Quick questions on Australia's macroeconomic objectives and trade-offs (QCE Economics Unit 4)

In the long run, all five objectives are consistent through:

Fiscal policy. Federal Budget (revenue and expenditure decisions). Influences AD; provides public goods; redistributes income.

Real GDP growth at or near the trend rate (Treasury estimates 2.0 to 2.25 percent in 2025), without inflation or environmental degradation.

Unemployment at or near the Non-Accelerating Inflation Rate of Unemployment (NAIRU), estimated at 4.0 to 4.5 percent in 2025 by the RBA.

The RBA targets headline CPI of 2 to 3 percent on average over the medium term.

Reasonable share of national income for all citizens. Reduces poverty and supports social cohesion.

Growth that does not degrade the natural environment beyond regenerative capacity.

ABS National Accounts (cat. no. 5206.0), quarterly. Real GDP year-on-year.

ABS Labour Force (cat. no. 6202.0), monthly. Unemployment rate, supplemented by participation rate and underemployment.

ABS Consumer Price Index (cat. no. 6401.0), quarterly. Headline CPI and trimmed mean.

ABS Survey of Income and Housing. Gini coefficient (around 0.32 in Australia, 2024 indicative). Poverty rate (around 13 percent below the 50 percent of median income line; ACOSS/UNSW Poverty in Australia).

Greenhouse gas emissions (DCCEEW National Greenhouse Inventory). Air and water quality monitoring. Indigenous-led environmental measures.

Inflation and unemployment move in opposite directions in the short run. A fall in unemployment below the NAIRU produces wage pressure that feeds into prices.

Unemployment fell to 3.5 percent (50-year low) in 2022, well below the estimated NAIRU. Wage growth rose from below 2 percent to above 4 percent. Trimmed mean CPI peaked at 6.9 percent.

Higher economic activity has historically meant higher emissions and resource use. Australia has decoupled emissions from GDP since 2005 (GDP up 50 percent, emissions down 14 percent), but the absolute level remains too high to meet net-zero-by-2050.