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Economic growthis refers to the increase in real GDP per capita in one year. Economic growthis a key economic objective of any Australian government. However sustainedeconomic growth is concerned with continuing this economic growth for a longerper...

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Introduction

Economic growth is refers to the increase in real GDP per capita in one year. Economic growth is a key economic objective of any Australian government. However sustained economic growth is concerned with continuing this economic growth for a longer period of time. The Australian government can implement a range of policies (instruments that will bring a change in the economy) to promote sustained economic growth, on a micro (industry/area specific) or a macro (whole economy) level. Macroeconomic (macro) management is concerned with stabilising the aggregate level of economic activity. The two arms of macro management are Monetary Policy (MP; RBA control of interest rates to influence cost and availability of credit) and Fiscal Policy (FP; The federal budget). Implementations of these macro policies only serve to influence and effect individual actions in the short-term. Both policies however fail to address the promotion of sustained economic growth ie: growth in the long-term. MP and FP are used to stabilise the level of economic activity, playing a reactive role by not striving to direct the original promotion of economic growth. MP is directed towards controlling largely the effect of inflation in Australia, once again a reactive role. In addition, FP uses various balances of taxation and government spending to influence the economy, with concerns only truly for the short-term as FP is an annual commitment of any government. ...read more.

Middle

With this decrease in price and improved allocation of resources only efficient businesses in the market survive - ensuring that there is a higher aggregate supply and thus sustained economic growth (refer back to figure 1.2). Deregulation of both the financial markets and foreign investment regulations have proven this to be the case. In deregulating both markets there has been an increase in competition - largely from overseas firms. This deregulation opened up the opportunity to borrow from overseas and to fund long-term projects that would generate employment etc in the future. Though we increase overseas debt levels through this deregulation, and more of our money (income and savings) goes overseas, we still benefit in the long-term through this micro policy through the essential increase in competition leading to an allocation of efficient resources. We gain a long-term increase in efficiency and productivity of banks and sources of funds, which assist in promoting sustained economic growth in the Australian Economy. The micro policies of Privatisation ("Assets Sales" in budgetary policy - shifts controls from public sector to private sector then becomes part of micro management) and Corporatisation in Australia result in Australian businesses becoming much more efficient. The biggest impact is resources being allocated to more efficient individuals as opposed to inefficient government practices. ...read more.

Conclusion

Evidence of the success of Australia introducing micro policies in the eighties is emerging now, nearly a decade after implementation. Measurement of the productivity levels of Australia pre micro policy and post micro policy can be compared to show that micro management though slow does ensure sustained economic growth. The rate of productivity grew at an average rate of 0.8% in the 1980s whereas the average rate of productivity increased to 1.6% in the early 1990s (post recession). The Industry Commission suggests that the most important factor to contribute to this improvement is the reform of public utilities - testament to the fact that micro policies promote sustained economic growth. The Howard Coalition of 1996 to present has been criticised for not implementing a sufficient amount of micro policies but rather choosing to focus largely on macro policies. This criticism is made because it's been noted that micro policies and micro management are truly the catalyst for sustained economic growth with the greater part of macro policies being used to stabilise the aggregate level of economic activity in the short-term. If the Howard government, or any government of Australia wishes to promote sustained economic growth in the Australian Economy they must implement forms of both macro and micro policies but with an enhanced focus on microeconomic management. Preston Patrick Year 12 Economics (McQ) ...read more.

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