Policies used to …

Reduce unemployment …

Lasting reductions in unemployment take time and are dependent upon, sustainable economic growth over a long period of time. Broader
policy issue is a reduction in structural unemployment.

Macroeconomic policy used to reduce cyclical unemployment. Employment is derived from the demand for goods and services, reduction
ins unemployment corresponds with improvements in output.
- Expansionary Fiscal Policy= decreased taxation receipts or increased gov. spending (spending on infrastructure, businesses will
increase investment and employ more people) , stimulate economic growth and increase output through the multiplier effect.
- Expansionary Monetary policy = Reductions in the cash rate and therefore lower interest rates, stimulate consumer spending and
business investment, causing an increase in output.

Covid 19: Treasury estimated unemployment would have peaked 5% higher (over12%) without the economic support programs.
o JobKeeper: $1500 wage subsidy to over 3.5 million workers. Prevented employers from laying off staff
o Increase support for businesses, free child care and increase JobSeeker (unemployment benefits- $90 bn)
- Similar fiscal measures used during 2008 crash. The Australian Treasury estimates that without the stimulus packages the
unemployment rate would have been forecast to peak at 10 per cent rather than 8½ per cent
o $10.4 billion stimulus package, which for Australia is around 1 per cent of GDP. The package was comprised of $8.7 billion
that would flow to pensioners and low-income families in the form of cash bonuses, $1.5 billion to support housing
construction, and $187 million for new training places
o First home buyers grant
o $4.7bn to infrastructure projects boosting employment.

Microeconomic reform used to target economies structural unemployment reducing the NAIRU. Microeconomic reform, lifts economies
efficiency and productivity to increase economic growth and job creation in the long term.
- Labour Markert Policies
o $1 billion for TAFE funding accelerating the delivery of 465,000 TAFE places (improving skills and education of workforce)
o Australia’s Migration Policy ceiling increase to 195,000 in 2022-23 to ease labour shortages
o 4th Highest investment in labour market programs in OECD
o JobSeeker payment requirement change to ensure individual unemployed are actively seeking work or additional training
and education.
o Labour market deregulation in the 90s  improving productivity by enabling enterprise bargaining on wages. Tying wages
 to productivity.
o $12.7 bn in childcare subsidies to ensure families are staying in the workforce and not leaving the workforce to take care
of children.

Sustain low inflation

Monetary policy is the primary tool at reducing inflation. MP attempts to sustain economic growth at a level that does not create
inflationary pressures.
- 2-3% inflation targeting

Increasing Inflation  Tightening monetary policy (increase in the interest rates)  dampening effect on consumer and investment
spending  lower level of economic activity  lower inflation.
- Aggressive tightening policy post COVID 0.1  4.34 (current June 24)
- Inflation peaked at 7.8% was both a factor of increasing C as a result of increased savings ration during covid 24% being spent post
restrictions lifting, as well as supply constraints caused by global supply chain slowdowns due to the virus. Inflation stagnant at 4%
as of June 2024.

Fiscal Policy
- Supporting role in maintaining inflation.
- During times of increasing inflation, government might increase revenue and reduce spending in order to minimise demand
pressures therefore reducing demand pull inflation.

Microeconomic Policies
- Long term effect on lowering inflation.
- Trade liberalisation, reduced protection  lower prices on imports and increased completion improving efficient and productivny
of businesses, reducing prices
- Labour market reforms  wage being linked to productivity improvements  increases in productivity allow for a country to
afford real wage increases without inflationary pressures

To achieve external stability

Achieving external stability has historically been an important concern for Australia, although in recent years it has become a less
prominent macroeconomic policy objective.
- Reflective of Consenting Adults (Pitchford Thesis): Majority of debt which adds to the CAD stems from the private sector.
 - Improved export revenue and increased household savings have reduced concern around external stability.

Monetary Policy
- Not used to directly influence external balances.
- Higher interest rates  Increased capital inflows (higher returns on investment at higher I/R)  Increased debit outflows (NPY
outflows to service the capital inflows from the KAFA)  worsening CA.
- Not used to target long term structural cases of external imbalances

Fiscal Policy
- Fiscal consolidation (balanced or surplus budget) to address low national savings. Increase national saving reducing the need for
private savings to fund budget.
- COVID 19  increased government borrowing.

Superannuation Guarantee
- Superannuation accounts investing overseas  increased INFLOWS in NPY (returns on overseas investment)  narrowing NPY 
improvement in CA

SIDE NOTE: Covid 19, dividend freeze during COVID 19  decrease NPY outflows  narrowing NPY  improvement in CA

Microeconomic Reform
- Addresses structural problems causing external imbalances.
- Improvements in efficiency and productivity and I.C. Reduce capacity constraints, alleviating skills shortages. Improve trade
balances and external imbalances.

