|Assessment Details and Submission Guidelines|
|Unit Title||Economics and International Trade|
|Assessment Type||Individual Assignment|
|Assessment Title||Economic Analysis of the Australian Market|
|Purpose of the assessment (with ULO Mapping)||To complete this assessment, students are required to:|
|Weight||40 % of the total assessments|
|Word limit||No more than specified in each section in the detailed task list|
Holmes Institute is committed to ensuring and upholding Academic Integrity, as Academic Integrity is integral to maintaining academic quality and the reputation of Holmes’ graduates. Accordingly, all assessment tasks need to comply with academic integrity guidelines. Table 1 identifies the six categories of Academic Integrity breaches. If you have any questions about Academic Integrity issues related to your assessment tasks, please consult your lecturer or tutor for relevant referencing guidelines and support resources. Many of these resources can also be found through the Study Sills link on Blackboard.
Academic Integrity breaches are a serious offence punishable by penalties that may range from deduction of marks, failure of the assessment task or unit involved, suspension of course enrolment, or cancellation of course enrolment.
The assignment task is a written analysis of any published article regarding the Australian Market (newspaper, magazine or website) from 01 Jan 2020 and onwards. Your task is not to research and provide data. You are instead ask to analyse an event using your knowledge of economic principles. You will be required to apply the economic concepts you have learned in class to interpret events reported in your article.
Task 1: Choose your article.
Task 2: Ensure that a full printed copy of your article is saved as part of the Appendix of your paper. Deductions will be applied if the printed copy is not provided.
Task 3: Microeconomic Analysis (Part 1)
In this part of your assessment, you will analyse the event reported in your chosen article based on microeconomic concepts learned in class. Ensure that you have the full print out of the article in the Appendix of your paper.
Task 4: Individual Online Presentation (Part 2)
In this part of your assessment, you will summarise in an online presentation, all your findings from your analysis.
Task 5: Macroeconomic Analysis (Part 3)
This is your final paper and should include both Microeconomic (Part 1) and Macroeconomic Analysis (Part 2) and the full print out of the article in your appendix.
Unit Name: Economic Analysis of the Australian Market
Unit Code: HC1072 (T1 2020)
The following report analyses a published article regarding the Australian Market (newspaper, magazine or website) from 01 Jan 2020 and onwards. The report focuses on the events in the article and analyse the same using the knowledge of economic principles. Hence, the focus is on application of the economic concepts learnt in class and not on analysing the data provided in the selected published article.
The selected published article for this purpose is a news article, ‘Australia needs public investment during the Covid recession, not tax cuts’ (Jericho, 2020) which is available on ‘The Guardian’ website.
This report will analyse this article with respect to economic concepts and principles learnt in the class. The focus will be more on microeconomic concepts used in the article.
The selected article provides an overview of Australian economy in these testing times when COVID-19 has become a global pandemic and also leading to recession in most of the economies. The article mentions that Australia is one of the economies that is going into recession due to impact of COVID-19. To substantiate the same, the article mentions that the economy of Australia has shrunk by almost 7% during the year with respect to the country’s GDP (gross domestic product). This is equivalent of a drop of 7.2% in Gross Domestic Product per capita.
The article further mentions that while this drop in terms of percentages may not look as tough, it becomes easier to understand when it is compared in terms of years. For example, Australia’s reduced GDP per capita as reported for the quarter ending June 2020 was around $17,371 which is the low level of GDP per capita noted around June 2011. Hence, in other words, we can say that impact of COVID-19 is such that it has pulled the Australian economy back by 9 years (from 2020 to 2011 level of GDP per capita).
Further, the article says that in order to reach the pre-recession peak, it will almost take same number of years as the years lost. This is because it becomes much more difficult to gain back the momentum in order to reach the earlier peak.
Hence, in order to reach the pre-COVID-19 level of GDP in 2020, where the Australian economy has lost almost 9 years of growth, it will take another nine years or so. Hence, overall, the economy faces a setback of almost 18 years. The explanation in terms of years provides a much more impressive idea about the loss caused to economy due to COVID-19 pandemic.
The article further goes on to analyse macroeconomic indicators of the Australian economy in the current situation and it observes that while private investment has completely collapsed, the public sector spending has also been stagnant with negligible growth.
The article notices that due to adverse economic conditions currently being faced, the propensity to save has increased leading to lower consumption levels. And while there is no investment in the economy (private or public), coupled with low consumption, the only way to arrest the fall in economy is to increase the production levels by increasing public expenditure, particularly public infrastructure sector expenditure.
The article advocates that this is a better way to recover rather than introducing tax cuts which will not help the correct strata of the economy. In other words, the tax cuts will help those who are earning by giving them relief. However, they will also most likely save that money, not consume, due to adverse conditions. However, the tax cuts are useless for the people who have lost their jobs due to COVID-19. Hence, neither those with jobs will spend the money as they will save it and those without jobs will get no relief. In either situation, the production will not be kick-started due to lack of consumption in the economy.
Industry Analysis: Public Housing
As discussed above, the author opines that instead of introducing tax cuts in order to combat the recession due to COVID-19, it will be more effective to increase public expenditure, particularly on infrastructure such as, public housing.
Housing is critical for well-being of citizens of any country, including Australia. A person unable to afford a house or a roof faces multiple challenges such as financial, social as well as the mental health will be affected. In such cases, a very effective method is to provide housing assistance which provides support to those with low income by providing rent below market or financial assistance in purchasing house etc. This is very effective in tackling the risk of homelessness that will occur in case of lack of public housing.
According to AIHW (2020), social housing or public housing is the very base in Australia as it provides financial assistance to the Australians with low income and those who are eligible as per terms and conditions.
As of June 2019, around 797,100 occupants in Australia were using public housing that accounted for as many as 437,000 dwellings across Australia. The report observes that as many as 70% of social housing dwellings were in public housing. This indicates the importance of public housing in Australia.
This indicates that public spending on housing sector needs to increase as there is a huge demand for the same. Hence, the supply must also be there in form of public expenditure (Ketchell, 2020).
However, the supply is restricted or limited due to multiple factors. One of such factors is huge government expenditure on COVID-19 related relief packages such that expenditure in other sectors has been stagnant or limited.
The shortage of supply in long run will cause imbalance in market equilibrium such that the demand for public housing will exceed the supply of public housing. This shortage can lead to corrupt practices such as a parallel black economy, bribery, etc. It may also impact the prices which will soar due to limited supply. This is in addition to the risk of homelessness and adverse impact on the well-being of Australian citizens.
Hence, the supply must match the demand so as to maintain market equilibrium. This is one of the basic economic concepts that explain that for a market to remain in equilibrium and avoid mismatches such as, heating-up of the market or black sale due to shortage.
From the above discussion, it can be seen that the Australian economy is facing recession due to adverse impact of COVID-19 that has shook the world. Further, the impact has been such that economy growth has gone down to 2011 levels and will take a few more years to recover.
To arrest the same, the government has been doling out relief packages and also introduced tax cuts. However, the need is to revive economic growth by jumpstarting production and consumption. This cannot be done by tax cuts.
The private investment has halted due to adverse conditions and at such times, public expenditure must increase so as to maintain the economic growth.
Even within public expenditure, focus needs to be on infrastructure, particularly public housing that has high demand and limited supply. This will increase the consumption in the economy and help the recovery process.