Comparing Economies Research Report

Australia and Japan

Rayan El Taher
Rayan El Taher

2021
Table of Contents
Introduction 3
Type and size of the economy and economic growth 3
Employment and Unemployment 4
Quality of Life 4
Environmental Quality 5
The role of government – health care / education / welfare payment 6
Conclusion 7
Bibliography 7

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Introduction
This is a comparative report that outlines the differences in detail between the Australian and Japanese
economies while explaining the similarities and differences throughout an array of aspects. These
aspects include the type and size of the economy and economic growth, employment and
unemployment, quality of life, environmental quality and the role of government including health care /
education / welfare payment. The Australia economy is a substantially developed mixed market
economy which involves government regulation. The economy of Japan is an extremely advanced free-
market economy. Japan being the dominant economy of the two, boasting a significantly higher GDP, is
the world's second largest developed economy.

Type and size of the economy and economic growth

As aforementioned, Australia is a mixed market economy with a nominal GDP of $1.397 (A$1.797)
trillion compared to Japan’s nominal GDP of $4.910 (A$6.316) trillion according to data gathered in
2020 by World Bank. A mixed market economy combines private and state enterprise while a free-
market economy like Japan’s, regulates production and labour through supply and demand with little or
no government intervention. Australia’s economy is expected to be the 14th largest in the world while
Japan is far ahead at 3rd largest in the world. When it comes to GDP growth, Australia grew at an
extraordinarily higher percentage than Japan at 2.161% (refer to Figure 1) in comparison to 0.654%
(refer to Figure 1.1) in 2019. This growth difference has been prominent for the most part of 7-8 years.
Japan’s slow growth has been contributed to by a sharp drop of exports in the past few years. Another
difference is that Australia hasn’t been in a recession since 1990 while Japan’s last recession was in
2015.

Figure 1: Economic Growth in Japan Figure 1.1: Economic Growth in Australia

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Employment and Unemployment

When it comes to comparing Australia and Japan’s employment and unemployment levels, the gap is
surprisingly immense with Australia having an unemployment rate of 6.2% and Japan having nearly a
third of that at around 2.3%. Japan also has a
mind-blowingly higher labour force with
67.24 million people employed while
Australia having only around 20% of that
relative to its population difference at only
12.9 million people. With reference to the
statistics from 2020 in Figure 1.2, 3.36% of
the Australia labour force work in agriculture,
24.07% work in industry and 72.57% work in
services. As for employment by sector in Figure 1.2: Employment by Industry in Australia
Japan, 3.9% work in agriculture, 26.2% work
in industry and 69.8% work in services. An important topic to discuss when it comes to employment and
unemployment is the distribution of income in Australia and Japan. In Australia, the average yearly
income for a full-time worker averaged $89,122 in the second quarter of 2020. On the other hand, a full-
time worker in Japan would on average earn $61,155 a year. According to statistics gathered in 2020,
the highest 20% of households who earn $4,166 a week having six times the income of the lowest 20%
who earn $753 a week in Australia. This considerable gap creates major income inequality giving the
impression that some people may struggle to support themselves and their families while others won’t at
all. Recently, Japan’s middle class has gradually started to disappear, and poverty has increased to
15.7%, close to the 17% of Australia. The Gini coefficient states that Australia has a Gini coefficient of
0.32 while Japan has a very close 0.34. The Gini coefficient scale states that everybody is equal at 0
while at 1, only a single person is receiving the entire country’s income. This creates a clear picture that
Japan’s income distribution isn’t equal either or very good and is a reason for increasing poverty. Equal
income distribution would give the less wealthy a needed leg up, however unfortunately this isn’t the
case in either country’s economy.

Quality of Life
Australia and Japan have their own similarities and differences when it comes to their quality of life.
Quality of life is a measure of an
individual’s state when it comes to how
happy they are, their health, material
living conditions and other important
factors. A suitable way to measure this is
through HDI or Human Development
Index. HDI measures essential factors Figure 1.3: Australia’s HDI over the past 40 years
including life expectancy, education
and per capita income to provide a statistic on where a country would rank in terms of quality of life and
how this would affect the population. Australia has had a steady yet continuous surge in its HDI over the