One of the best measures of external stability is the extent to which Australia maintains the confidence of international investors.
Governments aim to sustain international confidence in Australia’s economy with consistent, medium-term policy settings such as
Australia’s inflation targeting regime, the goal of budget surpluses and a continued commitment to microeconomic reform. This approach
has been largely successful in maintaining international confidence in Australia’s economy in recent decades.
To achieve income equality

As employment is the main source of income in an economy, unemployment is the main reason for low incomes and poverty. Therefore,
periods of unemployment in Aus contributed significantly to gap between high and low income earners.
Fiscal Policy
The 2023–24 Budget allocated $250 billion for social security and welfare payments. The largest transfer payments are the age pension
($59 billion), the disability support pension ($21 billion) and the JobSeeker payment for the unemployed ($13 billion).
- Automatic stabilisers
 During periods of low economic growth and increasing unemployment, government benefits support
individuals however, lower than incomes of those in employment.
 Progressive Tax System
o However, in 2018, the lowest 40 per cent of income earners had a proportionately larger tax
burden, earning only 12 per cent of total private income but paying 15 per cent of total taxes. This
occurs because of the impact of indirect consumption taxes that are not related to household
incomes, such as the Goods and Services Tax.

Lower rates of unemployment tend to reduce gap between the rich and the poor.

- JobKeeper
o Maintain employer and employee relationship and minimise job losses during the periods when economic activity was
disrupted.
o Limited labour marker scarring
o Limited long term unemployment which may have led to long lasting rise in inequality.
o the COVID-19 pandemic, temporary increases in income support payments helped to reduce the percentage of
Australians in poverty from 14.6 per cent of the population in March 2020 to 12 per cent of the population in June 2020
- Stage 3 Tax Cuts

Microeconomic Policy
- Decentralisation of labour market has widened inequality
o Higher skilled workers have greater bargaining power and this increased disparity between high skill and those low skilled
workers on modern awards
o Minimum wage  increases with inflation. Supports equality
 Minimum wage at 55% of median full time earnings
 Increased from $23.23 to $24.10 as a response to a surge in inflation following the war in Ukraine and the
recovery from the COVID-19 pandemic
- Changing Labour Markets
o Increased casualisation and part time  increases in underemployment – exacerbating income inequality
 o 6.8% of all jobs are secondary employment (need for individuals to work more jobs to sustain standard of living)
- Microeconomic reform usually involves changing structure of the economy, as such it increases the level of structually
unemployed in the short term and thus increasing inequality.

Compulsory Super  improving wealth equality

- Introduced in 1992, 94% of workforce covered with super
- Improves wealth and asset accumulation by making it a requirement to have 11.5% of income in super account + cannot be
touched until retirements (very rare exceptions otherwise)

Housing Affordability  Wealth Inequality

- Houses are the main source of wealth
- Increased affordability will reduced wealth inequality gap.
- 80% of investment properties owned by the top 20% of wealth holders
- The Government plans to establish a $10 billion Housing Australia Future Fund to build 30,000 social and affordable homes over
five year

Monetary Policy
- Indirect impact
- Interest rates influencing economic growth and such unemployment
- Increased rates  decreased disposable income for large mortgage households (increasing inequality)
- Increased rates  decrease the value of property (decreased demand for housing leading to falling price) leading to improved
wealth inequality.

To Support environmental sustainability

Government policies can influence environmental management by discouraging environmentally harmful activities and providing
incentives for firms and individuals to act in an environmentally responsible manner

- Ban on production or sale

o Illegal to sell agricultural products contain mercury in Australia.
 Ban on Shirtan (type of fungicide) prevents the release of 5000kg of mercury into the environment annually
o Banning = elimination of externalities associated with its production and use
  Other economic issues involved, banning will lead to employment issues for those in those industries
o Ban on single use plastics in 2021. Reduction in the amount of plastic ending up in the ocean and reduction in plastic
pollution
o Banning also prevents consumption that may harm the environment
- Tax on production or use
o Taxes cover the economic cost of production or consumption of a particular good
o Taxes internalise the externality, requiting firms and individuals to pay for some or all of the economic cost.
 Carbon tax
 Taxes on petrol
- Subsidies
o Encourage the production or use of environmentally friendly goods and services
 Public Transport
 Solar Panels
- Government Funding
o Used to accelerate the introduction of new technologies that have environmental benefits
 $500 million in Powering Australia Technology Fund. To help businesses develop innovative projects and
technologies to reduce emissions
- Government provide these services itself
o Public Goods.