Research Project: Inflation's Impact on Australian Industrial Sector

This research proposal examines the impact of inflation on the Australian industrial sector. It aims to establish a relationship between inflation and industrial development using secondary data from reliable sources, incorporating graphs, charts, and tables to enhance credibility. The study investigates the effects of inflation on employment, sales, and income across various sectors like agriculture, mining, and manufacturing. The research includes a problem statement, objectives, research questions, justification, conceptual framework, research hypothesis, and a detailed methodology involving data collection and analysis strategies. It addresses how inflation influences factors such as employment, sales, income, and profitability. The paper also explores the possible strategies to combat negative inflationary pressure. The project will use secondary data, including data from the Reserve Bank of Australia, Australian statistics, the Australian Bureau of Statistics, and other relevant government websites, along with reputed news articles and journals. The research will use analytical design and the derived outcomes are expected to be presented logically in association with theories.

Running head: Impact of Inflation on Australian Industrial Sector
Impact of Inflation on Australian Industrial Sector
Name of the Student
Name of the University
Author Note
Course ID:

1Impact of Inflation on Australian Industrial Sector
Abstract
The following research proposal aims to provide an outline of the study, which is on the
impact of inflation on Australian industrial sectors. The research objective is to provide
evidence of a relationship between inflation and industrial development. With the help of
secondary data from authentic and reliable sources, the research aims to prove the strong
correlation between the two major factors in the Australian economy. The data is expected to
be appropriately related to theories, empirical findings, and represent the entire report
logically. In addition to this, the paper expects to incorporate reliable graphs, charts and
tables to enhance credibility.

2Impact of Inflation on Australian Industrial Sector
Table of Contents
1. Introduction............................................................................................................................3
1.1. Problem Statement..........................................................................................................3
1.2. Objective and aim of the research...................................................................................6
1.3. Research Questions.........................................................................................................6
2. Justification and output of the project....................................................................................7
3. Conceptual Framework..........................................................................................................8
4. Research Hypothesis..............................................................................................................9
5. Research Methodology.........................................................................................................10
5.1. Method of collecting data..............................................................................................10
5.2. Data analysis strategy....................................................................................................11
5.3. Budget and ethical considerations.................................................................................11
6. Organisation of the study.....................................................................................................12
References................................................................................................................................13

3Impact of Inflation on Australian Industrial Sector
1. Introduction
For decades, Australia has been witnessing a stable and relatively low rate of
inflation. Since 1993, the targeted rate of inflation in Australia was set at 2.5 percent by the
Reserve Bank of Australia (Abs.gov.au, 2016). This low rate of inflation is an effect of the
reduction in the rate of exchange in the country. Apart from this, the historically high rate of
inflation instigated the government to reduce the inflation rate. As a result, the inflationary
shock and rapid economic expansion plan lead to a constant fall in the inflation rate. The
Australian inflation rate tends to affect the industrial sector of the country. The current rate of
inflation in Australia is about 1.9 percent (Tradingeconomics.com, 2020).
The agricultural industry and mining industry recorded stable rates of growth. On the
other hand, the manufacturing sector and property market are negatively affected by the
lower rate of inflation. Between 2016 to 2017, the manufacturing and mining sector recorded
a fall in employment, whereas the rate of employment in the agricultural sector increased
during the same year (Abs.gov.au, 2017). In contrast to this, the sales and income of service
increased in agriculture and mining. However, there is a fall in the sales and service income
for the manufacturing sector. Soon after the further fall in the inflation rate, the industry
dynamics changed in the year 2018. The agriculture sector experienced a fall in the growth
rate. On the other hand, the mining, construction and manufacturing sector fared well with a
stronger rate of growth.
All these factors and low-income growth are related to a lower rate of inflation.
Therefore, this paper will try to gather evidence for the exact effect of inflation over the
growth and fall of the industrial sector of Australia. The research will include a secondary
analysis of data from different sources.
1.1. Problem Statement

4Impact of Inflation on Australian Industrial Sector
Inflation tends to affect industries in various ways. Several researchers have found the
existence of a relation between inflation and different aspects of an industry. These aspects
include employment, sales, income, profit and many others. Therefore, not only the
Australian economy, several economies are facing issues with the relationship between
inflation and industrial factors. Over a few decades, the Australian economy is recording a
relatively low rate of inflation (Bis.org, 2020). In addition to this, the inflation rate is stable
and maintained in the country. Several types of research are considering the reason behind
this stable inflation rate is the economic expansion of Australia, along with influential
inflationary shocks. To be precise, industrialized or manufacturing economies are affected by
variation in the inflation rate. Thus, in the context of Australia, this can be implied that the
currency movements of the country, which in turn can affect the industrial sector of Australia,
have targeted the relatively low rate of inflation.
Figure 1: Inflation rate of Australia for ten years
(Source: Tradingeconomics.com, 2020)

