ECONOMICS

Business Macroeconomics Assignment

Business Macroeconomics Assignment

Question 1

Multi-speed economy refers to economic phenomenon in a country where various sectors of economy such as agriculture and services or manufacturing shows the different growth potential between each other. Australia is currently 13th on rank of highest nominal GDP around the globe. Australia has witnessed various growth milestones in various sectors in the recent past. One such sector for instance, mining sector witnessed significant growth and increasing much faster as compared to manufacturing and service sectors and agriculture sectors of Australian economy (CEDA, 2012).

Causes of Multi-speed economy of Australia

There are several factors which are found to be causative of multi-speed economy prevailing in the Australia. The major determinants or factors which are found to have significant association with the two-speed economy is property and estate, increase household debts due to the high availability of properties on credit, trade for base metal commodities, increasing rate of real inflation, fluctuation of fuel prices and discount or interest rates, and last but not the least fiscal deficit (CEDA, 2012).

The factors which are causative for the low economic performance of Australian agriculture sector is found to range from global warming, water security, soil fertility, weeds, drought, bio-security and climatic changes that are subject to the high-low performance of Australian agriculture sector. In addition, the increase of tariffs on export of agriculture products has seriously impacted the performance of the Australian agriculture sector. The main exports of agricultural products are based on the countries like Japan and Europe and these high tariffs have discouraged many exports on wider scale. This made the Australian agriculture sector less competitive as compared to other countries such as Thailand and India which is performing more export activates through economic strategies of giving subsidies to their farmers and reducing tariffs on the exported goods. Moreover, various legal scandals on international frontiers regarding the export of Australian agricultural products have seriously impact negatively on the name of its wheat and other agriculture products abroad. One such major legal controversy entails is Australian Wheat Board (AWB) involvements in bribing the Iraqi officials in year 2005 have seriously affected the positive image and reputation on international borders. These all determinants and factors combined with some major controversies associated with the agricultural sector has led the Australian people to shift themselves to the mining sector and other manufacturing sector than agriculture sector which is no more promising and offering growth in various parts of Australia nation-wide (CEDA, 2012).

Advantages of Multi-Speed Economy

The multi-speed economy offers range of benefits for households and overall economy. The multi-speed economy provides the management and prioritization of resources. Australian government in recent past is intensively focusing on the investing in those sectors that show promising welfare for the people in the society as well as those which have high potential of high speed growth so that unemployment can be reduced and high performance can achieved for the Australian economy. The Australian government is thus focusing on the prioritization in order to take the remedial steps ...