Commerce Assignment

Recent Trends for Inflation:

Inflation is the measure of the rise in prices of a set of goods and services over a period of
time. It is measured by CPI (consumer price index) every quarter. Over the past 2-3 years,
Australia’s inflation rate has risen exponentially with constant increases which has currently
peaked at 8.4% in quarter 4 of 2022. In comparison, as shown in the graph below, the
inflation rate in 2020 was 0.85%, and 3.5% in 2021. According to the ING Group, the forecast
predictions for the inflation rate at the end of 2024 is 4.7%, and 2.5% in 2025.

Recent Trends for Unemployment:

Unemployment occurs when one does not have a paying job but is able and willing to work.
Over the past few years, the unemployment rate skyrocketed from 5% to 7.5% in July of
2020, and the number of unemployed people stood at 1,009,400. This slowly decreased
throughout 2021, and 2022 with the current unemployment rate sitting at 3.5% and the
number of unemployed people is 505,000 in February 2023. In the next few years, it’s
forecasted that the unemployment rate will slightly increase to 4.5% in June 2025.
Causes of Inflation:

Inflation has recently been at its all-time high in Australia in more than three decades, and it
has been caused by multiple worldwide events that have occurred over the past few years.
To start off, the pandemic has greatly affected the inflation rates as worldwide lockdowns
ceased the majority of imports of goods and services around the world. This has caused
major supply chain issues as the shortage of essential products, and the increase of demand
for goods and services rise resulting in an increase in inflation rates. Furthermore, the war
between Russia and Ukraine exacerbated the economic effects of the pandemic, as it caused
a shortage of exports that included the supply of fuels which is an essential good, therefore
resulting in rising prices. This leads to worsening inflation as consumers must pay higher
prices for their daily essentials. The effects of the above have been displayed in the recent
inflation rate trends above, as in 2020, the inflation rate was at 0.85% whereas at the end of
2022, almost a year after the Ukraine war began, it stands at 8.4%.

Causes of Unemployment:
Over the past few years, unemployment has skyrocketed because of the covid lockdowns,
the war between Russia and Ukraine, and high interest/cash rates. The covid lockdowns was
a partial cause of unemployment as it caused business such as airlines, travelling industries,
and hospitality to temporarily or permanently shut down leading to people becoming
unemployed. As mentioned above, the Ukraine war has affected unemployment as it has
caused fuel to become more expensive which means the cost of goods and services will
increase. This will lead to businesses being forced to cut costs which leads to the layoff of
staff/employees. This has been reflected in the recent layoffs of Google and Amazon, with
both companies cutting more than
10,000 employees due to a need to
reduce costs. The increase in interest
rates have also affected unemployment
as businesses had taken loans from the
bank as they thought the cash rate
would remain at 0.1%. The increase has
resulted in businesses also having to cut
costs which leads to more people
becoming unemployed.

Policies that Address Inflation:

The policies that help reduce inflation include the contractionary monetary policy, and the
fiscal policy. The contractionary monetary policy is a policy that is controlled by the RBA and
refers to increasing the cash rate to tackle increasing inflation rates. This will influence
consumers’ decisions as if the cash rate increases, the interest rate on credit products
increases, therefore resulting in consumers less likely to spend or borrow money which will
decrease inflation. The contractionary fiscal policy refers to the decrease in government
spending and increasing taxes. This will lead to reduced disposable income and propensity
to spend which results in the decrease of inflation.
Policies that Address Unemployment:

The expansionary fiscal policy is a policy that addresses unemployment. The expansionary
fiscal policy refers to the decrease of taxes and increase in government spending to
generate economic growth. This stimulates spending as it encourages consumers to spend
more on goods and services, therefore increasing aggregate demand. This pressures
businesses to produce more supply, hence needing more employees which results in
reducing unemployment. The JobTrainer program is another policy that addresses
unemployment as it is a government initiative that promotes employment by upskilling
young people and job seekers by providing a low-cost training course to develop new skills.
This will provide people with more skills so that they will be more applicable to jobs which
reduces unemployment.

Discuss the Effectiveness of these policies:

Inflation

Contractionary Monetary Policy:

The contractionary monetary policy’s effectiveness has been displayed over the past few
years. It is currently in use in Australia as the inflation rates constantly rise, and each time
the RBA responds by increasing cash rates in the hopes of combating inflation. The rise of
inflation rates commenced in mid-2021, which was when cash rates started to increase as
shown below in the graphs. Fast forward to January 2023, the inflation rate stands at 7.8%
and the cash rate has increased from 0.1% to 3.1%. The policy seems like it hasn’t taken
effect yet however, this has recently changed as in the past two months, the inflation rate
has dropped from 8.4% to 7.4% and now down to 6.8% as reported on March 29 th by the
ABS. This has shown that after ten months of consecutive increase in cash rate, the
contractionary monetary policy has started to take its effect and reduce the inflation rate
hence showing that it is effective.
Contractionary Fiscal policy:

The contractionary fiscal policy primarily focuses on reducing government spending and
increasing taxes so that inflation can go down. It is a tool used by the government to aid the
monetary policy to address inflation. This occurs as when taxes increase, more money is
transferred to the government and less to the consumer and their spending. This results in
the economy slowing down, hence inflation decreases. The fiscal policy also refers to
reducing government spending which means less money for consumers, and fewer goods
purchased, which can potentially reduce inflation. The recent $22 billion budget repair has
displayed how the Australian Government will aim to reduce government spending so that
inflation will decrease. Overall, the fiscal policy does influence inflation but not as greatly as
the monetary policy.

Unemployment

Expansionary Fiscal Policy:

The expansionary fiscal policy is effective in reducing unemployment as it promotes

businesses to employ more people. This is due to the policy influencing and stimulating
economic growth by decreasing taxes and increasing government spending. This would
mean consumers would have more money to spend which will result in higher demand of
goods and services. Businesses would then have to provide for the high demand and
increase supply which results in increasing jobs and employees. The ARRA (American
Recovery and Reinvestment Act) in 2009 is a perfect example of the effectiveness of the
expansionary fiscal policy as the ARRA produced a tax cut for individuals which stimulated
the economy and provided over 3 million jobs and pulled America out of recession.

JobTrainer:

As part of the 2020-21 Australian budget, JobTrainer was introduced as a government

initiative to promote employment for people who want to change or start a new job. This
program has been highly effective and successful as it has helps people upskill or reskill for a
new career via a fee free training program. This program includes many different careers,
for example, a certificate for early childhood education which can aid people to get teaching
jobs. This is one of the many skills Australians can learn and this program has benefited
more than 300,000 Australians to gain job-ready skills which has helped the unemployment
rate.

Aboriginal Inequality in the Australian Economy

Outline the extent of the disadvantages:

Unemployment

Unemployment has always been a disadvantage in the Aboriginal community, and it has yet
to be fixed. There are numerous causes for lower employment rates that include poor
education, discrimination, poor health and remote location. These have contributed to the
statistics of unemployment shown ahead. The gap in employment rates between Indigenous
and non-indigenous was 27% in the 2017-2019 period. Furthermore, as shown in the graph
below, every statistic of Indigenous Australians’ education level is lower than Non-
Indigenous Australians, which highlights how the Aboriginal people are disadvantaged which
results in unemployment. This disadvantage will cause them to spiral down into further
complications such as crime and health issues.

Health:

As stated above, unemployment causes psychological distress and anxiety which leads to
more health issues because of behavioural risks including excessive alcohol consumption,
smoking, and physical inactivity. The extent of disadvantages to which Aboriginals face is
also caused by their decline to seek healthcare services. Their fear of disrespect, racism and
judgement are reported as barriers to Aboriginal people for avoiding healthcare services.
This all adds up to shocking statistics as shown through the Australian Burden of Disease
Study. It states 240,000 years of Indigenous’ healthy life have been lost in 2018, and the life
expectancy gap between Indigenous and non-Indigenous averages to 8.2 years for both
male and female which is seen in the graph below. This shows how one disadvantage leads
to another causing physical/mental health issues and shorter life expectancy for Indigenous
Australians.
Discuss at least ONE Government Policy Initiative:

Due to the health and standard of living gap between the Indigenous and non-Indigenous
people, the Australian government has created a campaign known as, Closing the Gap, to
combat this issue. This campaign started in 2017, with a gathering of prominent Indigenous
individuals and the government to form a new strategy and partnership to deliver a better
future for the Aboriginal nation. Closing the Gap has many different policies, reforms and
outcomes integrated in it such as Halve the gap in employment outcomes within a decade.
This goal intends to improve employment outcomes, government investment in mainstream
employment programs and disability and programs. The Indigenous Skills and Employment
program (ISEP) is an example that contributes to the Close the Gap campaign through
connecting Aboriginal people to jobs, trainings and career advancement opportunities.
Whilst this policy is in early stages, it shows how the government is taking initiative to help
the Aboriginal community regarding unemployment.

The National Aboriginal and Torres Strait Islander health plan 2013—2023 was an effective
government policy that helped reduce the disadvantage of Aboriginal health. The plan was
created in collaboration with Aboriginal communities to devise long-term goals and deliver a
better future for the Aboriginal nation. This plan was executed by improving access to
healthcare services, addressing social factors such as education, providing early childhood
development programs and increased funding for indigenous health. At the end of 2021,
this plan has been highly effective as it has achieved ten goals including the reduction of
smoking rates, increased immunisation rates and antenatal care. This policy has ended in
2023, but the new plan, The National Aboriginal and Torres Strait Islander Health Plan 2021-
2031 will hopefully continue its progress.

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