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The Australian growth miracle: an evolutionary macroeconomic explanation

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  • John Foster

Abstract

An evolutionary macroeconomic approach is applied to explain economic growth in Australia from 1901 to 2008. Support is found for the hypothesis that there were two distinct developmental phases: before and after World War II. The evidence suggests that, in each phase, growth followed an innovation diffusion trajectory made possible by a growing capital stock. In the first phase, capital equipment seems to have augmented labour while, in the second, it reduced labour inputs, replaced by cheap fossil fuel inputs. This allowed significant transfers of labour into an expanding service sector. Strong economies of scale were operative in both phases, with labour hour inputs dominating in the first phase and fossil fuel consumption in the second. The results indicate that the Australian economy currently has very strong growth potential over the coming decade, although its heavy reliance on fossil fuels is viewed as a threat in the medium term.

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  • John Foster, 2016. "The Australian growth miracle: an evolutionary macroeconomic explanation," Cambridge Journal of Economics, Oxford University Press, vol. 40(3), pages 871-894.
    • Handle: RePEc:oup:cambje:v:40:y:2016:i:3:p:871-894.
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    File URL: http://hdl.handle.net/10.1093/cje/bev027
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    1. Robert U. Ayres & Benjamin Warr, 2009. "The Economic Growth Engine," Books, Edward Elgar Publishing, number 13324.
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    12. Carlota Perez, 2002. "Technological Revolutions and Financial Capital," Books, Edward Elgar Publishing, number 2640.
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    Cited by:

    1. Doré, Natalia I. & Teixeira, Aurora A.C., 2023. "The role of human capital, structural change, and institutional quality on Brazil's economic growth over the last two hundred years (1822–2019)," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 1-12.
    2. Foster, John, 2021. "In search of a suitable heuristic for evolutionary economics: from generalized Darwinism to economic self-organisation," MPRA Paper 106146, University Library of Munich, Germany.
    3. John Foster, 2017. "Prior Commitment and Uncertainty in Complex Economic Systems: Reinstating History in the Core of Economic Analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(4), pages 392-418, September.

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