Economics Report: Analysis of Australian Labour Market and Policies

This report provides a comprehensive analysis of the Australian economy, focusing on several key aspects. It begins by critically evaluating the use of the unemployment rate as the sole indicator of labour market performance, highlighting the limitations and suggesting alternative indicators such as labour market churn, job openings, and participation rates. The report then examines the Australian government's plan to increase national infrastructure spending, discussing the long-run effects on productivity using a general equilibrium model. The analysis extends to the impact of federal budget decisions, specifically personal tax cuts for low and middle-income earners, utilizing an income-expenditure framework to assess the effects on output and consumption. Furthermore, the report discusses the wealth generated by booming housing and stock markets, offering insights into monetary policy and inflation targeting. The report concludes with a summary of the findings and provides references to support the analysis.

ECONOMICS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION 1..................................................................................................................................1
Problem of using the unemployment rate as the sole indicator to infer the performance of the
labour market...............................................................................................................................1
Useful labour market indicators can be used to supplement assessing health of the labour
market..........................................................................................................................................1
QUESTION 2..................................................................................................................................3
Australian Government has promised to increase national infrastructure spending in 2018 as
per federal budget........................................................................................................................3
Long-run effect on level of productivity in Australia..................................................................5
General equilibrium model which explains long run effects of national infrastructure plan on
labour, capital market and products.............................................................................................6
Exposition of Australian economy with consideration of full employment................................6
QUESTION 3..................................................................................................................................9
Federal budget affecting personal tax cut for low and middle-income standards.......................9
Income- Expenditure framework in tax cut raise in level of output and economic consumption
.....................................................................................................................................................9
QUESTION 4................................................................................................................................11
Wealth generated by booming houses and stock market in Australia.......................................11
Advising RBA governor of inflation target rate and monetary policy intervention..................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Economic concerns are the main area of government in making decision as well as strategies
for fruitful development. In the present report there will be analysis made on Australian
economic environment. Study will highlight all key issues and obstacles which have been faced
bay professionals for generating fruitful income. Moreover, there will be demonstration of the
planning made by federal government in budget of 2018-2019. Along with this, there will be
discussion over monetary system as well as inflation control plan made by government for the
fruitful development of the economy.
QUESTION 1
Problem of using the unemployment rate as the sole indicator to infer the performance of the
labour market
Condition of labour market is very essential to understand economic development. For
this, unemployment rate is taken as a metric for slack in respective scenario, but there are many
problems associated. This aspect does not measure health or strength of labour market. This
concept focuses on dividing individuals on the basis of those who are not employed, wants to
work and also applying for jobs (Chubb & Watermeyer, 2017. Pp.42(12). 2360-2372). Some of
these people are defined as unemployed. There are numerous people who are not employed due
to some reasons which are not included in statistical data that is provided by government. Apart
from that, employees who are completely discouraged or even marginally attached to labour
market are not counted in official unemployment rate. Government statistics are does not
provide complete in-depth analysis of circumstances which are occurring in this scenario.
Unemployment can be used for measuring disequilibrium of labour market. As provides insight
to the aspect of mismatch between demand of employer for various types of labours and
willingness of employees and ability of supplying that specific amount of labour.
Useful labour market indicators can be used to supplement assessing health of the labour market
Apart from unemployment rate, there are other factors which can be used for assessing
health of labour market. Some of them can be labour market churn, job leavings, job openings as
well as gross employment gain numbers.
Churn focuses on all facts which are providing net gain in jobs. Around 5 million of
individuals leave and starts are new job every month. Information related to opening of jobs,
hires as well as separations that can make up labour market churn. These data in government
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reports are known to be Jolts. Changes in number of employment affects net ratio of working
people in a nation. Huge number of churn indicates healthier labour market. As it provides closer
insight for measuring number of available jobs at a specific time period.
Exact number of employment can directly show strength of labour market. When the
demand for labour will increase, more employees would get employed. A better economy
recruits more individual. Despite of checking changes in employment rate, one must focus on
fluctuation of employment rates. With this indicator on can assess health of labour market.
