ECON1010 Macroeconomics 1 - Policy Brief Assignment Help

Part B: Policy Brief

Briefing for the Prime Minister 

Executive summary

Australia’s unemployment rate has remained steady at above 5% till 2018. With falling unemployment rate, it could be contended that labor market is moving towards full employment as more people are participating in the job market (Scutt, 2018). With falling unemployment rate and steady GDP at 3% in 2018, Australian economy is showing stability signs. However, this would push RBA to raise the interest rates causing rise in wages that can ultimately bring inflation in the economy (Jericho, 2019). The RBA must take policy actions while keeping in view that “too much money chasing too few goods” brings inflationary pressure in economy. 

Recommendations 

1. The Australian Government should steer its commitment towards full employment alongside with the inflation targeting. By creating a public job guarantee scheme, the participants will be able to work while contributing their skills to communities (Smith, 2018). This would prepare them for private job market where they could take up jobs whenever vacancy becomes available. 
2. The Australian Government needs to adhere to more sophisticated approach for creating jobs. Investing in the infrastructure can aid the federal government in bringing down the unemployment rate by giving more employment opportunities to the labor force (Jericho, 2019). This would also keep the balance check on wage rates and control inflation.  

Economic rationale

Australia’s economy and labour market have been resilient, with robust output growth rate of 2.83% and  falling unemployment rate of 5.387%. The trends show that the Australian economy is performing well and much stronger than expected in 2018. The unemployment rate in recent years have been falling noticeably while reaching as low as 5.39%. Stronger economic growth and better labor market conditions are expected to improve the wages and cater with inflation over coming years.

The long span of positive output growth (measured as GDP %) has continued for Australia while demonstrating the resilience of he economy. The trends of both unemployment rate and GDP rate indicates the absence of negative economic shocks. This designates that the policy rates in Australia might escalate in near future. Apart from the GDP growth rate, the labor market in Australia also depicts resilience with rising employment and tight labor market (OECD, 2018). The GDP per capita has also been showing the upward trend as compared to other OECD countries (see figure 3 below).