Australian wages stall at record low of 1.9 per cent

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Wage growth in Australia is at record lows, with wages in the private sector growing just 1.8 per cent over the past year. This, coupled with a rise in consumer prices by 1.9 per cent, means that standard of living in Australia has actually decreased.

How does this relate to the HSC syllabus?

  • Wage growth in the economy is typically a reflection of standard of living.
    • This is because higher wage growth means that individuals are earning a higher income, so they can purchase more goods to satisfy their wants and needs.
    • However, wage growth needs to be compared with inflation in order to have a more accurate assessment of standard of living. This is why we look at the real wage growth instead. We see that real wage growth has actually been negative, if you take into account the fact consumer prices have increased.
  • Wage growth is slow despite the fact that we are close to full employment in NSW and Victoria.
    • Recall that full employment refers to a situation where there is no cyclical unemployment. When we get close to full employment, unemployment may go below the non-accelerating inflation rate of unemployment (NAIRU), below which inflation accelerates. Below the NAIRU, we expect that wage growth accelerates as well, because the pool of available workers is lower, so employers increase wages in order to attract workers.
    • However, we are not seeing this. One reason behind this is the level of underemployment. This is a situation where a worker has a job but wishes to work more hours. This is an indication of spare capacity in the labour market and would contribute to low wage growth.

'Amazon of China' Alibaba already has supermarkets. Now it wants our food

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Chinese e-commerce giant Alibaba wants more Australian fresh produce to be sold in China. Alibaba already helps many Australian baby formula and vitamin producers access the Chinese market, and says that the next opportunity is in fresh produce.

How does this relate to the HSC syllabus?

  • China is Australia’s biggest export market. (HSC Topic 1)
    • Australia has a bilateral free trade agreement with China called ChAFTA. This gives Australian exporters reduced tariffs rates when selling goods in China.
    • Goods such as iron ore, coal ore, beef and dairy are some Australia’s main exports to China.
    • Alibaba makes it easier for Australian businesses to access the Chinese market by connecting buyers and sellers.
  • Australian goods are known for their high quality, and this acts as its comparative advantage in trade.
    • Consumers in China are willing to pay a premium for goods from Australia, thus allowing Australian businesses to earn more export income, increasing Australia’s economic growth.

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 six scholarships. He has experience at a top tier investment bank and a technology startup.

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