income by more than 50%. The economy was fastest growing nation
among developed nations in 2011 and had been one of the fastest growing country among OECD
members in 1990s. For at least next two years, the economy is expected to maintain the high
growth and expected to perform well in all sectors. Although the share of service sector in the
total GDP is about 68%, the economic growth of Australian economy is significantly driven by
its mining, manufacturing and agricultural sector. Australia is resource abundant nation and has
huge reserves of uranium, iron ore, natural gas, copper, renewable natural resources and coals.
This richness in terms of resources has allowed Australian economy to have rapid and robust
development in its manufacturing and agricultural industries. Also being a resource abundant
nation, Australia operates as a supplier of resources in the world and therefore is immune to any
economic turmoil which occurs globally. The performance of Australian business especially
SMEs have been quite good and optimistic since the end of 2009 financial crisis.
If we consider the overall growth patterns (across different sectors or industry)
as followed/adopted by Australian economy, we find that the economy is multi-speed i.e.
Different sectors
egions are growing at different speeds. Some says that Australian economy is
three-speed economy while some says it is 2-speed economy but the fact accepted by all is that it
is a multispeed economy. The divergent economic conditions across regions are the main reason
ehind this difference in speed. Australia although a single nation but with its huge diversity
across regions (in terms of culture, geography and political stature), it becomes difficult to
elieve that it is part of the same nation.
The mining sector has been the most prominent and highly growth
intensive sector of the economy ever since investment entered this sector due to its large resource
ase. The sector has been employing or pulling more resources than others. On the other hand if
we consider other sectors (non-mining sector) of the economy, the productivity has been
moderating and the growth rate is quite low. One of the reasons for this below average
performance in non-mining sector is the slowdown in world economy which shows the
vulnerability of Australian economy to global crisis. In addition, the fact that labor productivity
is different across region can also be the reason behind having different growth rates across
sectors.
It is not very advantageous to have multi-speed economy. Difference in growth is
not good for the long term growth of an economy. It leads to concentration of wealth in the
hands of few and leads to increase in income inequality across sectors by widening the income
gap between different sectors. The equity principle requires equity in terms of resource allocation
ut the growth differential will allow booming sector to exploit more resources than other sectors
and thereby violating the equity principle. The government can play a crucial role here. It needs
to focus more on sectors which are lagging behind so that they can be encouraged to grow at par
with dominant sector. Mining sector is the...