topic 3 eco issues Flashcards

Question

an eco's AS is determined by

Answer 1

THE **quantity & quality of FOP** (natural resources ,labour, capita, ability **entrepreneurs to combine** them **efficiently** to **produce** g&s * ecos w/ **more/higher** quality FOPs **able produce more** g&s * is **eco's potential:** when **AS ^, eco can grow faster, ^ total output (EG) & reduce in general price lvl (inflation)** * ^ AS --> ^ total output (EG) & reduce general $ (inflation) --> ^GDP & price stability (reduce upward pressureprices created by ^AD), make faster rates EG more sustainable * ST, ^AS = ^ output produced same cost * Short Run AS curves = total output in eco over various price lvls, firms ^ quantity output supplied as price lvl rises (move along AS curve/extension in supply) * AS ^ (rightward shift) when ^ qnatity and/quality eco's FOP

Answer 2

a **higher lvl of output** can be **produced** for **same cost** (when there's **^ quantity/improve quality of FOP**) 1. **population grwoth** * esp population in prime working ages * **labour** is main input into PP so if ^ through **immigration/birth rates, mroe workers available,** eco **able produce mroe** g&s * for several decades, **AUS**' **relatively high** pop growth (**immigration**) major contributor to growth rates **ahaead msot adv ecos** * also higher AD bc more consumers 2. **discover new resources** * eg. new mineral & metal deposits can be exploited to **^ exports & ^ EG** 3. **^ skill lvl of workforce** * improve edu & training for school students & existing workforce boost productive capacity by ^ efficiency of labour resources 4. **increased capital** * **investment** in capital equip ^ productive capacity (of ind firms & eco) by boosting productivity of labour (ind workers produce more using new tech) & often **replaced labour** (capital-labour substitution frees up labour resources to work elsewhere in eco) 5. **adoption of new tech** (??) * bus providing customers w/ **mobile app to place orders & receive online custoemr service saves cost** of **sales agents** visiting customers/speaking on phone --> **reduce labour costs** 6. **measures to improve efficiency** * ind firms adopt management & work practices of leading int bus' to use existing resources more efficiently --> boost productive capacity of eco 7. **gvt policies** * ^ competitive pressures within industries (manuf firms reduced protection trade, telecomms via privatisation & comp policy) boost efficiency of resources use --> productive capacity * **cheaper & easier** for **bus** operating in **highly regulated sectors**

Answer 3

* **run out** of **spare capacity** (**unutilised productive resources**) & reach **capacity** **cnstraints** * CAPACITY CONSTRAINTS: **limit**ations on eco's **ability** achieve **furtherEG bc productive resources fully utilised** (when eco approach **full employment)** * whne eco close full emp/oprating new productive capacity, **^ AD cant continue drive EG --> ^ inflation, firms outbid each otehr for ^ scarce productive resources, pass** **higher prod costs** to consumers as higher prices * (why **microeco policy** important bc focuses on **supply** side of eco for **LT growth)**

Answer 4

* **structural change** in eco --> productive, efficient, competitive * **longer transmission lag than macroeco policies** (many **yrs** to see impacts) * macroeco management successful if manage AD in way that encourages EG S-MT while giving micropolicies sufficient time to achieve **^ AS** needed to **avoid capacity constraints** * by **improving human capital** since more **skilled WF** has greater **labour productivity** & higher lvls **owrkforce participation** * **infrastructure** can ^ AS eg. **faster broadband networks** & **^ investment** in road, **rail infrastructure** * ^ AS **shifts** eco's **PPF curve right** * eg. **reduce protective trade** barriers, change structure &** rates of tax** (influence** resource allocation through dis/incentives**), change income taxes (influence AD, macro policy), comp policy reforms, reforms certain markets (financial, labour, product), * changes tech & markets unrelated to gvt reforms

Answer 5

eco contracts 2 consecutive quarters neg EG/falling real GDP

Answer 6

* changes in LS > change real GDP * EG ^ LS but if rate of pop growth > rate EG, GDP pc & LS fall even if ^EG * **real wages** can **rise, HHs** can enjoy **higher disposable income** **--> higher material LS** * key factor in **slower growth in AUS LS rcent yrs w/ real disposable income falling** some yrs is **long period of below-avg wages growth** * labour productivity impo influence on both AS & changes in GDPpc, influenced by tech adv, improved labour skills, quality of management & work arrangements (R&D for innovation, internet, edu & training)

Answer 7

faster EG --> ^ real GDPpc * real wages ^, HH ^ disposable incomes --> ^ material LS * EG and LS link weakenged bc wage growth slow

Answer 8

eco growth **creates jobs** * an eco that **sustains strong EG** --> everyone **willing & able to work able to find employment** * **LT, higher rates EG** associated w/ **develop**ment of **new, more adv industries** * c's w/ higher lvls eco growth --> **create more highly paid & highly skilled jobs**

Answer 9

higher lvls eco growth --> **price increases & larger wage claims** --> **inflation rises** (esp if **spending is growing **when eco **close to full capacity** & **growth in AS cant keep pace w/ growth in AD** * inflation side effect of eco growth * major aim of **macroeco policy** is **keep growth** at lvl **not so high** that prompts **surge inflation** (**sustainable rate of eco grwoth**)\ * macropolicy obj as 'sustainable rate of EG' * high inflation early 22 to mid 2024 partially due to surge AD (build up HH savings during pandemic & massive fiscal & monetary stimuls gvts provided) when supply side contraints (labour shortages, disrupted GSCs, soaring energy prices) limited AUS growth

Answer 10

EG often accompanied by **higher disposable incomes --> ^ consumer & bus spending --> higher lvl imports** * when eco **growing faster than** **trading partners (unless exports keep pace w/ growht in imports)**, can make **BOGS** **worsen**& **^ CAD** * excessive **CAD** can **undermine confidence** in eco so **BOP constraint** limit growth * when country faces BOP constraint, **policymakers** can deliberately **reduce** lvl **EG to improve external stability** (ensure ext imbalances eg. high CAD don't result in loss investor confidence harming dom eco) * achieving sustained EG crucial to maintain ext stability * keep foreign liabilities at sustainable lvl (% of GDP) eco must generate enough output growth & income to meet servicing costs of liabilities --> maintain rate EG matches/exceeds ^ foreign liaibilities (also maintain confidence of int investors, ensure ongoing availability of foreign capital --> sustain strong EG)

Answer 11

sometimes **benefits flow disproportionately to higher income earners/owners of capital** **than** flowing broadly **throughout** eco through **wage increases/lower prices** * increasingly benefits EG disprop flow to HI earners & wealther LCE owners than braod via general wage ^/lower prices * should reduce inequal income distribution by reducing u/e, with inequality ^ during weak growth due to ^ u/e but can ^ if benefits not widely shared * **absolute poverty should fall** as eco grows but **relative poverty likely rise** as income distributions more unequal during periods strong growth * **beenfits** of strong growth often skewed towards **skilled workers > unskilled so gap betw rich & poor widens**

Answer 12

if growth pursued w/ little regard to enviro --> **pollution, depletion non renewable energy sources**, dmage local enviro 9Higher demand & output --> ^ resource use --> pollution, depletenatural resources, enviro degradation) * **ecologically sustainable development accounts impact of EG on enviro** :gvts pursue growth strats avoid irreparable enviro damage * avoid catastrophic social, enviro, eco consequences --> break link betw ^ EG & ^GH gas emissions * in **LT, EG must be ecologically sustainable, avoid neg outcomes of resource depletion & climate change, ^ financial resources & ^ capacity to invest enviro freindly techs & stronger enviro protection --> less dependent on job creation & X income from epxloiting natural resources** * shift to **environmentally sustianable EG strats** can also **create new industries & jobs** eg. via **renewable energies(more labour intensive than fossil fuels) & low-carbon techs**

Answer 13

1. **global eco conditions mostly favourable** 2. **TOT boom 2005-11, 2017-22** 3. **pre-emptive MP: macroeco management (quickly reduce IR to support AD) to maintain sustainable rate EG** 4. **RBA's monetary policy on maintaining low inflation & sustainable growth rate** 5. **gvt used fiscal policy during eco downturns to stabilise EG** 6. **higher lvl sustained population growth than most adv ecos** 7. **large increases in asset prices** 8. **slowdown in productivity growth**

Answer 14

**mostly favourable** for AUS recent decades * **strong demand** for AUS' **resource exports** underpinned boom in **mining & construction investment** & surge in **export revenues** **--> ^national income** and **rebound quickly from ext shocks** (covid, gfc) * **rising inflation** due to **supply chain disruptions** & **global** surge inflation impacted growth **since** recovering **covid** and **russia** invasion 2022

Answer 15

* 2005- 2011, 2017-22 * driven by **very large increases in prices of AUS' commodity exports (iron ore, coal, natural gas) --> export revenues** ^substantially, **improve BOGS --> consecutive CAS -->** concerns **BOP constraint** * 2024 Budget forecast 15% decline TOT 2025-26, expect stabilise to avg

Answer 16

* lvl generates **employment growth & maintains external balance w/o pushing inflation above target range 2-3%** * AUS Treasury estimates AUS' **LT sustainable rate EG ~2.5% of GDP**

Answer 17

* PRE-EMPTIVE: IRs adjusted ANTICIPATING change **growth & inflation**' * during eco downturns, RBA quickly reduce IRs to support AD * also maintain low inflation & sustainable growth rate

Answer 18

mainly due to its **immigration** intake * **net overseas migration negative** 1st time since ww2 in 2020-21 --> **labour shortages constrain growth** in 2022-23

Answer 19

eg. **real estate & shares** since early 2000s **^ wealth of HHs -->** encourage greater **borrowing & consumption** aka **'wealth effect'** * higher housing prices **constrain spending power** of homebuyers but **overall wealth effect** of higher asset prices **^EG**

Answer 20

1. productivity * sustaining LT productivity growth 2. participation * high lvls workforce participation 3. population * continued population growth from natural growth & immigration to help AUS achieve highest possible rate eco grwoth * significance of policy measures to lift productivity growth & participation in LT

Answer 21

used by **gvt** to **influence rate EG** * main role influenc eco grwoth ST w/ aim to **smooth volatile fluctuations in BC** * only **limited impact** on lvl of **long-run** growth rate bc only limited influence on AS * affect growth rate in **ST by influencign AD** & achieve **highest lvl growth eco can sustain in S-MT**\ * can help ^ AS some ways (gvt spend edu, low IRs encourage investment in cpaital equip), main role influence EG ST by influencing AD * manage demand to smooth fluctuations in BC & achieve highest lvl growth eco can sustian S-MT (improving perf for full emp & price stability)

Answer 22

use federal Budget to achieve eco objs (esp **stabilise** eco activity, optimise **resource allocation, redistribute income)** * **gvt expeniture** in Budget **injection** into eco, gvt revenue **(taxation) leakage** * by adjusting **expenditure & rev**, gvt **influence** lvl **AD** --> lvl **EG** * if gvt wants ^ EG: **reduce taxation, ^ expenditure, both** via **discretionary**/explicit changes to **FP (stimulus package**/reduce tax rates)/**automatic stabilisers --> ^** lvl **injections relative to leakages --> ^ EG** than w/o expansionary policy * alt,EG constrained if taxation rev ^ ^/gvt expenditure reduced (via discretionary change eg. ^ tax rates or cut expenditure)/automatic stabilisers * **more eff stimulating growth during downturn** than slowing down eco growing too fast (bc **discretionary changes to FP** would have **contractionary effet** (^ tax rates, cut spending) **politically unpopular** * eg. **limitations** of FP (**S<)** FY06-08 federal budget surplus ^ but cut income tax rates & super meant while fiscal contractionary stance, surpluses significantly smaller than would've been --> criticised bc added i**nflationary pressure**s when EG strong (promted **tighter MP**) & created structural problem in budget (from revenue) --> structural problems (**unable return to budget surplus, larger deficits, accumulate gvt debt**...georgeious0

Answer 23

gvt use to influence eco grwoth * RBA changes official **CR to achieve gvt eco objs** (price stability, full emp, **sustianable EG**) --> influece **lvl IRs** in eco --> influneces lvl **AD** & rate **eco grwoth** * if gvt & RBA stimulate growth, reduce IRs --> encourage **consumer & bus spending (downward pressure ER, boost int competitiveness of X & M-competing firms)** * effective **inflation targeting** --> MP can contribute **LT growth** **(low, stable inflation --> conditions conducive to high consuemr & bus confidence** & support **int competitiveness**)

Answer 24

* macropolicies msot effective when used in coordinated, complementary way (contractionary FP reduced effectiveness of expansionary MP) * low IRs inflated asset prices (property) by ^ demand * MP more effective as contractionary > expansionary (^ IRs ties ^% income in loan repayments --> force lower HH consumption bc ppl cant spend moeny they no longer have) while IR cuts only ENCOURAGE ^ consumption (reducing repayments doesnt force ppl to spend)

Answer 25

to **^** eco's **sustainable grwoth rate** by **^ AS** & **reducing extent** higher **growth causes inflationary & CA problems** (by boosting int competitiveness --> trade balance) factors not capacity constraints that can constrain higher growth * ^ AS to **keep pace w/ rising AD** * Productivity Commission argues AUS strong growth rates 1990s from far-reaching microeco policies * increased **incestment in workforce skills** & physical **infrastructure** in recent **budgets** aimed **^ eco's AS** w/ **reforms to ^ competitive pressure**d & **Reduce unnecessary regulation** * effectiveness/lack of AUS microeco reform deteriorated recent decades, most sig contribution recent yrs from state gvts substantial investments in infrastructure (roads, ports) to relieve transport & SC bottlenecks

