Impacts of Underground Economy and Government Response in Australia

Project

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
What is underground economy and how it could hurt Australian economy along with response
of Australian federal government in it....................................................................................1
Australian federal government and RBA’s responses to the Covid-19 crisis along with
effectiveness of fiscal and monetary policy...........................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Covid-19 is infectious disease caused by corona virus. It has affected lives and health of
many people as well as economic condition of countries (Nishiura and et.al., 2020). This present
study is based on impacts of Covid-19 on Australia. It will discuss meaning and impacts of
underground or black economy on overall economy of Australia. Further, it will discuss response
of Australian federal government in reducing black economic condition; Lastly, this report will
show impacts of Covid-19 on economy of Australia and way by which Reserve Bank of
Australia, Australian federal government, fiscal and monetary policies responded in improving
economic condition.
MAIN BODY
What is underground economy and how it could hurt Australian economy along with response of
Australian federal government in it
Underground economy: In the context of this economy it can be said that it is the part of
country’s economic activity and all economic transactions which are being done in an illegal
manner. All economic transactions as well as activities which are being done either by unlawful
trading or transactions fail to comply with governmental reporting requirements (Huynh, 2020).
Some main examples by which economy underground economy develop include: sales of street
drugs and illegal prostitution. In this context it can also be said that it becomes difficult to
determine the size of underground economies as by nature it is not subject to governmental
oversight. It varies state to state and it is considered or known as: informal economy, black
market and shadow economy.
In the context of Australia, it can be said that in this tighter governmental regulation,
several businesses are manipulating size of the Australian economy by performing illegal
economic activities. The Australian bureau of statistics estimated underground economy
accounted for around 1.5% of Australia’ GDP in the year of 2012. Some activities by which this
economy is being generated in Australia include: Drugs selling, Identify fraud, underpayment of
GST, motor vehicle fraud, money laundering etc. It has both direct and indirect impact on local
people and Australian economy as there is a loss of taxation revenue as well as abuse of welfare
system. It affects those people who are not within the regulatory systems as it affects their
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workplace relations, leads to immigration, occupational health and safety and others.
Payments are made in costs often in such underground economic activities and in cash payments,
tax and costs are avoided. People who think that system is not fair and due to lack of their trust
and confidence it leads to underground economy (Braithwaite, 2020).
Impacts of underground economy on Australian economy: In this regards, it can be said that
underground economy or illegal economic activities are associated with unemployment. People
who are unemployed or claim to be unemployed are more likely to participate in such activities.
So, it can be said that changes in unemployment rate affects the size and the growth of the
underground economy in Australia. It is also found that number of people in Australia prefers to
remain unemployed and perform such activities (Black economy Measures in Australia. 2019).
One of the main impacts which it has on Australian economy is lack or revenues. This
underground economy is tax free in the nature which directly affects revenue of the country. Due
to lack of revenue, government is finding problems in generating fund and making use of that
fund for vulnerable people or for welfare of citizens. This economy or black market is not
counted in government statistics by which Australia underestimates its GDP. Workers are not
getting legal protection. It also exploits customers of general people as people do not have
receipts, warrantees and any proof. So, they become victims of crimes and exploited. So, overall
it can be said that it is affecting local innocent people and economy of the Australia (The Black
Economy and Its Impact,. 2016).
Role of Australian federal Government in responding underground economy: The
government has started to focus on this area and for that it implemented the treasury laws and
fair work amendments according to which it can seek for penalties for contravention of
workplace laws. In the year of 2016, Australian Government established the black or
underground economy taskforce in order to develop an innovative as well as forward looking
policy response to combat to underground economy in Australia. For responding to black
economy taskforce’s final report, Australian Government also announced a whole of
government package, whose main aim is to reduce this black economic activity and having
positive impacts on the overall economy of Australia and also helping vulnerable people by fund
generated by revenue and taxes (The whole of Government Black Economy Action Plan, 2016.).
Some series of announcements include: black economy standing taskforce, extension of taxable
payment reporting systems, new ATO enforcement against black economy etc. Its final report
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