Question

1. This year, COVID-related disturbances have reduced Australia’s net migration to about zero, instead of about 150 000, and construction is forecast to remain low over the short term. What principle of macroeconomics explains why a steady level of net investment in the construction of new offices, houses, retail centres etc. depends significantly on the steady growth of population. [Hint: look at the lecture recording for 24 Sept.] [Limit 5 words: 1 mark]

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2. During recent decades, state how the slope and position of Australia’s Phillips Curve has changed [Limit 20 words: 1 mark]

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3. What happens to Australia’s measured productivity while largescale investment in new mines is happening? Why? [Limit 20 words: 1 mark]

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4. Over the last 30 years, does the quantity theory explain inflation over the trend in Australia? [Limit 20 words: 1 mark]

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5. During Australia’s mining boom this century, did Australia regularly achieve a positive balance of trade? If yes, state one year when it did not. If no, state one year when it did. [Limit 20 words: 1 mark]

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6. Why does it matter for the price of assets that the stock of existing assets is much greater than the flow of newly produced assets?   
   [Limit 20 words: 1 mark]

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Answer 1

I) The construction industry is completely dependent on the supply of labor. That is, the construction industry is affected if the supply of construction worker is less. So when the net immigration in Australia was zero during the Corona period, there was less supply of people i.e. construction workers due to which low net investment also happened and there was no work in the construction sector.This construction sector is a capital dependent sector and due to lack of demand in the people due to covid, the lack of capital in the construction sector, ie the intention to invest the key, seems less due to which such happen.

2) Phillips curve showing that lower wages rate growth in Australia . This is due to low inflation in Australia in recently years. Low inflation means slightly lower demand in the economy. Which also associated with 2007-08 financial crisis as well as lower population growth in australia and thus skilled labor supply at lower side.

3) there is a slump in productivity of coal and mining sector in recent decades opposite to before . Mains reason behind these are depletion of Insitu mineral resources in regards of coal ,oil and natural gas etc. Theres is a gap between capital expenditure in this sector and this cost of labor and capital is higher than output. That why it is not remain that productive for investor and thus cost of production increasing as well as in electricity ,water sector also.although large scale investment is happening but due to cost of production and investment is higher and thus less profitable than 1990s decade.

4) there is a low inflation trend seen in Australia in recent years , which is not full define by this theory(slightly higher Bank rate) other direct and indirect factor controlling this.After GFC(global financial crisis) demand still low in the economy and low utilise of resources like laborlabor, capital etc and increase influence of new ,innovation, technology like ola ,uber , online Sale airbnb and softish commodity prices as well. These things led to companies lacking pricing power and low bargain power for worker.