Question

The Australian Government recently introduced the HomeBuilder scheme. Under the scheme, the government will provide eligible home owner-occupiers with a grant of $25,000 to spend on building a new home or to renovate an existing one. Use the formula ‘GDP = C + I + G + X - M’ to analyse how this is expected to affect Australia’s GDP/economy, ceteris paribus.

Answer 1

The home builder scheme encourages new home builds to maintain the pained building industry. This also helps to pump money to the economy. The Australian government turned to housing construction to launch the post corona virus programmes. This programme targeted to create real jobs, which avoid the risk will encourage the transfer of wealth and assets. Most of the employment opportunities related to constriction work. This scheme improves the job opportunities and also tried to maintain the living standard of the people.

The government expenditure is one of the most important sectors in aggregate demand. The spending of government for this kind of activities increase the aggregate demand. Consumption expenditure (C), Investment expenditure (I), Government expenditure (G) and Net exports are the major components. Among this the rise of one component will increase the others also, and at the same time, the aggregate demand also. The government intervention by the Australian government increases the employment opportunities. This increasing employment increases the wage rates. Thus the labour supply increased. This improves the consumption pattern of workers and the living standard also. On the other hand, the rise in labour supply and demand in the construction sector increased, leads to the rise in overall GDP.