Answer 26

one of most powerful **ext shocks** in AUS eco history * ended AUS' record breaking 28 yr eco growth cycle * shut down state & national borders, enforced lockdowns across AUS,** temporary prohibition on entire sectors** of eco activity * **consumer spending** shifted dramatically * travel, leisure, entertainment spending curtailed * **spending increase**d as HHs stockpiled emergency supplies from supermakrets & spent more on home entertainment * **share market fell** 37% in a month ( paragraph for essays here) * gvt's FP measures complemented by immediate MP action from RBA cut cash rate down to 0.1 Nov 2020 also supported supply of credit to keep eco afloat & undertook asset purchases (outright purchase of assets by RBA from private secotr)

Answer 27

1. **eco grwoth** * GDP fell 2 successive quarters of 2020 (essay stats) 2. **labour market** * u/e peaked 7.5% july 2020, highest rate over 20 yrs * 2020 retail & hospitality managers, hospitality workers, sports & personal services workers 3 occupations most job losses * Participation rate hsitoric high April 2021 3. **businesses** * diff impacts across industries * rely on international tourism suffered severe * bus in accommodation & food services, tranpsrt, postal & warehousing, arts & recreation services hit hard by lockdowns & most likely report diff meeting financial commitments * others (delivery, onlnie retail) benefited from expanded opps 4. **inflation** * unusually large but temporary price movements (most bc gvt decision to make child care free for several months) ersulted in 1st decline in year-ended CPI inflation since early 1960s & largest quarterly decline since 1931 * underlying inflation expected remain below inflation target range (?0 5. **distribution of income & wealth** * lasting effects on distribution of welath takes many yrs to emerge * income ineq worsened steadily w/ disproportionate effects on lower skilled workers

Answer 28

**proportion of ppl** engaged in **productive** work * high lvls u/e major problem bc **opp cost of ^u/e is less production, slower EG, lower taxation revenue, higher SWP** * **LT social costs** including **^ inequality, poverty**, family problems, **crime, social division** * **underemployment & underutilisation of labour**

Answer 29

* **age & gender** profile of workforce * expansion of **highly skilled** * **decline of unskilled jobs** * move **away from secure full time employment**

Answer 30

section of population **15/+ yo working/actively seeking work** * all employed & u/e persons in country at **PIT** consists of: * ppl aged 15/+ currently employed for at least **1 hr per week of paid work**, includes those on paid **leave**, on leave, stood down **w/o pay for < 4 weeks,** on **strike**, on **workers' compensation,** receiving payments whilst undertaking full time study * **self employed** ppl workers at least 1hr per week

Answer 31

* children under 15 yo * **full time, non working students** 15/+ yo * ppl who perform **full time domestic duties** * u/e ppl who **arent willing to actively apply for jobs & attend job interviews/not available** to start work * ppl **retired** from labour force

Answer 32

**% of pop aged 15/+** (working age pop) in labour force employed or unemployed (either working/actively seeking work) * **working age population** if 15/+ (**can participate in LF**) * size of LF account ppl's willingness & ability participate by working or , looking for work * choose not to participate in LF (studying, carer's responsibilities, volunteering FT, other income sources, feel unlikely find work) * **labour force/working age pop**

Answer 33

situation where individuals want to work but unable to find job, as result **labour resources in eco not utilised** * reflect no. ppl out of work but **actively seeking** * to determine rate of u/e, ABS conducts monthly survey of labour force (~50 000 ppls), calculating total no. u/e & rate of u/e

Answer 34

* **regularly checking ads** from **diff sources** for **available jobs** * willign to **respond** to** job ad**vertisements, **apply** for jobs w/ employer & **attend interviews** * **registering** with an **employment agency** linked to **Job Services AUS**

Answer 35

from **structural changes** occurred in **AUS LM recent years,** classifying ppl into **3 categories (employed, u/e, not in LF)** **doesnt provide** **compelte** pic of actual **utilisation of labour/spare capacity** * **disguise exten**t AUS' **LM problems**

Answer 36

1. by **classifying** ppl **un/employed**, official stats dont account **NO. HRS PPL WORK** * some **emplyoed wanna work more hrs** (**UNDEREMPLOYED**) * 40 hr week job --> 4 diff 10 hrs per week jobs, reduce official u/e rate **w/ increasing real eco activity/demand for labour** 2. **classifying** ppl in **not/in LF**, official u/e stats **DONT include ppl who UNABLE FIND work & LEFT LF** (**HIDDEN U/E**) * **discouraged jobseekers** eg, students would rather work, disabled who wouldve taken if available

Answer 37

**labour force underutilisation rate** measuring no. ppl u/e + no. who wanna work more hrs * also publishes an extended LF underutilisation rate, adds to underutilisation rate 2 groups who are marginally attached to the LM (ppl actively looking for work & able to start within 4 weeks but not within 1 week & discouraged jobseekers)

Answer 38

**doesnt give accurate view of spare capacity** in **LM** bc **u/e** usually **wanna work 3x** as many additional hrs as **underemplyoed** ppl * to measure better amt of spare capacity in LM, RBA calculates an **'Hours based Labour Underutilisation rate'**, a measure that **adds** to the **u/e rate** the **extra hrs** **underemplyoed PT workers seeking** --> converts those hrs to **equivalent** of **FT** jobs

Answer 39

**3%**, assuming **no changes** in **medium term** trends in **immigration**, family sizes, **productivity, participation**

Answer 40

**Okun's Law** to **reduce u/e**, the **EG growth rate** must **exceed** the **sum og % growth in labour productivity** **&** **^size of LF over same period (Yr?)** * an implication of O's L is in **ST, higher rates of productivity growth** make it **more diff to reduce rate u/e** * conversely, one of **ST impacts of lower productivity growth** often **lower rate u/e** * **trade off** betw faster **productivity growth** & faster **employment growth** **only** **ST** * **LT**, higher lvl productivity growth should --> **stronger EG & more job creation** but in **ST mroe jobs** likely **created** during period **lower productivity** growth bc **emplyoers forced** ot **hire more** workers to**^ production** during lower growth in labour productivity ## Footnote to reduce u/e by 1% GDP must grow 2% above its LT trend -->

Answer 41

occurs bc of structural changes within eco caused by changes in **tech/pattern** of **demand for g&s** * workers skilsl **previously useful** in **declining industries** **dont match job opps** opening up in **newly emerging** industries * msot of AUS' persistent, **LT u/e problem** attributed to structural u/e

Answer 42

occurs bc of downturn in lvl eco activity & falls during times strong eco grwoth * falling demand --> fewer emp opps * major contributor to rise u/e in 2020 bc covid pademic let so short recession

Answer 43

represents ppl **temporarily** u/e as they **change jobs** * finihsed one job but havent started new one * takes **time to move** form 1 job to another as workers invest **time & effort finding suitable job** & **emplyoers** invest too to **search** for **suitable candidates** * **inevitable** although **increased by delays** in **matching** u/e ppl to available jobs * improving **efficiency of job matching services** through job & skills databases can hep reduce frictional u/e

Answer 44

occurs at **predictable** & **regular times throughout yr** bc **seasonal nature** of some kinds of work k * accounts for influx of **students finishing school**, uni, TAFE courses betw **Dec & March** every yr * **official** u/e figures usually **seasonally adjusted** to account for these **fluctuations**

Answer 45

ppl who can be considered **u/e but dont fit ABS** definition of u/e & **not reflected in u/e statistics** * **discouraged job seekers** **no longer actively looking for job** * **not participating in LF** * shows in **statistics as decline in LFPR** but **not** shown **in u/e** statisitcs * ABS reported **sustained ^ in recent yrs** in no. ppl who **wanna** work & **able** to work but **not actively seeking** work eg. family responsibilities, ST illness, **study**

Answer 46

ppl **who work less than FT (35 hrs/week)** but would **like to work longer hours** * **not classified** as **u/e** * **AUS more ppl underemplyoed than u/e** * **LT trend rising** underemp reflects **faster growth in PT & casual work than FT jobs recent yrs**, **esp** for **young** workers

Answer 47

ppl **out of work for 12 months or longer**, **usually** from **structural** u/e * once a large pool LT u/e ppl exists, it can be **diff to reduce** * **high EG can help** bc **stops** pool **growing**but on **own not enough to solve** problem * **often** turns into **permanent u/e** bc ppl out of work long period **harder to find job** **even** when **eco activity picks up**

Answer 48

* **new arrivals** into u/e pool are re-absorbed **into workforce more quickly** esp if have **skills up to date** & **attractive for employers** > **LT u/e** * LT u/e usually suffer from **structural u/e** & **dont possess skills demanded in LM** * u/e ppl **lose confidence** they'll find work when **persistently unsuccessful** in **applying **for jobs * u/e ppl lose contact w/ paid work & **dont learn new skills** & developments in LM --> **reduce emp opps** further * potential **employers look less favourably** toward ppl **out of work** for **long PIT**

Answer 49

* **sig decline** LT u/e as **prop total u/e** **90s & 2000s** * LT began **rising** again **after GFC + discouraged jobseekers (not actively seeking work)** **nt counted** in LT u/e * AUS' **large scale policy resposne** to **COVID** rcession effective** prevent**ing LM 'scarring' (LT u/e) whcih **initaialy doubled** but **mid 2023 fell below pre-pandemic lvl --> success** of policy respnse

Answer 50

ppl **out of work** for **so long** that employers consider **unemployable bc personal circumstances** * **mental/physical disability, drug abuse, anti-social behaviour** * when someone assessed **unable** to undertake **work even on PT** basis, placed on **disability support pension**, **not counted** in official **u/e statistics**

Answer 51

**non-accelerating inflation rate of unemployment** * lvl of **u/e** with **no cyclical u/e** (where eco is at **full employment**) * **some** lvl u/e **inevitable** in eco & efforts to **reduce** u/e **below 'natural'** lvl **counterproductive** * **conflict** betw **inflation & u/e** can be shown on **Phillips Curve** * suggests **policies to encourage eco grwoth & reduce u/e** will be **worthwhile** up **to** a **point** but **beyond**, policies only create **inflation** * **lower NAIRU increases eco's capacity to grow w/o ^ inflation**, achieved over **LT**through **policies reducing structural, seaosnal, frictional, hardcore u/e** * **trended downward** in recent decades

Answer 52

* when **u/e above NAIRU**, there is **spare capacity in LM** **--> policymakers** should **stim eco grwoth to reduce u/e** * when u/e **at/below** NAIRU, **^ eco grwoth will ^ wage pressures** bc **insuff nos. u/e ppl to fill job vacancies** (**need** to have **right skills & be available** to work) * efforts to **reduce u/e below NAIRU** result in **higher inflation**

Answer 53

* over **LT** through **policies** that **reduce structural, seaosnal, fricitional u/e** * eg. **^ retraining programs** to **aid structural** u/e or make **easier** for workers to **change jobs/mvoe interstate/removing hurdles** for ppl w/ **disability** to **access workplace**

Answer 54

* **EG too low** to generate adequate employment grwoth * **jobseekers dont have right skills to fill job vacancies** * jobseekers **not enough adequate opps for edu & training** * **rapid structureal change** in eco --> **more** **workers** whos **skills no longer demanded** * **wage rates too high** esp for **low-skilled** workers * too many regulations surrounding employment, discouraging emplyoers from hiring new employees (>..) * some ppl **choose** remain u/e bc can **receive gvt welfare benefits** * **workers in HI ecos** whos **jobs can be performed overseas cant comepte w/ workers** who **paid low wages** in **developing ecos** * **not enough** done to **help** ppl **w/ mental illness/disability** to **find suitable work**

Answer 55

**demand for labour** is **derived demand** for **g&S** that labour helps **produce** * if **downturn** in lvl **AD**, downturn in demand for labour, ^ U/E LVL decline AD can be from: * **eco downturn** w/ **lower domestic consumption & investment** * **gvt policeis** (eg. **contractionary F/MP)** to **dampen demand** * **decrease** in **demand** for AUS' **exports** due to **global recession, slower growth** in ecos of **major trading partenrs/less competitive** AUS **g&S in world markets** * u/e likely start rising when **growth falls below ~2%** * growth **>3%**, lvl u/e likely **fall** * generally **time lag ~6 months** betw change in lvl **EG** & change in **employment lvls** * changes in lvl eco grwoth **mainly** affect **cyclical u/e** * **trends** in **measures** of **u/e & underutilisation** **confirm** **correlation** **w/ rate of EG**

Answer 56

**MP** settings can **influence** lvl **cyclical u/e** in **S-MT** **by influencing** **BC** * **F&MP both influence** lvl **AD by influencing BC -->** influence lvl **u/e S-MT** * **expansionary** stance to **^ EG & job creation**

Answer 57

* ^ LFPR tend cause ^ rate u/e in **ST** bc **more ppl** who **previously not seeking work** (**not** officially **unemployed**) **start actively** seeking employment * usually **during eco recovery** when many **discouraged jobseekers** observe **emp opps** improving & start looking for work * **re-enter LM & unless obtain job immediately**, u/e * lvl **u/e** only **reduced slowly during eco recovery** wven when **EG & employment growth strong bc more ppl looking** for jobs

