Economic growth involves an increase in the volume of goods and services that an economy can produce of a period of time, and is measured as a percentage increase in the value of goods and services produced in a country in one year. There are both positive and negative effects that come out of economic growth, mainly in relation to living standards, unemployment, inflation, external stability, income distribution and the environment. Recently Australia’s economic growth performance has been promising, considerably better than most countries in this unstable time in global affairs.

In the late 1990’s the RBA had successfully maintained a sustainable rate of economic growth. Their target was between 3-5 % in which they achieved. This was mainly due to their responsible and carefully planned monetary policy that the RBA carried out over these years that has prevented large fluctuations in the Business cycle. Though the economy and hence, economic growth has experienced a considerable downturn. This is due to a continuing weakness in the international economy. Continuing meaning that thou

Unemployment is also affected by economic growth. The more the ability for firms to produce a commodity the more jobs are being created. Therefore at times of stable economic growth more able and willing people will be employed in the workforce thus, lowering the unemployment rate.

CAD, inflation and other negative effects that arise from economic growth is the reason there is a limit to the desirable level of growth.

A bi product of economic growth is consumer spending. As with wage increases comes a higher disposable income. This in effect creates a bigger problem of the CAD because imports are what the extra income tends to be spent on. Therefore faster economic growth causes a decrease in external stability because of the greater CAD. This is why economic growth has to occur at a sustainable level. The CAD, along with inflation acts as a speed limit on economic growth.

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