China’s economic growth
The freefall of the global economy forced Chinese economic growth to fall to a low of 9.2%. The GDP growth had been steadily growing from 1999 to a high of 14.2% in 2007. The real GDP did not reduce due to the global financial crisis. The Gross Domestic Product did not reduce but the growth rate was reduced (Xiaochuan, 2009). The growth rate was reduced because of fallen exports and tax revenue. In February 2009, exports and imports were down 25.7% and 24.1% respectively on a year-on-year basis (Behravesh, 2009).
This forced the government to introduce an economic stimulus package forcing interest rates down to a low of 5.31%. During this period, inflation rates shot up in most countries. China recorded a high of 7.8% in 2008. Unemployment rates were not affected much due to the china crisis. However, there was a relative reduced to four percent in 2007 and 2008 increased to 4.3% in 2009. According to Behravesh (2009), more than 20 million migrant workers lost their jobs in 2008.
The data provided shows that Greece was one of the worst affected by the Global Financial Crisis. The real GDP increased steadily from 1999 to 2008, but from 2008 to 2010, it decreased due to the Global Financial Crisis. Per capita, real GDP showed steady from 1999 to 2007 and reduced from 2008 to 2010. The real GDP determined the real per capita GDP hence the similar behavior. The reduced real GDP resulted in a 12.7 percent public deficit in 2010 which had doubled from 2009 (Sklias & Galatsidas, 2010).
The growth rate of annual GDP had a similar trend as real GDP. There had been a fluctuating positive growth from 1999 to 2007. The rate turned negative in 2008 and further reduced in 2009 and 2010. The growth rate was at an all-time low of -3.52 in 2010. Although the unemployment rate was steady from 1999 to 2007, it was lowest during the Global financial crisis in 2008 and 2009. However, it hit an all-time high recording of 12.5% in 2010. Despite the serious financial crisis faced in Greece, the inflation rate remained steady and reduced in 2010. Due to reduced employment, exports, and imports, government earnings from taxes and revenue reduced significantly.
In 1999 and 2000, the contribution to GDP was 22.52% and 23.46% respectively; by 2010, the contribution of tax and revenues to the GDP was at 19.61%. Due to reduced tax, government expenditure had to be reduced while public dept increased (Sklias & Galatsidas, 2010).
The Global Financial Crisis did not have adverse effects on Australian compared to other developed economies (Kearns, 2009). From 1999 to 2010, real GDP showed a slow but steady increase which was duplicated in real per capita GDP. However, the last three years showed a very small increase, which is clearly shown by the growth rate which sunk to a low of 1.45% in 2009. The unemployment rate had been decreasing from 1999 to 2008, however, because of the global financial crisis; it increased from 4.2% to 5.6% in 2009 and slightly reduced to 5.2% in 2010. Interest rates have all along been higher in Australia than in other developed economies.
During the Global Financial Crisis, the rates went down in Australia. In 2009, it recorded a low of 6.02%. On the other hand, the inflation rates dropped slightly from the previous years. By 2010 the rate was at 0.09%. The percentage of government consumption of the GDP increased during the global financial crisis, while the percentage of taxes and revenue in the GDP maintained a steady percentage over the years. Although the current GDP of Australia increased steadily over the years, 1999 suffered a serious decrease due to the GFC.
Macroeconomic behavior of Australia and Greece
According to the aggregate expenditure diagrams provided, there is a great difference in the macroeconomic behaviors of Australia and Greece. Australia’s spending is steady and predictable (Horne, 1964). The diagram shows that government expenditure has been decreasing over the years until the global financial crisis started when spending increased significantly. The government cushioned investors from the effects of the crisis by bringing interest rates down. This meant government expenditure had to go up. Australia’s macroeconomic behavior is not entirely reliant on prevailing economic conditions. Taxes and revenues went down during the global financial crisis because the economy has a large asset issue backed securities.
Investors are protected from the negative effects of any financial crisis by the use of favorable terms of trade which has helped it to export its products to China. This helps to maintain its taxes and revenues even during times of crisis. Large stimulus packages are used to stabilize the economy when there is a looming crisis. From the diagram, government expenditure does not rely on its revenues. For a long time, the expenditure steadily reduced despite fluctuating revenues. This is different macroeconomic behavior from the Greek one.
The expenditure does not show any form of steadiness over some time. The diagram shows that both expenditure and revenue are not steady. Government draws its budget based on the prevailing conditions. Budget deficit occurred during the financial crisis when revenue reduced and the expenditure increased. Funding of expenditure directly relies on taxes and revenues which are dependent on prevailing economic conditions. When employment, export, and import go down, revenue is affected. As a result, the Greek economy encountered a serious deficit during the global financial crisis. Tight regulatory conditions are limiting traders from prospering (Nanto, 1999).
Behravesh, N 2009, Top-10 Economic Predictions for 2009. Web.
Horne, D 1964, The lucky country: Australia in the sixties. Penguin Books, Melbourne.
Kearns, J 2009, ‘The Australian Money Market in a Global Crisis‘, in 14th Melbourne Money and Finance Conference ‘Financial Globalization: Implications for Australian Financial Institutions and Markets’, Reserve Bank of Australia, Melbourne, pp. 15-27. Web.
Nanto, DK 1999, The Global Financial Crisis: Analysis and Policy Implications. CRS Report for Congress RL34742, Congressional Research Service, Washington.
Sklias, P & Galatsidas, G 2010, ‘The Political Economy of the Greek Crisis: Roots, Causes and Perspectives for Sustainable Development’, Middle Eastern Finance and Economics, no. 7, pp. 166-177. Web.
Xiaochuan, Z 2009, ‘Reform the International Monetary System’, BIS Review, vol. 41, pp. 1-3. Web.