Strong and Sustainable Economic Growth

Meaning of Strong and Sustainable Economic Growth

Economic growth is defined as an increase in the level of national production of goods and services over a period of time (usually one year).
The rate of economic growth is measured by the annual percentage change in real Gross Domestic Product (GDP).
Real GDP measures the actual volume of goods and services produced, adjusted for the effects of inflation.

KEY TAKEAWAY: Economic growth is about increasing production, and we measure it using real GDP growth.

The goal of strong and sustainable economic growth is defined as the fastest rate of growth in national production that is consistent with achieving a low inflation rate and other government goals, such as:
- Environmental sustainability
- External stability (manageable current account deficit and foreign debt)
- Equitable income distribution

Strong economic growth generally refers to a rate of real GDP growth that is above the long-term average for Australia (around 3%).
A strong rate of growth is desirable because it leads to:
- Increased employment opportunities
- Higher average incomes and living standards
- Increased government revenue, which can be used to fund essential services (e.g., healthcare, education) and infrastructure.

Sustainable economic growth refers to a rate of economic growth that can be maintained over a long period without creating significant economic or environmental problems for future generations.
Sustainability considers the long-term implications of current growth rates on:
- Natural resources: Ensuring that resources are not depleted too quickly.
- The environment: Minimizing pollution and environmental degradation.
- Inflation: Avoiding excessive demand-pull inflation.
- External stability: Keeping the current account deficit and foreign debt at manageable levels.

EXAM TIP: Always define both “strong” and “sustainable” when answering questions about this goal.