Answer 58

* involves **sig ST costs** * very sig is **loss of jobs in less eff industries or/& major structural change** * **globalisation** contributed to **changes in LMs** around world w/ **domestic bus'** **more integrated into GSCs --> offshoring** some jobs * OECD countries recent decades whos trade & **globalisation only 1/2 job losses as automation** * **^ remote working** & **reduction in jobs** involving **face to face contact** after COVID

Answer 59

**rapid** tech change in **ST** cause **u/e** * **pace** of **change** in **LM** expected to **accelerate**i n 2020s as **automation driven by AI applications** continues **transform jobs** * **administrative jobs** (accountants, HR staff) most at risk with >1/2 **lost** as algorithms **replace human data processing** on spreadsheets & email * **structural u/e** although tech also **creates new job opps**

Answer 60

**productivity of labour** sig affecting **employer decision** to ^/reduce u/e * low productivity grwoth diff S< impacts * **^productivity grwoth slows emp growth/^ u/e ST bc fewer emps required per unit of output but LT, contributes ^EG & lower u/e** * **slowdown productivity grwoth --> lower u/e ST but higher u/e LT sicne eco less competitive & slower growth** (emplyoers can **sub** greater use of **capital for** reduced **labour** use)

Answer 61

**structural u/e** related to **mismatch** betw **skills** of u/e & skills demand by employers for **job vancies** * 2000s sig **skills shortages** emerged for **occupational** grousp eg. tradesppl, health professionals, construction workers * persistent skill shortages continue for wide range technicians & trade workers eg. butchers, air-conditioning mechanics, * sig nos ppl out of work --> **gaps** in AUS' **edu & training system -->** make AUS **more reliant on skilled migration** to **fill job vacancies**

Answer 62

**sustained ^ labour costs (wages)** 1. **SHORTAGE of SKILLED LABOUR** **--> employers compete** for **limited** pool of **labour --> force up** general labour costs --> **wage inflation** 2. **EXCESSIVE WAGE DEMANDS** * **nominal wages rise too fast --> outstrup inflation & productivity ^ --> reduce bus profits.** * bus **sub capital for labour/reduce output** to improve profits 3. **FWC ^award wages** substantially in its National Minimum Wage Order to improve **LS** of **lower paid** workers --> too **expensive** for employers to **keep** **workers** 4. substantial **^** labour **ON-COSTS** * additional costs employing labour (**super**, sick **leave**, **holiday pay,** workers' compensation * mainly affected by **gvt policy decisions** * too high, **decline demand for labour**

Answer 63

**gvt agency regulate**d **AUS workplaces** * sets **min wages** * approves **enterprise agreements** * sometimes **resolves industrial disputes**

Answer 64

* one reason for **higher labour costs** * relatively **high min wages** rates make **less attractive** for employers to **hire less-skilled workers** --> ^ u/e * **dereg**ulation of **LM --> lower min wages & lower u/e** * but **OECD** studies of AUS LM point to **relative flexibility** of **AUS LM** & highlight **need** for **improvement in skills & training** to **reduce underemp than LM rules**

Answer 65

* OC of lost output & income --> restrain AS & AD --> EG * AS: u/e --> **eco's resources not used to full capcity,** operating **under** its **PPF** --> u/e comes w/ **OC** since **not contributing to PP** --> total output/real GDP lower than potential GDP/LRAS in ST as eco below full emp & LRAS restrained by depreciation of human capital LT due to LT u/e * AD: **lower total output = lower HH incomes & expenditure --> lose income & consumer confidence --> consumption (hence investment) falls --> multiplier effect generates greater than prop fall real GDP from initial ^ u/e -->lower sales & profits** okun's law to reduce u/e by 1%, gvt must ^ EG by 2%

Answer 66

* **multiplier**'s **impact** * changes in **hidden u/e** as **discouraged workers drop out/re-enter LF** * changes in **hrs worked for PT, casual, contract** workers (^/dec lvls **underemp)** * changes in **labour productivity** as **demand for output changes** (productivity may **fall** due to **overstaffing** during **downturns** & ^ during booms responding to ^ demand)

Answer 67

u/e have **lower incomes** (**rely** on **welfare payments)** --> lower LS * rely welfare payments --> struggle pay basic living costs & cant accumulate savings w/ little discretionary income available for non-essential goods * **employed** need contribute **higher taxes** to **cover cost of income support to u/e**/enjoy fewer benefits from collective g&s gvt provides as other public expenditure cut * high rates u/e --> **lower prod of consumer & capital goods (more labour resources unutilised)** --> lower LS now & future

Answer 68

* u/e extended POT, persistently high --> **u/e lose LM skills, confidence, experience, less/un employable** * **cyclical/ST u/e** can turn into **LT structural u/e** , '**hysteresis**' --> ^ NAIRU reduce ecos' productive capacity * **new members** of **LF** eg. young school leavers, new uni **graduates** more **diff to develop skills if unable obtain jobs** **soon finishing edu**

Answer 69

process where **u/e** in **current** period **results** in **persistent u/e** in **future** periods as u/e ppl **lose skills, job contacts, motivation** to work

Answer 70

high lvls u/e sig influence on **gvt's revenue & expenditure --> federal Budget** * **falling incomes** from u/e (& lower wage growth for employed) generates **less tax revenue** & gvt **burdened w/ ^ transfer payments** **(unemp benefits)** to u/e, & **cost of training & LM programs** * decrease in rev & ^ in expenditure **deteriorates ST budget outcomes & LT public debt lvls**

Answer 71

**high u/e(& underutilisation) -->** **excess labour supply** in eco --> **downward pressure** on **wages** * **'downward stickiness'** for **wages**: nominal wages **dont** often get **reduce**d bc safety nets of min wage rates set by FWC in MAs & national min wage/EAs which cant undercut relevant awards * more **likely** lead to **slower wage growth over time** than actual reductions in nominal wages * wage growth weak when POSITIVE U/E GAP (u/e rate above NAIRU) bc spare capacity in LM & higher when neg u/e gap due to scarce labour resources * underemp lvl reflects LM' spare capacity, influence wage growth by downward pressure on wages when it's higher, also bargaining power of emps & changes in labour productivity * by suppressing wage lvls --> reduce consumption expenditure of employed & u/e, --> high u/e & sapre capacity further constrain AD & EG

Answer 72

**higher underemp**loyment from 2013-2021 – underemployment represents **spare capacity** in the **labour market** but is **not reflected in the unemployment gap** (ie. the presence of underemployment means that the unemployment gap is really **larger than it appears** to be) public sector wage caps – federal and state governments introduced legislated maximum pay rises in the early 2010s, which **limited wage growth** for public sector employees and indirectly reduced private sector wage increases (the federal wage cap was scrapped in 2020, while the NSW cap was scrapped in 2023) low productivity growth – with the wages of those on enterprise agreements linked to levels of productivity, low rates of productivity growth have contributed to lower wage growth in the economy (however, some have argued that higher wages lead to higher productivity by increasing employee morale – suggesting that low wage growth has contributed to lower productivity growth, not the other way around) decreased employee bargaining power – falling rates of unionisation and unfavourable changes in workplace laws (including an increase in individual contracts and fewer powers for industrial tribunals such as the FWC) led to wage growth even lower than expected based on factors such as the level of labour utilisation and labour productivity (growth in real wages fell below productivity growth in the early 2000s, indicating that the benefits of productivity gains have increasingly flowed to profits at the expense of wages)

Answer 73

^ u/e --> less equal incoem distribution * u/e & need u/e benefits = **loss of income,** **relatively worse** off comapred to **HI earners** **--> poverty & inequality in income distribution** * widening gap betw HHs exacerbated bc **u/e** occurs **more frequent**ly among **LI earners** eg. **young & unskilled** * **'intergenerational'** dimension of inequality & **poverty** where disadv passed from 1 **generation** to next aka '**poverty trap'**

Answer 74

* ^ **poverty** * more pronounced **class divisions** * ^ **inequality of opp** (poverty becomes **intergenerational**, **disadv pass**es **generations** * **slow EG** bc **constrain AD & AS (lower consumption expenditure** if prop **incoem concentrated** in **upper** quintile of HH rises since **HHs** have **higher MPS & lower MPC** than **LI** groups + ^ income inequality comes w/ **^ inequality in edu outcomes** --> less edu **WF reduce quality of labour resources --> reduce productive capacity)**

Answer 75

u/e associated many serious personal & social problems in AUS esp those suffer from **LT u/e** ^ incidence of: * severe financial hardship & **poverty** * ^ lvls **debt** * homeslessness * family tensions * **loss** work **skills** * ^ **crime** lvls * poor **health**, mental health, higher risk **suicide** * **social problems have eco cost** for community since more **resources** directed towards **dealing** w/ em * more **public funds spent on health, welfare services, social workers, police** **than satisfying** other **community wants** * ^ u/e & **inequality** can create social tensions & **backlash against globalisation** (^ public support for protectionism esp US)

Answer 76

* u/e problem **more severe** for **some** societal **groups** compared to others * young **15-19 exp** lvls **u/e 3x** rate general pop * **ATSI** relatively **high** u/e rates esp in **sparsely settled regional areas** but **no diff** in employment rates if **higher lvls edu**, --> edu & skills critical **closing gap** * **age related u/e** **highest** u/e rates, **high LF underutilisation** rate, **lower earnings** & **fewer opps** for **career progression** - **older workers** also greater difficulty finding work once they **lost a job** & most **likely out of work** for **long** **PIT** while younger workers least likely exp LT employment * **specific regions** suffer from higher u/e rates than others * **ppl born outside AUS** - **higher u/e** rate during **1st years** in country when **adjusting to language & cultural differences,** 1/4 permanent skilled migrants **over-qualified for current job** but **lacked work experience & access to local networks** - COVID lockdowns greater impact on u/e for migrants relative to AUS born pop bc conentration in accommodation & food services industries * higher u/e for some groups can indicate **discrimination & unequal emp opps in LM** * **LT** **cause** **high u/e** rates **among groups** is failures in **edu systems** eg. **remote learning** challengign for disadv students & **low skilled** workers **reduced opps** for learning during pandemic, greater need future **retraining** in changing jobs market

Answer 77

**employers seek**ing workers w/ greater **skills & experience** * explains AUS' **^ing school retention rate** & **LT ^participation** in **tertiary edu**cation * **most jobs require post-secondary school skills**, challenge for AUS' **edu & training ststem** to manage transition from school to further edu, training, apprenticeships * no. young workers looking for FT employment u/e 12+ months ^54% in yr to march 2021 bc above-avg lvls **casual & PT empoyment** & heavier concentration of young workers in sectors eg. hospitality & accommodation among devastated industries

Answer 78

**lasting reductions** in u/e **take time** to achieve, **dependent** upon **sustaining EG** over **long time** * **rising** u/e --> gvts challenge to **minimise ST ^** in joblessness to acheive **fastest return** to low u/e * broader gvt challenge to reduce **LT structural** u/e through **LM policies, investing in training** & wider **eco reforms** * Okun's Law: ^ labour productivity/size of LF --> can ^ real GDP w/o dec u/e 'jobless growth' --> growth rates must be high enough to create enough jobs for LM entrants & existing u/e

Answer 79

**macroeco policies** to **sustain grwoth** & **minimise sharp downturns in BC** * employment is **derived demand for production** --> reductions in u/e need **^output** * **expansionary FP** (lower taxes/^ gvt spending) can **stim eco activity** & **^ output through multiplier effect** (^ spending more effective bc gvts only hope tax cuts will ^ consumption/investment) * eg. gvts ^ **expenditure** on **infrastructure** **--> bus ^ investment & employ** more * **expansioanry MP** (lower IRs) stim **consumer spending & bus nvestment --> ^ output**

Answer 80

* goals achieving EG rate 3/+% & keeping inflation in 2-3% targt band central to macroeco policy since 1990s

Answer 81

by lifting eco's **efficiency, competitiveness** & **productivity,** **microeco reform** aims to **^ EG** & **job creation** over **LT** despite ^ structural u/e ST * **reduce tariffs, dereg**ulation, **comp policy**, **privatisation, tax reform** * esp **LM policies** **(industrial relations, edu, training**, welfare to work initiatives) to **^emp growth** over time

Answer 82

imp role **reducing types u/e** range available to **gvts** : * **edu & training** programs for ppl **out of work**/**risk** of u/e * measures to **improve matching** **u/e to job vacancies** * policies to **^ demand for labour** by making more **attractive for employers to hire** workers eg. wage subsidies

Answer 83

**enterprise bargaining, employment conditions** (policies for wage determination & LM regulation influence how forces of demand & supply interact in LM) * **^ productivity** & give **employers incentives to hire** workers * ongoing debate how AUS can **balance policies** give **flexibility to employers & policies** provide **fair pay** & **conditiosn to employees** (also policies for ^EG & LS)

Answer 84

move inds **off welfare** & **into paid emp**loyment * making **harder to access** welfare payments eg. **longer waiting periods (vary depending on one's lvl savings), toughter eligiblity rules**, requirements to** keep applying** for **jobs** & undertake **training** * if more diff to access income support payments, (which failed to keep pace w/ wage growth & living costs recent decades) **encourage** u/e to **actively seek work/add edu & training** * BUT many argue low u/e benefits & tight eligibility restrictions hurt job prospects of u/e by making more diff to meet costs of finding job(?)