Participation of labour force facilitate in measuring percentage number of individuals
who are eligible or either officially unemployed or working. Changes in number of workers
participation rate, serves a perception of customers regarding strength of labour market. When it
will grow strong, ideal high salary offering jobs would be available and individuals will create
interest for joining labour force and raising the participation rate accordingly (Penrose, 2017. Pp.
pp. 33-48). Low rate of participation depicts weakness of labour market. Part time workers, who
contributes for part time in an economy is considered to be important aspect. When number of
these labours gets exceeded, labour market starts becoming weak.
Job vacancies can be regarded as a source of conveying data regarding prospect of
employment and contributes in assessing conditions of labour market. The ratio of vacancies to
number of unemployed individuals usually increases when market of workers is considered as
tight. High ratio depicts that number of jobs available are more as compared to people who are
in search for. According to the provided graph, in Australia ratio of vacancy is high but below
pre-crisis level. It is considered to be in consistent as compared to spare capacity which is
indicated through unemployment rate. High vacancy rates also indicate greater mismatches of
skills or frictions. These aspects lead to maximise ratio of vacancy to unemployed due to
shortage of labour which have appropriate skills. It can also change due to composition of
economy.
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QUESTION 2
Australian Government has promised to increase national infrastructure spending in 2018 as per
federal budget
It has been estimated by federal government in Australia that they will raise the national
infrastructure spending in 2018. Development of infrastructure facilities are the main concerns in
an economy which requires to higher funds and various resources. In respect with the same,
government has planned 10 years of infrastructure strategies in relation with reducing
congestion, increment in security as well as generating employment opportunities.
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Illustration 1: Vacancy to unemployed ratio
(Source: Indicators of Labour Market Conditions in Advanced Economies, 2018)

Figure 1 10 years plan of government for infrastructure development
(Source: Building Australia, 2018)
In respect with this, government has considered various major projects which will be
operate in various states of Australia. Million of dollars will be spend in various development
activities and due to this there will be requirement of balancing economy on a favourable scale.
Highest amount of fund will be required in New South Wales for developing western Sydney
airport, West Connex project in Sydney and Wester Sydney infrastructural plan (Federal Budget
2018-2019 Analysis, 2018). Along with this Victoria will also require funds of ring road and
freeway upgradations.
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Long-run effect on level of productivity in Australia
Efforts of Australian government and strategic plans to improve the infrastructural
facilities will help in rising efficiency in nation. It will have direct impact ion rising the GDP
level of the nation in the required year (Roobavannan & et.al., 2017. Pp. 136. 178-188).
Domestic production of a nation only depends on efficiency of the country in producing the
commodities as well as less dependency of them on foreign countries. However, as per the past
records it can be said that Australia has rise in per capital income as well as productivity which
ascertains favourable gains in economy.
Figure 2 Historical growth of production and income in Australia
(Source: Australia Productivity Performance and Real Incomes, 2018)
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General equilibrium model which explains long run effects of national infrastructure plan on
labour, capital market and products
Impacts of infrastructural activities in Australia which will help in generating employment
opportunities for citizens. It has been analysed and assumed by economists that there will be
creation of jobs in all segmentation like, framing, tourism, commercial activities etc. There are 8
million Australians which are making major efforts in producing wealth to national economy.
Labour market in Australia has reflected boom in productivity and capital markets (Fleischmann,
Daniel & Welters, 2017. pp. 10(2). 119-138). Rise in GDP rates have reduced the inflation in
country as well as created huge employment opportunities which has been result in favourable
per capita income in a period.
On the other side, the growth in various segmentation such as health and care, agricultural
activities and tourism department has been raised which have resulted in positive rise of wealth.
As per the federal budgets it has been estimated that, in the coming period there will be rise in
the $220 million regional communities in building better region funds. Reduction in tax rates
will also have positive impacts in rising income capacity and economic stability in nation.
