Economics - Gross Domestic Product - Monetary Policy of Australia - Essay Writing Assessment Answer

March 04, 2018
Author : Ashley Simons

Solution Code: 1AGAC


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Economics Assignment

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Unemployment happens when people without work are searching for remunerated work. It is an unwanted and uncomfortable situation. Young people particularly have more difficulty in finding employment because of a limited skill-set and the least experience. Unemployment results in poverty, and is a contributing factor for increasing crimes all over the world. The concept of unemployment in Australia is that if people were actively seeking work and could not find even one hour of it, they are considered to be unemployed. The island continent’s economy has undergone many changes, mainly due to technological advancements, competition from less developed and developing economies, changes in the consumption pattern of families. All these factors have contributed to a significant decline in job prospects for persons with a limited formal qualification. Married women and women with dependents are finding employment with better pay. Unemployment is not evenly distributed across the labor pool, but certain groups are more like to be unemployed than others. In the following discussions, we will be focusing on unemployment in Australia; unemployment rate and its types. The issues surrounding unemployment and the various measures the government has taken to reduce it. We will also be commenting on the unemployment policies of some Australian states.

The unemployment rate is the measure of occurrence of unemployment and is computed as a percentage; it is the ratio of the number of unemployed individuals in the country to all individuals currently in the labor force of the country. The employment rate, however, does not provide data on how many people are employed in positions that underutilize their skills. According to the website of Australian Bureau of Statistics, as of August 2016, unemployment rate was stable at 5.7 percent (Australian Bureau of Statistics, 2016). The participation rate was stable at 64.8 percent, and the monthly hours worked in all jobs rose from 1.7 million hours to 1,657.1 hours. Full-time employment increased, and part-time employment decreased (Australian Bureau of Statistics, 2016). This indicates a favorable trend in Australia’s economy.

Unemployment rates differ amongst various regions in Australia. Tasmania has recorded the highest unemployment rate, followed by South Australia, Western Australia, Queensland, Victoria, New South Wales, Australian Capital Territory and Northern Territory (Australian Government, Department of Unemployment, 2016).

Unemployment Rates by State and Territory, August 2016 (%) (Australian Government, Department of Unemployment, 2016)

State/Territory Unemployment Rate (%)
Northern Territory 3.5
Australian Capital Territory 3.6
New South Wales 5.0
Victoria 5.5
Queensland 6.2
Western Australia 6.3
South Australia 6.8
Tasmania 7.2


Employed Persons Unemployed Rate

(Australian Bureau of Statistics, 2016)

Unemployment can be classified as –

  • Voluntary unemployment – Here people voluntarily give up their jobs to look for new ones, often better and more paying.
  • Involuntary unemployment – Here people become jobless due to getting fired, or being laid off by their employer, and the need to find work elsewhere. This type of unemployment is viewed as more problematic than voluntary unemployment.
  • Frictional unemployment – Joblessness due to Frictional unemployment lasts only for short periods of time. This category of unemployment refers to people who are changing jobs and require time to find a new job and are currently jobs.
  • Cyclic Unemployment - This type refers to the unemployment that occurs during business cycles of recessions and depressions. Cyclic unemployment happens when demand for goods and services decrease, companies to cut costs lay off workers and reduce production activities. As the economy recovers from recession, depression, cyclic unemployment vanishes. Economists usually focus on addressing the causes of recession and depression rather than focusing on cyclic unemployment.
  • Structural Unemployment – Structural Unemployment occurs when some labor markets have more workers than available jobs, and salaries don’t decrease to accommodate everyone. Structural unemployment is also thought of as a situation, where the labor forces skills do not match the skills demanded by the market.
  • Seasonal Unemployment – Seasonal unemployment occurs when the requirement for certain types of work changes over the course of the year. (Wagner, 2014)

South Australia will be hit hard by firms increased willingness to automate manufacturing process, and use sophisticated high-end technologies to do most jobs. It is predicted that by 2030, one in six jobs in the country will be replaced by a robot. Tasmania is expected to be affected the least due to computerization of jobs. Adelaide, Sydney, Perth, and Melbourne are at increased risk of joblessness. South Australia and Adelaide have the greatest percentage of job vacancies and 75 percent of jobs have been computerized.

High paying jobs that require critical/creative thinking skills, complex decision-making, planning and emotional intelligence are unlikely to be automated; hence unemployment in this level of job is going to be low. Less paying, unskilled and labor intensive jobs are at an increasing threat to be replaced by a computer. The most unfavorable impact will be felt by low-paying, unskilled jobs.

According to the Graduate Job Report, 32 Australian graduates compete for one available job. The appearance of intelligent devices will lead to lesser jobs for unskilled workers, as they will be computerized. If employees want to survive in the job market, they will be required to up-skill with further education, or by doing voluntary work. Others might have to design entirely new career goals because many jobs would have become obsolete (Adzuna, 2016). Automating tasks will improve the organization’s overall productivity and reduce costs, but will cause unemployment. Job positions for highly skilled workers are expected to increase, but for low-skilled workers they are becoming more competitive. I think low-skilled workers must move on to the managerial aspect of things, as such work can never be automated (Adzuna, 2016).

