Australia Economics

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The Australian economy has, for a long time, been firmly in place, including a highly educated workforce, a strong population growth rate and a strong institutional framework: the provisions of the law; regulatory validity and effective surveillance of parts of the economy include ensuring the soundness of the financial system; promote careful management of monetary and financial issues. The Australian government has made concrete plans for the long-term development of the economy: including promoting the development of Labor Productivity and Labor Supply

- Increase in Labor Productivity

- Commit to spend $ 1.1 billion on national and scientific initiatives: accelerate the development of technology for the future.

- The government has concluded negotiations on extending the technology agreement

- Increase in Labor Supply:

- The government providing employment packages for young people: this policy package will increase employment to population ratio

- Commitment to child-care packages: This will ensure the maintenance and promotion of birth rates

- The government spends $ 1.5 billion over four years start from 2017-2018 to establish the Skilling Australian Fund to help improve the skills of Australian workers. (G20 Germany 2017, 2017)

Labor market analysis

Unemployment rate of Australia over the last 10 years ( 2006- 2016)

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Unemployment rate measures the percentages of a nation's unemployed workforce. Includes people over 16 who have unsuccessfully sought jobs or who have been laid off in the past 4 weeks and are still actively looking for a job. There are three different types of unemployment:

- Frictional unemployment appears when there is a lack of information between employers and employees, preventing them from recognizing each other. It is often a part of the job search process and growth when there are high unemployment benefits.

- Structural unemployment occurs when there is the emergence of new technology, changes in the market led to the skills of the workforce is no longer appropriate, become obsolete.

- Cyclical unemployment occurs when there is an economic downturn and is the result of the natural cyclicality of the economy.

Each type of unemployment requires the government to take different appropriate actions to address.

The unemployment rate of Australia graph above shows that over the last ten years Australia's unemployment rate arrange between 4 percent and 6.5 percent. Particularly in the period from 2006 to 2008, the rate remained at a low level of 4 percent to 4.5 percent, followed by the impact of the global financial crisis, the unemployment rate in 2009 soared to nearly 6 percent and since then the unemployment rate has always been between 5 percent and 6.5 percent. Between 2007 and 2009, the outbreak of economic development in the Asian region, more specifically China, positively influenced Australia's economic development. Promote a boom in the exploitation of mining industry, providing a great source of revenue and creating more employment opportunities for the workforce. That factor has made the actual rate of unemployment in this stage very low. After the 2009 Global Financial Crisis, although Australia has not fallen into recession, the unemployment rate has gone up under the GFC and has not returned to a stable level like before the GFC. Much of Australia's unemployment is frictional unemployment. To tackle unemployment, the government has improved the efficiency of the Australian service system, and Australian employment services are being restructured to make it easier for people looking for work. Focus more on the principles of mutual obligation. Since 2014 the biggest problem that the Australian economy is facing is youth unemployment and underemployment and the government has not taken much action to solve this problem.

Price level analysis

The inflation rate of Australia during the last decade (2006-2016)

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Inflation estimates the rising price of goods and services over time. Inflation will lead to increased costs in living and simplifying the value of the country's currency, means that with each currency unit, consumers will buy less goods and services than before. When inflation occurs, the Creditors will suffer a loss and the Debtors will benefit. Inflation occurs when there is an imbalance between supply and demand, a change in the cost of production and distribution, or the impact of a tax increase on the product.

From the Inflation rate of Australia over the last ten years graph above, we can see that Australia's annual inflation rate has remained low, fluctuating in the range of 1 percent to 3 percent. Particularly in 2009, there was a spike due to the influence of Global Financial Crisis. The Australian government has set its main economic objective of maintaining low inflation (ensuring currency stability). The Reserve Bank of Australia has defined this as a desirable situation where slower and more moderate inflation has risen only in the range of 2-3% per annum throughout the business cycle. To maintain its key low-inflation target, the Australian government has implemented two policies:

- Demand aggregated policies are applied to control demand.

- Contractionary monetary policy loosened, with high interest rates to return excess spending. Discourage the consumption ( C) and investment spending ( I ), therefore will reduce Aggregate Demand (AD).

- Contractionary budgetary policy reduce government spending and raise taxes. This led to weaker spending demand as a result of reduced personal spending (C), reduced investment (I) and government spending (G), unsold stocks started to rise and demand for inflation halted.

- Aggregate supply policies can be applied to control cost inflation.

- Reduce the protection of tariffs to cut costs in production. Lower tax reductions will encourage companies to change their structure, improve efficiency and reduce costs in the production process. In addition, the cost of importing materials and equipment is also becoming cheaper, allowing businesses to profit from low prices.

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