Minute Statistics

[hermansia12]

Hey Everybody!

One of the most important thing in HSC and Prelim economics is reading the news and keeping up to date with current affairs and policies.

Unfortunately, it can also be very time consuming and the articles may be difficult to understand due to the jargon. So in this thread, I will be updating daily with a summary of important Economic Updates in the news and analyzing them against the important things you need to know in them with regards to HSC economics.

Hopefully this will make the news more relevant and easier to understand.

Please feel free to ask any questions and clarify any concepts with regards to anything I post, I will be happy to answer them

Keep calm and Analyze

[hermansia12]

25th October 2016, Tuesday

$AU has fallen to an 8-month Low -> Trading at $0.7601US, falling 0.003 cents from 21st October (Last Friday).  Weakness due to growing strength of $US

• -Exports are more competitive – Reduce our Current Account Deficit (CAD) in the Balance of goods and services (BOGS) as there is a higher demand for our exports due lower terms of trade. Despite this, Australia is uncompetitive in most industry exports therefore it can be difficult to take full advantage of this perk.
• -Must look towards fiscal policy to stimulate comparative advantage in its services exports as it accounts for 58% of AUS. industry share output.
• -Foreign debt increases (as the $AU’s value falls against other foreign currencies) which could be problematic for our economy as we rely on foreign investment and borrowing to fund capital and infrastructure. This could mean a decline standard of living/quality of life as infrastructure spending decreases (spending on education, healthcare improves quality of life), with more of the budget prioritising repayment of debt.
  

Inflation Rate of 1%:

• -Consumer Price Inflation (CPI) is predicted to increase by 0.8% over September Quarter. This signifies a prediction of economic growth due to the Seasonal event of Christmas whereby consumers are more inclined to increase spending. Higher Demand = Higher price
• -Higher Headline inflation could also be due to Higher tax on cigarettes and alcohol and environmental factors of heavy rain leading to lower fruit and vegetable production- Need to turn to underlying inflation rate for more accurate measure.
• -However, this may not be enough to stimulate sustainable growth as the inflation rate will still only be about 1.4%.
  (Inflation rate needs to be in the 2-3% target band for sustainable growth)
• -RBA suggests that one cash rate for the nation may not be effective for the economy- Monetary policy is less effective in stimulating economic growth than in the past (all time low cash rate of 1.5% is still ineffective in reaching target economic goals of Economic growth and inflation.  This means that Australia needs more effective Fiscal policy in order to stimulate spending, increasing injections.   

Summary and Analysis of the following news Articles:

http://www.abc.net.au/news/2016-10-23/the-week-in-finance:-inflation-holds-the-key-to-another-rate-cut/7958004

http://www.news.com.au/finance/markets/world-markets/finance-news-you-need-to-know-today/news-story/1357ae0e08b41f44d1daa5a53c82aefd

[onepunchboy]

this is great! thank you for doing this

[hermansia12]

26th October, Wednesday

Casualization of the workforce:
-Overall employment fell by 10,000 in September,
-Economy lost 53,000 full jobs however 43,000 part-time jobs created. i.e 10,000 full time jobs lost in the labour market. ‘
-Part time workers now make up 30% of workforce, compared to 15% in 1980. Casual workers make up 20% of workforce compared to 15% in 1990s.
-Evidence of casualisation of the workforce -> Less Income security, underemployment (people wishing to work more but are not given opportunity), denied access to benefits such as sick leave and annual leave
-Unemployment recently fell to 5.6% (from 5.7% in August) due to the fall in participation rate to 64.5%, its lowest in 2 years- Lots of hidden unemployment as people give up looking for job and leave the workforce. Means that market is inefficient- does not capitalize on all available labour resources.
-Employment growth is slowing; Underlying weakness in the labour market- Higher wages means that Aus. is not competitive on most of its exports therefore must rely on imports (more leakages than injections so slower overall economic growth). Lower Economic growth, less supply of jobs but an over demand to be employed. 
-Job numbers may contribute to RBA’s intention to cut cash rate; Monetary Policy to lower price through lower interest rates, stimulate aggregate demand, higher demand for labour to become more productive and increase supply to meet demand. However, doubt RBA will cut already low cash rate of 1.5% as RBA may wish to wait for more signs of slowdown in labour market and especially with the low inflation rate of 1%.
 
