Research summary - Assignment Example

The Australian Government makes unprecedented investment in the education sector; particular emphasis is laid on the improvement of the state of undergraduate education in the country and the technical training facilities. It makes investments in universities and other tertiary education channels with the aim of driving an overall comprehensive reform in the training sector in the economy and the post-compulsory education sector (Pritchett 367). This includes a two-fold step; short term injection of fund to the weak areas of the economy on one hand and on the other hand, building up on the strengths of the education sector in the economy.

At present the education sector of Australia is strong enough to boost up the economic potential of the economy. The government is making a realistic plan for the next decade in order to ensure that current activities to reform the country’s higher education system makes it sustainable in the future. A description of the relevant economic model There is considerable debate regarding the effect of public expenditure on growth (Basu and Bhattarai, “Does Government Spending on Education Promote Growth and Schooling Returns?”). According to some scholars, there is mixed effect of positive public expenditure on the growth of an economy in the long run (Pritchett 371).

Sylwester shows that in some countries the effect of government’s financial support on the contemporary higher education (under graduate studies and training) sector casts an impact on the growth of the economy depending on the level of education of the general population of the country (Sylwester 380). According to economic theory, growth is positively correlated to returns to higher education. Simultaneously, research shows that the higher the level of government education on education sector, the lower is the level of growth in the country compared to other countries with lower spending on education sector by government.

In other words the countries with higher rates of growth reflect lower public spending on education sector. Regression analysis on time series data shows, government spending on education has positive effect on economic growth for the richer countries, but, for the poorer countries it can potentially hurt growth (Blankeau, Simpson and Tomljanovich 396). Studies show that the relationship existing between government spending on education and economic growth is negative for the countries with low share of higher education, while, for countries with high share of education, this relationship is positive (Basu and Bhattarai, “Does Government Spending on Education Promote Growth and Schooling Returns?”). This phenomenon suggests that a non linear and potentially U shaped relationship might be present between growth and public spending on education (Blankeau, Simpson and Tomljanovich 397).

Australia is a developed nation and the per capita GDP in the country is US $ 43,300 (according to 2012 estimates) (“The World Fact book”). The level of growth in the economy shows a rising trend over the past two decades. Therefore, the level of