unit 4 aos 2 Flashcards
AS policies
- improve a nations productive capacity
- government strategies designed to make supply side conditions more favourable for individuals, firms and industries that produce goods & services, so they are more able to expand output & australia’s productive capacity
> seeks to increase the quantity and quality of resources, increase productivity and reduce production costs, grow profits and increase competitiveness
how does AS policy impact supply side conditions
- impact the quantity and quality of resources available
> encourage growth of productive capacity & potential inflationary rate of EG - raise productivity & lower production costs
> so firms can produce more output from the same inputs & become more profitable & internationally competitive - reduces market failures
> to help improve efficiency in resource allocation & satisfaction of australians wants
aim of AS policy to lift efficiency in resource allocation
grow aus productive capacity & potential level of GDP & AS through increasing efficiency in how resources are allocated
- allocative: resources go where they are most wanted, maximise wb
- productive/ technical: businesses using the least cost method of production
- dynamic: firms being adaptive to changing economic circumstances, improves satisfaction of wants
- intertemporal: balance between employing resources for immediate vs future use, more enviro friendly
aim of AS policy to improve international competitiveness
- forces local businesses to be more efficient, making them more internationally competitive so that they can sell goods at a lower price relative to overseas competitors
- this makes them able to grow sales, boosting output, employment, incomes & LS
aim of AS policy to promote domestic macroeconomic stability
- promotes non-inflationary rate of SSEG
- promotes low inflation by cutting production costs
- promotes full employment
aim of AS policy to support better living standards
- reduces the severity of structural problems
> unemployment, incomes, purchasing power, satisfaction of wants - by increasing the quantity & efficiency of resources available, creating incentives for suppliers & growing productive capacity, AS policies can improve our international competitiveness, strengthen macroeconomic goals, and improve LS
australia’s AS policies
- a budgetary policy used to affect AS
- skilled immigration
- trade liberalisation
- market based environmental policies
budgetary policies used to affect AS
- budgetary policies can make AS conditions more favourable by increasing efficiency, cutting production costs, increasing business profits and competitiveness, and expanding productive capacity
Includes outlays to improve: - infrastructure
- education and training
- research and development
- budget subsidies
- tax reform
one budget policy as an AS policy- training & education
- training & educatipn = greater quantity or quality of labour is = productive capacity is increased
- spending on education and training is designed to increase the quantity and quality of human capital
> improves skills of labour and raises productivity - improved quality and quantity of labour resources helps to reduce costs of production for businesses
- skill of labour is also becoming increasingly important with technological advancements, increasing the need for education & training to ensure workers remain productive & can contribute to evolving economy
recent training and education budgetary policy
2024-25 budget:
- funding towards a wage increase for early childhood education and care workforce
- investing in skills for priority industries
> any budgetary policy that improves the delivery of education, and thus improves the quality of the labour force, will help boost AS via improved labour productivity & skill, and therefore productive capacity. will also assist achievement of macro goals
infrastructure budgetary policy
- physical structures and capital that support EA, including roads, railways, airports, hospitals, communications and digital technology structures and public transport
- spending on infrastructure helps to reduce costs of production for businesses across the economy, by reducing bottlenecks and congestion and speeding up business operations.
