Market structure of telecommunication industry in Australia

Assessment

Table of Contents
PART 1 - TRADE WAR BETWEEN CHINA & THE US ............................................................1
1.1 Effects of US's import tariffs for Chinese leather handbags on US consumer and producer
surplus.....................................................................................................................................1
1.2 Impact of import tariff on price of US produced cars that rely on steel and market quantity
of cars.....................................................................................................................................3
REFERENCES................................................................................................................................7
PART 2 - MERGER OF VODAFONE AND TPG TELECOM ...................................................9
2.1 Market structure and characteristics of telecommunication industry in Australia...........9
2.2 An economic analysis on ACCC's concerns, with rationale behind decision of Australia
for rejection of proposed merger of Vodafone and TPG Telecom.......................................10
2.3 Recommendations for type of market structure for telecommunication industry in
Australia...............................................................................................................................11
REFERENCES..............................................................................................................................13
PART 3: LABOUR ELECTION PROMISE – MINIMUM WAGE RATE.................................15
3.1 Economic theories and concepts for increasing the minimum wage rate......................15
3.2 Impact of significant increase in minimum wage rate on Australian labour market......15
3.3 Illustration on how significant increase in minimum wage rate on demand, supply, price
and quantity for a normal good in Australian economy.......................................................18
REFERENCES..............................................................................................................................20
.......................................................................................................................................................21

PART 1 - TRADE WAR BETWEEN CHINA & THE US
1.1 Effects of US's import tariffs for Chinese leather handbags on US consumer and producer
surplus
A trade war is considered as the major factor that diminishes or lead economy of a nation
to recession period. It mainly happens when any country retaliates others due to raise in import
tariffs or impose some more restrictions to oppose their imports (Han, 2018). Hereby, tariff can
be defined as a tax or duty which is imposed on goods that are imported into a country. So, at
global level, it majorly affects the consumers and organisations, in terms of hike in existing
price. In context with US – China Trade war, it is highly pushing the world economy where, the
longer it goes on will result in damaging the international trade (Stolper, 2017). In order to
protect domestic companies, in January 2018, The US President Donald Trump has put heavy
excise duties for imposition of tariffs against Chinese unfair tactics for building the high trade
surplus. It includes the planned levy tariffs of 10% on more than $300 billion of Chinese imports.
After such restrictions, Trump has felt that it is majorly impact on economy and job security of
citizens of US (Moon, 2018). In apparel market, like targeting on leather handbags that made in
China, it adversely affects the demanded and supplied quantity of domestic market.
1

From the given figure, it has been analysed that due to uneven tax burdens on certain
commodities like leather handbags, has distorted the investment decisions. It has resulted in
decreasing the economic growth including lower GDP, employment and wages in long run. Due
to trade barriers, quantities of goods especially in apparel market has been much reduced in US
market, that adversely effect the consumers and business both negatively. Hereby, effects on
consumers can be seen by reduction in quantity of demand because they have to more for
purchasing goods from apparel market, that are majorly made in China. Under the proposed tariff
rate i.e. 25% US consumers will pay more i.e. over $7 billion, which is just double that they have
paid ($3billion) for purchasing Chinese products (Impact of Trade and Tariffs on US, 2019).
Hike in price may stark for leather handbags or other apparel items, with more complex supply
chains that is – citizens will bear the burnt of increased or multiple sets of tariffs. While in
context with businesses, although tariffs relives them short-term protection to domestic industries
from shielding competition, but when consumers pay more on goods like leather handbags then
they spend less on others (Irwin, 2017). It results in propped up to the major disadvantages for
domestic companies in terms of less efficiency of resource allocation, that results in slow down
2
Illustration 1: Higher Average Rates apply to Leather Handbags and other products

the economic growth. It has led to reduce employment, lower income as well as less economic
output also. This would can be estimated through given economic impact of tariffs majorly on
$150 billion in Chinese imports -
(Source:Tax Foundation taxes and growth model, March 2018)
In context with supplied quantity of leather handbags, it has been analysed that there have
been further tariffs planned for Europe with a value of over $20 (USHSLA) only for leather
products, because of a dispute (Dixon, 2017). The USHSLA (United States Hide, Skin and
Leather Association) have raised this concerns over respective potential tariff, including its
impacts on the leather, hides and skins industry, by claiming that US exports more than 95% of
total domestic production to EU and other nations, that are shipped to key markets. Leather
handbag imports in 2018, were valued at near about $917 million (How Trump Tariffs Are
Affecting the Footwear and Apparel Sectors, 2019). But after enactment of trade restrictions or
tariff rate, the effects of it on nature of supply chain has ultimately affect US organisations that
retail foreign goods and upon US leather handbag imports by using US-based materials.
1.2 Impact of import tariff on price of US produced cars that rely on steel and market quantity of
cars
According to the article given by Nick Carey and Arunima Banerjee (2018), it has been
evaluated that due to imposed tariff rates on import materials, especially of Chinese one,
organisations that deal in automobile sectors have faced high loss of profitability on produced
cars. They are also facing the year of declining sales after increased tariff and interest rates. In
order to protect US industry, when President Donald Trump announced certain plans against
hefty tariffs on imports of materials like steel, aluminium and more, it legs down the shares of
auto makers in given sector (Morris, 2017). In this regard, as per principles of economy, when
3
Illustration 2: Impact of Trade and Tariff on US

government put plans on trade policies or increases the tariff rates, then prices of respective
commodities will definitely rise. Therefore, with announcement of 10% on aluminium and 25%
on steel imports that rocketed by the stock market, now a toll has been taken on industrial
companies, auto makers and aircraft manufacturers. In 2016, US auto industry has hit a record of
high sales on motor vehicles i.e. near about 17.23 million, but after announcement of tariff rates,
2% sales are dropped in 2018 (Auto-makers among sectors reeling over U.S. steel, aluminium
tariffs, 2018). Consumers also have ended up to pay more to purchase desired cars and trucks
because to recover increased amount of manufacturing the cars, companies have raised the price
of same as shown in below graph-
Under this conditions, shares of three major auto makers that are - Ford Motor Co. was
let down by near about 3.0%, General Motors with approx. 3.9% and Fiat Chrysler was 2.8%.
According to John Toohey (head of equities in San Antonio at USAA Asset management
company) due to declining auto sales, the tariff would be considered as hard to pass onto
customers as shown below. According to this table, average price of vehicles increases with
decrease in sales, where magnitude of adverse effects is determined by using potential Section
232 tariffs on steel and aluminium metals that are imported (U.S. Consumer & Economic
Impacts of U.S. Automotive Trade Policies, 2019).
4
Illustration 3: U.S. Consumer Price Indices for All Items-Except Food & Energy, and New
Vehicles, 1994-2018