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What microeconomic reform policies have the Australian government proposed for or implemented into the Australian economy? Discuss at least five reforms.

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Introduction

1. What microeconomic reform policies have the Australian government proposed for or implemented into the Australian economy? Discuss at least five reforms. Your answer must discuss the following: - Reasons for the policies Their policies are to raise the supply potential of the economy, leading to higher economic growth, domestic demand and living standards, and also to reduce interference with price signals in the labor and product markets, enhancing economic efficiency, competition and reducing inflationary pressure, finally to stabilize external debt and increase the efficiency with which the capital stock is used, reducing demand on domestic saving without reducing living standards. - Cost and benefits of such reforms I. Government business enterprises Providing key inputs for the private sector. It pushed up the level of economic activity, income output, and employment. However it imposed more tax on households sector. II. Communication services This policy brought increased profitability for Telstra and Australia Post, as well reductions in the price of Telstra's services, but this reform caused a reduction in employment in Australia post and a fall in Telstra's employment at first. III. Labor market reform It aims to boost productivity and international competitiveness, encouraging investment, saving and profitability in the economy with a positive impact on standards of living. It reduced unemployment and increases in productivity and elimination of inappropriate workplace restrictions. IV. Financial system It is deregulation of banking sector and government owned business. It brought increased competition, product innovation, interest rates to enjoy a better return for savers, and market share of banks to win back market share from non-bank intermediaries for banks. However, in costs the deregulation caused customer's lack of knowledge, higher costs for some customers and growth in bad debts. V. Industry assistance It is the protection of local industries. It protects infant industries in international competitions, and employment to be able to compete with goods produced by cheaper foreign labor. ...read more.

Middle

tax concessions, export grants), on one hand, and protectionist measures (e.g. tariffs and quotas or liberal import policies, on the other, is therefore critical for net export spending and the aggregate demand. - explanation of the multiplier effect Changes in the economy's levels of consumption, investment, government spending or net exports will cause a more than proportional change in the level of aggregate demand, as the extra spending leads to extra income which is then spent, leading to more income and more spending. - the impact of exports on production and employment in Australia Figure 2 The flows in the economy Inflows I, G,X Full employment Unemployment I=investment G=government spending Economic activity, income, output, X=exports Employment S=saving T=taxation M=imports outflows S, T, M as you see figure 2, it explains the impact of exports on production and employment. Exports as inflows push up the level of outputs which is production and employment. That is, exports bring us more production and employment. 3. Select two of the following topics: - the Australian dollar exchange rate - inflation - balance of payments/current account deficit - effect of low Australian on inflation - market deregulation for each topic (select two): - find related article - analyze the article - relate the content of the article to theory covered in class -the Australian dollar exchange rate Inflation targeting and exchange rate fluctuations in Australia. Several recent papers have explored the possibility that inflation-targeting central banks in small open economies pay too much attention to exchange rate fluctuations; changing short-term interest rates in response to fluctuations that have transient effects on inflation could be counterproductive. Accordingly, we investigate whether the Reserve Bank of Australia, while ultimately concerned with aggregate inflation and output, should set short-term interest rates on the basis of expected inflation in the non-tradable sector or go even further and react directly to expected wage pressures in that sector? ...read more.

Conclusion

The growth of the Australia economy is blessed with the business section which it is remarkable, is the basis of a low inflation and a low interest rate, and was excellent in competitive power, the labor market which is rich in pliability, and the efficient and democratic government section. 7. explain the reasons why Australia participates in international trade. Your answer is to discuss the following: - the balance of payments Y=C + I + G + (X - M) Let's take a look at (X - M) from GDP expenditure. The balance of payments is directly related to Y, that is, net income affects GDP(I). More exports than imports contribute to push up the level of GDP(I), so Australia participates in international trade to look for better balance of payments. - the effect of exchange rates on the economy When exchange rates is high, it is the right time to import. On the other hand, when exchange rates is low, it is the right time to export. For example, rice trades 50 cents and 70 cents/kg with Japan, which is the better rate to have a business with Japan? It is clear to trade at 50 cents/kg with Japan that brings more money in Australian economy. That is, very high exchange rates is not favorable to push up the level of GDP (I). - Australia's foreign debt Foreign debt means the total amount which, at any given time, Australian residents owe to overseas countries. In other words, foreign debt is an excess of imports over exports, which also affects investments as inflows. As a result Australia's foreign debt pushes down the level of GDP(I). - Australia's current account deficit Australia's current account deficit is the net income deficit. Excess imports that is foreign debt causes current account deficit. In international trade, it is possible to reduce the amount of current account deficit to increase net income in surplus, which also means affect GDP (I). This is why Australia participates in international business. ...read more.

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