Describe the main phases of the business cycle and discuss recent economic growth patterns in Australia - Essay Example

At the end, there is a depiction of the movement of the leading index and coincident index, which are two composite indices of prime economic indicators. These indices are particularly designed to predict business cycle and growth rate cycle patterns. The basic features of business cycles in Australia over the past few decades and the compatibility of the recent economic growth with the prevailing business cycle phase are analyzed on the basis of these indicators and the NBER methodology. The analysis of business cycles in Australia shows strong incidence of asymmetry as compared to the growth rate cycles.

The study of business cycles is crucial for exploring the economic activities and its trends of a given nation or territory. In Economics, “business cycle” is the up and down movements of the economy which occurs at irregular intervals. The major indicators of business cycles or tools of measuring the business cycles include the important macroeconomic variables and essentially, fluctuations in GDP. A business cycle is an irregular, unpredictable, or non-repetitive phenomenon. A business cycle is recognized as a succession of four phases.

The first phase is Contraction, which implies a slowdown in the pace of economic activity. Next comes, Trough, which is the lower point of turn of a business cycle. This is a point from where the phase of downturn or contraction moves towards expansion or upturn. The third phase is that of Expansion, a speedup in the pace of economic activity; and finally comes peak, the upper turning of a business cycle. The research on the cyclical instability, contraction and expansion of economic activities or outputs is an important aspect of study in economics.

Particularly, this area of research got emphasis since the seminal works of Burns and Mitchell (1946) at National Bureau of Economic