5Impact of Inflation on Australian Industrial Sector
Figure 2: Rate of unemployment in Australia for over ten years
(Source: Tradingeconomics.com, 2020)
Figure 3: Industry growth in Australia
(Source: businessinsider.com.au, 2018)
The figure on inflation and unemployment rate indicates that with a fall in the
inflation rate, there is a fall in the unemployment rate in the country. This is also evident from
the strong growth faced by the manufacturing, construction and mining businesses of
Australia's economy. From 1993 to 2017, the targeted rate of inflation of the RBA was about

6Impact of Inflation on Australian Industrial Sector
2 percent. Later in the year 2018, the further fall in the inflation rate boosted the growth of
the service sector and industrial sector. However, the agricultural sector witnessed severe
downfall due to a fall in the profitability of the farmers. Therefore, the research aims to focus
on the various aspects of inflation and its impact on the Australian industrial sector.
1.2. Objective and aim of the research
The main objective of the concerned research is to evaluate the impact of the
Australian low inflation rate on the Australian industrial sector. Thus, the objective of the
study are:
 To determine the factors that affect the inflation rate in the country.
 To evaluate the relationship between Australian industrial development and various
economic factors, including the inflation rate.
 To analyze different ways to combat any negative effect of inflation in the economy
of Australia.
1.3. Research Questions
After evaluating the main area of focus for the study, the following research questions are
being developed, which includes:
 What are the different microeconomic and macroeconomic factors that affect the
inflation rate in Australia?
 What is the relationship between the low inflation rate and industrial business
development in the economy of Australia?
 What are the possible steps that can be taken to rectify the associated loopholes of a
low rate of inflation?

7Impact of Inflation on Australian Industrial Sector
The research study strictly concentrates on the effect of inflation on the development of
Australian industries. The variables of concern from the industrial point of view include
employment in different industries, sales and service returns or income, profitability and
return. Additionally, the paper will try to incorporate the possible strategies to combat
negative inflationary pressure.
2. Justification and output of the project
Several types of research have come out with the point that exchange rates, interest
rates and monetary supply affects inflation (Wulan & Nurfaiza, 2014). In other words, an
increase in government spending, hoarding of goods, a fall in tax rates and a rise in
international prices generates a substantial impact on inflation movements. Inflation implies
the rise in prices of goods and services produced in a country. These factors create as well as
ignites the inflation rate at the same time. Several research studies claim that inflation
generates an indirect effect on the growth and development of the business and industrial
sectors. Devaluation of currencies increases inflation and affects the budget of the households
(Shuaib, Augustine & Frank, 2015). This increase in expenditure reduces the real income of
individuals. Consequently, the growth of the economy is affected that generates a direct
impact on industrial growth and development. Apart from this, studies suggest that there is a
strong connection as well as the trade-off between price movements and financial stability.
This relation tends to generate a direct impact on industrial growth (Kim & Mehrotra, 2017).
Additionally, the United States has witnessed a positive correlation between stock
market trends and the inflation rate in the country (Jareño, Ferrer & Miroslavova, 2016).
Similar to this, researchers have found that inflationary shocks in Australia have affected the
mining, manufacturing and construction sectors of Australia. In contrast to this, the financial
and insurance sectors remained unaffected by the inflationary shocks in Australia (Knop &
Vespignani, 2014). There is a certain specific group of industries in the three sectors that are

8Impact of Inflation on Australian Industrial Sector
strongly affected by an increase in demand. These include mining, residential and
commercial construction and non-metallic industries. On the other hand, manufacturing
industries such as textiles clothing and other retailing industries remained unaffected by the
inflationary shock of Australia. In addition to this, studies have found that movements in the
exchange rate affect Australia’s low rate of inflation (Manalo, Perera & Rees, 2015). This
low rate of inflation is a crucial reason behind low growth in wages, which is affecting
domestic participation of labour force (Valadkhani, Babacan & Dabir-Alai, 2014). Thus,
evidence suggests that there can be both a direct as well as indirect impact of inflation over
the industrial sector of the Australian economy.
3. Conceptual Framework
Apart from searches showing evidence strong connection between commodity prices
and industrial growth, statistical data of the EAS (Economic Active Survey) indicates that
with a fall in the inflation rate, certain industrial sectors of Australia witnessed robust growth
(Abs.gov.au, 2017). From 2017 to 2018, the mining sector recorded a growth of 26 percent in
earnings and EBITDA. Similar to this, construction, wholesale trade and manufacturing
sector recorded a 9.8 percent, 24.5 percent and 10.8 percent growth in EBITDA respectively.
However, during the same period, the agricultural sector witnessed a severe fall by 12.9
percent in EBITDA (Abs.gov.au, 2018). Employment in mining, manufacturing and
construction sector increased rapidly. Contrary to this, the agricultural sector witnessed a shift
in employment numbers in the negative direction. Therefore, data can be related to proving
the significance of the hypothesis developed. These industry figures are listed in the table
below:

