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Production Costs in Australia Assignment

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Added on  2021-06-17

Production Costs in Australia Assignment

   Added on 2021-06-17

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Running Head: Production Costs in AustraliaCosts of Production in the Australian Car Manufacturing IndustryBy (Name)(Tutor)(University)(Date)
Production Costs in Australia Assignment_1
Production Costs in Australia2Costs of Production in the Australian Car Manufacturing IndustryIntroductionThe newspaper article “Collapse of Australian car manufacturing will harm R&D in other sectors: study” was written on The Conversation by Abbas Valadkhani in October 2016. The article is concerned with the high production costs that is experienced in Australia. The costshave gone up such that businesses are operating at losses and are not even able to break even. Compared to some other economies, the Australian costs are very high. Specifically, this article notes that car manufacturing industry is becoming unsustainable due to high costs. This is an important industry in Australia and thus its fall will result in great losses. The suppliers are hurt by the high costs and thus may view this paper to be of utmost importance to them. The other group that is mainly affected by the fall of the Australian car manufacturing industry are the employees employed directly on this industry or those employed on value addition sectors. This article notes that more than million people are employed in this sector; they need to be aware of what the future of this industry holds for them. This paper will tell them whether to look for a new job or to have hopes that this industry won’t fall. Policy makers need to determine the possible losses that will occur if this industry fails to operate in the near future.Economic AnalysisCost of production determines the level of economic growth in an economy. When the production cost rises, it results in cost push inflation where the final output is sold at higher prices. Fig: Impacts of high production costs Price levelAS1AS0PiP*Aggregate DemandQiQ*Real GDP
Production Costs in Australia Assignment_2
Production Costs in Australia3The high costs of production makes it difficult for the Australian car manufactures to produce the equilibrium level of output Q* and sell it at price P*. As these producers cut their level of production, they shift their Aggregate supply curve to the left lowering real GDP from Q* to Qi (Agarwal, 2017). The new Aggregate supply curve is a higher level and thus the price also shift from equilibrium P* to Pi. This rise in price is what is referred to as cost-push inflation (Pettinger, 2016). According to this newspaper, this economy is about to change structurally which will result in an increase in structural unemployment. This is a type of unemployment resulting from an industry shifting its operations to overseas where there are low production costs (Pijl, 2015). When operations are shifted to overseas economies, the shifting company doesnot shift with its initial employees as this would create an additional costs. Furthermore, labor costs in Australia are higher than for other nations and thus would be cheaper to employ labor from the host economy.Fig: Australian labor costsSource: Tradingeconomics.com (2018)The labor costs in Australia has been high for the last 5 years, the costs fell in the first quarter of 2017 but went up as the year came to an end. Creation of jobs is an important role for the government. According to this article, 256 vacuums will be created after the downfall of the car manufacturing companies. There are more than million persons employed in this industry which makes approximately 8.5% of the total workforce. Creation of jobs is not an easy task as currently Australia is at a high unemployment rate. Thus, the closure of these companies will
Production Costs in Australia Assignment_3

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