Answer 85

AUS high lvls immigration * **reduce rather than ^ u/e** bc immigration program focus on **skilled** **workers** & migrants contribute to ^ labour demand via their demand for output & starting new bus which expand & employ existing aussies * BUT massive ^ temporary migration to AUS (unlike permanent migration) is uncapped & less favourable LM impacts bc likelier unskilled & compete w/ local jobseekers for job vacancies w/o adding as much as permanent migrants to AD & demand for labour

Answer 86

**^ WF particiaption** by **reform**ing **way tax & welfare systems interact** (more effective policy change) * **u/e** ppl **& low income earners** often face **high 'effective marginal tax rates' --> every extra dollar earned from work pay tax & lose a portion of welfare benefit** (undermines incentive to seek paid work) --> disincentive 'poverty trap' if u/e benefits to generous/marginal tax rates too high --> create eco disadv in accepting job * **reducing** marginal rates of income tax & ^ thresholds for LI earners --> **incentives to lift WF participation & ^ emp**loyment (reduce welfare traps) * **changes to parental leave programs** ti & supply by making it **easier** for parents to **stay emp** **LT** * **paid parental leave** w/ policies to make **child care affordable** & **accessible** **easier** for **both parents to maintain emp**loyment & take care of **children**

Answer 87

**^ LM supply** & **reduce hidden u/e** by making **easier for parents to stay emp LT** * **paid parental leave** & extended unpaid leave w/ policies making **childcare more accessible & affordable --> easier for both parents** to **maintain emp & care for children**

Answer 88

helping **match jobseekers w/ job vacancies** * introduced WF AUS Online july 2022 **emp services** platform help **online job searching & funding most disadv jobseekers & LT u/ed**. * AUS' **job placement policies** criticised for underinvestment in helping those need most, spends **<1/2 OECD avg** on employment services (--> ppl drop out LM altogether)

Answer 89

**sustained** increase in **general lvl of prices in an eco** * measured in AUS by **% change in CPI**, which **summarises the movement in the prices of a basket of g&s, weighted according to their significance for the avg AUS HH** * annual inflation rate caclulated by % change in CPI over the year

Answer 90

* basket of g&S used to calculate the CPI doesnt include all g&S available in eco but covers wide selection reflecting **avg HH spending patterns** * CPI gives good indication of **overall movement in prices of consumer goods** & reflects **general changes in cost of living** (how much ocnsumers have to pay for g&S they buy) * compiled by ABS & published **every 3 months** * excludes some items of Hh spending eg. changesi n mortgage IRs & consumer credit charges * doesnt include prices of property/land so changes in residentical property prices recent yrs not reflected directly in CPI * weights given to expenditure groups in the basket based on ABS HH Expenditure Survey * ABS regularly updates weighting for each expenditure group to accurately reflect avg consumer purchasing patterns

Answer 91

'**headline'** inflation * calculated using the **CPI** * can be **misleading** indicator of **ongoing price pressures** in eco bc **includes some g&S** whose **prices highly volatile**/**affected** by **one-off** factors * prefer **underlying inflation** aka 'core' inflation * underlying inflation **removes effects of one-off/volatile price movemetns --> less variable** than headline inflation * **underlying** inflation either **below/above headline** inflation rate eg. one-off dramatic falls in prices of certain goods reduced headline inflation rate but had much smalelr impact on underlying rate

Answer 92

calculate avg inflation rate after excluding the 15% of items w/ largest price increases & 15% of items w/ smallest price increases/(largest price falls) from the CPI

Answer 93

**inflation rate** of the item at the **middle** of the **price change**s in the **CPI basket** (the **50th percentile by weight**).

Answer 94

**average** of the **trimmed mean** & **weighted median added** together & then divided by 2 * (trimmed mean + weighted median)/2

Answer 95

when **AD/spending growing** while **eco near**ing its **supply capacity** so higher demand **leads** to **higher prices** not **more output** * in **market eco**, **prices** determined by interaction of **supply & demand** in market * when **AD/spending exceeds** eco's **productive capcity**, **prices rise** as **output can't expand more in ST** * **consumers force** prices up by **bidding against each other** for **limited g&S available** * consumers willing pay higher price any given lvl supply (price ^ that results from higher AD)

Answer 96

when ^ in production costs eg. (wage increases) that producers pass on in form of higher prices, raising inflation rate * casued by **^ costs of FOP** * when production costs rise, firms try pass on to consumers by raising price of products * producers face **higher costs** so **supply less quantity** for any **given price lvl** * ^price --> **contract demand**

Answer 97

* **Wages & prices of raw materials** eg. fuel * when **wages ^ faster than productivity growth, ^ cost of labour per unit of output** * wages typically 60% of firm's costs, firms attempt **pass** wage ^ to **consumers to maintain profitability** * ^ price raw materials --> ^ price product to maintain **profit margins** **(similarly**)

Answer 98

1. if prices of g&s expected to ^ in eco, **consuemrs** **purchase products before prices increase** * consumers ^ consumption --> **higher demand-pull inflation** * if **firm expects demand** for product will **^, raise prices to max profits** --> ^ inflation 2. **employees** expect inflation ^, **negotiate wage increases** * **workpalce contracts** typically **negotiated in advance** for next **2,3 yrs** so if emp expects higher inflation next few years ask for higher wage rise to **preserve purchasing power of wage --> firms pass wage increases --> cost push inflation**

Answer 99

once inds expect higher inflation, act in way that accelerate higher inflation, entrench in eco --> take eco contraction (eg. 1990s recession) to bring expectations down

Answer 100

trasnfer to AUS via international transactions * **depreciate AUD --> ^ dom price of imports --> inflation** * **extent** **^** in import **prices/fall in AUD** **--> consuemrs** **pay higher** prices for imports **depends on market conditions** * if **imports** face **comp from locally made products, importers** can **reduce profit margens & not pass to consumers** full effect of overseas price rise/depreciation * **imported inflation** accounts for **larger share** of variability in **headline inflation** rate than past (AUS **integration with global eco**) * also **international factors** sig reducing inflation in AUS (**lwo fuel prices** **directly reduce inflation** bc **sig** item in **basket of g&s** to **measure CPI,** & **indirectly** bc **lower prod costs** for AUS businesses)

Answer 101

direclty influence lvl inflation (&price): * by ^ indirect taxes, gvt impact general lvl prices * eg. gvt make child care free for parents during lockdown reduced headline rate of inflation to below 0 * deregulating an industry * changing tariff rates * imposing price controls * price monitoring * increasing charges for g&S provided by AUS gvt

Answer 102

* when **^ money supply outstrips EG rate**, an ^d volume of money chases the same **amt g&s --> prices** likely rise * if **money supply ^ w/o ^ real production --> ^ AD relative to supply** that causes inflation * 'monetary inflation'

Answer 103

* one of major **constraints on EG** * **excessive EG** --> raise **inflationary pressues (^ wage demands, strong ocnsumer demand bidding up price lvls)** * higher inflation **distorts eco decision making (producers & consumers** change their **spendign & investment** decisions to **minimise effect** on themselves eg. **buy assets > investing income producing activities)** * discourage bus investment bc makes **producers uncertain abt future prices & costs --> future profit** lvls * distort consumers' decisions to **spend/save disposable income** * likelier **spend & not save** during high inflation **bc purchasing power reduced** over time however recently **other factors (house prices, super, broader eco outlook) can be mre influencing lvl savings in eco** * when **eco strong performance & ppl's assets rising value, consumption rises & savings rate falls even when inflation rates low** * **consumers spend more to avoid holding money that will buy less later.**

Answer 104

* **sustained** lower inflation rate --> **maintain moderate EG w/o** curtailing growth through **higher IRs** * low inflation beneficial EG bc removes **distorition** to **investment & savings** **decisions** from high inflation * **incentive to invest in LT productive assets > ST speculative investments** (bus investment) * sustained low inflation **encourage consumers to save higher prop of disposable income** (^APS)

Answer 105

major influence on **nominal wage** (**pay received by employees in dollar terms for contribution to PP not adjusted for inflation)** **demands** * higher inflation --. employees seek larger wage increases to compensate for erosion of purchasing power of nominal wages --> **wage-price inflationary spiral** diff to break, wage ^ --> higher prices --> higher wage demands... * AUS recent yrs lower inflation rates **reduced annual wage growth** (check tectbook) * if **inflation exceed growth of nominal wages, real wages decline** as employees **lose purchasing power** as **prices ^ at higher rate than income**

Answer 106

high inflation rates --> **lower income earners incomes dont rise quickly as prices**, face **higher IRs on borrowings** * hurts inds on **fixed incomes**/incomes **not indexed to/rise as fast as inflation rate** * **erod value of existing savings** so inds who cant protect their savings from the impact of inflation's **net wealth** declines

Answer 107

closely related in **ST** * higher lvls inflation --> more **contractionary fiscal & monetary policies** **--> slower eco grwoth & higher u/e in S-MT** * high lvls u/e often have low infaltion rates (demonstrated by **Phillips curve**) * previously gvts chose betw **low inflation & slower growth/lower u/e at risk of rising inflation** * over **LT** inverse relationship **breaks down** eg. mid 1970s AUS simultaneous ^s in inflation & u/e (**Stagflation**)

Answer 108

**purchasing power parity** theory says **ER** in **LT** changes to **reflect real purchasing power of currencies** --> goods** traded globally** (processed food, clothes, electronic goods) **cost roughly similar** amts in **diff countries** once moeny **converted **into** local currency** * ecos w/ **high inflation** should exp **depreciation relative to ecos w/ lower** inflation rates * assumes **free trade & floating exchange rates** eg. ER equal 2 countries if 1 higher inflation then price of its bikes rise & AUS **become more internationally competitive, ^ exports** to NZ & NZ consumers **switch to cheaper AUS substitutes** --> **^ demand for AUD --> appreciation** --> AUS bikes **less competitive, restore PPP betw 2 ecos** * doesnt work perfectly bc **local factors (transport costs, taxes, ST influences of global financial flows on currencies)** * PPP LT anchor for ER betw diff countries

Answer 109

**ability** of an **eco's exports** to **compete** on **global markets** * eco can be competitive by **selling products of higher quality/lower price than competitors** * high inflation --> **^ prices** for AUS **exports --> reduce international competitiveness --> lower quantity of exports** * as **price domestic goods ^, soneumrs switch to import substitues --> worsen trade deficit** * **low inflation improve AUS IC** --> **price** of AUS g&s **more attractive** to **other countries** & make **local products more competitive w/ imports** -->** expansion of exports & replace imports w/ domestic substitutes** --> **improve trade deficit**

Answer 110

**ST** higher inflation **appreciate ER** bc **speculators anticipate RBA raising IRs -->** attract **^ financial flows** * high inflation causes currency to **depreciate over time** * stronger relationship when depreciation causes high inflation * **LT, sustained low inflation** may foster **^ interntaional confidence in AUS eco** & **strengthen value **of AUD

Answer 111

lower inflation --> reductions in nominal IRs (nominal IRs based on real rate of return (real IR) + inflation) * higher inflation --> higher IRs as **RBA** tries **reduce demand pressures** in eco & **avoid neg consequences of high inflation**

Answer 112

limited * **small** amt inflation beneficial bc allows **adjust**ments in **relative prices** in an eco **w/o** requiring **reductions in normal prices** often '**sticky' esp wages** * **easier for debtors to repay loans with money less valuable than money they borrowed. --> ^ borrowing and lending, --> ^ spending** * low positive lvl inflation **reduces likelihood** of eco experiencing **falling prices** (**deflation**), can also have neg consequences * **deflation** gives **consumersi ncentive to delay purchases --> fall consumer spending & eco downturn** * also makes **borrowing money less attractive** bc **amt repaid rising in real terms** (not falling) * also make **hiring workers less attractive** if **nominal wage rates stay same** & **real wages rise** * RBA targets low inflation lvls to avoid but dont strive for 0 inflation --> ^ risk of deflation & other eco problems

Answer 113

**MONETARY**, other parts of the policy mix * played primary role in AUS' low inflation record since early 1990s * **S-MT,** MP attemps **sustain EG lvl doesnt create inflationary pressures**, hold between **RBA'S 2-3% target** * if starts **rising, RBA ^ IRs** throughout eco by **tightening** MP --> **dampen sonumer & investment spending --> lower lvl ecoactivity --> lower inflation**

Answer 114

**pre-emptive MP** by taking action against **inflation before** problem * generally aims to **^ IRs before inflation** reaches **top of target band** to account **time lag betw policy implementation & effect**

Answer 115

consistently its **intention** to use MP primarily to **ensure inflation remains within target band --> lower inflatioanry expectations --> reduce inflation**

Answer 116

* period rising inflationary pressures, gvt can ^ revenue & reduce spending to minimise demand pressures in the eco --> **reduce demand-pull inflation** * FP settings support low inflation object can **reduce need** for **higher IRs** to combat inflation

Answer 117

LT 1. reduced **PROTECTION --> lower M prices & ^ comp** faced by **domestic producers** from **overseas competitors** & new entrants to domestic markets --> mroe **diff for domestic producers to raise prices** 2. **LM reforms** try ensure **wage ^s link to productivity improvements** * **^ productivity -->** eco **afford real wage ^S w/o inflationary pressures** & large wage rises in **other sectors** of eco (**deregulated LM)** * hire easily, find jobs faster, labour resources used more efficiently --> participation, 3. greater **investment** in eco **infrastructure** (roads, railways) **avoid** transport & **bottlenecks** that **^ production costs & add inflationary pressures** * labour mobility, transport costs

