Current State of Australian Economy and Challenges Faced by the Government

Question:

Critical evaluation of microeconomic impact of any policy or Structural change or cyclical event – The Government, in its federal budget 2015, announced $237 million in cut to the health and education departments. Likewise, other eight different departments are under functional and an efficiency review, which may cause more cuts and more job losses. 
 

The Federation of Australia has been working towards the improvement of Australis since 1901 where the Australian Government has aimed to change the lives of the people enormously by continuing the change at a larger rate. There are various opportunities and challenges which the Australian Government has been facing in terms of reviving its economy in order to increase the global economy to a great extent (Commonwealth Grants Commission 2015).

The risks are being left without much addresals where lower no. of jobs, lower economic growth and lower life styles leading to reduced life standards were all observed in the process.

In this article we would discuss the facts of the Australian economy which might have led to the formation of microeconomic reforms in almost all the sectors of Australia. In this context we would also identify the related economic variables which have an impact on the situation like production, profit, investment, price, consumption and risk factors.

The main purpose of evaluating this report is to analyse the impact of the microeconomic reforms of any policy or Structural changes in any process.

Australia is relatively a smaller populated Country which is placed over larger areas of land and the population has a major difference between 1901 and the present times. Australians have become more ethnically diverse than ever before and they have also grown their ideas extensively in terms of the economic aspects. Owing to the vast technological changes Australians have connected greatly to almost all the people in the world. Most of the Australians live much more a better life in terms of their health and education where they have grown their k knowledge extensively by establishing contacts with the others in terms of improving their health and life expectancy. 
Changes to the ways in which the Australians have been choosing to live their lives has also changed the ways in which they live as they have been contributing to the increase of the Australian Government’s expenditure where the Government has been facing extreme pressure in terms of budget which is related to various departments.

The Government has been facing pressure with respect to their revenues largely owing to the result of the fall of the commodity prices in Australia. In spite of these budgetary issues the public’s expectation in terms of higher quality of services and products have been increasing as this need is being felt by the Government that they need a higher skilled population than ever before in order to compete with the other international countries in establishing their economy (Daley and McGannon 2013).

On these lines the two critical departments for which the Government works with greater efficiency like the Health and Education should be revived by increasing the departmental efficiencies which can contribute in enhancing their functions.

Evaluation of Microeconomic Reforms and Policies

The impact which these services would have on the Organizational functions should also be assessed in order to motivate the employees to perform and maintain their higher standards to be able to secure Australia’s brighter future. The public should innovate to the best standards and they should create greater opportunities.

The Abbott Government in 2015 has create some special budget where the second budget has been called to place their small businesses at the centre with a surprise tax package which has been a complete miss for the business communities (Commonwealth Grants Commission 2015).

The Government has taken various measures in order to give an increase to the economy however it has proved to be a miss. The Government has focussed majorly on the small business firms where the taxes have been reduced from 30% to 28.5% with an annual turnover of less than $2 million. For unincorporated business firms as well they have reduced the taxes from 5% to 1.5%. 

In the sectors of Health and Education the Budget has given a set of mixed results. In the Health Sector the results have been winners as well as losers. The winning segment consisted of the following points.

Winners

• Medical Researchers receive $ 400 million for all their research projects
• The recovery leave for the living organ donors has been extended from 6 to 9 weeks
• For women new cervical cancer means less no. of pap smears
• In the context of Cancer Patients there have been new drugs and breast cancer melanoma

Losers

• Anti – Vaccinators lose childcare subsidies and benefits related to the family if they aren’t vaccinated
• If any of the family members are chronically ill with some health issue they would have to spend more in order to qualify for the benefits
• Shortfall in terms of hospital funding prevails in spite of the budget

This sector has proven to be a big time loser where the University Graduates living overseas will have to repay their HECS debts

If we have a greater insight into the budget we would see that an initiative in order to contribute towards the economic growth of the Country. The Government wants the people to spend and the Government feels that this type of a budgetary reform would work because these initiatives will have major flows on the effects of the economy in terms of providing them a greater growth. More amounts of cash which can be routed into the economy will prove this budget to be a great win – win for all the people (Commonwealth Government Department of Social Services 2015).

In the present context where there are various reforms being made in terms of micro economic policies the education sector will have a greater competition involved with the type of budgetary reforms which have been formed and implemented.

The Universities are large to face the competition however the schools in which some of the Students enrol themselves for any higher courses might not be as big and the international schools and universities might have to face tougher competition with relation to the education being provided and to be implemented. The Educational institution should face the competition by forming newer courses and by enrolling maximum no. of students and by also targeting those niche markets from where they would be able to get students where there might be lesser drop outs in terms of course enrolments (Productivity Commission 2015).

