2.7 (Part 2) The recent influence of
aggregate supply side factors to 2013.
1. Changes
in the
productivity
cycle
Affects the growth in productive capacity and the
sustainable level of economic activity.
past decade, Australia’s labour productivity grew by
only 1.5% per year.
lower than our long term average, restricting our
productive capacity.
productivity growth strengthened, a faster pace of economic
activity and improved living standards would be the result
2. Changes in federal
government aggregate
supply policies
Gov put in a
number of policies
to try and boost
aggregate supply
side conditions
tax reforms to strengthen incentives to work, increased
immigration which contained skilled workers, kept interest
rates down, decreased tariffs to increase productivity and
national infrastructure projects like the M80 and the NBN
help increase the efficiency in the use of resources and
further grew the economic activity.
3. Fewer strikes
2009-2013, strike rates were
considerably low at less than
1%.
favourable supply factor
has meant that there has
been an increase in
resources available and
therefore improved
productive capacity, faster
long term sustainable rate
of economic growth and
better material living
standards.
4. Changes in real unit
labour costs (RULC)
2009-10 and
2012-13, there
was a fall in the
average annual
change in
RULCs of about
0.5%.
Fall is favourable supply side
condition improved
profitability, encouraging
firms to expand thereby
growing our long term
productive capacity and
allow for a faster
sustainable pace of
economic activity.
rise in minimum
wage, along with a
1.2% rise in RULCs
in 2012-13 created
less favourable
developments which
led many
businesses to
closure and slowed
the growth of
productive capacity.
5. Changes in interest rates
Following the GFC, interest rates were lowered to
encourage spending.
Lower rates favourable
supply side conditions
Higher interest rates are less favourable because of
the lower profits, high credit costs, less investment in
new equipment and reduced growth of productive
capacity.
high interest rates are around for
a while, this impacts AS,
economic activity and material
living standards
6.
Changes
in the
profit
growth of
firms
Strong profit growth is favourable supply side conditions
Profits help with expansion as firms are more willing
to grow. In the long term this helps raise AS
Depressed profit growth is less favourable due to
expansion plans put on hold and some firms are
forced to close, cutting our productive capacity.
7. Record labour
force participation
rates
Aus participation
rates recently in
2012-13 reached a
record high of more
than 65%
participation rate has slipped recently
and slow growth is occurring.
improved the
availability of labour,
productive capacity and
sustainable economic
growth.
Aus gov keen to lift
rates to help ease
labour shortages
Overview
recent years Australia’s economic
activity has rose by 2.7% per year
weaker than the estimated GDP
of around 3.25%
reason for slow downs within demand
and the shifting between conditions.
less favourable supply side conditions which has limited growth
in our productive capacity and sustainable economic activity.
8. Bottlenecks in
labour and
infrastructure
except during the GFC
there were constraints that
limited growth in Aus
productive capacity,
slowing our sustainable
rate of economic activity.
constraints are
unfavourable were in
areas of skilled labour and
economic and social
infrastructure.
commencement of major infrastructure projects
by the Australian government such as the NBN
should eventual expand our productive capacity
in some of those key areas, lifting the
sustainable future rate of activity.
9. Changing
climatic
conditions
Natural disasters have greatly impacted our
productive capacity and reduced our AS.
negative impacts show in the floods
which occurred in QLD. NSW and VIC
b/w 2010 - 2013. Affected crops,
mining, tourism and other types of
production. It also hindered our
infrastructure including bridges, roads,
ports, railways, farms, businesses and
mines.
depresses growth
10. Changing in oil prices
oil prices have a major effect on production costs
for most businesses because firms need oil to
transport goods and deliver services and it is also
used in input areas such as packaging, chemicals,
synthetics and plastics.
Low oil prices like in 2008-09 had favourable
supply side conditions as it cut costs and lifted
profits, encouraging expansion and lifting the
growth of productive capacity.
high oil prices from 2010 and 2013 discouraged
production for most firms and depressed growth in
productive capacity