Answer 118

global > domestic

Answer 119

aim of **gvt policy** to promote **sustainab**ility on **external accs **so AUS can **service** its **foreign liability** in **M-LT** & **avoid ucrrency volatility** * ensures **imbalances** in AUS' relationship w/ **global eco dont hinder **achieving domestic **eco policy goals (higher growth, lower u/e, lower inflation**) bc goals affected by external imbalances (**unsustainable ^ in CAD/foreign liabilities/large movements of ER)** * IF**overseas investors** decide AUS' **ext**ernal **position not sustainable --> depreciat**ion of currency, **withdraw investment funds, diff** for **firms to access overseas FMs, higher IRs, slower EG**

Answer 120

ER, CA balance, NFL not: * NPI, BOGS, * foreign debt, * global EG, * gobal IRs, * net foreign debt, * budget deficits

Answer 121

* high lvls result in **large share profits going offshore ** * offset NPI acc outflows but inflows of profits from AUS investments overseas

Answer 122

receded bc **'improved CA**' & bc **external imbalances havent neg impacted AUS' eco performance** * AUS **maintained confidence** of **foreign investors** whilst **larger external imbalances than most adv ecos** (**^ commodity export revenues strengthen confidence** in **sustainability** of AUS' external imbalances)

Answer 123

best measure of trends in CA over time rather than size of CAD in dollar terms * accurate comparison across time & betw countries * long history large CADs since 1980s, paid out considerably more for goods, ervices, income than received from overseas

Answer 124

* extent CAD perceived as problem & policy response required depends on factors causing it * **sustainable?** * high CAD 1st as largely a trade problem related to AUS' balance on g&s, most ppl see as structural issues related to primary income acc * CAD result of **Svings & investment gap rather than a trade gap** --> argue sustainable since result of high lvls direct investment in AUS --> help generate higher eco grwoth & exports in LT * others say puts AUS risk not able to finance its external liabilities

Answer 125

* CAD **1980S** blames on persistent **deficits** on **BOGS** caused by **slow export growth** & **expanding demand for imports** * BOGS **not main** contributor to AUS' CAD but crucial part of AUS BOP performance 1. AUS **lacks international competitiveness** in many **higher value-added** areas of **global trade** eg. ETMs * many of AUS' trad **manuf industries** **lose their markets** at home & overseas bc **unable to compete** w/ **overseas comeptitors** who **specialise in large-scale, low cost manufacturing** * many areas **manuf largely moved offshore** (clothes, textiles, electronics) * AUS' manuf sector **declined as share total output --> ^ reliance on M** * **since 2000s** sustained period **high commodity prices --> appreciate AUD --> AUS' non-commodity resources less competitive** * **'Dutch disease' demand for 1 type X may drive up value of ER --> make other exports less competitive --> contract production** of said exports * **lack IC** from cost factors **(ability to sell g&s at attractive prices on global markets** due to **ERs, labour costs, productivity** lvls) & non cost factors **(quality of production, reliability of supply,** marketing efforts, customer services) * AUS **lags behind avg for adv ecos in infrastructure access** esp **electricity & IT** --> impact **ability** AUS **access international X markets** 2. AUS' **TOT** major **effect changes in CAD** * global commodity prices went into **LT decline 1975-2000 --> slower growth in AUS' export rev & ^ CAD** * trend changes 2003 TOT ^ dramatically * **large ivnestments in mining sector to take adv of higher prices for resource exports --> 2010s sustained downward trend in CAD --> aus' 1st CAS's** in almsot 5 decades * **relationship betw movements in TOT & AUS' trade balance (hence CAD) strengthened recent yrs** from avg deficit 1.5% of GDP 200s to avg surplus 0.2% 2010s * while AUS profited from period high commodity prices, **risk of heavy reliance on minerals & energy exports** is** sharp fall in prices** fror them**/major disruption to AUS' exports to China --> large ^ in CAD**

Answer 126

result of excess domestic investment > domestic savings **savings-investment gap** * if **dometic spending > domestic output --> CAD** --> make up by bringing in **financial inflow from overseas (AUS BORROWS from overseas/sells domestic assets to overseas)** * **foreign savings** instead of domestic savings used to **finance domestic investment** * if gvt runs **budget deficit --> reduce lvl national savings** & **widen S&I gap** * relationship betw/ **bus investment, net saving** & **fall in investment** helped **narrow gap & lower CAD** * country w/ small pop, large land mass, **extensive natural resource** AUS relied on **overseas capital(foreign investment(** to **fill gap betwn domestic S&I to develop** eco **more rapidly than** if **relied only on domestic sources of capital** * as long as **foreign investors & loans increasing** AUS' **productive capcity** & **not** just **funding purchase of existing assets** eg. housing, **add** to AUS' **capacity to service** its **foreign liabilities** --> **CAD sustainable LT**

Answer 127

thesis: **as long as a CAD result** of **S&I** decisions by **private sector** & **not** from **distorition** to normal **market mechanisms**, **no concern** abt **eco's ext stability** * **AUS' CAD & foreign liabilities almost entirely** generated by **private sector** --> argue AUS' CA problem diff from other c's w/ large external imbalances who exp **financial crises from large foreign debt burdens bc their debt was result of gvt borrowings** * AUS' **foreign liabilities helped fund private investment projects**/were direct **investments in firms** & ventures **by foreign residents** * if private sector decision making not distorted by other factors eg. gvt policy, inds & firms make **proper calculations of risks & costs of borrowing** fro overseas & borrowers & lenders responsible for own decisions - 'consulting adults' * AUS' foreign liabilities largely accumulated by private sector --> aus gvt no need to be too concerned abt lvl foreign liabilities more than w/ lvl domestic liabilities

Answer 128

* criticised since GFC, whether assunption (that private sector decision making involves proper calculation of risks) always true * large FIs unable accurately calculate risks of borrowing & lending w/ complex financial products (mrotgage-backed securities) in GFC * also assumes private sector debt entirely separate from public sector debt but GFC national gvts forced to assume liabilities of their c's private-sector banks to avert serious financial collapse but AUS better eco perf during global recession GFC supported at least in enviro of strong commodity prices, AUS' external imbalances sustainable

Answer 129

are equal to **AUS' financial obligations (foreign debt + foreign equity) to rest of world - rest of world's ifnancial obligations to AUS** hence, **net foreign debt** **( total stock of loans owed by aussies to foreigners = total stock of loans owed by foreigners to aussies) + net foreign equity (total value assets in AUS** * eg. land, shares, companies in foreign ownership **- total value assets overseas owned by aussies)** * reflect AUS' **total finacncial obligations to foreigners minus total financial obligations of foreigners to AUS**

Answer 130

**foreign debt** * **initial borrowed sum eventually** has to be repaid & debt must be **serviced w/ regular interest payments** * servicing of AUS' debt constitutes an **outflow of funds on CA --> ^ CAD** * **selling assets to foreigners doesnt add directly to AUS' foreign debt** * AUs **dont have to repay price** of **purchasing equity unless company/assets sold back to aussies** * however aus **must send overseas returns on equity investment (company profits, rent on land, dividends on shares)** * **recent yrs** **equity servicing costs on PI acc exceeded interest repayments on debt** * **returns on equity** AUS pays to overseas investors **partly offset by returns received** by aussies from **investments overseas**

Answer 131

reflects growth in net foreign debt & changes in net foreign equity * trend of ongoing growth in AUS' **net foreign debt to GDP ratio** since beginning of globalisation era 1980s * fluctuations can occur in ST responding to movements in AUD & trends in foreign investment inflows & outflows

Answer 132

**debt sustainability** problem * **debt size rising faster than ^ GDP** (like most yrs), **interest payments** on debt will progressively take up **greater prop of GDP --> reduce AUS** overall **SOL & EG protential** * **high foreign debt** can create cycle "**debt trap scenario**", starting with a **high CAD --> requires inflow of foreign funds** ( foreign debt/**selling AUS assets to foreigners**) **--> larger foreign debt**, AUS' interest payments on the debt ^ --> record as **PI debits outflows on CA**, hence today's foreign debt adds to future deficits on the CA

Answer 133

**reduce** AUS' **international credit rating** (whcih reflects confidence that FMs have in AUS) --> More **diff to borrow funds internationally --> ^ IR** on borrowing * a **sustained long period** of **low global IRs & rising export revenue** ensured AUS able to **service its foreign liabilites**

Answer 134

measure c's **capacity to service its foreign debt** * **prop of export revenue msut be spent on interest payments on foreign debt** * c better service its foreign debt when has **high volume of exports --> earn large amts of foreign currency** * 2020-21 AUS fell, despite ^ in foreign debt lvls, very low lvls of global IRs & rapid growth in value of exports meant that servicing cost of that debt is manageable

Answer 135

**debt & equity** into the **private sector** * partial **inflow from offshore funding of banking sector** - **Aus banks borrow on overseas FMs to make loans to AUS HH &bus** * however after GFC **banks reduced reliance on offshore funding** bc **^d domestic savings** * **larger share** of **capital flows into AUS** gone **into investment securities** as **foreign investors purchase AUS GVT debt** * AUS **gvt** one of small no. national gvts that still holds a **AAA credit rating, attractive to overseas lenders bc very low risk lvl**

Answer 136

**smaller** component of AUS' **foreign liabilities** * when **foreign investors buy assets in AUS**, recorded as **^ foreign equity** * when **aussies buy overseas assets,** recorded as **dec net foreign equity** * **since 2013, value of AUS' foreign assets > value of foreign ownership of AUS assets (negative net foreign equity thus NFL) --> trend ^ in AUS ownership of foreign assets** * as a % of GDP peaked in 1990s bc foreign ivnestment in AUS increasingly involved asset sales than foreign borrowing * **mroe volatile than net foreign debt** --> reflects **ER movemetn**s & **shifts in market valuation of companies & assets** which are affected by **changes in investor sentiment**

Answer 137

**profits & dividends returned to overseas investors,** can create ongoing strain on AUS' external accs by **worsen**ing **NPI** acc (although **offset by earnings from AUS' overseas investments**) * some dis of foreign ownership but **sustainability of servicing costs for foreign equity less concern than foreign debt** bc **dividends only sent overseas when AUS asset/bus generating profitable return** while **interespt payemtns on debt must be paid regardless if theres profit** | there was a short answer in the 2nd part

Answer 138

.large **rise** in **value** of AUS **investments overseas** & overall **growth of other ocuntries' liabilities to AUS** * however, AUS' **gross foreign liabilities still larger** & over same period, **foreign owned equity in AUS increased while gross foreign debt increased** * while AUS' **gross foreign debt ~2/3 > lvl AUS lendign to overseas, gap betw foreign equity inflows & outflows much smaller**

Answer 139

**longer term**, but occassionally concern in recent decades * among **adv ecos, AUS relatively high foreign liabilities w/ CADs appear unsustainable in LT** * if **global conditions** became **less favourable** to AUS they in last 2 decades, can make AUS **vulnrable** * eg. **reliance** of **AUS financial system** on **ongoing inflow of foreign capital** major reason whygvt provided a temporary guarantee for all overseas loans of banks & FIs after GFC * shows extent consistently high lvl external imbalance increases vulnerability of eco to adverse eco developments overseas

Answer 140

direct link betw AUS & rest of world * all trade & financial relations betw AUS & other countries **mediated** through this * hence **sig impact** on AUS **international competitiveness & external stability**

Answer 141

* high lvl volatility in AUD result of AUS **heavily reliance on commodity exports, larger fluctuations** in commodity-based currencies often **attract speculators** * more result of **^d global eco instability** than domestic

Answer 142

* **very low commodity prices 2000s** & internet developed --> countries w/ 'low tech' ecos eg. AUS shunned by global markets * changed **after 2003** when AUS began **largest TOT boom** in its history as **commodity prices rose sharply w/ China's surging demand for natural resources** * trend **^ in AUD continued until 2011 bc of rising exports, sustained eco grwoth & IR differential betw AUS & other ecos** * falling **TOT sharp fall** in AUD **early 2010s** * another depreciation alter that year reflected **weakness in AUS eco, stronger growth in other ecos**, then COVID 19 global reccion on commodity exporters eg. AUS but resilience & its **rising TOT** contributed to **appreciation in currency**

Answer 143

pwoerful mechanism to **adjust** changing **conditions in global eco** * during periods **weaker growth in AUS/global eco,** ER **depreciations** helped AUS more **internationally competitive** & stimulated **export growth** * after 2011 fall in TOT, depreciation made **exporters & import-competing sectors more comeptitive** * many **non-mining firms in there adversely affected by high value of AUD** during mining boom * **recent yrs** lower dollar supported international competitiveness in **export industries**

Answer 144

helps AUS adjust to changing global conditions w/ sig impact on AUS external stability * change in ER influences **BOP** by affecting AUS' **international copetitiveness & size and servicing costs** of AUS **foreign debt borrowed in foreign currency** * if value of dollar continually subject to change, 2 of major indicators in AUS' external stability also volatile, create policy challenges & eco instability

Answer 145

vicious cycle * **investors fear further volatility in the dollar** & **discouraged investment decisions** if dollar falling **sharply** bc target of finacnial **speculators who make money from ST FM changes** * **downward trend, can continue until enough investors believe currency undervalued & starts buying again** * Forex markets often overshoot when major currency movements occur

Answer 146

**recent yrs, external stability not major obj of macroeco policy** * aim improving external stability **not major influence on F/MP settings** * reflects acceptance of '**consenting adults**' view of **CA** among **policymakers** that CADs & foreign debt reflect ecisions of **private sector** & dont require policy change by gvt * reduced concern **AUS' improved Medium term export prospects, recent trade surpluses & ^ HH savings** * achieving **sustainable** outcomes on **CA & foreign liabilities & value of currency** **LT** ojbs of eco policy, **reduce risk of external shocks** could adversely affect AUS' **access to GFMs**

