Professional Documents
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Capital Productivity =
Multifactor Productivity (a greater productivity than just capital and labour productivity)=
Effects of microeconomic policies on individual product and factor markets, individual industries and the
economy
The three main types of efficiency gains from Microeconomic policies are:
Technical or productive efficiency: Firms producing output using the least cost combination of
resources. This means producing the maximum output at the minimum average cost. This is
producing at the technical optimum
Allocative efficiency: Involves firms charging prices which reflect the marginal cost of production so
that resources are allocated in such a way to reflect consumer preferences for goods and services
Dynamic efficiency: Firms adapting to changing economic circumstances by using the latest cost
reducing technology to meet changing consumer preferences. This is also known as inter-temporal
efficiency
The strong growth in Australian labour productivity in the 1990's and 2000's reflected:
-Increases in capital per works, which is known as capital deepening
-Improvements in the quality of labour though education and training
-Improvements in efficiency to which labour and capital are used in production
Microeconomic policies are characterised by:-
-A change in the pattern of production in an economy over time
-It results in changes to products and the processes of production as well as the elimination of some
industries and the emergence of other industries.
-Directed at aggregate supply or output side of the economy
-They attempt to improve the economy's allocation of resources in long run
-They are directed at product/consumer markets where final goods and services are sold, and factor markets
where productive inputs such as land, labour and capital and enterprise are bought and sold
-They impact on both tradable goods sector (export and import competing firms) and the non-tradable goods
sector (mainly domestic public sector) of the economy
-They target both government owned and operated businesses as well as privately owned and operated
enterprises
What has happened to Australian industries over the past century?
Microeconomic policies have lead to structural changes in the Australian Economy to make it more
productive, efficient and competitive. Structural change was induced from both changes in markets and
technology as well as government policy. Opened Australia into the effects of Globalisation, has to compete
just not domestic producers but foreign competitions. Production methods, technology has changed and
consumer tastes and preferences. Had to have structural change to survive in the global economy
Causes of structural change:
Market Based Structural Changes:
-Increasing importance of the services sector as a contributor to GDP and employment
-The impact of technological change and use of ICT goods in reducing production costs and prices
-The increasing integration of the Australian economy into the global economy, with exports and imports
rising from 12% of GDP in 1990 to account for more than 20% of GDP by 2010
-The growth of the East Asian market, especially China in influencing the Australian trade patterns
-The changing composition and distribution of the Australian workforce
-Changes in Australian consumption patterns with the greater expenditure (as a proportion of household
disposable income) on services relative to goods
Government Microeconomic Reform Policies:
-The application of national competition policy in 1995 to strengthen competitive pressures in markets in order
to raise technical efficiency and allocative efficiency and lower consumer prices
-Reductions in the levels of industry assistance in 1988, 1991, 2005 and 2010, though tariff reform to increase
the competitiveness of Australian industry and the volume of exports
-Increases in the efficiency of public trading enterprises (PTE's) which provide infrastructure, though the
policies of privatisation, deregulation, commercial and corporatisation
-Increases in the productivity of labour and capital through reforms to capital and labour markets such as
financial deregulation and the productivity based system of enterprise bargaining
-Improvements in the tax system such as broadening of the tax base (introduction of fringe benefits and
capital gains taxes) and reducing the tax burden through cuts to marginal tax rates and raising the income tax
thresholds in federal budgets
Constraints on structural change.
-Structural unemployment
- Increases in current account deficit
-Low levels of productivity
-High inflation
-Low Savings
Why is structural change important?
