Analyse the similarities and differences between Australia’s economic performance with Indonesia. PDF

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Analyse the similarities and differences between Australia’s economic performance with Indonesia....

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Analyse the similarities and differences between Australia’s economic performance with Indonesia. Australia and Indonesia are situated in the Asia-Pacific region providing insightful comparisons into their economic performances. Indonesia holds economic, political, cultural and strategic importance to Australia as it is one of the closest and fastest developing countries in Asia (Riley 2021, p. 44). An economic system is how governments organise and distribute resources, goods and services across a region – a response to the four economic questions (CFI 2021). Both are classified as mixed market economies denoting private ownership of resources and substantial government intervention (Riley 2021, p. 42). However, Australia classifies as an advanced economy and Indonesia as an emerging economy with lower levels of economic growth and quality of life. Through critical analysis of Australia and Indonesia, the link between employment, distribution of income, the role of the government in environmental sustainability and other areas, assist in highlighting similarities, differences and factors influencing economic performance. Economic Growth and Quality of Life Economic growth refers to changes in a country’s output of goods and services over certain periods, usually represented as an upswing in the economic cycle and is measured by Gross Domestic Product. This growth correlates towards the standards of living and quality of life of the country’s citizens. In terms of nominal GDP, Australia measured at “1.3t USD” in 2020 whereas Indonesia has a GDP of “1.16t USD” in 2021 (IMF 2021). Correspondingly, considering demography and Purchasing Power Parity (PPP) which compares the purchasing power of a countries’ currencies then Australia would also tower over Indonesia with “50,845 USD per capita”, on the contrary Indonesia measures at “13,259 USD per capita” (IMF 2021). Indonesia’s low GDP per capita suggests difficulty in supplying their inhabitants with necessities such as food, water, and shelter. Economic activity during the COVID-19 pandemic has considerably decreased for both countries because of border closures, lockdowns, and coronavirus safety practices. Comparison between Australia and Indonesia’s economic growth (refer to figure 1) reveals Indonesia’s resistance to coronavirus effects only experiencing a “1.5% GDP decrease in 2020” while Australia’s economy was dramatically curbed with a “6.7% decrease” because Australia is highly trade and tourist oriented. (IMF 2021).

A country’s prosperity reflects education levels, majorly contributing to the quality of life of an individual. Australia averages “12.7 years of schooling” however; Indonesia averages “8.2 years of schooling in 2020” (UNDP 2020). A knowledgeable society with sufficient education stimulates higher rates of economic growth and helps governments alleviate poverty, suggested through the GDP per capita of both countries. Specialised workforces are key determinants for business and economic 1�

growth because a nation’s productivity significantly increases as skilled workers can perform tasks efficiently. Australia’s Human Development Index which is an average measure of human development (HDI) is “0.944 ranking 8th worldwide” whereas Indonesia’s HDI value is “0.718 ranking 107th” further illustrating the notion of education’s contribution to an increased quality of life (UNDP 2020). Therefore, the interconnection of economic growth and quality of life appraises the need for skilled employment impacting economic performance.

GDP Growth

Years

Figure 1 (IMF 2021) 2020)

Employment and Distribution of Income Employment, a factor of production which is a crucial component in economic prosperity as it lays foundations of the distribution of income amongst a population. Increased employee earnings lead to higher rates of consumer spending benefitting business operations and overall economic growth. Australia and Indonesia’s number of employable people who are working or actively seeking work as a percentage of working population (age 15-65) are relatively similar. Australia has a participation rate of “66.1%” in contrast with Indonesia’s “67.8% in 2021” (CEIC 2021; ABS 2021). Despite Australia’s progressively aging population seen in figure 2, its labour force remains close to Indonesia’s. In 2020, unemployment rates in Australia appeared to be influenced by the coronavirus pandemic, reaching “6.6%” – an all-time low (ABS 2021). On the other hand, Indonesia once again unfazed by the pandemic recorded an unemployment rate of “4.84%”, considerably less than Australia. President Joko Widodo of Indonesia reportedly has been “focusing more on economic stability than public health” suggesting the odd numbers Indonesia was presenting (The Conversation 2021). Employees are attributed to different values of worth, they are generally paid based on their level of qualification, skill, productivity, and work hours. This links together with the distribution of income 2�

which is the equality in which income is dealt out among members of a society. If everyone earns the same amount of money, then income distribution is perfect, typically however, a society’s income distribution lies in the middle between unequal and equal. It can measured through the Gini Coefficient, the higher the number the greater income inequality. Income inequality is greater in Indonesia which has a Gini Coefficient of “0.390 in 2018” compared to Australia’s Gini Coefficient of “0.344 in 2014” (World Bank 2020). It is clear that distribution of income is more equal in Australia due to progressive taxation and social welfare payments. The higher the income the more tax et. (R al we nds, a D per 20). Austra

staina and I ble. G nabili Figure 2 (Population Pyramid 2020)

syste Figure 3 (Population Pyramid 2020)

essential resources and services. In Australia, health care is provided through the Medicare health care scheme since 1984 (AGDP 2021). Its three major parts are medical services, public hospitals and medicines - most is financed if not all. In 2018, there were “693 public hospitals and 657 private hospitals in Australia” with “24% of private hospitals funded” (AIHW 2021). On the other hand, “in 2019, there were 2,813 hospitals in Indonesia, “63.5%” are run by private organisations (The Jakarta Post 2021).” These statistics suggest the lack of Indonesia’s government assistance in health care as they spend “3% of their GDP” in contrast to Australia’s “13.9%” towards health care (World Bank 2020). As previously mentioned, education is severely lacking in Indonesia struggling to offer egalitarian and inclusive high-quality education to its citizens. Under the Commonwealth Constitution, Australian governments are responsible for determining curricula and funding government and higher education institutions while providing supplementary funding for schools and VET – education accounts for “5.3% of GDP in Australia” whilst “3.6% GDP for Indonesia in 2018” (ABS 2021; HDR 2020). The government plays a pivotal role in the distribution and provision of social welfare. The UN defines social welfare as “activities organized to help individuals meet their basic needs and improve 3�

their welfare” (UN 2021). The Australian Government provides payments to eligible citizens, ranging from Age Pension to JobSeeker Payments. Currently, the initiative of JobKeeper was introduced to combat coronavirus, assisting in stabilising employment. Social security and welfare represent “33.9% of the Australian Government’s expenses in 2020” (APH 2021). Indonesia’s social protection developed drastically in response to the Asian Crisis (2008) yet social assistance programs do not address all challenges as many live under the poverty line as stated beforehand. Indonesia’s below average social welfare is a product of “26.2% GDP” allocation and lack of government proactiveness (World Bank 2020). Lastly, governments contribute to environmental sustainability through policy enforcement. A country’s environmental sustainability refers to maintaining the environment for future needs – reflecting economic performance as the environment provides resources and acts as a sink for waste. Poor environmental quality may affect economic growth and wellbeing, decreasing the production and quality of life of individuals (OECD 2020). Indonesia’s rapid industrialisation and large population led to deterioration of the land and deforestation stemming from over exportation of paper, timber, and oil (Riley 2021, p. 50). However, Indonesia has reduced rates of deforestation, declining from 2015 to 2018. The data reported “440,000 ha in 2018, slightly lower than the 2017 number of 480,000 ha” (WRI 2020). Indonesia’s government intervention through moratorium of deforestation has been criticised as mere ‘propaganda’ but nonetheless there has been a decrease in deforestation rates (refer to figure 4) (Mongabay 2021). Conversely, Australia’s environment has been negatively impacted in recent years due to extensive bushfires, especially the 2019-20 bushfire – the Black Summer. This disastrous event resulted in “19m ha of land burnt”, “474 deaths”, nearly 3 billion animal deaths and costed an estimated “483m USD” (WWF 2021). The absence of government assistance in the start was criticised as, “Scott Morrison and his government have been accused of downplaying the severity of the fires, prioritising the country’s coal industry”. As a result of the large coal fired electricity industry, carbon dioxide emissions in 2014 were “361.3m tonnes” whereas Indonesia, despite differences in size and population produced “369.9m tonnes” (Earth 2020; World Bank 2020). Generally, role of governments were more apparent and effective in Australia as healthcare, education, and social welfare statistically outperformed Indonesia but Indonesia’s environmental sustainability was superior, hence highlighting their respective economic performances.

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Figure 4 (GFW 2020) In summary, the two differing countries of Australia and Indonesia offer insights into factors influencing economic performance. Both countries depend on each other, particularly in trade and education due to geographical proximity. The interconnection of economic growth and quality of life; distribution of income and employment; government’s role in environmental sustainability and other aspects reveal which economy subsides over the other. As a summation of the evidence above, Australia’s economy prevails in comparison to Indonesia mainly due to Australia’s substantially greater quality of life and government intervention.

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