Answer 147

1. **MP** * past, **contractionary** MP to **reduce consumer spending on M** to create **ST improve BOGS** * now **ineff** since **temporary impact** & results in **slowdown across eco** * **higher IRs can ^ capital inflows --> ^NPI outflows --> worsen CA** * **unable to target LT structural causes of AUS' external imbalances** 2. **fiscal policy**\ * some role addressing AUS' **low lvl** **national savings** * adopt policy of **fiscal consolidation (running balanced/surplus budgets over course of eco cycle)**, gvts since late 90s**reduce influence on private savings over MT** * after COVID fiscal strat gvt prioritised **higher growth & ower u/e > fiscal consolidation --> aus' public debt lvls high throughout 2020s & neg effect national savings** * **if debt falls as share of GDP** 2024-25 onwards, **improve**ment in **national savings** & **lessen upward pressure on IRs & 'crowding out' of private borrowers** 3. **compulsory super** requires employers to set aside **10% of emp's wages in a superfund** --> **lifted lvl national savings** since early 90s * major contribution to **^d AUS' overseas investments** --> create **financial inflows on NPI acc** * ^s in super so reaches **12% over 5 yrs --> support external balance** 4. **microeco reform** can address **structural** problems causign AUS' **external imbalances** * **international competitiveness** of AUS g&s improved if measures lifting **productivity** of AUS producers * policies include measures to **reduce capacity constraints** in the eco by improving **infrastructure** & alleviating **skills shortages, remove protection**ist barriers **shielding ineff producers from foreign comp,** **LM reforms** to **^ productivity & Workforce participation**

Answer 148

the **extent** whcih AUS **maintains confidence of international investors** * gvts through **consistent, MT policy** settings eg. AUS'** infaltion targeting, goal budget surpluses**, contniued **microeco reform** --> **largely successful** maintaining international confidence in AUS' eco **recent decades** * **international investors** mostly accepted '**consenting adults**' view of AUS' **CAD & foreign debt**

Answer 149

* even if **high lvl foreign debt** result of **private sector borrow**ings, **gvts** can be **forced** to tak **eresponsibility** to **prevent** a meltdown of their entire **financial system** & potential **eco depression** * AUS **GVT guaranteed its private sector foreign debt**, which **undermines** argument that **private sector borrowings from overseas dont matter** bc shows in times of **extreme financial isntability, extl imbalance** (whatever origins) can **make** **eco mroe vulenrable to ext shocks**

Answer 150

major challenge gvt policy to ensure fairness in distribution of welath & eco **opp** in society * ecos w/ **smaller gap** in incomes betw high & low **income earners** have **greater happiness**, better **health outcomes**, higher lvls **social mobility** * **globalisation increased inequ in many countries** * one o greatest challenges **adjust**ing to **structural** eco **change** is ensuring **one part society doesnt have unfair share** of **burden** of change & **benefits dont just flow** to those **financially well off**

Answer 151

traditionally **relatively lw** lvls **inequality** * around **OECD avg** * income ineq increased 1990s & 2000s but **sustained EG, unviersal access to public edu & HC & targeted social security safety net prevent widening inequality** * deg of **income ineq** in AUS **^** since mid 1990s * AUS has **more unequal dist than many OECD** ecos (above median)

Answer 152

**side effects of policies** that encourage **market** forced & **improve competitiveness** * lvls ineq can ^ when nations implement eco policies eg. **reduce marignal income tax rates, restrict welfare, reduce spending on public services, deregulat LMs** * but **always** **trade-off betw ^grwoth & reduced inequ** * **high lvls ineq can reduce eco grwoth**

Answer 153

* amt of **money/other benefits measured in monetary terms** that **flows to inds/HHs from sale of FOP over PIT** * wages from labour, rent from land, interest from capital, profit from enterprise * benefit flows to owners of FOP for **owning, maintaining, managing productive resources** * **pensions** & benefits from **gvt**

Answer 154

**degree** which income **unevenly distributed** among **ppl** in the **eco** * high lvl **equality** : ppl receive **similar share of income or large gap** betw **high & low income earners**

Answer 155

by the **share of total income received by diff groups** * **prop of dispoable income** (after tax) **received** by each **quintil** (20% grouping ranked lowest to highest income earners) * past 25 yrs **share of income risen for highest** income quintile * but **trend towards rising ineq stabilsied** since GFC * **diff in avg incomes (before tax & welfare pyments)**

Answer 156

mean * **avg lvl income** calculated by **dividing total income of group/no. income recipients** in group median * lvl incoem divides incoem recipients in group into **1/2** * 1 having incomes **above** median * 2 incomes **below** median **(middle income)**

Answer 157

graph of **income distribution**, plotting **cumulative ^ in pop** against **cumulative ^ in income** * **cumulative %** of **total income** received (**y**-axis) against cumulative % of income **recipients (x-axis)** * if income ditributed **evenly** across pop, curve **diagonal** line through **origin** **line of equality** * **further** curve **away from line,** **greater** deg income **ineq** in society

Answer 158

no. betw **0 (all incomes equal) & 1 (single HH receives all income)** that measures **extent** of income ineq in an eco, calculated by measuring **deg curve deviates from line of equality** * single statistic summarises distribution of income across pop * **ratio of area betw actual Lorenz curve & line of equality (A) & total area under line (A+B)** * smaller gini coeff, mroe even distr of inc

Answer 159

more complex than measuring income lvls * **dist welath more unequal than distr income** * top quntile earns 40.4% of total income, top quintil owns 63.5% total welath * bottom quintil earn 7.5% total income, <1% total wealth * **wealth ineq** remained **relatively stable** over time but **gini coeff** shows **improve**ment 1980s & 2000s, **worsen**ing from 2012

Answer 160

positive impact of **compulsory super** introduced in 1990s * **build** **store of wealth** for ppl in **lower income quintiles** w/ **jobs**who often **dont have assets** eg. real estate

Answer 161

accrues to **owners of capital** **during** periods of **growth & decline** * AUS' **house prices risen dramatically past 2 decades, ^ wealth of asset owners** but **harder for low & middle income HHs** to buy home * real estate prices in expensive areas mroe responsive to IT changes --> **very low IRs recent yrs widen**ing wealth inequality as **owners of expensive properties** see **value of assets ^ >** less valuable **real estate**

Answer 162

**increase** * **strong demand** in some **sectors** in pandemic eg. **techm edical care** also highlighted how ppl w/ weatlh able to **capitalise** on **new opps** in changign eco conditions

Answer 163

**wages from labour** * **main source of income** for **consumers** * **wage/salary** payments for labour when consuemrs **participate in LM** * includes **non wage** income eg. bonuses, fringe benefits, **employer contributions to super** aka **returns to labour** **rent from land** * many consumers **own land** that becomes source of income when rented eg. own investment property generates rental income **earnings from cpaital** * **returns from own**ership of capital are sig source of HH income * returns include earnings from **financial assets** eg. investment funds, **super** accs & bank **deposits**, ownership of **shares**/whole **companies** * bc **ownership highly concentrated** among msot **welathy HHs**, large share of these earnings goes to wealthiest HHs * **main** way ineq in distribution of welath **contributes to ineq in distr of inc** **profit from entrepreneurshup** * substantial no. aussies operate bus' (esp small) * if bus makes **profit**, income considered **return for entrepreneurial skill** **transfer payments** * paymetns from gvt to assist ppl w/ **basic costs of living** * sig prop HH income through **social welfare** aka /gvt benefits * **2 types: social assistance benefits** (Welfare payments) & **social insurance benefits** (eg. workers compensation) * income collected through **taxation & transferred from gvts to HHs** * **>1/3** total incoem tax collected used to pay u/e & sickness benefits, age & disability pensions, family alowances, etc

Answer 164

HH **net worth** used by ABS to **measure private sector wealth** * net worth is **extent** whcih **value** of **HH assets** eg houses & savings (things they **own) exceeds value of liabilities** (loans, things they **owe)** * most from owner occupied **property, super**, investment property (ranked)

Answer 165

**housing & super** **increased recent yrs** while **savings & ownership of bus assets declined** * more value held in owner-occupied **properties** than any other asset * combined w/ investment properties, **real estate** assets >1/2 % HH welath in AUS * **super funds** **2nd largest Hh** asset & **largest ifnancial** asset

Answer 166

* **recent decades** AUS experienced **modest ^** in overall lvls **inequality** * income distribution asymmetric, **relatively small no. HHs have relatively high incomes & large no. HHs relatively low incomes** * **wealth mroe unequally distributed** than income * hihgly unequaly distr of wealth & even greater **concentration** of wealth at 'top' compared w/ distr of income * **income** remain **highest** bet **35-54yo** main yrs of working life, **15-19 lowest** * **younger** brackets employed in **casual, PT jobs lower-paying** * **higher edu qualifications** eg. tertiary degrees enjoy income lvls much **higher than** w/ vocational training**/no qualifications beyong high school** * earnings **highest w/ postgraduate degree** & lowest w/o post-school qualification * **rapid ^ in housing prices** 2000s **sig widened ineq** in ditr of welath by age

Answer 167

* **FT female** workers **earn less** than males * **little change in wage relativities** since ABS began publishing wages data for owmen over 3 decades ago * 1985 women in FT jobs earning 82% male earnings * part of diff in earnings explained by **historic human capital** factors (past **attitudes** concerning **role of women** in society, females **fewer opp**s to acquire **edu, skills, qualifications**) * after accounting diff in jobs & work hrs, **avg weekly earnings females lower ** * current **gender pay gap** influenced by **occupations w/ high prop female employees paid lower wages,** women have greater **home caring responsibilities,** fewer senior roles for employees who choose work **PT** (as **higher prop** of women do) * experience **in&Direct discrimination**, **avg male & female earnings working FT in same industries** * on avg, female emps earn less than male **regardless same qualifications & experience** * gender pay gap **not exclusive to male-dominated industries, greatest** income discrepancies occur in industries where **females account greater prop of workforce** **(health, social services**)

Answer 168

way **women accumulate lower super** **balances** **during working lvies** * super balances for women who worked **FT** through careers 17% **lower avg** than men * including **casual & PT**, gender gap 33% reflects **higher prop women** working these positions --> women paid **lower wages**, take **longer career breaks** for caring responsibilities, when take (**parental leave employers not required make super payments**)

Answer 169

* almost 1/2 aussies born overseas (1st gen aussie)/have 1/+ parent born overseas (2nd gen aussie) * **~60% migrants come from countries not English-speaking** nations * **ST, migrants ** (esp from **non english** speaking countries) have **slightly higher rates u/e** * **LT**, u/e **same** lvl for**aus born & overseas** * **migrants** from **english speaking** countries **likelier** to be **highly skilled & professionaly qualified --> lower** rate **u/e** comapred to recent migrants * those who came to AUS under **skilled migration program** have **LFPR 85%, higher** than PR for pop 67% * little data on relation betw migrant status & HH income & Wealth * compared w/ native-born, aussies w/ **migrant bg** have **higher incomes** if from **english-speaking countries** & lower incomes if not, **sig less wealth**, higher **underemp**loyment --> **barriers to employment in higher paid jobs for non english speaking migrants due to english proficiency**

Answer 170

**recent demographci changes** in AUS eg. growth of **female particiaption in workforce, decreasing fmaily size**s (**couples raise fewer children avg) , ^ prop** of ppl **living alone** * **large disparity in family income & Wealth lvls** * **1 person HHs & single parents** HHs receive **weekly income lvls sig below median** * **small % single parent w/ children under 4 employed FT** * single parents work **longer hrs as hcildren older, work fewer hrs than couples --> lower incomes**, almost 1/2 bottom incoem quintile --> **lower rates FT employment bc caring responsibilities** * couples **w/o dependent children highest income** family structure * couples w/ **dependent children** have much **lower prop HH members in paid work, lower avg incomes** than coupels w/o dependents * **couples w/ children more likley to be older** so adults in HH likelier have **higher ind incomes even if share among HH members** * major reason for low incoem lvls single person HHs is bc **large no. aged ppl no longer in paid workforce** & **rely on gvt benefits** as **primary income source** * **^ transfer payment rates for older Aussies & low-income families fell**

Answer 171

**similar** pattern to income distribution, with **couple-HHs** enjoying **sig higher wealth** lvls **compared w/ single parents** & person **HHs** * main diff is **single person HHs much mroe wealth than single parents** **despite similar weekly incomes** --> influence of **'income-poor & asset-rich' elderly** ppl in single person category who **paid off mortgages & live off gvt pensions**/other retirement incomes

Answer 172

**regional factors influence demographic change** (ppl in disadv areas 'take flight' to prosperous areas) & major issue **driving** direction og gvt policies for **inc ineq.** * **avg income** lvls **differ among states** but **ineq** betw ppl in **major cities & regional areas, between better-off & less well-off suburbs in major cities more sig** * **ACT & NT** enjoy **highest HH incomes** & **Tasmania** suffer **lowest** income * **WA &NT** (regions w/ **largest shares of eco activity in mining)** experienced **lasting benefit from mining boom** & have **incomes above majority** of eastern states * age role in interstate inequalirt where **areas w/ younger pops** eg. **ACT & NSW** have **higher incomes** than states w/ older populations eg. Tasmania * **inequ iwthin states esp betw major cities** & rest of state * **1/2 NSW's most disadv regions concentrated in 6% of state,** geographical ineq barely changed since 2007 * NSW pop living in capital city area **earn more than those rural areas** * **even larger diffs for net wealth,** big diff betw **property values** in cirites compared to **regional areas**, Sydney HHs have property **assets, worth more than double avg home values for HHs in rest of NSW** (remember the limitations for interstate too)

