Australia’s Money Supply vs. GDP

In Money Supply on March 24, 2011 by CQCA

The above chart shows Australia’s nominal GDP divided by that year’s broad money (blue), M3 (red), and M1 (green).

From this chart we can see that Australia’s broad money and M3 went from a two-to-one ratio to about a one-to-one ratio with GDP. Its M1 measure went from an eight-to-one ratio to about a five-to-one ratio with GDP.

The GDP numbers are nominal, unadjusted rates, meaning that GDP growth over these times has not kept up with monetary expansion. This should indicate that Australia’s GDP has actually been shrinking for the last twenty years.

One Response to “Australia’s Money Supply vs. GDP”

  1. Very interesting!
    Can I reference this chart, and can you provide the sources of the data used to construct the chart.

    The decline of Money supply to GDP is worrying, as its occurring in all developed nations. Yet there was a growing liquidity glut before the GFC, and another re-ocurring post GFC (Deutsche Bank report 2010).

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