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Assessment Task 2 Topic On February 20 this year, the International Monetary Fund (IMF) stated that "wage growth is weak and inflation is below its target range" for the Australian economy. What risks...

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Assessment Task 2 Topic

On February 20 this year, the International Monetary Fund (IMF) stated that "wage growth is weak and inflation is below its target range" for the Australian economy. What risks does a slow growth rate in wages pose to the Australian economy, and why are economists and governments so eager to see a general rise in wages for everyone?

The following theories in Macroeconomics may be used to analyse this topic:

  • Aggregate Demand and Aggregate Supply
  • Unemployment
  • Inflation
  • The RBA

Use of graphs and diagrams in your essay is highly encouraged, as this will display to the marker your understanding and ability to analyse a highly topical issue in Macroeconomics. When incorporating graphs into your essay, please adopt the following three critera:

  1. original (not a screenshot from your text) incorporating labels;
  2. correctly applied; and
  3. adds to your analysis

Additionally, this essay should be submitted in essay format, using Harvard style referencing.It is also expected that you include at least 5 sources in your essay. Suggested sources include your textbook, journal articles from the ACU library's online databases, and websites, as long as they are reputable (major media sources, government websites (ABS, RBA, IMF etc)).

As an example, a suggested format for your essay is as follows;

  1. Introduction
  2. Discussion of low wage growth in Australia (using appropriate data)
  3. Risks of low wage growth
    • Theory 1
    • Theory 2
    • (Theory 3)
  4. Conclusion
  5. Bibliography
  6. (Appendices)
Answered Same Day May 07, 2020

Solution

Abr Writing answered on May 11 2020
108 Votes
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Table of Contents
Introduction    3
Low Wage Growth    3
Risks of Low Wage Growth    5
The Unemployment Theory    5
The Inflation Theory    6
The 0-Hour Contracts    6
The RBA    7
Conclusion    7
References    9
Introduction
Australian economy is facing some difficult situation. The labour wage rates are not growing as fast as they should. And to add to that the inflation is also lesser than the target that was set for it. Post the 1990s Australia has faced this low of inflation for the first time. As of January 2018, the inflation was only 1.9%. There are few sectors which have been doing well to compensate for the consumer goods market which is facing price challenges due to competition. These are tobacco (8.4%), petrol (10.3%), holiday travel (6.3%) and fruits (9.3%). Even though the inflation rates on these sectors are above the national inflation but still the inflation distribution is not even throughout the country. And then there are sectors like furniture, clothing, international holiday etc. which are seeing negative inflation growth. (Business Australia, 2018) Even the taxation in Australia is towards the large side. In a report by IMF it is estimated that the tax system in Australia when compared with other developed economies is in the top three and that results in the employees taking lesser net amount in hand monthly.
Low Wage Growth
Australia is the 12th most expensive country in the whole world. But there is a huge segregation of this expense throughout the country. While places like Melbourne and Brisbane have an average weekly rent of $350+ there are places like Hobart and Adelaide have an average weekly rent of $285. This shows that in general the Australian economy is increasing. But the perception of people in Australia is not the same. People in cities like Sydney have in past planned protests to try and get the administration understand their concern about the pay that they are receiving. (Chang, 2018)
The official wage rate does not tell the complete picture as well. They show that the wage rate is increasing but not at the rate that may be deemed as satisfactory. But when these rates are
oken down to understand the change in wage rate for an hourly basis then the wage rate has gone down. Many people are working longer hours than before and they are then able to earn more, even though meagrely, than what they used to earn. But the longer working hours has added stress to their lives and that has adversely affected them as well. (Rush, 2018)
The following diagram shows the change in percentage in the wage growth rate of Australia. In the last 5 years there has been a stark change in the wage growth rate. While in 2012 the wages were growing at a percentage change of 3.6 compared to 2011, it has starkly reduced by 2017. According to many senior economists, this has undermined the workers who now fear to demand more pay since the overall pay increase across sectors is so low. (Cassidy, 2018)
A major reason for the low wage raise is that in Australia there has been an increase in part time jobs which are also casual. In this trend the employees are not looking to stick at one job for a longer duration of time. If they do, they can command more wage in the subsequent appraisals. But instead they are looking to move between jobs,...
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