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Australia is a country, and a continent.

It is located in Oceania between the Indian


Ocean and the South Pacific Ocean. It is the sixth largest country in the world with a total
area of 7,686,850 square kilometers (2,967,910 sq mi). Country and continent
surrounded by the Indian and Pacific oceans. Its major cities Sydney, Brisbane,
Melbourne, Perth, and Adelaide are coastal. Its capital, Canberra, is inland. The country
is known for its Sydney Opera House, the Great Barrier Reef, a vast interior desert
wilderness called the Outback, and unique animal species like kangaroos and duck-billed
platypuses.

EMPLOYMENT

Australia Labour Last Previous Highest Lowest Unit


Unemployment Rate 5.88 5.88 11.20 3.98 percent [+]
Employment Rate 61.02 61.04 63.41 53.48 percent [+]
Employed Persons 12059.56 11998.65 12059.56 5995.76 Thousand [+]
Unemployed Persons 753.13 749.13 958.40 363.60 Thousand [+]
Part Time Employment -13590.00 -35950.00 72660.00 -72900.00 Persons [+]
Full Time Employment 74500.00 38800.00 74900.00 -80900.00 Persons [+]
Employment Change 60900.00 2800.00 99500.00 -74800.00 Persons [+]
Labor Force Participation 64.78 64.56 65.79 60.11 percent [+]
Rate
Youth Unemployment Rate 13.27 13.30 20.22 7.61 percent [+]
Productivity 101.90 101.90 104.21 58.20 Index Points [+]
Labour Costs 99.30 101.30 102.50 45.40 Index Points [+]
Job Vacancies 186.40 181.00 190.00 28.40 Thousand [+]
Job Advertisements 165991.07 165468.99 258100.79 72752.60 [+]
Wages 1163.50 1163.50 1163.50 59.10 AUD/Week [+]
Wages In Manufacturing 1295.10 1295.10 1295.10 333.00 AUD/Week [+]
Wage Growth 1.90 1.90 4.30 1.90 percent [+]
Minimum Wages 672.70 672.70 672.70 543.78 AUD/week [+]
Population 24.13 23.94 24.13 10.39 Million [+]
Retirement Age Women 65.50 65.00 65.50 62.00 [+]
Retirement Age Men 65.50 65.00 65.50 65.00 [+]
Wages High Skilled 5350.00 6590.00 6590.00 5000.00 AUD/Mont [+]
h
Living Wage Family 2582.40 2559.90 2657.10 2549.80 AUD/Mont [+]
h
Living Wage Individual 2260.43 2206.65 2299.00 2173.00 AUD/Mont [+]
h
*FIGURE 1- Australian Labor Statistic as of March 2017

In March, the seasonally adjusted labour force participation rate came in at 64.8 percent,
up from 64.6 percent in the prior month and above consensus of 64.6 percent.

Employment increased by 60,900 to 12,059,600, beating market estimates of a 20,000


gain: full-time employment increased by 74,500 to 8,238,600 while part-time employment
decreased 13,600 to 3,821,000.

Unemployment increased 4,000 to 753,100. The number of unemployed persons looking


for full-time work increased by 2,900 to 528,600 and the number of unemployed persons
only looking for part-time work increased by 1,100 to 224,500.

Seasonally adjusted aggregate monthly hours worked in all jobs increased 3.2 million
hours to 1,664.2 million hours.

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INFLATION

Based on the statistical data gathered consumer prices in Australia rose 2.1 percent
through the year to the March quarter of 2017 from 1.5 percent in the fourth quarter 2016
while markets expected a 2.2 percent rise. It was the highest inflation rate since the
September quarter 2014, driven by a surge in cost of transport and an increase in cost of
food and non-alcoholic beverages and housing. On a quarterly basis, consumer prices
rose 0.5 percent, the same as in the previous quarter but slightly below market
expectations of a 0.6 percent increase. The most significant price rises this quarter are
automotive fuel (5.7 percent), new dwelling purchase by owner-occupiers (1.0 percent),
medical and hospital services (1.6 percent) and electricity (2.5 percent). These rises were
partially offset by falls in international holiday travel and accommodation (-3.8 percent),
fruit (-6.7 percent) and furniture (-3.5 percent). Inflation Rate in Australia averaged 5.07
percent from 1951 until 2017, reaching an all time high of 23.90 percent in the fourth
quarter of 1951 and a record low of -1.30 percent in the second quarter of 1962.