Lucy Turnbull’s Three-City Sydney Vision to boost job growth:
-Reshaping cities in Sydney, Eastern Harbour City, Central Parramatta River City and Western city, near proposed new airport at Badgery’s Creek – Businesses may move to these cities to capitalise on new infrastructure, creating jobs.
-Forecasted population growth outgrowing job growth
- “Opportunities have to be well distributed through our city so we do not become congested” (Lucy Turnbull)
- By 2041, expects that 680,000 more jobs in the east than the west of NSW; Sydney CBD has 10 times number of jobs than any other place in Sydney. Uneven job distribution.
-$20 Billion on metro rail line to be completed in 2024, running from Rouse Hill, Chatswood, CBD, Sydenham and Bankstown. Increase in infrastructure, improve quality of life and productivity (more efficient transportation).


Articles and statistics analysed:

http://www.smh.com.au/business/the-economy/jobless-rate-slips-in-parttime-boom-20161020-gs6tze.html

https://www.theguardian.com/business/grogonomics/2014/oct/17/the-casualisation-of-australias-workforce-is-nothing-to-panic-about

http://www.abs.gov.au/AUSSTATS/[email protected]/Lookup/4102.0Main+Features50Dec+2009


http://www.smh.com.au/nsw/lucy-turnbulls-threecity-sydney-vision-challenged-by-forecasts-of-jobs-growth-in-east-20161019-gs6fky.html

[hermansia12]

27th October, Thursday


Australia among the “least open” to foreign new investment
-Australia more suspicious about foreign ownership of new infrastructure than most economies
-Recent block to Chinese State Grid Corp from leasing 50% stake in Ausgrid due to national security concerns.
- Criticism and negativity from Chinese Government, less likely to invest in Australia in future.
-Lack of funds in Australia to invest into infrastructure due to historically low household saving ratio. (0% in 2000) Therefore reliant on foreign investment and borrowing to fund infrastructure and capital needed to increase productivity and develop comparative advantage. This increases amount of jobs which can decrease unemployment; Australia's CAD beneficial for its growth during mining boom in 2010-2014 due to the expensive capital required.
-Foreign borrowing and investment may stifle long term economic growth due to the accumulation of interest; more of the budget is needed to repay debt, less to spend fiscally as there are more leakages than injections. 

Consequences of blocking China in Ausgrid sale
-This decision led to “retaliation” from Chinese Economy; “reduced the appetite of Chinese Companies to invest in Australia and hurt bilateral trade ties”
- Free Trade agreements help boost amount of exports; Decrease in demand for Aus. Exports can lead to increased unemployment due to a reduced amount of demand, leading to oversupply.
-Australia needs to balance its need for foreign investment to drive economic growth with asset security (must keep enough resources for Aus. Economy to experience sustainable long term growth)

Articles summarised:

http://www.smh.com.au/business/the-economy/australians-among-the-least-open-to-foreigners-owning-new-infrastructure-20161023-gs8wf6.html

http://www.smh.com.au/business/energy/australia-discovers-cost-of-blocking-china-in-ausgrid-sale-20161020-gs7dbt.html

[hermansia12]

28th October 2016, Friday

Underlying Inflation slips
-Trimmed mean of inflation fell from 0.5% in June to 0.4% in September Quarter
- Weighted median fell from 0.4% in June to 0.3% in September Quarter
-RBA’s cuts to cash rate to the low 1.5% were responses to lower than expected inflation; Has not been as effective yet in raising inflation to target band. Could be due to monetary policy's slow impact to economic growth and inflation (Usually about a year for impact to be felt by economy).
-Headline rate increases were due to rises in price of fruit and vegetables (about 15% increase in price), tobacco excise
-Stronger dollar to limit imported inflation and low wage growth to stifle domestic inflation.
- Concerns about housing market with such a low cash rate
-Predicts that the low underlying inflation will lead to cutting cash rate to 1% by next year

Biggest Jump in Terms of Trade since 2011
-Aus. Terms of trade increasing over past half year.
-Largest gain in September quarter, leading to stronger dollar and predicted increase in GDP
-Export prices rose 3.5% whilst import prices fell 1% -> 4.5% increase in terms of trade (Largest jump since 2011 aka during the mining boom)
-Increase purchasing power, more spending, nominal GDP increases and high standards of living
-Coal and iron prices strengthening, up to a 150% increase. Other bulk commodities with an increase in price include sugar, beef, gold, gas and metals (Exports Australia is relatively competitive in due to natural abundance)
-Hence, predicted that terms of trade haven’t peaked yet -> Long term economic growth and reducing the CAD in the Balance of Goods and Services
-Strength of exports may be dampened due to rising fuel prices however due to the resulting Increased transportation costs (less demand if price increase) 

