According to "Australia in the Global Economy", economic growth is defined as a sustained increase in a country's productive capacity over time. This is commonly measured by the percentage increase in real gross domestic product (GDP). Economic growth is measured using a particular equation: Real GDP (current year) - Real GDP (previous year) x 100 Real GDP (previous year) 1 Economic growth = Until the global financial crisis, Australia had maintained a relatively stable level of economic growth which was around 3.5%. Although it has not experienced high growth, Australia has been one of the rare economies (other than China) to have gone through a period of consistent growth, with growth ranging between 2% and 5% between 1994 and 2007. This large level of steady growth has been largely influenced by rising commodity prices, which has had a huge impact on Australian exports as Australia is predominantly an exporter of mineral materials, particularly coal, iron ore and gold. The global financial crisis hit the Australian economy at a slower time than the rest of the world, largely due to government policies aimed at reducing its impact. Economic growth during the global financial crisis collapsed, with GDP growth falling from 3.7% in 2007/8 to 1% in 2008/2009. This collapse in economic growth has been linked to rising unemployment rates, which we will discuss later in the report. The global financial crisis forced the government to use the entire surplus and more than that accumulated during the Howard years (which was recorded at $21 billion at the end of the 2007/8 financial year and -$30 billion by the end of the 2008/9 financial year); however, this use of funds has been very effective. While many have been skeptical about how the government spent its stimulus package, (first injection… half the document… at that point Australia had an unemployment rate of 4.3%. The unemployment rate Australian increased to 5.6% at the end of 2009, with prospects of higher unemployment rates. This has required expansionary economic policies to increase aggregate demand levels and increase GDP growth. There are numerous causes of unemployment in the economy Some of these causes are:• Level of economic growth • Position of macroeconomic policies • Constraints on economic growth • Rising participation rates • Structural change • Technological change • Productivity • Inadequate levels of training and investment • Rapid increase in the cost of work and • Inflexibility in the labor market Works cited by the Australian Bureau of Statistics http://www.abs.gov.au/ausstats/[email protected]/mf/6202.0http://www.smh.com.au/opinion/politics/rudd-should-cash-in-on-the-economy-20100327-r3yr.html