*FIGURE 2- Australia Inflation rate as of January 2017

ECONOMIC GROWTH

Australian Business and Economy is the most thriving in the world and has made a
stable base in the world economy. Australia was highly praised by various international
organizations like International Monetary Fund for brilliant macroeconomic management
and consistent economic reform. The small business sectors in Australia are the most
significant part of its economy. The amount of investment in Australia is fourth largest in
the world. The per capita Gross Domestic Product is marginally less than United States
and United Kingdom which proves the high standard of Australian Economy. The
development in the economic sector has led to the significant rise in the living standard of
the citizens. Low inflation rate is also a positive characteristics of Australian economy
which is absent in most of the developed countries.

The development of Australian economy can be traced back to the mid nineteenth
century when production of wool began here. With the discovery of gold in the same
decade Australia experienced economic growth and increase in population. The vast
stretch of fertile lands and the huge natural resources of the country were mainly
responsible for the sustained growth which the country experienced. From the Second
World War the economic expansion in this country augmented highly and the boom
period continued till 1970s. In 1987 the Australian Stock Exchange Limited was
established which contributed to the economic advancement.

Australia is a country which is largely dependent on its agricultural industries. Agriculture


has always been one of the primary sources of income for Australian people. Earlier agro
products accounted to about 80% of the total export goods but now it has gone down to

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3% of the total export. Despite the decline in agricultural exports, even now, about
370,000 people are engaged in farming in Australia. Although the agricultural industry
has witnessed a fall from its position during the 1970s, it still contributes largely towards
Australian economy. Australia was one of the largest exporters of beef and wool in the
whole world and the third largest of wine and wheat even in the year 2005.

Mining industry is one of the chief industries which have led to the growth of population in
the Australian continent, right from the time when gold was discovered in Australia.
Mineral and fuels top the list of Australian exports. The total export value of minerals has
risen by 21% in the year 2006 as compared to that in 2001.

The Australian manufacturing industry is well-developed with al modern amenities being


used for the manufacturing processes. The major manufacturing units include machinery
and equipment, metals, wood and paper and others.

The ship building industry of Australia is one of the most important industries in the
Australian economy. Western Australia is considered to be the leader in terms of high
speed and lightweight ship building. Currently, Australia accounts for about 30% of the
international market share for aluminium shipbuilding.

The Australian aviation industry is growing rapidly because the country depends largely
on its internal airports. The main units of the Australian civil aviation industry are the
international airlines sector, general aviation sector, safety and the domestic regional
airlines sector.

Australia places a great importance towards banking and insurance sector industries.
The Australian insurance market is one of the most stabilized and has been providing
insurance solutions to people down the ages. Insurance solutions in Australia are
provided by competent firms and legal advisors who are experts in their fields.

The information and technology industry of Australia contributes about 38% of the global
IT market solutions and is the third largest in the Asia-Pacific region. In the total global
economy the Australian information and technology industry accounts for US$38. This
industry of Australia has witnessed a rapid growth in the past few decades and has
helped the country to secure a strong position in world economy.

As Australia is one of the most developed nations of the world the telecommunication
industry of Australia is one of the most advanced sectors. The leading company which
dictates the Australian telecommunication industry is Telstra. Few other
telecommunication companies operating in Australia are Telstra, AAPT, Powertel, Optus,
Telecom, Primus, Soul and Vodafone. Mitsubishi and Toyota are the two major Japanese
automobile manufacturing industries in Australia.

SOCIO-ECONOMIC STATUS
The total population in Australia was estimated at 24.1 million people on June 30th 2016,
according to the preliminary census figures. Australia's population grew by 1.4 percent
during the year ended 30 June 2016. All states and territories recorded positive
population growth, with Victoria recording the highest growth rate of all states and
territories at (2.1 percent) and the Northern Territory recording the lowest growth rate (0.2
percent). Looking back, in the year of 1960, Australia had a population of 10.4 million
people.

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*FIGURE 3- Australia Population as of 2016