Articles summarized:

http://www.smh.com.au/business/the-economy/eyes-on-reserve-bank-as-inflation-climbs-to-13-per-cent-in-september-20161026-gsashn.html

http://www.smh.com.au/business/the-economy/biggest-jump-in-terms-of-trade-since-2011-20161027-gsc1bt.html 

[hermansia12]

29th October, 2016 Saturday

Australia and the Trans-Pacific Partnership (TPP):
-“Gigantic foundation stone for our future prosperity” (Malcolm Turnbull)
-Biggest global trade deal in 20 years 
-TPP includes US, Aus, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, Vietnam and Brunei (12 nations but not including China)
- 40% of Global GDP and eliminate 98% of tariffs, free trade for Aus. Exports and services as well as increase investment
-Ensure that tobacco control measures remain intact (Esp. with recent tobacco excise) 
-Lower tariffs means that approx. $13m per year for the sugar industry (Injection and reduce CAD in the balance of goods and services)
-Increased foreign investment from $252m to $1094m
-Agreement has been drafted but not yet in force

Childcare and the economy:
-Affects young parents returning to work; childcare esp. in cities where there is undersupply
-Increased childcare can improve productivity, reduce social inequity (esp. to increase number of women in the workforce) -> Increase participation rate as more people can enter the workforce and offset aging population
-Women between 15-65’s participation rate is about 10% lower than men’s of the same demographic
- Childcare prices increased by 50% over last 5 years – discourages qualified workers from entering the workforce due to domestic responsibilities
-Turnbull gov. to spend $11 billion in subsidising childcare in 2018-19( An increased value from the current $8 billion). Make child care more competitive and productive ->increasing supply -> Achieve above economic benefits   
-Streamlining 2 childcare payments into more targeted subsidy -> Families to save $30 a week
-Low income families may still be disadvantaged under this system-> Social inequity

Articles summarised:

https://www.theguardian.com/business/2015/oct/06/australia-and-the-trans-pacific-partnership-what-we-do-and-dont-know

http://www.smh.com.au/comment/the-billions-we-spend-on-childcare-is-failing-women-the-economy-and-children-20161025-gsaaa0.html

[kevin217]

29th October, 2016 Saturday

Australia and the Trans-Pacific Partnership (TPP):
-“Gigantic foundation stone for our future prosperity” (Malcolm Turnbull)
-Biggest global trade deal in 20 years 
-TPP includes US, Aus, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, Vietnam and Brunei (12 nations but not including China)
- 40% of Global GDP and eliminate 98% of tariffs, free trade for Aus. Exports and services as well as increase investment
-Ensure that tobacco control measures remain intact (Esp. with recent tobacco excise) 
-Lower tariffs means that approx. $13m per year for the sugar industry (Injection and reduce CAD in the balance of goods and services)
-Increased foreign investment from $252m to $1094m
-Agreement has been drafted but not yet in force

Childcare and the economy:
-Affects young parents returning to work; childcare esp. in cities where there is undersupply
-Increased childcare can improve productivity, reduce social inequity (esp. to increase number of women in the workforce) -> Increase participation rate as more people can enter the workforce and offset aging population
-Women between 15-65’s participation rate is about 10% lower than men’s of the same demographic
- Childcare prices increased by 50% over last 5 years – discourages qualified workers from entering the workforce due to domestic responsibilities
-Turnbull gov. to spend $11 billion in subsidising childcare in 2018-19( An increased value from the current $8 billion). Make child care more competitive and productive ->increasing supply -> Achieve above economic benefits   
-Streamlining 2 childcare payments into more targeted subsidy -> Families to save $30 a week
-Low income families may still be disadvantaged under this system-> Social inequity

Articles summarised:

https://www.theguardian.com/business/2015/oct/06/australia-and-the-trans-pacific-partnership-what-we-do-and-dont-know

http://www.smh.com.au/comment/the-billions-we-spend-on-childcare-is-failing-women-the-economy-and-children-20161025-gsaaa0.html

Hi hermansia, regarding childcare subsidies, is it part of fiscal or microeconomic policy?