Structural change is important because it can lead to:
-Lower inflation outcomes through a system of competitive domestic markets
-Lower rates of unemployment though reforms in the labour market, including more efficient work and
management practices and greater flexibility in the allocation and mobility of labour
-Higher levels of national savings though the introduction of compulsory superannuation and New Tax System
in 2000, which includes stronger incentives for private saving as well as Commonwealth state financial
relations to raise public saving
-A reduction in the Current Account Deficit (though measures such as tariff reform) to raise export
competitiveness and improve Australia's terms of trade performance by increasing exports
-Increased level of productivity (though labour market reforms) which help to support a rise in Australia's long
term sustainable rate of economic growth)
Ross Gittens Productivity Article:
List some economic terms: Productivity, Economic Reform, Micro Reforms, Market Failure,
Counterproductive, Balanced Budget, Service- Delivery Sectors
List reasons for a decline in productivity in Australia:
Aiming for a balanced budget and reducing government spending
Reduction or lack in spending on human capital such as programs to increase education
Income inequality, the poor are reluctant to work harder if they wont get higher incomes
Limited spending on infrastructure
Wanting a budget surplus rather than a deficit and economic growth
Laying off workers as soon as the business turns down, results in lower productivity as people are put off by
this concept of being laid off due to a downturn in the business, bad morale
Company restructures
By increasing competition we might be reducing efficiency, guarding and beating the competition, rivalry
between companies
YouTube Alan Coole = Productivity Video
Sol Eastlake: Productivity in Australia
-We should be concerned in the long run as we need productivity to increase standard of livings
-Less productivity can lead to increase in interest rates
-Affects both macro and micro economic reform
Improving:
Happens as a result of businesses of working or organinsing work more efficiently, bringin in new
technologies new production methods
Cutting Down:
-Removing ordit trails, money reports
Workplace Reforms:
-Depends on wage increases, mining and engineering increases???, no evidence of wage increases in mining
spilling over in manufacturing or interstate spillover effect
-Increases in enterprise bargaining
Trends: 3% during 1990s, declined to 1% government wants back at 2%
Summarise how the following policies have affected the product and factor markets
Product markets
1. National competition policy :
Is an agreement between Australias Commonwealth and State governments signed in 1996 to encourage
microeconomic reform throughout the Australian Economy
This affects businesses in many different sectors of the economy
The competition policy is aimed at higher productivity, few distortions to resource allocation and lower costs
for business and consumers
Government aims to increase competition in sectors where they operate monopolies such as electricity, gas,
water and rail The government has also agreed to remove special provisions that have public enterprises an
advantage over the private enterprises
Establishment of the national regime to regulate the cost of access to infrastructure, meaning businesses that
own a monopoly have to give access to that network at a reasonable price
Main Elements:
1: Limiting the anti competitive conduct of firms in the product and factor markets
2: Reforming regulation which unjustifiable restricts competition
3: Reforming the structure of public monopolies to facilitate competition
4: Providing third party access to certain facilities that are essential for competition
5: Restraining monopoly pricing behaviour
6: Fostering competitive neutrality between private and government business when they compete in
markets
ACC looks after this
2. Trade and industry policy:
Trade Policy:
The major policy initiative to promote exports and trade intensity was the reform of industry assistance in the
1988 Industry Statement and 1991 Industry Statement
The reduction of the majority of tariffs for manufacturing to 5% by 1996
The abolition of quotas and the reduction of tariffs for the PMV industry to 15% by 2000
Abolition of quotas for TCF in 1993 and a reduction in tariffs to a maximum of 25% by 2000
The effect of reduced protection were that an increase in $4billion in GDP though additional export volumes
and a higher rate of economic growth
Some policies include: AUSTRADE, Export Market Development Grants Scheme (EMDGS)
International Policies/ Agreements: Uruguay Round of the GATT, Doha UTO, APEC, ANCERTA and AUSTFA
Industry Policy:
Investing for Growth in December 1997, resulted in:
-Increased support for business research and development
-Emphasis on commercialisation of R&D such as the innovation fund
-Measures to increase the attractiveness of Australias position on a regional financial centre
Other policies such as Innovation Statement in 2001
3. Taxation reform to increase incentives
Tax reforms is important for increasing the incentives to work through higher productivity, save and
invest
Higher levels of productivity, saving and investment can be achieved if the taxation system is made
more efficient, equitable and compliance costs are reduced