The population of Australia represents 0.33 percent of the worlds total population which
arguably means that one person in every 308 people on the planet is a resident of
Australia. This page provides - Australia Population - actual values, historical data,
forecast, chart, statistics, economic calendar and news. Australia Population - actual
data, historical chart and calendar of releases - was last updated on May of 2017.
ealth status is a holistic concept that is determined by more than the presence or
absence of any disease. It is often summarised by life expectancy or self-assessed
health status, and more broadly includes measures of functioning, physical illness, and
mental wellbeing.
Life expectancies provide an indication of the number of years of life remaining from a
given point in time. Healthy life expectancy is measure of years lived without disability,
disease or injury.
Males born in Australia in 20072009 could expect to live to the age of 79.3 years and
72.0 of those years would be lived in good health.
Australian men born in 2009 can expect to live 24 years longer than males born in 1901.
The life expectancy of males born in 2003 decreased with increasing remoteness: from
78.8 in Major cities to 75.4 in Remote and Very remote areas.
Healthy life expectancy also decreased with increasing remoteness, by 4.0 years (at
birth) and 2.1 years (at age 60).
Mortality
Age and cause of death are important measures of the health status of a population.
They can be used to assess the success of interventions to improve disease outcomes,
signal changes in community health status and disease processes, and highlight
inequalities in health status between population groups.
In 2008, there were 74,000 deaths among Australian males. The leading cause of death
was ischaemic heart disease, followed by lung cancer and stroke.

*FIGURE 4- Leading causes of death among males, 2008

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Death rates increase with age and causes of death among males differ by age and
population group:
72 to 100 is the ratio of prostate cancer deaths among overseas born males compared to
Australian born males.

Developing literacy and numeracy skills in the early years of schooling continues to be a
key focus of recommendations around the Australian education system. Literacy and
numeracy are essential foundational skills that allow young people to succeed in life. The
National Assessment Program Literacy and Numeracy (NAPLAN) testing was
introduced in Australia in 2008 to identify whether all students have the literacy and
numeracy skills that provide the critical foundation for their learning, and for their
productive and rewarding participation in the community. Parents, carers and teachers
play a crucial role in supporting a child's learning - from the early years through to
adulthood.

An enduring goal of educational, economic and social policy in Australia is to improve the
educational outcomes of children, increasing the likelihood that they will transition into
employment and participate fully in society. Studies show that students from low
socioeconomic status families do not perform as well at school as children from higher
socioeconomic status families. This is not to say that children from disadvantaged
families cannot do well at school, as a child's innate ability is also an important
influencing factor. However, understanding the socioeconomic factors that relate to
educational disadvantage and how these factors interact is an area of ongoing interest.

People who had attained a higher education qualification (Bachelor degree and
above) were more likely than others to have achieved a score at Level 3 or above in
literacy and numeracy, and Level 2 or above in problem solving in technology-rich
environments (PSTRE). Among people whose highest qualification was a Postgraduate
degree (Masters degree or higher), 82% had a literacy score of Level 3 or above, while
for people whose highest qualification was a Bachelor degree, 77% had a literacy score
of Level 3 or above. For the people whose highest qualification was a Postgraduate
degree, 77% had a numeracy score at Level 3 or above, and 50% had a PSTRE score at
Level 2 or above. In contrast, among people without a non-school qualification 44% had
a literacy score and 34% a numeracy score at Level 3 or above, and 22% a PSTRE
score at Level 2 or above).

*FIGURE 5- Proportion at each skill level, By highest non-school qualification 2011 2012

There is considerable variation in skill levels by the field of study of the highest
non-school qualification. A high proportion of people whose qualification was in 'Natural
and Physical Sciences', achieved a score at Level 3 or above in literacy (81%) and
numeracy (74%), and Level 2 or above in PSTRE (49%). Other groupings have much
lower proportions. Of people whose qualification was in 'Architecture and Building', 47%
achieved a literacy score and 45% a numeracy score at Level 3 or above and, and 19% a

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PSTRE score at Level 2 or above. The differences reflect, in part, the level of non-school
qualification undertaken. For example, a higher proportion of persons in 'architecture and
building' studied in vocational education, whereas most people studying in 'Natural and
Physical Sciences' attained a Bachelor degree or higher.
Among the 16.3 million people for whom a skill level was measured, 2.3 million
(14%) were studying for a non-school qualifcation. People who were studying for a
Bachelor degree or higher were much more likely than people studying for a lower level
qualification to have attained a score at Level 3 or above in literacy and numeracy and
Level 2 or above in PSTRE. For people studying for a Bachelor degree, 80% had a
literacy score at Level 3 or above compared with 54% studying a Certificate III/IV, and
34% doing a Certificate I/II.

Among people studying a Bachelor's degree 66% were assessed for numeracy at
Level 3 or above. In comparison 40% of people studying a Certificate III/IV were at Level
3 or above and 28% of people studying for a Certificate I/II.

For PSTRE, 59% of people studying a Bachelor degree were at Level 2 or above,
compared to 32% of people studying a Certificate III/IV and 23% studying a Certificate
I/II.

