Economic Management Essay - 2750 Words

Economic Management (Essay Sample) Content: ECONOMIC SITUATION AND FOCUSBy:Course:Instructor Name:Institutional Affiliation:City:State:Date:Executive SummaryThe report is mainly to capture the steady and significant changes in the market economy of Australia in 2015. It considers factors which led to this change: increasing supply and lower production costs, increase or decline in the labour productivity, factors that lead to the incline in or decline in the exports and imports and causes of changes in demand and financial speculation. The paper then discusses the proposition that there is an increase in human consumption as income increases over the years. In considering future supply, it will be argued that this is likely to remain high even when there are government interventions to increase the importation of the capital good. In considering demand, the discussion will point to the other sectors which leads to the growth of the entire economy such as the labour force, the business sector, Both private and p ublic which aid in the provision of goods and services in the economy. The paper concludes that there is need for the government to reconsider different dimensions in order to control both the labour market, external sector, business sectors and all other sectors that contribute immensely to the growth of GDP to remain low in the foreseeable future.TABLE OF CONTENT TOC \o "1-3" \h \z \u Executive Summary PAGEREF _Toc429521812 \h 1Introduction PAGEREF _Toc429521813 \h 2Business Sector PAGEREF _Toc429521814 \h 4Labour Market PAGEREF _Toc429521815 \h 8References PAGEREF _Toc429521816 \h 11IntroductionThe Australian market is one of the largest market economies in the whole world with a total wealth of 6.4 trillion. It is dominated by the service sector comprising of 68% of the GDP, mining industry, 8.4% and agriculture that is 12%.economic growth in Australia currently is depending on the mining industry and agricultural sector. Therefore, the Australian economy has grown with 2.5% ov er the past two years with the decline in mining investments and a rise in the dwelling investments supported by the decrease in interest rates and incline in housing prices. The growth is supported by an increase in exports and decline in imports.Some of the main indicators suggest that markets and economic conditions remained flexible in the labour market.Therefore, this is inconsistent with a continuation of below-trend growth in economic activity. Although employment growth picked up, spare capacity continued to increase over 2014.Household SectorHouseholds are the individuals that form part of the Australian market. The individualà ¢Ã¢â€š ¬s consumption patterns are mainly guided by the economic theory of supply and demand which mainly states that; when supply of goods and services increases holding other factors constant, the demand of the goods will go down hence lowering the prices of goods and services in the market. The axiom has governed the Australian market for a coupl e of year minimum government interventions.In particular, this year Household consumption growth has picked up from its lows in early 2013 but remains below its long-run average pace. The growth rate of labour income has been slow over time due to constrained by the growth of consumption that remains moderate despite the effect of very low-interest rates. The consumption rate has been growing faster than the rate of income of the household.It, therefore, shows that individual households spend whatever the income they earn and eventually saving the rest. It can lead to a decline in investment which later cause crises in the entire economy.In addition, it can lead to the increase in unemployment in the economy which results to high inflation in the long run. The increase in consumption in Victoria and South Wales is mainly due to an increase in the housing prices which, as a result, increases their income immensely.It has also been improved by the mining investments which has been tak ing place for a couple of years. According to pareto, there is no way one can make soothing better off without making the other worse off, in this context, when consumption of individual increases more than proportionately with income, then the investments by households in other sectors of the economy than investments in other sectors of the economy must be made worse off. Therefore, to cater for the coming generation, there is a need for the consumers to be taught on the importance of savings and investment in different sectors of the economy be it agriculture business or mining. The recent indicators suggest that consumption have grown with an increase in retail sales by 1.5%.the highest sale on the January and the December quarter was due to sales of durable goods. The graph below therefore illustrates the households pattern of consumption for the previous years that include unincorporated sectors of the economy. Consumption growth rate rises with an increase in income and falls proportionately with a decline in income over the years from 1989 to 2014. With the consistency and strong growth in housing prices, increase in population and decline in interest rates, there is 7% growth in the dwelling investments in the September quarter.Business SectorThe business sector of the Australian government for part of the larger sector of the market.It is comprised of the incorporated business units that include the partnerships, companies, corporative societies, and parastatals. These are the sectors that are mainly responsible for the production of goods and services in the economy. They always strive to maximize profit and revenue while striving to minimize cost as much as possible.in the current year, the private business investments have declined in September 2014 by 5%.it was due to a decline the mining investments in the mining industry. The fall in investment patterns was mainly offset by a smaller increase in investment in the non-mining sectors of the econom y. The research has shown that a decline in the mining sector was greatest in 2012 due to a decrease in the composition of the iron ore, coal and natural gas deposits. It is therefore expected to continue over the years since other current projects are not yet completed, and few new mining investment projects are likely to go ahead given the decline in commodity prices. Besides, investment will continue to decline over 10 per cent in 2014/15, although there is uncertainty in the estimate and the Bank's liaison points to a larger fall in the investments. The profits of the Mining sector fell by 8 per cent over the year followed by a sharp decline in commodity prices which is partially offset by the depreciated Australian dollar exchange rate and other cost-cutting measures. Further decrease in the prices of the commodity is likely to continue for a given period, which also lead to a decline in the mining and other non-mining investment opportunities. The concept above can be illustr ated by the following graph504825-95250PriceQUANTITY DEMANDEDCurrently, there is a further depreciation in exchange rates that increases the scope of investment though additional support for the demand for domestic industries, businesses and firms producing tradable goods and services. This effect will be offset slightly by the higher cost of imported inputs. The greater decline in prices of oil in the second half of 2015 is likely to provide support to businesses, factories and firms that use fuel as their raw materials in a production or indirectly to household consumption.External SectorThe Australian government also do trade with other international economies. The current divergent central bank monetary and fiscal policies and a very sharp fall in the prices of goods and services have led to various moves in the international financial markets. The recent addition of policy stimulus by the Bank of Japan and the European central bank has led to the decline in the bond yield in b oth local and international economies. The trading partner in the market promises this year as export volumes increase this quarter, iron ore exports increase by 25 per cent, thermal coal also increases immensely this year.It, therefore, reflects the expansion of production and infrastructure in the entire economy. During and beyond 2015, exports are expected to increase since there is an increase in the investments in the natural gas extraction project.Besides; the service sector also did saw a massive increase in the export levels in the September quarter. The growth was mainly catalyzed by the tourism export and education services. Due a high number of people demanding recreational facilities by the government has led to the increase of leisure as a normal good.It, therefore, means that individuals abroad will prefer leisure to work.As Australian government export more tourism services to other nation, there are a lot of revenues generated by them which can be used to develop oth er sectors of the economy.Also, the. The manufacturing sector also exported large volumes of manufacturing products to other nations. The export in this sector has been boosted by the depreciation of the exchange rates since mid-2014.it therefore indicates that the service sector mainly thrives when there is depreciation or devaluation of the exchange rates .on the other hand, the imports of capital goods have fallen this year while the importation of consumption goods have increased proportionately to income this year. There is the need for the government to intervene to control the importation of the consumption goods but encourage the importation of the capital goods which can be used in the production of these consumable goods. There is also the need for the government to invest in information technology to improve both labor and capital productivity.Agricultural/Farming SectorAgriculture forms part of the backbone ...