The NEW TAX SYSTEM commenced on July 1
st
2000, changed included:
Indirect taxes and some state taxes were abolished but were replaced by GST (Goods and Services
Tax) of 10%
Abolition of inefficient indirect taxes such as sales taxes led to cost reductions for many producers
and exports of goods and services were given zero rating under the GST system, increased
competitive of exports
Cuts in marginal tax rates
Lowering of company tax
Factor market
4. Labour market and industrial relations reforms
Labour market reform occurred since 1985 when productivity based bargaining stream was
introduced under Prices and Incomes Accord
Industrial Relations Reform Act in 1993 encouraged greater labour market flexibility by promoting
more enterprise level wage bargaining
The Workplace Relations Act in 1996 continued the process of wage decentralisation
Key reforms in Workplace Relations Act in 1996:
Provision of greater choice on how enterprise agreements are reached through Australian Workplace
Agreements (AWA)
Limiting the award system to the role of a social safety net administered by AIRC
Ending compulsory unionism
Placing restrictions on unions negotiation in Certified Agreements such as limitations on the use of
industrial action
Relaxing the Unfair Dismissal Rules to encourage employer flexibility
Workplace Relations Ammendment (Work Choices), Australian Fair Pay Comission (AFPC) to review minimum
wages, Workplace Relations Ammendment Act 2007 introduced a Fairness Test to apply to all agreemtns as a
safety net and replaced the Office of Employment Advocate with the Workplace Authority to administer
AWAs
Fair Work 2009:
Ten National employment Standards to provide a safety net for working conditions to all employees in
the national system
Fair Work Australia and Fair Work Ombudsman established to regulate and enforce the national
workplace relations system
Modern Awards were introduced to rationalise over 4,000 federal awards to 120 Modern Awards
Renewed emphasis on collective enterprise bargaining based on good faith bargaining and application
of a Better Off Overall Test to single enterprise, multi enterprise and Greenfields agreements
Labour Market reforms were linked to reforms of the social security and welfare system though:
Establishment of Centrelink to improve efficiency, equity and targeting of social security payments
and Job Search Allowances and Family Payments
Introduction of Work For Dole
Introduction of Welfare to Work to encourage people receiving welfare support to increase their
workforce participation by securing part time paid employment
5. Financial deregulation
Involves the removal of direct controls over interest rates and lending policies in the banking system to
improve efficiency and competition in the allocation of funds between banks and non bank financial
intermediaries such as building and credit unions
Main Financial Deregulation in 1983 are:
Abolition if all direct Reserve Bank controls over interest rates and the volume and direction of bank
lending
The use of open market operations by the Reserve Bank to conduct monetary policy
The floating of the exchange rate and the abandonment of the crawling peg system
The entry of 16 new foreign banks, which were granted banking licenses, and allowed to compete
with other financial institutions in domestic financial markets
Financial Market Deregulation has resulted in more efficient allocation of capital resources, increased
competition levels, increased integration with overseas capital markets and more effective conduct of
monetary policy by RBA
Regulation and deregulation- Competition Policy:
The regulation of economic activity in Australia begun in early 1990s with the establishment of a centralized
system of wage determination and the protection of domestic manufacturing through tariffs and quotas
In the 1950s public trading enterprises such as TAA were established to compete with private sector
enterprises such as Ansett and public monopolies such as Telecom
The high levels of government regulation were a response to market failure, justified by the government on
economic, political and social grounds, these included:
-The regulation of wages and imports were seen as necessary to guarantee living standards though income
and employment protection for workers and their families
-Public monopolies were seen as preferable to private monopolies as they could be operated in the national
interest to achieve board economic, social and strategic goals
-Regulation of key markets would prevent high levels of foreign ownership and control
Deregulation: Refers to the removal of government restrictions on the operation of markets such as tariffs,
quotas and subsidies to promote competition and efficiency
The industries deregulated in the Australian Economy:
1. The financial system was deregulated in 1983, with controls on interest rates, bank lending and
deposits lifted, 16 new foreign banks were granted licenses to operate in Australia and the
currency was floated instead of being fixed
2. Domestic airline industry was deregulated in 1991, the two airline policy was removed, and
Qantas and Australian Airlines merged
3. Telecommunications were deregulated in 1992 with the entry of Optus to compete with Telecom.
Telecom was merged with OTC to become Telstra. Other major carriers such as AAPT, Orange,
Primus and Dodo entered the market in 1997 after full deregulation of telecommunications,
