Unemployment rate up slightly despite surge in full-time jobs


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The unemployment rate for June rose from 5.7 per cent to 5.8 per cent. Participation rate rose slightly to 64.9 per cent. In contrast to previous months, the newly employed were in full-time positions, a gain of 38,400 in the number of full time jobs. Employment overall increased by 7,900 while unemployment increased by 9,900. The Reserve Bank’s focus is now on second-quarter consumer price data to determine whether there will be a rate cut in August.

How does this relate to the HSC syllabus?

  • The unemployment rate refers to the percentage of the labour force that is unemployed (those that do not have a job but are actively seeking one). The unemployment rate rise is in line with expectations, reflecting the state of the Australian and global economy.
  • The level of employment rose in June, while the unemployment rate rose. This is counter-intuitive, but is possible because the number of unemployed increased by more than the increase in employment.
  • The participation rate refers to the percentage of the working age population that is in the labour force. The participation rate increase represents a greater number of unemployed and employed, which together make up the labour force.
  • The increase in unemployment rate provides another reason for the Reserve Bank of Australia to decrease the cash rate in their next meeting. If the RBA decrease the cash rate, cost of credit for individuals and businesses will lower, creating greater consumption and investment and driving increased aggregate demand.

China GDP grows 6.7% in second quarter from year earlier, slightly better than expected


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Chinese economic data shows that the Chinese economy grew 6.7 per cent in the second quarter from a year earlier, better than expectations. Analysts had predicted growth of 6.6 per cent, which would have been the lowest growth since the global financial crisis. Investors fear a slowdown of China, combined with the economic after-shocks of Brexit, will leave the global economy at risk.

How does this relate to the HSC syllabus?

  • The Chinese economy went through an economic boom since Deng Xiao Ping’s open door policy, as the economy transitioned from an agricultural economy into an export-led emerging economy with a comparative advantage in manufactured goods.
  • The Chinese economy is now undergoing a new transition – from an export-led economy to an economy driven by consumption and services. This transition has seen China’s economic growth decrease, which has caused concerns due to its potential ripple effect on the global economy and the increasing synchronisation of China’s regional business cycle with international business cycle.

S&P officially puts Australia's AAA rating on downgrade watch


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Standard & Poor’s, an international credit rating agency, has put Australia’s sovereign credit rating on a “negative” outlook from a “stable” outlook. Whether or not S&P actually downgrades Australia’s credit rating will be based on an assessment of the government’s ability to manage the budget and dependent on whether it will be able to meet the target of a fiscal surplus by 2020-21. They have also indicated that they will be monitoring Australia’s external stability and current account deficit.

How does this relate to the HSC syllabus?

  • A credit rating is an evaluation of a party’s credit risk, or ability to pay back loans. Standard & Poor’s rating scale uses AAA to represent an excellent credit rating, followed by AA+, AA and AA-, which represent a ‘high’ credit rating. Australia’s credit rating is AAA.
  • A credit rating determines the interest rate that governments need to pay on their debt. An economy with a higher credit rating is deemed to be safer and hence they are able to pay a lower interest rate. The potential downgrade of Australia’s credit rating may lead to rising interest costs.
  • Australia’s budget has remained in deficit since the global financial crisis, when Kevin Rudd, the prime minister at the time, issued fiscal stimulus to boost economic growth in the economy. The Australian government has since struggled to consolidate the budget back to a fiscal surplus.
  • The current account deficit reflects an economy’s external stability, which is an economy’s ability to pay back overseas obligations. S&P has indicated an increased likelihood of downgrading Australia’s credit rating if the current account deficit remains at a higher end of historical range of approximately 3-6 per cent of GDP.

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.

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.

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