Porter’s Five Forces Model is a useful model based on which the competitors in the markets would be able to assess the scope of competition and the scope of profitability which they would be able to make and their probable risks which they might face as well.

Impact of Reforms on Education and Health Sectors

The model considers various organizations in the industry and four main competitors like the Customers, Suppliers, and Potential entrants into the industry and substitute products.

With the type of budget which the Australian Government has proposed there is a higher risk of competition which is likely to come up and would also allow various buyers to be more selective in terms of placing their requirements in terms of education in order to improve the efficiency of the functioning  of the industry. The Organizations which intend to enter the market will face a higher competition in terms of positioning themselves in the market (Productivity Commission 2015).

In a shorter term period there would be an increase in the competition in terms of more and more newer buyers entering the market where it would make the present market more unstable by demanding more focus on their present situations and systems. The Organizations in the Health and Education segment in the present market would be forced to come up with better and  cost – effective solutions in order to achieve results which would generate higher revenues. In the long term if the same trend continues the organizations would be forced to deal with the negative impacts which they might face as an industry. This situation is applicable to the Health and the Education sectors.

The bidding of the contracts would also not be as viable and will not be cost – effective in terms of generating higher revenue as an Organization.

In order to generate profits the Organizations would look at the international buyers from different locations or they would choose to move out of the industry. 

Health and Education sectors are relatively critical and there are lesser no. of Organizations in this context at least those with a higher brand value. Health and Education sectors are also known for their specialised nature where there is a steady increase in the market growth and there is also an increase in terms of its industry competition (Phillip Kotler, Jhon Bowen, James Makens 2003).

The departments of Health and Education sectors offer higher risks and rewards as there are lesser no. of companies in competition and even if there might be competition from the international markets they should be able to establish themselves in the local markets and provide genuine service in order to capture their markets.

As discussed earlier that there could be competition with the type of new budgetary proposals made in the Health and Education sectors however minimal capital investments would be essential as the established Educational institutions and the Hospitals might offer their business to be run by the external organizations. The switching costs might also be lower in this case as there is not much costs involved in terms of setting up any of their initial entries. The only competition which would offer itself upfront for the new entry competitor in the business is the already existing competition which the Organization might have been facing (Michael  E Porter 2015).

The policies which might have been set by the Government would also be a source of competition where the new entrants would have to deal with them in a way where they can prove themselves to be more standardised in such a business environment.

Health and Education sectors are considered to be niche sectors and there are various methods of providing service to the consumers in terms of economic services, products which they offer, advice on various services and providing technical assistance. Expensive products which incur various costs in terms of construction of newer buildings which might involve special costs of maintenance could also result in creating competitive pressures from new substitute products and services (Michael  E Porter 2015).

In the Health and Education sectors the supplier pool is large where the employees and the resources which are required to educate the people in the University and schools is available however there might be lesser raw material like the sophisticated materials which are required to set up the Health and Education environment might not be available. 

Conclusion

The Governments work in various ways to deliver public services especially like Health and Education sectors where they provide highest quality services however continue to educate the Australians and their highly skilled population to continue on a global stage. We have analysed the microeconomic reforms which were made related to the Health and Education sectors in 2015 by the Federal Government of Australia by conducting an analysis using the Porter’s Five Forces Model. The Government in future can be positive about the checks it has made on the reforms and the efficiency with which it can work towards the Country’s growth.  

References

Commonwealth Grants Commission 2015, “letter to Treasurer”, Advice on the Treatment of Large and Volatile State Revenues, 

Gareth Hutchens 2015, “Federal Budget 2015 – The Government’s something special may  not save Australia”, Viewed on May 24h 2016,

Productivity Commission 2014, “Child Care and Early Childhood Learning”, Inquiry Report, Canberra, p. 497

Productivity Commission 2015, “Report on Government Services”, Volume B: Child care, education and training, Canberra

Productivity Commission 2015, “Report on Government Services”, Volume B: Child care, education and training, Canberra

Commonwealth Government Department of Social Services 2015, “Child Care Assistance Package”, 10 May 2015, 

Commonwealth of Australia 2015, “Intergenerational Report”, Canberra 2015 indicates that economic growth into the future will come from productivity which is directly linked to education. 45

J Daley and C McGannon 2013, “Grattan Institute paper: Budget pressures on Australian governments”, Grattan Institute, Melbourne

Michael  E Porter 2015, “The Five Competitive Forces That Shape Strategy”, Harvard Business Review, 78 – 95, Viewed on May 24^th 2016, 

Phillip Kotler, Jhon Bowen, James Makens 2003, “Marketing for Hospitality and Tourism”, 3^rd ed. Prentice Hall.