Answer 173

**doesnt account differences in cost of living** * Sydney pay highest weekly rents in country, but weekly median rent for Pertt property is 2/3 * **incomes may be similar in both cities but actual living costs lower in smaller city --> higher LS** ( remember w/ **interstate comparisons, cost of living differences** mean **raw income** lvls can **exaggerate true extent of incoem ineq** **betw geographic areas.**)

Answer 174

although **distr welath in AUS way more unequal than distr income**, **closely related** * inds w/ **high incomes** alos enjoy **greater lvls wealth compared to low income earners** * HH income can be used to **purchase g&S, service debts & acquire assets** * **more income** a HH has** left after covering living expenses, greater capacity to build wealth** * **mroe wealth** HH has, **greater capcity to generate income** * HH can generate higher income in form **rent from property investment/dividends from a share** portfolio but these assets may **not** be **affordable until income lvls reach certain threshold** * **^ in income ineq can result in widening wealth ineq, & ^ wealth ineq can result in ^ income ineq -->** explains **gap betw incomes** of AUS' **youngest & oldest** age groups grown since 2008

Answer 175

ineq has some **limited eco benefits but sig social costs** * some argue **ineq natural consequence of free market functioning effectively** since each ind **receives share of income according to** their **marginal productivity** & **create and strengthen** ind **incentives to ^ share of output** (ppl more encourages to **work harder to gain larger** **share** in **distr of income**) * but some argue **system** of **free market capitalism divides society into diff classes** (**wrking, middle, upper**) tends to **entrench high lvls ineq & poverty**

Answer 176

**inequality** in **distr income reduces total utility** in society bc ppl on **higher incomes gain less utility from ^ in income** than ppl on lower incomes * principle of **diminishing marginal utility: as more of good consumed, provide progressively less utility to consumer** * **extra $1** of incoem **worth more to lower income earner** than higher income earner * more equitable distr of income --> ^ total utility (create **greater overall lvl satisfaction in society)** * **diff to measure accurately**

Answer 177

**low income earners spend higher prop of income** than hgiher income earners since **cost of basic essentials (housing, food**) take higher prop of their income * lower income earners have **higher MPC** bc **spend more** of each **additional dollar earned** than higher income earners --> an eco w/ **high** lvl **income inequality, relatively lower lvl consumption & higher lvl savings --> lower eco activity, employment, investment, LS** * rise in income ineq in OECD ecos 1985 - 2005 reduced cumulative growth from 1990 to 2010 bc as **ineq increases, lower income HHs less able access edu opps** * w/ **lower educational attainment**, inds **less likely to stay employed** & eco will experience costs of **hiehr u/e & lower participation rates**

Answer 178

* ineq in distr of income creates a '**leisure class' of higher income earners** in society * leisure class puts l**arge prop of their money towards CC**, consume **expensive g&s --> culture** where ind **worth depends on access to lifestyle**

Answer 179

ineq inc distr causes **relative poverty --> develop underclass of low income earners w/ limited access to edu opps**, suffer **health** & ther disadv --> **reduce LFP** & create **self-perpetuating cycle of disadvantage**

Answer 180

gvts provide **safety net income support** for ppl **out of work, aged, disabled** * higher lvls inequality place **^d demands on gvt revenue** bc more ppl **low incomes** **require gvt assistance** * **entrenched disadv** imposes **proportionately greater costs on gvts** as inds **dont participate in workforce** & **rely heavily on gvt services**

Answer 181

distr of incoem & ewalth creates **class distinctions** in modern ecos eg. **upper, middle, working** class * class divisions --> tensions betw ppl & **betw diff regions, higher lvls crime & social disorder** * **wage disputes betw workers & employers** where workers try improve income lvl commonc cause of **dispute** * divisions may lead to **social & eco instability** esp in **developing ecos** where gains of rising **prosperity** often **unequally distributed**

Answer 182

**aus** doesnt suffer from high lvl of absolute poverty but experiences **sig** lvls of **relative poverty** * **3%** of aus population **persistently in poverty --> traps families** into **vicious cycle of low incomes & limited eco opps** * high poverty lvls associated w/ ^ lvls of **crime, suicide, disease, reduced life expectancy**

Answer 183

inc inequality can **^ productive capacity of resources --> ^ real GDP per capita** * eco benefits mainly derived from **incentive effects** of inequality

Answer 184

* higher qualifications & skills reap **higher income rewards --> new entrants & existing participants in LF** encouraged to **imrpvoe edu & skill lvls** (quality of LF) * **assumes children** growing up in **poor HHs** still ahve opp to **access good edu, perform well** at school, **afford higher** edu * if children in **low income groups dont have opp** gaining good educational standards, eco likely suffer **LT** from **lower lvls productivity growth**

Answer 185

* potential to earn **higher incomes** produces **incentive** for workers to work longer hrs/**overtime** --> enhance **EG** * **only**willing to **give up leisure** to **work longer hrs if feel extra income more valuable** than leisure time * if **^d output rewarded** through higher pay, encoaurges improved **labour productivity**

Answer 186

**higher incomes incentive** to encourage labour to **move where most needed** * more **mobile LF --> more eff allocation of resources** & higher rate **EG** * past decade imp as high earnings in mining jobs attracted workers to remove parts of AUS eg. NT

Answer 187

prospect of considerable incoem rewards for entrepreneurs encourages risk taking with new investment & innovation * if entrepreneurs received no extra reward for risk taking **fewer entrepreneurs & bus**inesses, lower rate **eco grwoth, weaker investment**, less **innovation,** fewer**jobs**, **reduced productive capacity** in eco

Answer 188

strong relationship betw income & saving lvls * **higher income** earned --> **greater prop of income saved** vice versa * greater income ineq should encourage ^ savings in eco bc **more income earners** * ^ savings --. **reduce** AUS **reliance** on **foreign capital** by providng **domestic funds for investment**

Answer 189

diff to identify * potential eco benefits eg. **higher** lvls of **saving/productivity** maybe **bnefit all members** of **society** * social benefits from eco system **encouraging hard work, risk taking** & **social mobility** but income ineq has few social benefits overall since **system** (that **determines distr of income & welath) doesnt give everyoen same lvl opp** to pursue their **income & wealth** goals * given the problem of **ineq of opp**ortunity, social benefits associated w/ inequality are very **limited**

Answer 190

**existing ineq in distr of income & wealth perpetuates ineq of opp** * HI earners have better **access to edu opps**, likely to gain admission to **uni courses** & take **higher paid occupations** ppl who **acquire welath through inheritance greater opp to build** wealth through **investments > start with no wealth** ppl may not have access to same **networks of ppl for new opps** * **new migrants** likley find **diff to access social & bus networks** * this ineq makes **diff to overcome** bc **many barriers to opps are informal** (bus ppl prefer do bus w/ ppl **they know, similar social bg**) exclude

Answer 191

**direct & indirect** influences * **fiscal & LM policies** have **most direct impact** by **changing lvls gvt benefits, tax**ation, **wages, salaries** * **side effects** of policies for **other** purposes eg. **mciroeco** polciy also affect ineq * **recent decades** gvts adopted strat **reducing intervention in markets** but **take** additional **targeted policy** steps to **reduce eco & social disadvs** eg. personalised assistance w/ training & finding work * during **heightened instability, major policy intervenions** to **prevent** severe eco **downturn** that could **sharply ^ ineq** (covid)

Answer 192

* **emp**loyment **main source of income** for **HH**s --> **u/e main reason for low incomes & poverty** * periods of **u/e & underemp** contribute sig to **^ gap betw high & low income earners** (AUS) * **u/e rely** on **gvt benefits --> siig below avg incomes** earned by **employed** * lower u/e rates --> reduce gap betw rich & poor * **inequ higher** when ppl of**working age drop out of LF/remain u/e for LT**, LT u/e very **diff to find emp**loyment * **^ workforce participation** to **keep** emps in **WF** & support **re-entry of LT u/e** into work can help **reduce lvl income ineq LT**

Answer 193

**changes in pattern of emp**loyoment --> many **jobs created recent yrs casual/PT > FT** ('secondary' jobs not worker's main source of income) * decline of FT work --> ^ **underemp**, often hold casual, temporary jobs **low paid** in 'gig eco' w/ **work hrs changign weekly --> lower incomes,** suffer greater **fluctuations in income** lvls bc when eco **downturn, 1st** measure bus take is **reduce casual & overtime hrs** **decentralisation of LM** **widened ineq betw wage earners** * under **EAs,** workers w/ **greater skills & bargaining power** achieved **higher avg wage ^s > less skilled** workers who **rely on industrial awards for wage rises** * jobs became more highyl skilled & specialised --> gap betw pay for high skilled & unskilled work widened AUS'** industrial relations regulated FWC** influence ineq through **annual decision** on adjustments to **min wages** in AUS * establishes min wage lvls for millions emps **covered by awards** & agreements, & **indirectly influences other wage outcomes** * since 1st min wage decision 2010, FWC willing to raise min wages to **assist low paid workers** when confident ^s affordable

Answer 194

changes in gvt **taxation, transfer payments, etc** **most direct** **impact** on ineq in AUS * overall **gvt intervention reduces income ineq by taxing wealthiest groups heavier** & **redistributing income** to **lower socio-eco groups** * final income of HHs more evenyl distributed than income from private sources * w/o taxes/gvt benefits, incoem for highest qunitile >12x avg for lowest quintile (receive most age pensions & disability support) * gvt policies --> **avg annual disposable income received by lowest quintile** of income earners **almost doubled** so highest income earners take **lil over 5x lwoest quintile**

Answer 195

* largest transfer payments age pension, disability support pension, u/e & other working age benefits, carers payment

Answer 196

lvl **tax**ation is**diff betw gross income & disposable** income * bc AUS has **progressive incoem tax system** **w/ higher marginal tax rates for higher income** lvls * **lowest** 40% **income earners** had **prop**ortionately **larger tax burden bc indirect consumption taxes not related to income offset by gvt benefits** assist lowest 3 income quintiles * gvt payments ot **u/ed, low incoem** earners, **elderly** & provision of gvt services eg. **health, edu**, housing primary mechanism reducing disadv * family payments increase incoem for low & middle income families

Answer 197

since introduction 1992 * **employers required contribute min 10%** of **amp's wages to superfund cant access until retirement** * since mid 1980s, prop of emps covered by super rose like 52% * while **super assets boost wealth of all wealth quintiles, esp imp for low-middle income earners** (one of **few sig** financial **assets)** * low income earners disproportionately affected by covid recession --> could ^ ineq in LT as lower income earners lost benefit of savings * **beneficial** effects of compulsory super for **reducign ineq expected grow further** **if** compulsory super contributions **^ to 12%** of employee incomes by 2025 (longstanding policy commitment of successive gvts) CHECK TEXTBOOK

Answer 198

impact og gvt policeis to **create more equitable distr of income** can be **outweighed** by **consequences of other gvt policies** that **widen gap** betw **higher & lower inc** earners * using **MP** to **slow** rate of **eco grwoth: IRs ^ --> transfers wealth from low to high income earners bc LI earners are borrowers & must pay higher IRs** but **HI earners** often have **net savings** so **high IRs ^ their income** -> unintended side effect used for other purposes eg. maintain low inflatio nrate **microeco reform** sometimes r**equire eco restructing** --> create **u/e ST/closure** of some **industries** * **privatisation** of formerly **GBEs** often followed by **price ^s & 'downsizing'** of **workforce** to **improve profitability for SHs** * to improve **efficiency & ^ ROIs** to **owners of assets --> benefits flow to wealthier asset owners** while **costs felt most by lower income earners** * challenge to implement in way doesnt ^ inequality * often substantial adjustment packages to compensate for hardship lower income groups experience from reforms ensure not disadved * targeted transitional support to groups directly affected by reforms minimise hardships associated w/ structural change

Answer 199

**progressive income tax, swp**, gvt services, **compulsory super reduced inequality** **microeco & LM reforms** contribute to **rising inequality**

Answer 200

represents the totality of physical enviro which human society lives * includes land, water, climate, plant & animal life * gvts address impact of eco activity on enviro to improve QOL & preserve natural enviro for future gens

Answer 201

protecting & enhancing natural enviro * protecting **quality of air, water, soil,** * **preserving natural enviros & biodiversity**, * ensure **sustainable use of non & renewable resources**, * **minimise neg enviro consequences of eco activity**

Answer 202

* reducing **GH gas emissions --> climate change** * ensure adequate **supplies of water for HHs, farmers, bus'** * preserving **health of forests, ecosystems, waterways** **farming, mining, industry --> land degradation, deplete NON-renewable resources, EXTINTion of plant & animal species, pollution of water systems**

Answer 203

economic costs in short term, grwoth in long term * protect enviro --> support eco grwoth in **M-LT**

Answer 204

recent decades enviro factors incorporated into eco theory through EEs * emphasises need to **pursue sustainable lvl growth**, accounting **effects eco activity** has **on enviro** * unless hidden costs of eco grwoth accounted, fast growth --> **rapid depletion of resources, polluted enviro, reduce QOL**

Answer 205

**conserving** & enhancing the community's **resources so ecological processes & QOL maintained** * **lvl** of **eco activity compatible w/ LT preservation** of enviro **than max lvlgrowth possible in ST** * principle of fairness betw generations /**intergenerational equity** describes **resources shouldnt be used in way that'll limit QOL of future gens** (1 of major principels)

