Poorest households claim biggest wealth gains, says RBA


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In its quarterly bulletin, the RBA found that the bottom 20% of households experienced a 21% increase in their wealth whilst the middle classes experienced no change and the top 20% suffered a drop in wealth. A large proportion of this growth was made up of younger households that are just starting to build wealth. Growth in wealth grew mostly in NSW and VIC while wealth levels in WA and QLD have fallen as a result of a reduction in property prices.

How does this relate to the HSC syllabus?

  • Wealth refers to the value of an individual’s assets at a period in time. Income, on the other hand, refers to the money earned by an individual over a period of time. An increase in wealth for the lowest quintile simultaneous to a reduction in wealth for the higher income classes signifies a reduction in wealth inequality (HSC Topic 3 – Economic Issues).
  • The increase in wealth in the lower 20% of the population can be significantly attributed to the growing wealth of younger households which are beginning to make sustainable incomes. This is because income is required to generate wealth by buying assets such as property (HSC Topic 3 – Economic Issues). As such, these lower income households consisting of younger people have been rapidly growing their wealth as their careers start and income increases.
  • Wealth between states, however, can be seen to be increasingly unevenly distributed. While NSW and VIC have experienced increases in wealth, QLD and WA have suffered decreases. This can be attributed to the fact that NSW and VIC are experiencing high rates of growth which is increasing the income of NSW and VIC residents. This enables them to purchase property and shares to increase their wealth. Furthermore, given that WA and QLD are experiencing low income growth due to the receding mining boom, individuals are starting to migrate to NSW and VIC which the opportunities in services are greater, which is reducing demand for property prices in WA and QLD which further serves to reduce wealth.

Market-led infrastructure proposals failing to deliver


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Of the market-led proposals that have been submitted, only 5 out 350 have been successful in Australia. It is commonly thought that market-led strategies would be a faster and more efficient than the government in the development of infrastructure projects. However, it is proposed that lack of clarity of their goals cause it to be unsuccessful. High failure rates are further brought on by confusion between the private and public sector as to what is being sought.

How does this relate to the HSC syllabus?

  • Infrastructure projects such as road construction and maintenance is typically provided as a public good by the government since they require significant investment and usually do not generate significant profits (Preliminary Topic 6 – Government and the Economy; HSC Topic 4 – Economic Policies and Management). Since the goal of a firm is to maximise profits, provision of goods such as road (that are not toll roads) and renovating public facilities such as the $1 billion renovation of Wynyard Station are not ideal for most companies (Preliminary Topic 2 – Consumers and Business).
  • It is suggested that a market-led proposal would lead to a more efficient provision of these public goods. Market led proposals are projects suggested to the government by firms which is contrary to the ordinary market process of the government looking for tenders to implement a project. Since the project is motivated by the market, it is argued that the competitive forces would influence the market to produce efficiently and effectively. Contrary to this, however, market-led proposals have been shown to be ineffective given the lack of clarity of their strategic goals and non-alignment with the goals of the government.

May jobless rate unchanged at 5.7% as economy creates 17,900 new jobs


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The unemployment rate has remained steady at 5.7% in May, with full employment steady and part time work rising by 17,900. While the unemployment rate was as forecasted, the annual pace of jobs growth slowed to below 2%, suggesting that the labour market has weakened in 2016. Further signs of weakness in the job market has been indicated by the lowest participation rate in almost a year.

How does this relate to the HSC syllabus?

  • Although unemployment has remained unchanged, there remains signs of weakness in the labour market. It can be argued that the unemployment rate is only at a low level of 5.7% currently as a result of the reduced participation rate. The participation rate reflects how many people who are part of the working age population are part of the labour force. With a reduced participation rate, ceteris paribus, unemployment decreases because unemployed people as a proportion of the labour force decreases (Preliminary Topic 4 – Labour Markets; HSC Topic 3 – Economic Issues).

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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