Micro Flashcards
Labour markets
- decentralised labour market
- 1983: Price and incomes accords – added 1.7% to the GDP
- early 1980s: award restructuring and simplification shift from centralised wage fixing to enterprise bargaining
- workplace relations amendment Act 2005
impacts:
- wage rises linked to higher productivity
- worker productivity is now more accountable and incentives exist to work longer and harder for higher wages
- wage negotiations now reflect circumstances inside and outside the business
Financial markets
- 1973: regulatory controls over some interest rates removed, mortgage rates
- 1979-82: Tender system adopted for treasury notes (1979) and treasury bonds (1982)
- 1983 Floated the Australian dollar
- Removal of barriers for banks
- Independent RBA sets cash rate and manipulates monetary policy
- Inflation targeting framework Mundell-Fleming framework indicates that if exchange rate is flexible a country can pursue an independent monetary policy
Tarrif reforms 1988
- 1988 Tariff cuts:
o all tariffs above 15% to be reduced in annual steps
to 15% in 1992
o Tariffs 10 and 15% to be reduced in annual steps to
10%
National competition policy
- The Hilmer report 1993 led to the national competition policy
- Extended trade practices laws to stop anti-competitive activities
- Created the ACCC – 1995 to administer the competition and consumer act 2010
- Introduced competitive neutrality so SOE have no advantage
- Developed a national access regime to enable businesses to use government owned infrastructure
- Established review and reform framework for laws that restrict competition
- Encourage workable competition
Theory - definition
Micro-economic policy is actions taken by the government in order to change the supply of goods and services in particular industries in the economy by increasing productivity (output per input), or addressing positive and negative externalities, with the general aim of improving aggregate supply which will result in an increase in the GDP and a reduction in inflationary pressures.
- actions from government to influence AS
- increases productivity (output per input)
- positive or negative externalities
- increase GDP reduce inflation
Theory - Intro
There have been a number of structural changes and deregulations in Australia’s recent history. In response to a drop in GDP per capita as a result of drops in international competitiveness the 1980s and 90s saw many new structural changes and reforms in Australia’s factor markets (financial and labour) and product markets (competition policy and trade liberalization). This saw indexed Multifactor Productivity (MFP) increase from 77 in 1980 to 105 in 2001.
- drop in GDP per cap from a drop in IC in 80s and 90s lead to new reforms and restructure of factor markets
- saw multifactor productivity (MFP) increased from 77 in 1980 to 105 in 2001
Theory - basic implementation
Microeconomic policy is implemented through changes to laws, market regulation, and taxation and spending policies directed towards specific industries such as corporatisation or privatisation. To implement micro-policy the government can target reforms towards either the factor or the product markets. Reforms to the factor markets are the most effective as the product market relies on the factor market for inputs, therefore an increase in productivity in factor markets will also lead to an increase in productivity for the product market.
- implemented through laws, market regulation, and tax
- corporatisation or privatisation
- target either product or factor markets
- factor market more effective as it has a knock on effect
Theory - Rational
The rational of microeconomic policy is designed to increase aggregate supply by increasingly productivity,
Allocative efficiency refers to the ability of an economy to allocate its resources efficiency.
Technical efficiency refers to the actual productivity in the economy and the businesses within it
Dynamic efficiency refers to the ability of an economy to reallocate resources in response to changing economic circumstances.
Theory - Graph reference
Reference graph ADAS
Microeconomic policy often has negative effects in the beginning with more positive effects occurring later on shown in the ‘J curve’ graph below
Tariff reforms 1991
- Passenger motor vehicle tariff to continue to fall by 2.5% pa to 15% in 2000
- Radical reduction in TCF (textiles, clothes, footwear),
- quotas abolished,
- max tariff rates of 15% and 25% for clothing by 2000. All other manufacturers, max tariff 5% in 1996
Tariff reforms 1997
Abbot government:
- Decision not to subsidise car industry
- Negotiate FTAs
Financial market impacts
- ANZ, CBA, NAB, Westpac reduced branches and
headcount by 20% since the floating of the
Australian dollar - Longer banking hours, increased technology and
innovation
National Competition policy impacts
- Australia’s real GDP boosted by 5.5%
- Rural and regional Australia projected a boost to
GDP in the longer term of 2.5% - electricity, gas, urban, water, telecommunications,
urban transport, and rail freight sectors boosted
GDP by 2.5% - Sectoral impacts: electricity prices down by 19%
since 1990s, telecommunications charges fell 20%,
milk price fallen 5% since deregulation in 2000