- contributes to improved productivity through reduced costs of production & increased efficiency, as workers and output can be more efficiently transported
- enhances efficiency, productivity and improves AS over the medium-longer term, and therefore helps to improve int. competitiveness, achieve domestic macroeconomic goals and lift living standards
purpose of the skilled immigration policy
- australia has lifted its immigration target due to skills shortages
> due to being an underpopulated country & having an ageing population - eases problems cause by an ageing population
> worsening labour shortages
> relatively high wage costs
> erosion of govs financial position (due to more outlays on pensions and healthcare)
skilled immigration policy
- designed to attract migrants who make a significant contribution to the economy & fill positions where no australian workers are available
- based on a system reflecting how likely a person is to make the greatest economic contribution
- skilled migrants have a high participation rate
features of the policy:
> sets annual targets to manage the number of people allowed visa entry
> allows flexibility since the annual intake target can vary to reflect changing domestic conditions & overseas circumstances
> gives priority to migrants with special types of skills where we have shortages
> encourages those in younger age groups, slowing effects of our ageing population
effect of skilled immigration policy on population
- increases population numbers, easing the problem of underpopulation
- slows the effects of our ageing population by introducing young skilled workers into the labour force
impact of skilled immigration on productivity & participation
- increases the size of the labour force, its productivity & participation rate
- skilled immigrants have higher levels of education than aus-born residents, which increases the quality of human capital resources, slows wage costs & improves business competitiveness, profits and productive capacity, strengthening AS
- the increase in participation rate enhances productive capacity, boosts AS & grows our potential level of EG, employment & income growth
impact of skilled immigration on international competitiveness
- for local producers to sell their goods overseas attractive prices they need a skilled & innovative workforce
- helps firms gain greater economies of large scale production, as they can spread production costs more thinly as output expands for a bigger market, lower prices = more competitive
impact of skilled immigration on the achievement of domestic macroeconomic goals
- slow inflation:
> adds more to supply than demand for labour, reducing labour shortages and wage costs
> could contribute to inflation (add to demand for housing) - increase the rate of EG:
> boosts productive capacity & size of the market
> added stress on water, land for housing, non-renewable resources due to growing pop. - help create full employment:
> fills jobs that cant be sourced locally
> reduces shortages and allows businesses to start up/ expand
> reduces unemployment rate, increasing AD, EA & demand for labour > reduces cyclical unemployment
impact of skilled immigration on living standards
- material:
> eases labour shortages that would have limited business expansion, boosts productivity, and keeps wage costs lower, improving the purchasing power of incomes –> strengthens eco WB by making AS conditions more favourable for producers & making a stronger domestic macroeco environment - non-material:
> more creative, multicultural society, improving WB
> could decrease WB by adding to traffic congestion, work travel times (reducing leisure time) & environmental challenges
weaknesses of skilled immigration policy
- not a permanent solution
> immigrants will age too, so doesn’t permanently solve the issue unless rates keep rising - economic benefits are relatively small
> not a big impact on GDP - non-material trade offs
> enviro problems, resource depletion, greenhouse gas emissions, overcrowding, traffic congestion
trade liberalisation
AS policy that implies reducing protection of local industries from import competition
> cutting tariffs, import quotas, signing FTA’s
- ways it grows efficiency in resource allocation & boosts productive capacity:
> encourages specialisation in areas where the comparative cost advantage is greatest
> local firms restructure operations to raise efficiency due to o/s competition
> grows the size of markets
features of trade liberalisation policy- tariff cuts
tariffs: indirect tax levied on imported goods, making them less attractive to local consumers
- high tariffs limit foreign competition, driving up prices & causing resources in local markets to be allocated inefficiently, reducing purchasing power
- the reduction of tariffs has helped to improve allocative, technical & dynamic efficiency
- encourages local firms to be more internationally competitive by forcing them to restructure production and lower costs
> helps to expand aus productive capacity, AS, incomes & LS
features of trade liberalisation policy- reduced subsidies
- subsidies to local producers are designed to cover some production costs
> can sometimes cause firms to misallocate resources - trade liberalisation aims to reduce these, as they force firms to reallocate resources to areas where they have the greatest comparative cost advantage
> grows efficiency & AS
> there has been a gradual reduction in subsidies in recent years, with the exception of the 2020-21 pandemic to prevent business closures
features of trade liberalisation policy- abolition of import quotas
import quotas restrict supply of o/s goods allowed into the country to protect local businesses
- adoption of trade liberalisation has progressively abolished these import quotas, resulting in freer trade, increased efficiency in resource allocation, boosting productive capacity & SSEG
> slows cost inflation as firms have to keep prices low relative to o/s competitors = ^ LS
features of trade liberalisation policy- increased FTA’s
- aus government has been trying to develop export markets abroad by reducing protectionism & signing FTA’s
> eg. aus-UK FTA, 2023 - these expose local firms to greater overseas competition, forcing them to specialise in areas of production where they have the greatest comparative cost advantage & become more cost efficient in order to improve their competitiveness
> firms that can’t reduce their costs may close, leading to structural unemployment