Question

1. The Australian government has implemented a number of microeconomic reforms over the past 40 years including deregulation of banking. Do you think banking deregulation has been beneficial or not? Explain your answer. Describe what you think may be the difficulties with microeconomic reform in Australia and highlight an area that you think currently requires microeconomic reform. Justify your answer.

Answer 1

• The deregulation of banking has been both beneficial & harmful for Australian economy in the following ways -

• Benefits:
  • It gave customers more choices and information.
  • It improved the banking system of Australia to high world class service.
  • It increased the efficiency in banking system.
  • It provided the finance in banking sector in the form of FDI.
• Cons:
  • The private banking system aims more on making profit than welfare of people.
  • There may be possibility of unhealthy Competition between all banks and all banks provide poor service.
  • It may impact country's Economic potential in the form of FDI, FPI.

• There are following difficulties with microeconomic reform in Australia –

• The standards of air and water quality being lowered. This would result in decreasing the quality of air & water at the cost of Economic benefits.
• It had weakened the labour safety laws.
• It private sector is more biased towards machine & automation than man. Thus it generated very less employment as compared to economic growth.
• The regulation had result in survival of fittest in the economy.
• It creates more inequality in the Economy.

• The areas which currently in Australia which requires microeconomic reforms –

• Reform in the manufacturing and services should be done in Sustainable way, ie it should not harm the Environment.
• Encourage private sector to invest in Renewable Energy based industries like battery operated Vehicles.
• Encourage recycling & reusing of products which are non biodegradable like plastics, iron & steel etc.
• Shift towards organic agriculture from chemical based Agriculture etc.
• Reform in subsidies ie, shift from indirect/in kind Subsidy towards direct/in cash subsidy which would give peoples more choices.