MONETARY AND FISCAL POLICY

The Reserve Bank of Australia is responsible for formulating and implementing monetary
policy. Monetary policy decisions involve setting the interest rate on overnight loans in the
money market. Other interest rates in the economy are influenced by this interest rate to
varying degrees, so that the behavior of borrowers and lenders in the financial markets is
affected by monetary policy (though not only by monetary policy).
The formulation of monetary policy is the primary responsibility of the Reserve Bank
Board. The Board usually meets eleven times each year, on the first Tuesday of the
month except in January. Hence, the dates of meetings are well known in advance. For
each meeting, the Bank's staff prepare a detailed account of developments in the
Australian and international economies, and in domestic and international financial
markets. The papers contain a recommendation for the policy decision. Senior staff
attend the meeting and give presentations. Monetary policy decisions by the Reserve
Bank Board are communicated publicly shortly after the conclusion of the meeting.
From day to day, the Bank's Domestic Markets Department has the task of maintaining
conditions in the money market so as to keep the cash rate at or near an operating target
decided by the Board. The cash rate is the rate charged on overnight loans between
financial intermediaries. It has a powerful influence on other interest rates and forms the
base on which the structure of interest rates in the economy is built. The close
relationship between the cash rate and other money market interest. Changes in
monetary policy mean a change in the operating target for the cash rate, and hence a
shift in the interest rate structure prevailing in the financial system.
Movements in the cash rate are quickly passed through to other capital market interest
rates such as money market rates and bond yields. These interest rates are also
influenced by the risk tolerance of investors and preferences for holding funds in a form
that are readily redeemable. The cash rate and other capital market interest rates then
feed through to the whole structure of deposit and lending rates. In Australia, most
deposits and loans are at variable or short-term fixed rates, so there is a high pass
through of changes in the cash rate to deposit and lending rates. But because of the
other factors influencing capital market rates, and fluctuations in the level of competition
in the banking sector, deposit and lending rates do not always move in lockstep with the
cash rate.

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The changes in interest rates affect economic activity and inflation with much longer lags,
because it takes time for individuals and businesses to adjust their behavior. Interest
rates affect economic activity via a number of mechanisms. They can affect saving and
spending behavior of firms and households, as well as cash flow, the supply of credit,
asset prices and the exchange rate, all of which affect the level of aggregate demand. In
turn, developments in aggregate demand, in conjunction with developments in aggregate
supply, influence the level of inflation in the economy. Inflation is also influenced by the
effect that changes in interest rates have on imported goods prices, via the exchange
rate, and through their effect on inflation expectations more generally in the economy.
The ways in which monetary policy affects the economy are far from mechanical in their
operation. In aggregate, however, a general negative association between interest rates
and both demand growth and inflation is clear. Substantial rises in interest rates,
designed to restrain inflationary booms, have been followed by contractions in demand
and a reduction in inflation. Conversely, substantial interest rate reductions have been
followed by periods of significantly faster growth. In responding to cyclical developments
and inflationary pressures, monetary policy has had a powerful influence on aggregate
demand and inflation in the economy.

Australian fiscal policy is based on a medium-term framework designed to ensure budget


balance over the cycle. This medium-term framework ensures that the Government
balance sheet remains in good order. The formulation of the fiscal strategy, with an over
the cycle emphasis, also allows the use of fiscal policy as a demand management tool.
The fact that the strategy allows the use of discretionary fiscal policy raises the question
of the desirability and effectiveness of discretionary fiscal policy. Australia is a relatively
small, open, financially developed economy with a floating exchange rate. Standard
economic theory suggests that monetary policy is a relatively more potent demand
management tool for such economies. For example, it predicts that fiscal expansion will
produce higher interest rates that will reduce investment expenditure. However, it also
predicts that the instantaneous inflow of capital will to some extent circumvent any
change in interest rates, and produce an appreciation of the currency and a smaller
contribution of net exports to growth. In contrast, expansionary
monetary policy leads to lower interest rates, capital outflow and a depreciated currency,
which increases the net export contribution to growth. Symmetrically, with the first policy
case, the capital outflow will mitigate the actual change in domestic interest rates.
From a policy makers perspective it is important to have some understanding of the
effectiveness of fiscal policy to inform the desirability and magnitude of any fiscal
package. The paper does not attempt to ascertain the total effectiveness of fiscal policy.
This paper focuses on two factors private sector saving offsets and interest rate effects
that may reduce the effectiveness of fiscal policy as an aggregate demand management
tool in Australia.
The paper is organized as follows. Section II considers evidence of private sector saving
offsets in Australia. Section III considers the potential link between fiscal policy and
interest margins. Section IV considers the policy implications of the papers findings.

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