April unemployment rate holds at 5.7% on 10,800 extra jobs


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The unemployment rate was steady through April at 5.7%, with an increase of 10,800 jobs since March and an additional 25,700 jobs created. Full time employment fell by 9,300 jobs while part time employment increased by 20,200. Data further demonstrated the disparity between the growth rates of Victoria and New South Wales and the resource based states such as Western Australia and Queensland. Tasmania and South Australia experienced an improvement in their unemployment rates. It is evident, however, that growth in employment has slowed.

How does this relate to the HSC syllabus?

  • An employed person is defined as a person who works for at least an hour per week. As such, increases in the number of people in full time or part time labour will reduce the unemployment rate, ceteris paribus (Preliminary Topic 4 – Labour Markets; HSC Topic 3 – Economic Issues). In April, the number of full time jobs lost was outstripped by the number of part time jobs gained, therefore resulting in a stable unemployment rate.
  • The reduction in full time jobs with the simultaneous increase in part time jobs reflects the ‘casualisation’ of labour trend emerging in Australia (Preliminary Topic 4 – Labour Markets; HSC Topic 3 – Economic Issues). Despite this, the unemployment rate has remained unchanged as a result of the definition of employment which is reflective of the unemployment rate’s flaw of failing to take into account the people who want to work more hours, that is, those who are underemployed. This is an issue since underemployment signals the excess capacity of labour in the market. This is causing wages to grow slowly given that employers have more bargaining power in cases of excess supply of labour.
  • Data shows that growth in NSW and VIC is faster than other States. This is reflective of the fact that labour is a derived demand (Preliminary Topic 4 – Labour Markets). Since NSW and Vic are experiencing high growth due to the dominant services and property sectors in those states, firms and businesses are hiring more to support growth. Meanwhile, mining states such as WA and QLD are experiencing decreases in growth as capital expenditure is reduced and the economy transitions away from this sector. In response, firms are hiring less employees due to a reduction in output requirements, causing unemployment in these states.

Building industry pay growth flatlines: March 2016 ABS figures


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Contrary to the strong growth in construction in Australia, wage growth in this sector has been slow. Wages rose by 1.6% in March, unchanged from February according to the ABS. Construction wage growth was the fourth-weakest industry, ahead of mining, rental and real estate and administrative and support services.

How does this relate to the HSC syllabus?

  • Although the property sector is experiencing a high rate of growth, wage growth in that sector is one of the slowest in Australia. This is bizarre given that strong growth signals increased output produced by that sector. To support increased output, firms would increase its demand for labour. As labour market demand increases, wages should increase as firms become more competitive to attract employees (Preliminary Topic 4 – Labour Markets; HSC Topic 3 – Economic Issues).
  • Slow wage growth can signal excess supply of labour in the market. Although employment within this sector is increasing, there is enough supply so that the price of labour, or wages, does not increase as rapidly as expected (Preliminary Topic 4 – Labour Markets; HSC Topic 3 – Economic Issues).
  • Slow wage growth is a threat to Australian inflation. Australia’s shock first quarter inflation figures were largely driven by weak wage growth throughout the economy. This is because labour is a factor of production and therefore wages are a cost of production. With wages growing slowly, the cost of production in Australia has significantly reduced, causing the price of goods and services to stagnate (HSC Topic 3 – Economic Issues). As a result, the RBA cut the cash rate during its May meeting. The market is expecting a further cut in August.

The real risk to markets is not in New York but between Washington and Beijing


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The US has imposed a 522% tariff on allegedly dumped Chinese steel. US and European producers have been arguing that China has dumped steel into the global market, creating a situation of excess supply. The tariff has displeased China, calling for the US to ‘correct its mistake as quickly as possible’. China intends to maintain its tax rebate policy for domestic steel exporters.

The US has also criticised China for devaluing its currency, especially given that it set the yuan 0.5% lower against the US dollar this week.

How does this relate to the HSC syllabus?

  • Dumping refers to selling goods at an unrealistically low price, which has the effect of harming other producers in the market. China has recently been accused of dumping in the global steel market.
  • In response, a 522% tariff (tax on imports) has been imposed on Chinese steel, which makes these goods less competitive within the US market (HSC Topic 1 – The Global Economy). This is because the US government requires a tax to be paid by Chinese exporters on each unit of steel imported into the US. This results in a price increase since Chinese exporters pass on the tax to consumers to maintain their profit margins, which therefore causes them to have less competitive prices. As such, China has been displeased with the new policy since its exporters are being made less competitive which will reduce their export revenues.
  • China’s tax rebate policy is a protectionist policy for its steel producers to incentivise them to export (HSC Topic 1 – The Global Economy). This is known as an export incentive. Since exporters will be refunded some of their tax money which will increase their net profits, producers will be more willing to export steel rather than supply to the domestic market. As such, if steel producers increase their exporters, there will be an increase in supply in the global steel market which will decrease prices (Preliminary Topic 3 – Markets).
    • The reduction of steel prices has hurt US and European steel producers. Since US and European producers cannot produce steel as efficiently as China does, reductions in price negatively impact their profit margins and make their business unsustainable.
  • The US has expressed is disapproval of China’s currency devaluations. Since China has a managed float system, it can devalue or revalue its currency by announcing a new trading range to the market (HSC Topic 2 – Australia in the Global Economy). Within the past week, China has devalued the currency which means that the yuan has depreciated. This will be beneficial to its exporters since a depreciated currency would make Chinese exports cheaper since one unit of foreign currency would be worth more yuan. The US is unhappy with this since cheaper imports would increase competition for US domestic producers and potentially harm their businesses.
    • The US has expressed dissatisfaction at a number of countries, including China and South Korea for allegedly interfering in the currency markets to depreciate their currencies to increase international competitiveness. A number of countries now, including Australia, have pledged not to interfere in the currency market for fear of causing a currency or trade war. A currency or trade war occurs when economies devalue their currencies for the purpose of increasing the competitiveness of their exports to increase aggregate demand and therefore economic growth (recalling AD = C + I + G + X – M).

Theresa Dang THERESA DANG

Theresa Dang is an economics mentor at Keystone Education. She attended Sydney Girls High and achieved an ATAR of 99.70 in 2012. She is now studying Commerce and Law at the University of Sydney. She has experience in a global technology firm and a mutual fund.

Gary Liang GARY LIANG

Gary Liang is the founder and director of Keystone Education. He attended Sydney Boys High and achieved an ATAR of 99.95 in 2012. He achieved 5 state ranks in Mathematics, Mathematics Ext 1, Mathematics Ext 2, Chemistry and Economics. He is now studying Economics and Science (Advanced Mathematics) at the UNSW Australia, where he is the recipient of four scholarships.

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