Exposition of Australian economy with consideration of full employment
Expectations of government in bringing full employment in Australia. Thus, rise in the
number of infrastructural projects will be beneficial in uplifting employment opportunities
(Braithwaite, Reinhart & Job, 2018. pp. 55-69). It will positively result in rising productivity,
currency value as well as efficiency in natation which in turn increase employment ratio.
Downward sloping labour demand curve
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Figure 3 Downward sloping demand curve
(Source: The Price Elasticity of Demand, 2018)
Vertical Labour Supply Curve
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Figure 4 Labour market in Australia
(Source: Labour Supply and Labour Demand in Australia, 2018)
Perfectly Inelastic Savings Curve
Figure 5 Perfectly inelastic demand
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(Source: Inelastic demand in labour market, 2018)
QUESTION 3
Federal budget affecting personal tax cut for low and middle-income standards
It has been analysed here that, Australia has the rapid growth in economy which has have
leads country in attaining the higher level of growth. Thus, since last 27 years there has been
increment in economic stability as well as enhancing the level of jobs in a period. After the
impacts of Global financial crisis there has been drastic changes seen in the economy. GFC has
brought instability in all financial sector of Australia (Ellem & Tonts, 2018. Pp. 49(3). 383-395).
It has resulted in rising the inflation, unemployment rates as well as brings reduction in GDP
ratios.
Moreover, in relation with Tax reliefs which have been presented by Australian
government that results in encouraging rewards for government. Estimation of federal
departments has brought various plans or strategies among citizens such as:
 There has been development of 7 years of personal income plan for the lower, simple and
fairer taxes.
 Relief has been facilitated to the middle and low-income earners in Australia
 Redemptions of allowances will be awarded to the families living under pressures
 Simplification of personal tax system which will be around 37% of tax bracket.
 Relief will be awarded to the citizens as there will not be any rise in Medicare levy.
However, these are the reliefs and exemptions which were being awarded to local citizens
that has to be managed and monitored in a manner for generating higher revenue gains.
Remedies will be awarded to the low and middle-income earners which in turn impacts
positively in national economy (Chubb & Watermeyer, 2017. Pp. 42(12). 2360-2372). The
growth of production, per capita income and wealth will rise the living standard of citizens. To
improve economic standard of population which will required to have effective plans and
strategies that will result in qualitative increment.
Income- Expenditure framework in tax cut raise in level of output and economic consumption
Estimation and strategic planning of federal government in Australia has been aimed at
developing favourable economic growth. In accordance with the operational practices that have
been performed by small medium sized businesses which requires to have better policies and
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planning for growth and development. Motive behind reducing taxes is for developing the wealth
of such industries. Government has made various strategies such as:
 There will be lower taxes payable in the Australian Business with respect to make rise in
productivity.
 Rise in the instant asset write-off around $20000.
 There will be exemption awarded to transportation industries which will be around $75
billion.
 It has been planned by economists for developing smarter and stronger economic
development (Roobavannan & et.al., 2017. Pp. 136. 178-188).
 There will be support to the international competitiveness as well as invitation of foreign
companies for making investment in business.
 Improving funds in agriculture and defence industries to bring strength in national
defence system as well as economy.
Additionally, there has been various plans and operational determination have been made by
government for raising service standard in economy. Beneficial plans will help in increasing the
Medicare benefits (Fleischmann, Daniel & Welters, 2017.Pp. 10(2). 119-138). Moreover,
government has have planned to make investment in improving the medical facilities such as
funding in National Disability Insurance Schemes which will be fruitful in bringing employment
opportunities to the disable people. Similarly, as per bringing securities or defence system in
Australia which will be based on various planning and operational development.
 Improvement in the security system of Airport which will bring effective control on
terror activities.
 Executing the environment safety by considering the biosecurity. Therefore, which will
result in improving agriculture and tourism sector
 Enhancing national security as per better architecture.
 There will be continuation in operation sovereign border for encounter of combat against
smugglers.
QUESTION 4
Wealth generated by booming houses and stock market in Australia
The highest contribution in Australian economy has been payable by the booming house
and capital markets. They have opened up doors for the foreign investors which respect to make
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