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NSWEconomicsQuick questions
Topic 4: Economic Policies and Management
Quick questions on Microeconomic reform and Australia's aggregate supply (HSC Economics Topic 4)
15short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is microeconomic policy defined?Show answer
Microeconomic policy consists of measures by government to improve the efficiency with which individual markets allocate resources. While macroeconomic policy (fiscal, monetary) operates on aggregate demand, microeconomic policy operates on aggregate supply by lifting the economy's productive capacity.
What is three types of efficiency targeted?Show answer
1. Allocative efficiency. Resources are deployed where their marginal value is highest. Markets achieve this if prices reflect true social costs and benefits.
What is rationale for microeconomic reform?Show answer
The 1980s case for reform rested on three observations:
What is the major reforms since the 1980s?Show answer
Trade liberalisation (1988 onwards). Phased reduction of tariffs on motor vehicles, textiles, clothing and footwear. Average tariff fell from around 15 percent in the late 1980s to around 1 percent today. Domestic firms had to become globally competitive or exit.
What is the 2010s and 2020s reform agenda?Show answer
The post-2010 reform pace has slowed but key initiatives include:
What is impact on aggregate supply?Show answer
Microeconomic reform shifts long-run aggregate supply (LRAS) rightward. The economy can produce more without inflationary pressure. Concrete impacts:
What is impact on productivity?Show answer
Productivity is the central long-run determinant of living standards. Reform contributions:
What is impact on international competitiveness?Show answer
Reform improved Australia's competitiveness:
What is costs and limits of reform?Show answer
Adjustment costs. Reform displaces workers and firms in protected industries. Tariff cuts ended Australian car manufacturing; coal mining will decline through the 2030s.
What is the reform agenda for 2025 onwards?Show answer
The Productivity Commission's 2023 inquiry recommended:
What is trade liberalisation?Show answer
Phased reduction of tariffs on motor vehicles, textiles, clothing and footwear. Average tariff fell from around 15 percent in the late 1980s to around 1 percent today. Domestic firms had to become globally competitive or exit.
What is financial deregulation?Show answer
Floating the AUD (December 1983), removing exchange controls (1983-85), allowing foreign banks to operate (1985). Cost of capital fell; financial markets deepened.
What is national Competition Policy?Show answer
A coordinated reform agenda agreed between federal and state governments: - Competition Principles Agreement: review and reform all anti-competitive regulation. - National Access Regime: third-party access to essential infrastructure (rail track, pipelines). - Trade Practices Act extension: competitive conduct rules to apply to all businesses including state-owned enterprises.
What is tax reform?Show answer
Capital gains tax (1985), dividend imputation (1987), GST (introduced 1 July 2000 at 10 percent). The GST broadened the tax base, reduced reliance on inefficient state taxes, and was paired with personal income tax cuts.
What is labour market reform?Show answer
Move from centralised wage-fixing (1980s) to enterprise bargaining (1991), Workplace Relations Act 1996, Fair Work Act 2009. Greater flexibility in wage-setting at the firm level. Award modernisation reduced the number of federal awards from over 2,200 to 122.