[hermansia12]

Hi hermansia, regarding childcare subsidies, is it part of fiscal or microeconomic policy?

Hi Kevin,

The childcare subsidies are both fiscal and microeconomic.

The subsidies will improve productivity and competitiveness in the childcare industry which makes it microeconomic. However, since the subsidy is spending through the government budget, it is also considered a fiscal policy.  On a side note, it also targets macroeconomic objectives such as economic growth and higher participation rate (due to utilising the labour market more efficiently and encourage more parents esp. mothers to enter into the workforce).

[hermansia12]

30th October, 2016 Sunday

Paid Parental Leave
-Turnbull gov. proposing to amend paid parental leave;
-Currently, primary carers (usually the mother) can claim a maximum of 18 weeks of pay at minimum wage and the partner can claim 2 weeks. Scheme excludes those earning more than $150,000 per year
-Avg. of paid leave claimed is about 10 weeks
-National Employment standards (Labour market policy) states that parents can take up to 12 months of unpaid parental leave
-“International Labour Organisation recommends mothers to be entitled to at least 18 weeks of leave, on the equivalent of their normal rate of pay”

-Proposed changes: Parental leave restricted to 8 weeks ; choice to return to work or remain on unpaid parental leave for 26 weeks (Half a year)
-Lower capacity to spend as more income is spent on childcare, which could lower economic growth. However, the government hopes to combat this through the childcare subsidy
-Encourages women to enter the workforce, increasing participation rates
-May lead to lower standards of living as well-being and social development of families may be disrupted with the increased expectations to work

Population growth and economic growth:
-Theoretically, more people, increased spending, therefore faster rates of growth
-Population growth can increase underemployment, drive house prices up and increase traffic (meaning that transportation costs increase reducing profit margin)
-Need an increased amount of spending to infrastructure to account for these issues with growing population and maintain standard of living
-Underemployment nearly 10% in August 2016 and weak income growth;
-IMF warned that private sector debt is rising quickly in Australia -> lending to households rising by almost 50% of GDP since GFC level; Households have less to spend as more of their income is budgeted towards repayment of debt

Articles summarised:

http://www.abc.net.au/news/2016-10-25/ppl-plan-ignores-economics-of-well-functioning-families/7962698

http://www.news.com.au/finance/economy/australian-economy/population-growth-gives-australians-misleading-picture-of-economy/news-story/5a3e79b690885b788b88608df9182ff8

[hermansia12]

31st October, Monday 2016

Ultra-Low Interest Rates:
-Lowering the interest rates -> Stimulates the economy but can also increase risk taking
-Government bonds as the “benchmark of risk-free return”
-The longer the rates stay at such a low level -> Further risk of inflating prices which could lead to sharper correction when the interest rates rise (Causing a bubble esp. in housing prices)
-Low rates -> Less savings as there is less return; harder to finance productive investment
-“If sustained over the next couple of years, negative and low interest rates will challenge financial institutions’ business models and stability” -OECD

Migrants and growth of economy:
-Aus. Has weak regulation with employers who hire migrant workers -> higher chance of being exploited
-Immigrants have led to an increase in nation’s population growth (more than 50% of Aus. Population growth)  -> 25% of workers in Aus. Born in another country
-Immigrants increases labour productivity, decreased structural unemployment (by bringing skills which are difficult to find in Aus.)   

The attached image gives a summary of the current industries and areas of concern in each state:
WA – Unemployment rising due (at 6.3% in September 2016 increased from the decade average of 4.5%)  to the slowing down of the mining construction boom, falling consumer spending in retail
NSW- Population growth to dampen economic growth in the long term

Articles summarised:

http://www.smh.com.au/business/comment-and-analysis/why-ultralow-interest-rates-are-on-the-nose-20161027-gscpf4.html

http://theconversation.com/australia-is-at-risk-of-losing-migrants-who-are-vital-to-the-health-of-our-economy-67455

http://www.watoday.com.au/wa-news/fading-mining-boom-makes-western-australia-the-countrys-worst-economy-20161024-gs98no.html

[hermansia12]

1st November, Tuesday, 2016

BREAKING NEWS

Good luck to all HSC Economics students!!!! Wishing them all the best in their exams

[hermansia12]

