A good starting point is to look at the various dimensions of Economic Growth.
CAUSES
1. Aggregate Demand (AD)
AD = C + I + G + (X-M)
2. Aggregate Supply (AS)
Technological change, labour productivity, capital productivity, etc.
A decrease in productivity weakens AS and thus, weakens EG.
An increase in productivity improves AS and thus, improves EG.
3. Macroeconomic policies
Monetary policy contributes to changes in consumption and investment (which are components of AD) and thus, impacting EG via the transmission mechanism.
Fiscal policy contributes to changes in government expenditure (a component of AD) and thus, impacting EG. Also, items from the Budget can affect consumption (e.g. fiscal stimulus in 2009 contributed to consumption) and investment.
4. Microeconomic policies
Microeconomic reforms contribute to an increase in AS.
Recent Years
2008-09: GFC
2010-2011: Recovery from GFC and the peak of the Mining Boom
2012-2015: Slow down of the Mining sector
Example 1: End of the Mining Boom?
- Falling commodity prices and falling demand from China. Affecting net exports (X-M) and thus, weakening AD/growth. This also reduces mining investment.
Example 2: Mildly Contractionary Stance of Fiscal Policy
- The government's contractionary Budgetary stance reflects its desire to 'return to surplus'. A contractionary stance has implications for economic growth.
Example 3: Monetary Loosening
- In response to the current state of the Australian economy, the RBA has pursued expansionary monetary policy.