Newstart Allowance, Australia’s temporary unemployment stipend is paid to unemployed individuals of working age (Australian Government, National Commission of Audit ). It is given only after verifying if the recipient is unable to support himself/herself. The government also helps people to find employment, skill-gap of job-hunters are evaluated and determined how much aid they require from the government. Job seekers are classified as Stream 1, Stream 2, Stream 3, Stream 4, Stream 1 people are considered work-ready whereas Stream 4 persons are considered have the least skills for the job. People are trained based on the streams they have been categorized into. Stream 1 people receive very little help, while Stream 4 persons receive intense attention. The principle goal of Newstart allowance was to provide a standard of living to unemployed persons, who are not able to sustain themselves, either through work or savings (Australian Government, National Commission of Audit ). The allowance is given to people aged 22 years and above. In January 2014, the allowance amount was $501 for every two weeks for a single person or 452.3 each for a couple. Another type of allowance, Youth Allowance is given to jobless youth aging from 16 to 21. It is also paid to people engaged in education, as an encouragement to pursue further education, as in January 2014 the Youth Allowance was $414.4 for every two weeks for a single person above 18 years of age and living away from family. A big proportion of Newstart Allowance beneficiaries consist of parents and seniors. Newstart rates vary depending upon several factors, some which include –

  • If the recipient is 60 years old or above, with nine or more subsequent months of unemployment
  • Has dependent children to care for
  • A single parent/guardian of a dependent child. (Australian Government, National Commission of Audit )

Newstart Allowance also varies based on the income per fortnight of the individual, and if the person has assets beyond a certain pre-determined threshold, then he is not eligible for this allowance. To continue receiving Newstart payment, the beneficiaries have to regularly participate in activities like looking for work (Australian Government, National Commission of Audit ).

The present spending on Newstart Allowance is $8.4 billion per year, estimated to become $8.7 billion by 2016-2017 at a rate of 1.4 per cent per year (Australian Government, National Commission of Audit ). The column graph on the next page shows the proportion of first Newstart Allowance recipients by time on income support (Australian Government, National Commission of Audit ). It can be clearly seen that most beneficiaries catch up employment in a short period, usually, not more than 12 months, a noteworthy portion, around 20 per cent continue on the allowance for more than two years. A majority of the people on long-term allowance include seniors, single parents and the physically challenged. These groups presently constitute 40 per cent of the Newstart Allowance beneficiaries. People in the age range of 15 to 24 years constitute around 28 per cent of the persons unemployed for more than a year. Youth are the largest unemployed group. The table on the next page gives the statistics for the beneficiaries according to their age (Australian Government, National Commission of Audit ).

Newstart Allowance projected expenditure (Australian Government, National Commission of Audit )

Newstart Allowance recipients by duration on income support (Australian Government, National Commission of Audit )

Newstart Allowance recipients by age (Australian Government, National Commission of Audit )
Age Cohorts Per cent of total recipients
21-29 28
30-39 22
40-49 22
50-59 19
60-64 9

Many innovative policies have been declared by successive Governments to improve support for the Newstart Allowance beneficiaries to catch up employment. These include: (Australian Government, National Commission of Audit )

  1. Threshold required to be eligible for the allowance has been increased to $100.
  2. If job-hunters relocate to another area to take up a job, they will be given $3000 to $6000.
  3. Young Australians who are unemployed for 52 weeks or more get a job Commitment Bonus of $2500 to $6500.
  4. The Government has announced restoring the federal government program ‘Work for the Dole’ for people under 50 years of age, having been on monetary maintenance program for more than half a year.

Young people constitute a significant portion of people having a minimum wage. Nationally, 12 per cent of the youth are unemployed, contrasted by the general unemployment rate of 6 per cent. 17 per cent of Tasmanian youth are unemployed whereas 10 per cent of youth in Western Australia are unemployed (Australian Government, National Commission of Audit ).

General and youth unemployment rates by State (Australian Government, National Commission of Audit )

Australia’s minimum wage is set country wide through Annual Wage Cases conducted by Fair Work Australia, and is not different in States, in spite of considerable differences in economic conditions of various regions. A high minimum wage can cause significant unemployment to low-skilled or inexperienced workers, and absence of employment prospects kills the potential productivity of individuals and hence the capacity of the economy. A high proportion of young workers constitute people in the minimum wage category. High minimum wages might prevent youngsters from obtaining employment. Keeping a ceiling on minimum wages can increase job prospects for jobless workers as firms would be more enthusiastic in hiring cheap labor. Australia’s minimum wage is present $32000 per year, which is 56 per cent of the Average Weekly Earnings (Australian Government, National Commission of Audit ).

Average Weekly Earnings by State

Australia NSW Vic Qld WA SA Tas ACT NT
Average Weekly Earnings $1,105 $1,108 $1,046 $1,079 $1,298 $979 $938 $1,374 $1,253
Minimum wage as a percentage of State Average Weekly Earnings 56% 56% 59% 58% 48% 64% 66% 45% 50%

(Australian Government, National Commission of Audit )

The minimum wage is the same across the country, the similarity between minimum wage and Average Weekly Earnings is different across jurisdictions (Australian Government, National Commission of Audit ).

The Australian Government’s policies on unemployment have proven effective. The Government has committed to improving incentives with the help of Job Services of Australia. The Government has also promised to provide additional support to jobseekers, including cash bonus payments, relocation support, and Job Commitment Bonus. Relocation assistance will provide $6000 if the jobseeker moves to a regional area, and $3000 if he/she moves to a metropolitan area. If they can find and sustain work for a year without needing welfare money, then they are also eligible for the Job Commitment Bonus of $2500. If they remain off welfare for 24 months, then they will be paid another amount of $4000. It has been proposed by the National Commission of Audit that the income test to lose Newstart Allowance must be $19000 a year. The Commission proposes that there should be a future limit on the threshold of minimum wages, and a variable minimum wage across different regions in the country.

The Commission recommends minimum wages must be different in each jurisdiction, with a review every 10 years. It also recommends that if for some reason, the wage has reduced, then it should be kept constant until aligned with 44 per cent of the Average Weekly Earnings in that jurisdiction. It also recommends the setting of the minimum wage must be an administrative process, executed by the Department of Employment. The Government should collaborate with States guarantee realization.

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