Background Australia is one of the wealthiest Asia–Pacific countries and itseconomic expansion has last for more than two decades. It becomes visible fromthe 2009 global recession relatively undamaged, but stimulate expending by theprevious Labor government generated a fiscal deficit that has continued underfollowing Liberal governments. Australia is outstanding in the area ofservices, technologies, and high-value-added manufactured goodsinternationally. The important sources of exports are mining andagriculture. The forceful rule of law in Australia protects the property rights andhelps to diminish corruption.
Those enforcement of contracts are reliable andthe expropriation is very uncommon. Australia’s strong political environmentsupports transparent and well-established political processes, a firm legalsystem, competent governance and also the independent bureaucracy. The judicialsystem operates independently and even-handed. Moreover, anti-corruptionmeasures are generally effective.
From the view of government size, the top income tax rate of Australiais 45 percent, and the flat corporate tax rate is 30 percent. Besides, thereare also other taxes such as value-added tax and a capital gains tax. On thewhole, 27.5 percent of the total domestic income is the total taxes burden ofAustralian. On the other hand, government spending is equivalent to 37 percentof total output (GDP) over the past three years while the budgetdeficits equal to 2.
8 percent of GDP. Moreover, 36.8 percent of GDPis the public debt. Furthermore, Australia’s regulatory system is one of the mosttransparent and efficient management system all over the world and it isbenefit to entrepreneurship.
There are only three procedures to take to launcha business. First, the labor market is well substantiated by the modern andflexible employment code. Secondly, the Reserve Bank of Australia is sensibleto the slowdown in growth among the country’s trading partners, and lastly, theinflation remains below target levels. Lastly, the open market of Australia is less emphasized on trades. Thetotal value of exports and imports is equal to 41 percent of GDP. The averageapplied tax rate is 1.9 percent.
Some regulations obstruct agricultural trade.Therefore, most state-owned organizations have become privately-owned. Foreignindustries compete on equal terms with domestic banks and other financialinstitutions in Australia’s highly developed and competitive financialsystem. (The heritage foundation, 2017) SWOTAnalysis of Australia SWOT analysis is a business strategy tool that we normally useto know and determine our businesses’ strength, weakness,opportunity and its threat when we face some crisis in ourbusinesses. Hence, SWOT stands for strength, weakness,opportunity and threats.
Strength and weakness are theinternal factor as we need to determine them within the organization.Opportunity and threats are the external factor. Strength makesour businesses to survive for a long time and we have the ability tocompete with others competitors too.
SWOT analysis helpsus to know the weakness of the company so that we can improve it and producemore goods and services to our customers. Moreover, opportunity is where we geta chance to develop our business in the market place, earning as many profit aswe can whereas threat is that we will be kicked out from themarket easily because our products might be substituted byother similar goods. Therefore, we need to change the weakness into strengthand threats into opportunity. (http://www.marketingteacher.com/swot-analysis/). The strength of Australia is it owns a strong and elastic economybecause of the stable macroeconomic fundamental anddemonstrated the resilience to external shocks.
Besides, Australia isdeliberated to have a sound policy economy policy where vital policy changesfrom mid 1980s to turn of the century. Australia is strongly focuses on reforms,low inflation, a housing market bloom, growing ties with China which have ledto its 16 years of expansion. Due to the low employment that many people do notget their job, it caused reformation in labor market. If we want tostart a business in Australia, we must regard to the weaknesseswhich is over taxes and tariffs by the government. Itcauses the changes in duty rates and also the mixed tariffs increaseunpredictability, like the invisible hand. Furthermore, Australia has aninconsistent customs administration system and it is limited for foreignequity. The licensing and residency requirements restraint the ability ofAustralian services providers to conduct business.
Many companies takethe advantages of the opportunity to reduce the liability throughtheir goods. Australian dollar is likely to grow theeconomic value. Australia largesteconomy threat is China because it is a very powerfulcountry.
Thus, Australia and China are a two-team first of allboom and gloom. There is a sharp increase in demand and thesupply is constraint due to the underinvestment in mineralproduction and associated infrastructure and some unexpected effects of theglobal financial crisis. (https://www.youtube.com/watch?v=LgJ1uPxYyjw).Despite, Australia is putting in their effort to improve their weakness anddefeat the threat. Marketeconomy system The economic system of Australia is free market system which can bedefined as the individuals and sellers make economics decision using a pricemechanism. This system is often referred as ‘laissez-faire’ which means to letindividual do as they choose.
The growth of the economy of Australia isremarkable and it is among the first five developed countries of theworld. Apart from that, Australia is also an outstanding country in theinternational trade. Australian Securities Exchange (ASX), the dominant stockmarket of Australia ranked top eight largest stock market in theworld. (FinanacialDictionary.Net,2015).