9Impact of Inflation on Australian Industrial Sector
Figure 4: Industry figures of Australia in 2017-2018
(Abs.gov.au, 2018)
4. Research Hypothesis
Based on the data collected and kinds of literature reviewed, the appropriate
hypothesis for the research can be stated as:
H1: Inflation rate has a significant impact on employment in the industrial sector of Australia
H2: Inflation rate has a significant impact on the EBITDA in the industrial sector of Australia
H3: Inflation rate has a significant impact on the sales and service income in the industrial
sector of Australia
Here, the independent variable is the inflation rate of Australia and the dependent
variables are EBITDA, Sales and service income and employment in the industrial sector of
Australia. This is done to observe the impact of inflation over the three dependent variables
of the research study.

10Impact of Inflation on Australian Industrial Sector
5. Research Methodology
A research methodology helps in the further development of a research study. As a
result, a research methodology consists of various philosophies and traditional theories.
Research philosophy consists of three different parts, which include positivism,
interpretivism and realism (Madsen, Berger & Phythian, 2014). In our research study, we
need to include, investigate and explain the outcomes in a logical as well as critical manner.
Thus, it is a kind of quantitative research with a portion of the description of relevant
theories. The research paper will be analytically designed (Gray, 2019). As the data will be
collected from secondary sources, theories will be related to the data obtained. The
authenticity of secondary sources is mandatory for any research study. Thus, data will be
collected from authentic cites and journal. The data for different industries will be analysed
quantitatively with the use of statistical tools. The relation between inflation data and various
parameters depicting industrial growth will be evaluated using statistical methods, wherever
necessary and required. The derived outcomes are expected to be presented logically in
association with theories.
5.1. Method of collecting data
The study will use secondary data, as it is irrelevant to use primary data in case study
approaches. The secondary data will be collected from authentic websites, where the
government provides data (Quinlan et al., 2019). This includes the Reserve Bank of
Australia, Australian statistics, the Australian Bureau of Statistics and other relevant
government websites. Apart from these websites, reputed news articles, journals, business
and economic reviews will be used in the research for the collection of secondary data.
Surveyors for study collects primary data, which in turn helps in the research of other people
and turn the data into secondary data. This kind of data saves research duration and generates

11Impact of Inflation on Australian Industrial Sector
appropriate outcomes for the research questions mentioned. The research questions of the
concerned study can be best evaluated by using secondary data from the websites of
government and the official websites of the industries. The entire logic depends on the
requirement as well as the availability of information. The reliability and availability of data
will determine the outcome of the questions asked.
5.2. Data analysis strategy
After gathering the secondary data, the outcomes will be analysed using statistical
formulas and methods. In order to analyse the relationship between inflation and
employment, sales and profit cross tabulation method or correlation can be used, all
depending on the requirement of the analysis (Schabenberger & Gotway, 2017). The factors
affecting the inflation rate can be demonstrated by using graphs, charts or tables from
statistical sources of RBA or Australian statistics. After estimating and generating outcomes,
possible recommendations can be provided using references from theories and previous
policies. In addition to this, the pictorial representation of data and relationships between
variables will enhance the quality of the assignment.
5.3. Budget and ethical considerations
The budget is always a limitation for conducting research studies. However,
secondary data collection is economical and does not require extra time. Thus, it can be both
cost and time-efficient for the researcher. The energy and time will be reduced using
secondary data. Apart from this, ethics and moral issues are of serious concern. The
researcher will cite the theories taken and mentioned and will completely avoid plagiarism.
Theories mentioned will be addressed and provided credit to avoid unethical measures.

