Australia and Indonesia - a Comparative Study

Topics: Economic development, Human Development Index, Economics Pages: 9 (1727 words) Published: October 19, 2012
Comparative Study Australia and Indonesia


Alexander Vuong EC1101 – Sheaffe

Table of contents

Table of contents2
Appendix A – Economic Growth6
Table A1 (World Bank Group)6
Table A2 (CIA Factbook)6
Figure A1 (CIA Factbook)6
Appendix B – Economic Development7
Human Development Index (HDI)(HDR 2011)7
Table B1 (with indicators for HDI)7
Figure B1 (HDR 2011)7
Table B2 (World Bank Group)8
Figure B2 (World Bank Group)8
Table B3 (World Bank Group)8
Table B4 (World Bank Group)8
Appendix C – Economic role played by government9
Table C1 (World Bank)9
Health Profile (HP)(HDR 2011)9
Table C29
Figure C19

Compare and contrast the Australian and Indonesian economies in terms of economic growth, economic development and the role played by the government.

As Australia’s closest geographical neighbour, Indonesia and Australia have contrasting economies in regards to a number of different indicators. Economic growth, the increases in real GDP of an economy over a period of years, is an indicator which determines the size of an economy[1]. Along with economic development, these factors decide the classification of an economy either as an advanced economy, or a developing economy. Economic development is changes in an economy which result in a change in economic growth and human development[2]. The final indicator which is used to distinguish between the two economies is the economic role played by the government. This includes government expenditure as well as the impact that political decisions have on the economy. Despite receiving a milder downturn as a result of the GFC than Australia, Indonesia is characterized by these three indicators as a developing economy whereas Australia is an advanced economy on all facets of its growth and development.

Economic growth is a useful indicator in the comparison of Australia’s and Indonesia’s economies. Measured in GDP, this statistic determines the size of a country’s economy[3]. With reference to table A1, Australia’s GDP ($US) in 2011 reached $US1.5 trillion[4] making Australia the 13th largest economy in the world. Despite a 0.8%4 decrease in the average rate of GDP growth from 2010 to 2011, Australia recovered strongly from the Global Financial Crisis (GFC) and is classified as an industrialized and developed economy. In contrast, Indonesia’s GDP ($US) in 2011 peaked at around $US0.8 trillion3 ranking Indonesia as 18th in terms of economic size.

Compared to Australia, Indonesia’s economic size in relation to their population is characteristic of a developing economy. However, Indonesia’s average annual rate of GDP growth remained strong during and after the GFC as seen in Fig. A14. This is because the Indonesian government used a substantial US$6.2b fiscal package consisting of tax cuts and infrastructure investments to increase domestic demand. Being the largest market economy in South East Asia, Indonesia has sustained a high rate of economic growth and has seen developments in their standard of living. These traits illustrate that Indonesia will soon become a Newly Industrialized Economy (NIE) [5] .

Economic development provides a significant insight when contrasting the Australian and Indonesian economy. The Human Development Index (HDI) measured Australia as 2nd highest in the world in terms of “human development” in 2011. As evident in Fig. B1[6], Australia measured in at 0.93 with an outstanding GNI PPP per capita of $US 38,600 in 20115. This is because Australia has exceptional community and welfare services, levels of sanitation and a provision of law and order. In comparison, Indonesia’s HDI in 2011 was recorded as 0.625, with a ranking of 108 out of 169 countries. However, from 1980 – 2011, Indonesia’s HDI rose from 0.39 to 0.62 which illustrates the tremendous development of the country’s living standard4.

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