Unit 3 Economics AOS2 Economic Growth Goal

Hello. Hello everyone, and welcome to the first of what will hopefully be five videos about the goal of strong and sustainable economic growth. I'm mainly doing these so my classes can re go over some things that they've forgotten them from Area Stage 2, but also for anyone else who thinks this might be helpful to them in the near future. So in this first video, we're literally just going to briefly go over what the goal of strong sustainable economic growth is, how it impacts on the other two domestic economic goals, and a little bit of how it will then impact on living standards. So first up, the government's goal for strong sustainable economic growth is to achieve the highest growth rate possible, consistent with strong employment growth, but without running into unacceptable inflationary, external or environmental pressures. And this is usually at a rate of about 3 to 3.5% GDP growth per year. So those two points together become the full mark definition for strong sustainable economic growth. But I'm going to highlight to you these really key points that are key to getting the full marks on a question about strong sustainable economic growth. It is the unacceptable inflationary, external or environmental pressures as well as that 3 to 3.5% GDP growth per year. I have a lot of issues with my students where they'll say they'll get the first half of the definition right, they'll get this whole top area right, and they'll say this is about 3 to 3.5%. And it's like, what, 3 to 4, 3.5% of what? And so it's really, really important that you are really specific and outline that GDP growth per year. It sounds, when you look at the other goals like inflation, you're saying 2 to 3% on average over time with strong sustainable economic growth, it is at 3 to 3.5% GDP growth per year. And it's not just that. That takes into account whether we're successful or not. The government also takes into account international growth rates when analyzing the acceptability of our growth rates. That's probably going to become very, very important this year. It hasn't really been that important more recently, but you're gonna see all around the world this year, based on the pandemic, growth rates are probably going to go very, very low, but they're going to be acceptable because they're going to be similar in comparison to other countries. So for the fact that the reason our economic growth has been going okay, it hasn't been within the goal, but it's been not too bad recently and was doing very well before that was because of China's strong growth and now China's growth has dropped significantly and this can negatively impact us a lot in terms of our growth. So at the bottom here we've got the most current up to date measurement which is 2.2%. But we're likely to get the first quarter figures coming out soon because that's still the December 19th figures. We are through a quarter of the year. These statistics get updated quarterly. So we're likely to get the newest statistic very soon. So if you're watching this and it's like sometime in May or it's later in the year, that statistics probably wrong, try and get the newer one. But at the moment it's 2.2% and it's likely to change soon. It'll be interesting to see how it changes. Based on the panic buying in March, it might actually creep up a little bit. But it's likely that in the incoming future it's likely to go down. So economic growth, we have this target because it's the rate of growth that exists that helps us achieve the other objectives. So if economic growth was less than 3% annually, unemployment would soon start to rise. Because if we're not growing at that rate, businesses see that they don't need to produce that much more and to protect their profit margins, they're going to lay off workers and that leads to growing poverty. They've got less equality and income distribution, which is an old goal but still important, that there's going to be less income available and lower living standards overall. If people have less income, their material living standards are going to be worse and then that's likely going to lead onto lower non material living standards. If they're unemployed, they might have worse mental health. They might not have as good living standards at all. They might not be able to afford their home, they might not be able to afford the food they need to get by. However, if rates of economic growth were consistently larger than 5% per annum, then the pressures created would make it hard for the government to achieve other objectives like low inflation. The reason we have this 3 to 3.5% is because it's the highest rate we can grow sustainably, which means that the most we can grow, the most we can increase our production before we run into widespread shortages that will lead to demand inflation. So it's really important that we don't grow larger than that for too long because we'll start to burn through our resources and lead to more long term issues that mean it won't be sustainable. Prices will increase at a way that really negatively impacts the material and non material living standards of the population of Australia. And so that leads us into this key term of sustainability. It's strong and sustainable economic growth, not just strong economic growth. So sustainability in context is underpinned by three important considerations. So growth cannot be so high that it causes inflation to rise to unacceptable levels above the government goal. 3 to 3.5% can't result in external pressures on the economy, so it can't create an excessive current account deficit. So that would be an example of if we borrowed a obscene amount of money so we could grow at a rate faster than that, that would cause way more problems in the future when we have to repay that foreign debt. And also that it doesn't lead to an overuse of our nation's natural resources like we are currently trying to deal with the issues that earlier generations burned through our country's resources that aren't non renewable and we're not going to be able to use them. There's like certain resources we have that we only have maybe 20, 30 years worth of supply left and then after that we're going to have to find different things to use. And so this sustainable level of growth now is developed in a way that we are going to not burn through those too quickly where that would cause us long term issues with production. All right, so that is it for this first video about the strong sustainable economic growth. I hope this was useful for you. Just about what the goal is, the definition of the goal, how it then the importance of achieving it, what it does by achieving it, and the issues if we either go above or below it. In the next video that we're going to make, we're going to talk about the measurements of economic growth so how and why we use gdp, how we calculate GDP and the limitations of gross domestic product as a measure of economic growth. So as always, if this was useful to you, that is great. But if you have any questions at all, feel free to leave me a comment below. Send me a message, send me an email. I'll make sure my email address is available on my profile. Other than that, I hope you have an excellent day. Goodbye.