The four main constituents of the Australian economic system aretrade, manufacturing, services and finance. The fundamentals of theAustralian economy were further modified at the beginning of the 21st century.Federal taxation and state taxation are two main components of taxation inAustralia.
The new improved tax system was beneficial both for the producer andthe consumer. The main reason behind the remarkable growth of the Australianeconomy is the stable government and massive natural resources. (Compare Infobase Limited,2017). The resources and goods are owned by individuals and private firms in amarket economy. Private ownership permits people to obtain and use theresources as they choose. Another characteristic of free market system isfreedom of enterprise and choice that involve limited government and authority.Firms are free to produce goods and services and the consumers are free tochoose goods and services, they desire.
?Mr. Rouse, May 2011 ?. Consumers tend to purchasewhat they want and goods that they are able to afford it. There is nodoubt that producers will maximize their profits rather than fulfillingthe needs of consumer.
(Bertell Ollman, Oct2015). Thus, money becomes a part of necessary in our life as people areforced to produce goods and to sell it in order to getprofits. (Cindy Grigg, 2017). The merits of a free market system are itencourages sellers to produce quality goods. Since theprofits of manufacturers depend on the number of sales, they will produce morequality goods in order to obtain greater revenue. Secondly, free marketsystem also encourages competitiveness. A healthy competition will beestablished among the sellers that are selling the same commodities. Sellerswill tend to improve the quality of goods and sell it at an equitableprice for in order to survive in the competition.
Lastly, anadequate production of goods. Producers will ensure that they are able tosatisfy the wants of the consumer because they can determine what products areworkable through market system. (connectusfund.org,2015) The demerits of a free market system are the results of having inferiorproducts.
The production will easily result to mass produce as themanufactures pay more attention on making profits. By ordinary, mass producedcommodities are of low quality because the producers used to put in moreefforts to supply the consumer needs and thus pay less attention on the qualityof the products that they produce. (connectusfund.
org,2015). Secondly, inflation and unemployment rate increases. Producerscould not make profits if the consumers cannot afford to buy the merchandisethat they have produce.
Therefore, inflation andunemployment occur to lower down the cost of production. Lastly,unequal of distribution of wealth and income. The rich get richer and the poorget poorer, many absolutely and the rest in relation to the rapidly growingwealth of the rich. Egalitarian social relations become impossible with such agap between the rich and the poor. People with a lot of money begin to think ofthemselves as a better kind of human being and to look down upon the poor,while the poor feel a mixture of hatred, envy and queasy respect for therich. (Bertell Ollman, Oct1999). Market Failure The economic growth of a nation increases when the nation develops wellin politics, economy and social.
However, if the government does not manage thesystem properly, the entire country will face problems which is known as marketfailure. Market failure happens when the country or the government does notallocate the resources efficiently. They fail to use the scarce resources toproduce the goods and services to satisfy people’s unlimited wants. Or, they donot use up all the given resources to produce certain goods and serviceswisely. The government or private firms fail to plan on resources allocation.There are many types of market failure in the market and they areexternalities, unequal of distribution and income, the power of monopolies andothers.
Although Australia undoubtedly is a strong and rich country that rankedin the Top 20 all over the world, it still faces market failures. The firstmarket failure that Australia confronts is negative externalities such aspollution. Australia has the cleanest and freshest air in the world yet due tothe private firms fail to handle with the toxin substances after producing,pollutions occur everywhere. For air pollution, the two types of obnoxiousgases that contribute to global warming and climate change are carbon dioxideand methane.
Australian waters are contaminated by small and tinyplastic bags because the people litter anywhere. A rise in thesalinity of soil is the situation where the salt in the ground increases to thesurface due to over irrigation and the loss of native vegetationthat costs Australia loss ?3.5 billion annually. ?https://www.
coolaustralia.org/pollution-is-everywhere-primary/ ? Besides, Australian society has the income inequality which means thepoor become poorer and the rich become richer. There arealso two poorest districts in theNorthern Territory suffered from high income inequality. Theseare the immense region that surround Darwin, called “Daly, Tiwi, WestArnhem” (ratio of 5.2) and the “East Arnhem” region(5.
3). Other than that, the equalised median household income is A$1756 fortnightly for the whole of Australia.The district with the lowest median income was ” Daly, Tiwi, West Arnhem” in the NorthernTerritory is A$1020 fortnightly. Hence, the income between the whole Australiaand Northern Territory is A$736. The areaof Melbourne City has the most unequal incomes in Australia in which top 20%have an income that is 8.3 times as high as those in the bottom 20%.The ratio of inequality of Adelaide City to Sydney Inner City is 5.