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past approximate 30 years which has contributed to the impressive HDI of 0.944 putting Australia in 8 th
place in the world rank. Figure 1.3 gives an outline of Australia’s continuous HDI increase since 1980.
Meanwhile, Japan recorded a slightly less impressive HDI of 0.919, putting it 19 th place in the world
ranking. Between 1990 and 2019, Australia’s HDI has increased 8.4% from 0.871 to 0.944 while
Japan’s has increased 12.4% from 0.818 in 1990 to 0.919 in 2019. Surprisingly, Australia has a very
marginally lower life expectancy of 83.50 years compared to 84.67 years in Japan contrary to the HDI.
However, other factors such as income account to Australia’s higher HDI and this most prominently is
the difference in per capita income as discussed before. People living in Australia on average earn
around $27,000 more than people living in Japan which accounts to a better quality of life with more
piece of mind and financial stability. In terms of education, the average mean years of schooling in
Japan is 15.23 years, overtaking Australia’s seemingly minor 12.3 years. Overall, both countries have
very decent and close HDI ranks along with statistics which support them.

Environmental Quality
In the case of environmental quality and the output of carbon dioxide and waste, Australia and Japan
share a few similarities while mostly having differences. The main difference being that Japan produces
substantially more than Australia and exports in excess of $900 billions of goods compared to Australia
which exports less than a quarter of that at $195 billion. Australia produces 535.7 million tonnes of
carbon dioxide and more than 75.8 million
tonnes of waste every year. The reasoning
behind this staggering figure is that Australia is
the world's third-largest exporter of fossil
fuels, especially coal and produces more
carbon dioxide than nations in the Middle East
who are known for their exports. The severe
bushfires which occurred between the end of
2019 towards the beginning of 2020 also
contributed to this high number recorded last
year in 2020. On the other side of the
spectrum, Japan produces an astounding
Figure 1.4: World ranking by per capita emissions 1153.7 million tonnes of carbon dioxide and
42.7 million tonnes of waste every year. Figure
1.4 shows that Australia ranks third in the world for per capita emissions while Japan ranks 8 th. Per
capita emissions are a measure of greenhouse gases per person which allows countries to be fairly
ranked by incorporating their population numbers. With regard to waste production, luckily, over 50%
of waste produced in Australia and Japan is recycled. Japan is also the 3 rd manufacturing country in the
world, manufacturing much more than Australia especially when it comes to automotive, electronic
equipment and more. An obvious drawback of all this production and emissions is the impact on air
quality. According to world standards, Australia has very clean air while Japan’s is considered
moderately unsafe. In Australia, the air quality in most of 2019 met the WHO target at 8.00 µg/m³ while
Japan wasn’t far off at 11.36 µg/m³ which was higher than the WHO target however, still considered
good. Thus, Australia and Japan both have similarities including some of the lowest air pollution in the

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world, while differences being the majorly higher exports that Japan produce and differences in carbon
dioxide and waste output.

The role of government – health care / education / welfare payment

Both Australia and Japan undeniably have some of the best governments in the world and the reasoning
for this come from how they handle health care, education, welfare payments and overall spending or
expenditure. When governments spend
and emphasise on improving these
important factors, it allows for an array
of benefits in terms of the economy or
the welfare of the population and
reducing poverty and inequality. The
Australian Government has been
aiming to increase spending on
education (refer to figure 1.5) and has
been doing so for the past few years. In
2020-21, government spending on
education was approximately $38.264 Figure 1.5: Australian Government spending on education
million while Japan spent around
$65.099 million. This difference in spending is most likely due to the population difference where there
are nearly 4 times as many children in Japan compared to Australia. According to the Australian budget
2020-21, the total expenditure is roughly $507 billion making the expenditure on education and
schooling only 7.5% of that. Whereas Japan’s latest budget claims that expenditure is around $1.212
trillion and that going to education similarly is around 7.8%. Australia’s expenditure on health reached a
record $115.5 billion under their COVID-19 pandemic plan, which adds up to 5.83% of the total
expenditure. Similarly, Japan has also set a record in spending for the 2020-21 budget and has allocated
a decent amount towards their COVID-19 plan. Japan’s expenditure towards health was around $556.5
billion or 10.9% of their GDP. In regard to welfare, Australia’s spending is estimated to be $227.5
billion, representing 33.9% of the total expenditure while Japan is estimated to spend $421.8 billion.
Considering these statistics, it is clear that Australia spends much more than Japan on these important
factors. Even though Japan’s population is five times larger, spending is only double compared to
Australia when it comes to education and welfare, however the case is completely different in reference
to health where Japan allocates 5 times more than Australia.

Conclusion
In conclusion, it is undisputable throughout the extensive statistics, figures and measurements that
Australia and Japan hold many similarities and differences in their economies. These include the type
and size of these economies, levels of employment and unemployment, quality of life and HDI,
environmental quality and sustainability and their roles of government in reference to health care,
education and welfare.

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