Answer 206

grwoth should be **maintained** at lvl **so low u/e** & **not so high** that causes **excessive inflation/external imbalance** * **overuse**/exploiting **natural resource**s for **ST grwoth** can **deplete** resources & **permanently damage enviro --> reduce productivity** of affected **sectors** * consumption depleting eco's natural resources --> **reduce future potential output** in **LT** (esp **primary industries** **rely natural resources as inputs in PP --> decrease eco's PPF**)

Answer 207

improve **QOL** * **satisfying more material wants diminished if** at **expense of damage** to natural **enviro, depletion** of natural **resources/harm**ful for human **health** * harming enviro reduces **QOL for future pops** by depleting natural resources --> **future EG**

Answer 208

* **deforstation & soil erosion --> impossible to sustain food supply for local populations**

Answer 209

1. **integrating eco & enviro goals in policies** & activities 2. enuring **enviro assets appropriately valued** 3. managing **enviro risks** w/ caution 4. ensuring **fair**ness **allocating costs & assets within & betw generations** 5. accounting **global effects of enviro issues**

Answer 210

developed 1992 core objectives of strat: * **enhance individual & community wellbeing & welfare** by following a path of eco developmetn that safeguards welfare of future generations * **provide for equity within & betw generations** * **protect biological diversity** and **maintain** essential **Ecological processes & life-support systems**

Answer 211

in modern **market eco,** key **determinant** in decisiosn abt **what goods produced**, what **quantity, price** which sold * **interaction** of **market forces** of **supply & demand** to reach an **equilibrium price & quanttiy** of production --> **market outcomes** reflect balance betw **consumer preferences (demand) & costs of producing output (supply)** * when consuemrs demand goods, producers make available if they can receive a price that at least covers costs * as demand ^, production ^

Answer 212

but **doesnt** effectively **account LT effect** of **eco activity on enviro** * bc **producers enjoy PRIVATE benefit** from the activity that **depletes resources/pollutes enviro** but **dont directly face SOCIAL costs** of **eco activity** * **market price paid by consumers dont reflect social costs**

Answer 213

occurs bc **price mechanism only accoutns private benefits & costs of production to consumers & producers** * **doesnt account wider social costs & benefits --> passed on to otehr members of society (externalities)**

Answer 214

* **unintended neg outcome** of an **eco activity** whose **cost isnt reflected** in operation of **price mechanism** * **adverse spillover effects** on the enviro from eco activity * **demerit goods** g&S have neg externalities

Answer 215

* eco system based on private property ownership w/ no general property rights associated w/ enviro resources eg. oceans * **price mech doesnt determine price/value** for these **resources, freely used w/o regarding depletion --> enviro** **resources** destroyed **overuse** * this market failure is the **tragedy of the commons**

Answer 216

eg. company **reduces freight costs by transporting goods by road >rail** * use **trucks --> damage roads** in area + **noise & air pollution --> damage cars** bc **pot holes, loose stones, ^ risk accidents, ^ noise pollution** of trucks, **respiratory** problems from **worsened air quality** * **costs not to company (saving money)** * generates **neg externality** bc **society bears cost of raod damage, noise, air pollution**

Answer 217

**limited sales of depleted resources** **have a price** * when **enviro resources scarce --> cost of natural resources ^ --> reduce no. resouces consumed** * if many trees cut to sell on market --> **mroe expensive to supply --> remaining supply** in remote location of **lower quantity --> prices rse & reduce no. ppl** who can **afford** --> induce **producers & buyers** to look for & **develop alt inputs to production** * but this approach **only protects resources sold in markets (minerals, timber)** * **price mech no role allocating enviro resources** that can be **used for free** eg. atmosphere to dispose gas generated in PP * **remaining resources** may **not** be **protected if price ^s too late** by **too little**

Answer 218

**unintended positive outcome of an eco activity** whose **value not reflected in** operation of **price mechanism** * **beneficial spillover effects** from eco activity * **production doesnt usually** generate positive enviro outcomes but eg. **^ train service use --> reduce commute times for passengers, reduce road congetion & car pollution** * g&s w/ positive exts are **merit goods** * **benefits of production not enjoyed by ind consumer**

Answer 219

**supply curve** for **whole society** lies **above normal** supply suve * **vertical dist** betw 2 supply curves is **size of externality** * if **neg ext from producer/cosumer, price rise reflect**ing **higher cost of production & output fall bc g&S w/ neg ext overproduced** * add social benefits **social benefit demand curve above normal demand curve** * vertical dist betw 2 demand curves size of pos ext * **market only account private costs & benefits of production** * if **pos ext enjoyed by producer/consumer, price rise (higher value of good's production)** * **output rise (g&S w/ pos exts under-produced)**

Answer 220

1. **non excludable** * **once provided, producer cant exclude consumers from enjoying benefit** of goods **even if not prepared to pay** * national defence, street lights, clean environment 2. **non-rival** * **consuming** good by **ind** consumer **doesnt reduce quantity** of good **available for other** consumers

Answer 221

free rider : **groups/inds** who **benefit** from g/s **w/o contributing to cost of supplying** g/s * **consumers/bus** benefit w/o having to pay for its **production/maintenance** * eg. fishing company benefits from **clean oceans w/o paying cost** of **cleaning up ocean pollution** * **private markets dont/under provide** public goods since **private firms unable charge consuemrs** for enjoying **benefits --> price mech cant produce equilibrium** outcome properly **reflecting forces of supply & demand** & **setting price doesnt limit consumption of public goods** * **incentive** for free riders **undermines** attempt by **private sector** to **clean enviroment/protect** from **overuse/depletion --> provided by GVT**

Answer 222

g&s provided by gvt (**or its agencies**) * not all are publci goods * **train** services provided by gvt but **excludable (pay to ride**) * not all public goods provided by gvt

Answer 223

* ppl **disagree** on how to **calculate** the **enviro costs of eco activity** * which policies most effective solving enviro problems * **industries resist pressure** to **change practices/pay full costs** of **enviro impact** * gvts msut decide whose evidence most convincing, how enviro & eco goals balanced

Answer 224

in **LT, eco cant keep growing if enviro degraded** * enviro damage affects **human health** (higher lvls **air & water pollution, restricts availability of resources**) * awareness developed slow in AUS & industrialised world * **AUS poor record preserving biodiversity despite one of 6 biodiverse nations** measures **preserving enviro** try **avoid social & eco problems** when enviro **not actively preserved** eg: * **restrict development in enviro-sensitive** areas (mining, national parks) * **protect native plant & animal species from extinction** * **controlling emissions of waste** products * requiring new plantation in areas where logging occurred

Answer 225

1. **ST, enviro policies can reduce eco grwoth** through **interventions in price mechanism** may cause **higher prices/reduce supply** * eg. agri producers **oppose reduction in water** allocations for **irrigation** bc **lower agri output in ST** 2. **industries face higher costs if have to comply w/ rigorous enviro standards** * in **highly competitive global eco**, enviro standards can make us less competitive compared w/ **other c's / weaker enviro safeguards** * AUS may **miss** out **opps** lifting **EG & exports** * **farming, mining, construction most affected industries** & may **lobby gvts** to rpevent strict enviro protection policies 3. **cost of repairing damage to enviro** often **borne by** **taxpayers than those who caused** eco damage * eg. **gvt expenditure** on **grants** to community groups for **projects to manage erosion & protect habitats of threatened specieis** * gvt may **pass costs on to industry** eg. recycle bottles for 10c reform reduce littering, ^ recycling w/ scheme costs borne by beverage producers * gvt can improve **incentives for industries** to better preserve enviro

Answer 226

**natural enviro degraded** some way eg. harmful **chemical substances, noise**, **rubbish** * affects **atmosphere, water resources, land** * **all sectors** (manuf, agr, **HHs) contribute** * problem since many ppl lived clsoe proximity in towns & cities * (**Waste & pollution generated by production, pop grwoth, high concentrations of ppl in cities)** * **mining & manuf processes create toxic waste & pollution** * problem for **global eco,** national gvts, international institutions, eg. high lvls industrial pollutants eg. toxic metals & plastics found in aquatic life across oceans

Answer 227

**renewable** * can **naturally regenerate/replace themselves** in **relatively short PIT** * **may be depleted** to pt where become **non renewable (cant regenerate) & lost forever** eg. overfishing species --> cant reproduce, extnct **non-renewable resources** * **natural resources** in **limited supply** bc can **only** be **replenished** over a **long PIT/cannot** be replenished at all * **fossil fuels (petroleum, coal), minerals (copper, iron ore)**

Answer 228

*laws banning environmentally damaging production techniques * quotas to restrict emission of harmful pollutants * subsidies to encourage enviro friendly practices * taxes to discourage some forms eco activity

Answer 229

aka **global warming** related to **GG emissions (CO2**,, CH4), methane * **produce most profound threats** to global enviro * bc **worldwide reliance on fossil fuels, close link** betw **^ eco grwoth & higher carbon emissions** in most ecos * as **SOL improve, greater demands on limited natural resources to satisfy world's energy & food supply needs** * AUS vulnerable bc importance of **fossil fuels to energy production & exports** & **proximity to** other **countries** afected by ^** temps & rising sea lvls (indonesia, bangladesh)**

Answer 230

1. **electricity & heat production** 2. **agri,** forestry, other land use 3. industry 4. **transport**

Answer 231

Intergovernmental Panel on Climate Change * msot authoritative source of info on climate science w/ many world's leading scientists * estimate next 20 yrs global temps reach/exceed 1.5 degrees of warming --> ^ heat waves, longer warm seasons, shorter cold seasons * 2 degrees --> heat extremes reach critical tolerance thresholds for agri & healthy more often * even w/ sustained reductions in CO2, estimated take 20-30 yrs for global temps to stabilise

Answer 232

**climate change** is a **global problem** * addressing CC by **reducing co2 reduces eco grwoth esp ST** * **nations reluctant** to **reduce eco potential** esp if **unsure other nations** **do same**

Answer 233

* both **enviro & eco problem** * **w/o intervention**, **market failure** & **allow** important **resources overused** * **greatest impact on future gens** * **sustainable resource management** to **ensure present generation odesnt overconsume stocks** of **renewable resources** & **minimises depletion of non R resources**, ensure **new tech makes alt resource use possible**

Answer 234

estimate optimal rate for use of resources over time * calculate for both R & NR resources

Answer 235

arriving at a **threshold exploitation lvl** alows **resources to regenerate so no LT decline** in the resources * critical water shortages in AUS esp relying on Murray-Darling River System reflect LT overuse of renewable resource of fresh water

Answer 236

determine a **rate of decline acceptable** for **present & future generations** * **eliminate overuse & waste** * take action to **recycle/curb consumption of resources**

Answer 237

1. **hard** for **present gens to predict needs of future gens** 2. hard to **assess existing stock** of a mineral/other **resource** * may be **limited/conflicting evidence abt quantity of resource available**

Answer 238

* gvt policies can influence enviro management by **discouraging enviro harmful activities** & **incentivising firms & inds** to **act in envrio responsible manner** enviro issues still **secondary** role to other **eco objs** eg. eco grwoth despite recent decades increasingly imp issue for policymakers worldwide * **benefits of LT enviro policies less apparent than costs of improving enviro protection** * enviro problems take **years/decades to emerge, msot solutions** also need **years to have impact --> gvts delay acting** on enviro problems bc **less urgent** than **other issues & results policy actions often less immediate**

Answer 239

**ban production/sale of a g/s** * banning product **eliminates externalities** associated w/ its **production** & use to the extent that its use can be stopped * gvt bans can impose **severe costs on firms & inds** esp those whose **employment depends on its production** * gvts only consider option if product causing **severe enviro/social damage/suitable substitute product exists** * can also **prevent consumption/activities harm enviro** eg. China gvt banned imports of mixed recycled materials from other c's flow on effects for AUS recycling industry (AUS recycled waste exports to C) --> prices in recycled waste markets dropped significantly --> impact viability of AUS recycling industry --> oversupply of recyclable waste, dump into landfill

Answer 240

**impose a tax on its production/use** * require **firm/ind** that **causes externality to pay for some/all its costs** * eg. fed gvt imposes tax/excise on fuels eg. petrol --> recalculated very 6 months in line w/ ^s in CPI, tax on petrol forces owners of vehicles to pay some costs of air pollution

Answer 241

* in every major AUS city, gvts provide **Subsidised** **public transport services** eg. bus, train to offer inds **alt to motor vechiles** also **gvt funding** to accelerate **intro**duction of **new techs w/ envir obenefits** but **hgih establishment costs** eg. the Clean Energy Innovation Fund

Answer 242

**underprovision of resources** * gvt may need to **provide services itself** also seek to **Monitor & measure** **changes in enviro over time** eg. fed gvt publishes 'State of the Enviro' report documents changes in AUS enviro over 5 yr period (atmosphere, biodiversity, marine enviro, land,) * ABS records the AUS Enviro-Eco Accs measures AUS' stock of enviro assets as addition to typucal measure of assets in eco * availability of better quality data provides gvts better **info** abt **trade-offs in decision making** to **manage eco & enviro outcomes esp adverse consequences**

Answer 243

away from outright bans & providing public goods, eg taxes & subsidies * but exceptions eg. expansion of AUS' renewable energy Snowy Hydro Scheme jointly owned by Commonewealth, NSW, Vic gvts

topic 3 eco issues Flashcards

(269 cards)