5 to 4.8. ?Hubert Wu, Australian NationalUniversity and Harvard University ?. In addition, the main problem that leads to marketfailure is the monopolies power in Australia. The obstacles increase when thebusiness is controlled by monopoly power. Buyers or consumers are giventhe free hand to enjoy the advantages given when they pay forthe unconscionable prices and the private companies take over the profit.
For example, Australian government or the authorities are looking for aclean and harmless environment but yet the supply of gas is not sufficient forits people to consume as most of the rights have been taken over bybig companies and the companies bought the rights to exploit.(Ian Verrender,March 2017) . Government Intervention Governmentintervention refers to the government affects the economic activity and theallocation of resources. Government is designed to intervene in voluntarymarket activity by its nature. The common types of government interventioninclude taxes, subsidies, price controls, and control over government spending.
The general premise for government intervention is that voluntary decisions bycustomers and businesses fail to achieve efficiency or other goals that isimportant to the society. (https://definitions.uslegal.com/g/government-intervention/) Government impose taxes because they want to raise the governmentrevenue and to narrow the income distribution gap. Taxes can beclassified into direct tax and indirect tax. For instance, the TechGiant, Google and Facebook are paying the tax in Australia. This has madethe tax system in Australia raise to A$2 billion from themultinational companies. (Zlata Rodionova, 21 March2017) Anothertype of government intervention is subsidy.
Subsidy is the amount of moneythat government give to the industries in order to decrease the price ofnecessities goods and increase the producers’ income such asfarmers. Subsidies also used to encourage consumption of merit goods andachieve equitable distribution of income. In order to increase our country’sincome, the government also give subsidy to lower the price of exports. Anew statement shows that the firms which explore coal and energy aresubsidies by Australian taxpayers about US$35 billion each year in the form ofdirect spending and tax breaks. (Sue Lannin,November 2014) Reasons for GovernmentFailure Government failure occurs when the government interventions in theeconomy causes the inefficient allocation of resources and decline ineconomic welfare.
Government failure happens due to many reasons.Politician in the countries may not have enough knowledges or informationabout the types of services they want to provide to theirpeople. Politicians may not be the experts in their department but theyconcentrate on their political ideology. Another reason why governmentfaces failure is due to lack of incentives.
People who work forgovernment they do not get any rewards, thus they will not be motivated toimprove the services and cut costs that lead to inefficiency. Market economy system is good but not a perfect way to allocate theresources because the quality of goods is very poor. Since the private firmspurposely want to maximise their profit, they choose to use the lowest costmethod to produce the goods and sell it at a higher price to the consumers. Notonly that, the authorities do not want to produce goods andservices like merit goods because merit goods will not bring profit to them.The price of merit goods is not determined by price mechanism and it is givento those who need it only.
(Prateek Agarwal, August 2017). In addition,the community is lack of social welfare and there are no governmentservices. In Australian community, because of them using market economysystem, none of the government goods and services are provided to lowincome people. (Rachelle, April 2013).
The government should improve the market outcomes by distributingwealth from the rich to poor so that the income is equality. The governmentcan tax the rich people to pay more taxes and the taxes that havereceived from the high-income people can used to help the poor. Thegovernment should produce more public goods as public goods arenon-excludability and non-rivalry.
Every person should be charged thesame amount if they consume that goods or services. (Jesal Shethna, July2016). Government should also enforce the law by restricting them to selltheir products at a higher price. The government authority can punish those whoviolate the rules so that they will not take over the rights in themarket.
(Jesal Shethna, July2016). The government and the private firms can change the market economysystem into mixed market system so that people have the chance to choose thegoods and services they prefer. In Australia, the governmentensure that the goods and services are always produced in the lowest price tomake sure the poor can afford the basic things. Australian government determinethe most efficient choice that benefit the society. For instance, the workof the Production Commision focuses on achieving gains in efficiency in support of the overallnational interest. (http://www.
ncoa.gov.au/report/phase-one/part-a/2-2-what-should-governments-do.html) In the ‘real world’, all economies combine theelements of capitalism and socialism. The private sector co-existing alongsidethe public sector in the mixed economy system. Taking United Kingdom as areference of a remarkable mixed economy country, the government emphasizemostly on the market system because it has high level of efficiency inresponding the demand of the consumers.
However, decisions like militaryspending and public education are made by the UK government. (Business CaseStudies, 1995-2017). United Kingdom governmentallowed the free market system in business activity while the command economyin the areas of defense, welfare, and education. The government also providesfree healthcare to their people. (Kimberley Amadeo, September2016). Through the mixed economy system, UnitedKingdom government are able to regulate in areas where there is market failureefficiently.
With the stable government management and the mixed economy systemin United Kingdom, the government of United Kingdom are able to ensures the maximumstandard of living for population as a whole. (Joanne Adams, October 2015). Toconclude, the mixture of both capitalism and socialism is the best way toprotect the welfare of people and to benefit the growth of business activity ofa country.