Comparison of Australian and Indonesian Economy

The major points of contrast between the Australian and Indonesian economies are: GDP, GDP growth, inflation, unemployment and quality of life. In this essay I will also discuss the quality of the environment in each. There is also a large contrast between the land area and population of each nation.

The World Bank classifies Australia as a developed economy. It is a mixed market economy because the price mechanism works within the framework of government controls. 84% of the workforce is involved in service, 11% in manufacturing, and 10% in primary industry. In 2002, it was ranked 12th in the world in terms of per capita income. Indonesia is a developing economy. It relies heavily on primary industry and agriculture for domestic and international income, although, it is industrializing. 50% of the workforce is involved in agriculture, 35% is involved in manufacturing, and 15% is involved in services. In 2002 it was ranked 111th in the world in terms of per capita income.

Australia has a much larger surface area than Indonesia, and a much smaller population. Australia has a surface area of 7692 thousand sq km, whilst Indonesia has a surface area of 1905 thousand sq km. Australia’s population in 2004 was 20.2 million, whilst Indonesia in the same year was 223.8 million. It is important to note that because of Indonesia’s much higher population compared to Australia; it has a much lower GDP per capita, as GDP per capita is calculated as GDP/population.

In 2005, Indonesia’s GDP was US$280.9 billion; its GDP per capita was US$1237. In 2005, Australia’s GDP was US$692.4 billion; its GDP per capita was US$33629. This huge difference in GDP per capita is a result of the major difference in population size. From 2001-2002, Australia’s GDP increased by 3.5%. In the same time Indonesia’s GDP increased by 3.7%. This indicates that both economies are growing. Indonesia’s economy has been growing more than the Australian economy since 2000. According to the Australian Department of Foreign affairs and trade, the Australian economy has maintained growth at around 3% pa, whilst the Indonesian economy has been growing at 4.5-5% pa for the last 5 years. Its growth in 2005 was 5.7%.

From 1990-2002, the average inflation for Australia has been 2.3%. In Indonesia, however, it has been 14.0%. This major difference is due to economic and political instability in Indonesia over the past 10 years. In 1997, there was a currency crisis in Indonesia, and this, along with the political instability of President Suharto being replaced by Dr B. J. Habibie, led to the economy collapsing and going into recession. The currency crisis caused exchange rate depreciation, which cause the heightened inflation, shown in the figures at the beginning of this paragraph. Inflation caused many industries to collapse, creating high unemployment.

In 2002, Australia had an unemployment rate of 6.3%, in the same year; Indonesia had an unemployment rate of 20%. Indonesia’s unemployment rate is a result of the previously mentioned currency crisis and political instability of 1997. The unemployment in Indonesia has been rising since this time. As Indonesia’s unemployment has been increasing, Australia’s has been decreasing from 11.25% in 1992, to 5.1% in 2005. There is no great difference in the proportion of women inn the workforce. In 2002, Australia’s workforce was comprised of 45% women. In 2002, Indonesia’s workforce was comprised of 40% women.

Quality of life is measured by the World Bank on a Human Development Index. The Human Development Index (HDI) measure life expectancy, literacy and GDP per capita. In 2002, 177 nations were measured with this index. Out of the 177, Indonesia came 111th. This is due to the continuing effects of the fore mentioned currency crisis. Out of the 177, Australia came 3rd.

The Human Development Report that the results were published in showed stark contrasts in quality of life indicators between Australia and Indonesia. In Indonesia, the prevalence of Child Malnutrition from 1992-1998, has been 34%. In the same time, Australia’s prevalence has been 0%. Indonesia’s population’s access to sanitation in 2000 was 55%. Australia’s was 100%. The Indonesian life expectancy in 2002 was 66.6 years, while Australia’s was 79.1 years. This study shows that there are major differences in quality of life between Australia and Indonesia

The rapid industrialization of Indonesia’s economy and demographic pressure has led to significant deforestation in the nation and a decrease in the quality of the environment in general. From 1990-95, 10844 square km was forested on average each year. In comparison, Australia lost an average of 170 square km a year over the same time frame. This rapid deforestation has occurred because of the expansion of the paper and lumber exporting industries.

Because over 80% of Australia’s population lives in capital cities, Australia has very good environmental quality. Australia has a much higher GDP than Indonesia; however, Indonesia’s economy is growing at a faster rate than Australia. Indonesia has a very high unemployment rate, caused by Economic and Political instability 10 years ago. These economic and political problems also caused very high inflation. Indonesia’s quality of life is significantly worse than Australia’s, particularly in relation to sanitation. Indonesia’s is a newly industrializing economy. This has caused many environmental problems as Indonesia’s paper and lumber exporting companies rapidly forest the land.