12Impact of Inflation on Australian Industrial Sector
Table 1: Schedule for completing the project
Sections of the Project Duration (in days)
Research Proposal 6
Literature Review 10
Data Collection 10
Generating outcomes 5
Data Analysis 15
Presentation 16
Total number of days 62
6. Organisation of the study
The paper intends to analyse the impact of inflation over the industrial sector of the
Australian economy. In order to analyse the impact, researchers need to develop a
relationship between inflation and development of the industrial sector. The paper analyses
several types of research performed over the concerned topic of inflation and industries. It
develops theories from both the world and the Australian economy to develop a strong
hypothesis statement. The research objective tries to cover three crucial areas, which include
factors affecting inflation, the impact of inflation on Australian industries and
recommendations to control negative impacts. Concerning several kinds of literature and
evidence, the study develops three hypothesis statements by taking one independent variable
(inflation) and three dependent variables employment, sales and service income and
EBITDA. As a result, the study aims at using secondary data to perform a logical and
analytical study. This study will try to incorporate statistical techniques to review the
relationship and portray the outcomes using a pictorial representation of data. The research
tries to incorporate economic, ethical and moral considerations as well.

13Impact of Inflation on Australian Industrial Sector
References
Abs.gov.au, 2016. 8155.0 - Australian Industry, 2016-17. (2020). Retrieved 11 February
2020, from https://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/8155.02016-
17?OpenDocument
Abs.gov.au, 2017. 8155.0 - Australian Industry, 2016-17. (2020). Abs.gov.au. Retrieved 11
February 2020, from
https://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/8155.0Main+Features12016-
17
Tradingeconomics.com, 2020. Australia Inflation Rate | 1951-2019 Data | 2020-2022
Forecast | Calendar | Historical . (2020). Retrieved 11 February 2020, from
https://tradingeconomics.com/australia/inflation-cpi
Abs.gov.au, 2018. 8155.0 - Australian Industry, 2017-18. (2020). Abs.gov.au. Retrieved 11
February 2020, from
https://www.abs.gov.au/AUSSTATS/abs@.nsf/0/48791677FF5B2814CA256A1D000
1FECD?Opendocument
Tradingeconomics.com, 2020. Australia Unemployment Rate | 1978-2019 Data | 2020-2022
Forecast | Calendar . (2020). Tradingeconomics.com. Retrieved 11 February 2020,
from https://tradingeconomics.com/australia/unemployment-rate
businessinsider.com.au, 2018. Scutt, D. (2018). The industries with the fastest and slowest
wage growth in Australia. Business Insider Australia. Retrieved 11 February 2020,
from https://www.businessinsider.com.au/australia-wage-growth-by-industry-2018-2
Wulan, E. R., & Nurfaiza, S. (2014). Analysis of Factors Affecting Inflation in Indonesia: an
Islamic Perspective. International Journal of Nusantara Islam, 2(2), 67-80.

14Impact of Inflation on Australian Industrial Sector
Shuaib, I. M., Augustine, O. E., & Frank, A. O. (2015). Impact of inflation rate on the
economic growth in Nigeria. Journal of Economics, Management and Trade, 1-11.
Jareño, F., Ferrer, R., & Miroslavova, S. (2016). US stock market sensitivity to interest and
inflation rates: a quantile regression approach. Applied Economics, 48(26), 2469-
2481.
Knop, S. J., & Vespignani, J. L. (2014). The sectorial impact of commodity price shocks in
Australia. Economic Modelling, 42, 257-271.
Valadkhani, A., Babacan, A., & Dabir-Alai, P. (2014). The impacts of rising energy prices on
non-energy sectors in Australia. Economic Analysis and Policy, 44(4), 386-395.
Manalo, J., Perera, D., & Rees, D. M. (2015).Exchange rate movements and the Australian
economy. Economic Modelling, 47, 53-62.
Kim, S., & Mehrotra, A. (2017). Managing price and financial stability objectives in inflation
targeting economies in Asia and the Pacific. Journal of Financial Stability, 29, 106-
116.
Quinlan, C., Babin, B., Carr, J., & Griffin, M. (2019). Business research methods. South
Western Cengage.
Schabenberger, O., & Gotway, C. A. (2017). Statistical methods for spatial data analysis.
Chapman and Hall/CRC.
Gray, D. E. (2019). Doing research in the business world. Sage Publications Limited.
Madsen, C. Ø., Berger, J. B., & Phythian, M. (2014, September). The development in leading
e-Government articles 2001-2010: definitions, perspectives, scope, research
philosophies, methods and recommendations: an update of heeks and bailur.

15Impact of Inflation on Australian Industrial Sector
In International conference on electronic government (pp. 17-34). Springer, Berlin,
Heidelberg.
Bis.org. (2020). Retrieved 11 February 2020, from
https://www.bis.org/publ/bppdf/bispap03a.pdf