1st November, Tuesday, 2016
Tourism
-Natural beauty of Aus. Coastline, outback, landmarks (Sydney ranking top 25 global destinations) makes Australia a major lure to visitors
-Country needs to improve tourism services industry (Hotels and resorts) to capitalise further in this industry
-Not obvious that Australia has comparative advantage -> Make ourselves more competitive in the tourism industry -> Fiscal and microeconomic policies needed to drive industry
-Expected to become Aus. Biggest export sector (predicted to earn about $70 Billion in 2025)
-Services is our biggest industry sector accounting for 60% of Aus. output

Last Minute Stats. summary:

-Economic growth 3.3%
-Inflation at low 1% (Below target band of 2-3% required for growth)
-Cash rate at all time low 1.5%
-Unemployment rate at 5.6%
-Exchange rate: $0.76AU = $1US
-Household savings increased by about 10% since 2000

Articles and statistics summarised:
http://www.smh.com.au/business/holiday-in-australia-chinese-tourists-would-rather-go-to-russia-20161027-gscqbt.html

http://www.rba.gov.au/snapshots/economy-snapshot/

[hermansia12]

7th November 2016, Monday

Elections cast doubt over assumptions on tax reform
-   Tax reform are not easy to enact politically
-   Recent governments proposing increase in GST tax, reduce the rate of company tax by 5% to 25%, starting at smaller businesses, reducing income tax to top 20% of tax payers, tobacco excise 
-   This could increase the income inequality as lower income earners must spend a bigger portion of their income with increased GST
-   Expensive tax cuts (even though it is small) is popular -> Increase votes
-   Limitation of Fiscal Policy: Governments may be unwilling to propose unpopular reforms especially with unstable popularity

Ross Gittins’ comment of the Budget:
-   Budget repair slower than expected -> Tax collections have grown more slowly
-   Revenue forecasts repeatedly fallen short due to fall in export prices
-   Wage inflation slow down since 2014; Decreasing by 0.4% to 2.1% in 2016 (Less income tax revenue) 
-   “If… the Senate accepts the tax increases but declines to pass the company tax cut on to big business … the budget should be well ahead on the deal”

Coal Rally:
-   China aiming to reduce overcapacity and make its coal industry more efficient
-   Production cuts lowering output by approx. 10% in first 9 months
-   Tightness in prices decreasing; cutting spot prices  -> Lower prices on coal
-   Increases Demand due to correction in prices
-   Glencore (Aus. Company-> cut 50, 000 jobs in 2015) plans to reopen coal mine in Aus. Next year but output is not expected to boost its overall sales
-   Lower unemployment by creating jobs

Articles summarised:

http://www.smh.com.au/business/the-economy/elections-cast-doubt-over-assumptions-on-tax-reform-20161104-gshx08.html

http://www.smh.com.au/business/the-economy/how-to-fix-the-budget-without-really-trying-20161105-gsipy5.html

http://www.smh.com.au/business/mining-and-resources/coal-rally-challenges-chinas-effort-to-revamp-industry-20161104-gsinlv.html

[hermansia12]

9th October, Wednesday

Economy without Growth
-Productivity Commission “Justified global anxiety that improvements in productivity and the growth in national income have slowed”
- Economic Activity: annual production of goods and services (Aggregate demand and supply)
-Should be growing with the population, productivity should be growing
- Slowed by Aus. Lack of technological advance (i.e needs more infrastructure and capital equipment for further growth)
-Economist Robert Gordon “Slowdown in measured productivity improvement because there is less innovation than we became used to over the past century”
-But, may be unhealthy to pursue economic growth and productivity blindly; Loss in family ties as work becomes more mobile, longer shifts less leisure (Could see a degradation in quality of life)

RBA Snapshot trends against Last Month
-Inflation increased by 0.3% to 1.3% -> Tax Excise could contribute to this rise as well as increased spending due to seasonal event of Christmas
-Services sector output improved by 1% of total output over the past month; (now 59%)
-Becoming more competitive in this regard -> Increase aggregate supply -> Contribute to Economic growth
-Exchange rate has fallen further by 0.002 US cents; Could be due to lack of confidence with recent RBA reconsideration of the cash rate
- RBA maintains the cash rate at all time low of 1.5% -> Forecasted economic and inflation growth

Articles summarised:

http://www.smh.com.au/comment/an-economy-without-growth-is-far-from-our-biggest-worry-20161107-gsk817.html

http://www.rba.gov.au/snapshots/economy-snapshot/