prices fell
4. Federal government lifted import embargo on sugar, tobacco, dried and citrus fruits in 1995.
Wheat, milk and egg markets were all deregulated soon after
Reform of Public Trading Enterprises (PTEs):
Public Trading Enterprises such as GIO, state bank NSW and QLD, Telstra and Qantas as well as
Commonwealth Bank have been completely privatized
Privatisation: Driven by the view that greater economic efficiency can be achieved by privately own
enterprises which are subject to capital and product market discipline in competitive markets
Commercialisation: Policy of getting PETs to pay dividends to their government owners
Privatisation: Sale of public assets or service provision rights to the private sector
Main reforms in the PTEs recently are:
1. Privatisation of Commonwealth Bank, Telstra and Sydney Airport Corporation
2. Coorporitisation of state and federal PTEs though creation of more efficient management structures
such as setting out clear managerial objectives and performance
3. Commercialisation of PTEs such as Energy Australia to improve efficiency through payment of
dividends to government owners
4. Principles of competitive neutrality applies to PTEs such as payment of taxes, charges and interest on
loans to they operate in equivalent competitive private sector environment
Competition Policy:
The ACCC (Australian Competition and Consumer Commission) is an independent statutory authority which
administers the Trade Practices Act 1974
It also aims are regulating national industries so that individuals and business comply with the
Commonwealth competition policy
Trade Practices Acts purpose is to enhance the welfare of Australian through the promotion of competition
and fair trading
It covers product safety, unfair market prices, price monitoring, quality and labeling, warranties, misleading
advertising and fair trading of goods
Costs and Benefits of Microeconomic Reform:
Advantages in the microeconomic level:
1. Increases in technical, allocative and dynamic efficiency gains
2. Increases in levels of productivity in the economy as well as higher international competitiveness
Advantages include in the macroeconomic level:
1. Rising national productivity by improving productivity and efficiency of labour and capital
2. Lowing inflation and inflationary expectations through
3. Helping to reduce the current account deficit by increasing exports and competitiveness
4. Achieving a higher sustainable rate of economic growth through rising productivity
5. Helping to reduce unemployment though jobs creation in expanding industries
6. Helping to overcome structural problems such as low national saving
7. Achieving higher living standards though increasing real incomes
However, there are also several disadvantages of Microeconomic reforms, these include:
1. Structural changes resulting in structural unemployment in the economy
2. Increase costs of retaining and the relocation of displaced workers due to structural change by
microeconomic reform policies must be paid for by governments from the expected dividends , this
can increase the taxes from income earners to fund these expenditures
3. Increases in worker intensity, people working longer hours without extra pay
4. Closure of inefficient businesses
5. Less equal income distribution
Labour Market Policy:
Role of the National and State Industrial Relations Systems:
Industrial relations or workplace relations: refers to the system used to determine wages and working
conditions between employers and employees
Award: A legally binding agreement covering wages and conditions of employment for particular occupations
or industries
Through labour market policies, the government aims to:
1. Control the wage demands and expectations of trade unions in hope of achieving low inflation
outcomes
2. Promoting comparative advantage to protect incomes and working conditions of all employees in
Australia
3. Acting as a mechanism for solving industrial disputes though conciliation and arbitration powers of
Fair Work Australia
4. Promoting reform of labour market though the use of collective enterprise agreements and Modern
awards
The National Industrial Relations System:
From January 2010 under the Fair Work Act 2009 the power to set wages and conditions for many Australian
workers previously under state conditions moved to Federal system
This system includes:
1. A set of Ten National Employment Standards (NES)
2. Modern awards that apply nationally to specific industries and occupations
3. A National Minimum wage administered by Fair Work Australia
4. Enterprise bargaining arrangements
5. Protection from unfair dismissal
The State Industrial Relations:
This system contains the state industrial commissions and tribunals that administer state awards. It covers
workers who are not covered by the national system, mainly state and local government employees.
Evolution of National Industrial Relations System:
As of Aug 2008 wages for employees were set under the following structures:
Collective enterprise agreements (39.2%)
Unregistered individual arrangement (36.5%)
Award or pay scale only (16.5%).
Registered individual agreement (2.2%)
Unregistered collective agreement (0.6%)
The current system of industrial relations in Australia is based on five pieces of legislation:
1. The Workplace Relations Act (1996)
2. The Workplace Relations Amendment Act 2006 (Workchoices)
3. The Workplace Relations Amendment Act 2007 (A Stronger Safety Net)
4. The Workplace Relations Amendment Act 2008 (Transition to Fairness)
5. The Fair Work Act 2009
-------> Fair Work Australia (FWA): Responsibilities and functions
The safety net of minimum wages and employment conditions
1. Enterprise bargaining
2. Industrial action
3. Dispute revolution
4. Termination of employment
5. Other workplace matters
-------> Fair Work Ombudsman (FWO): Responsibilities and functions
Advice to employees and employers
1. Ensuring compliance with Fair Work Act 2009
2. Prosecution of breaches of the Fair Work Act 2009
3. Auditing workplaces for compliance with FWA
4. Use of Fair Work Inspectors to monitor and investigate complaints in workplaces
5. Publication of information and best practice guides on workplace relations and workplace
practices
The Workplace Relations Act (1996)
1. Simplified the award system to a safety net of only 20 matters
2. Introduced Australian Workplace Agreements (AWA)
3. Created the Office of the Employment Advocate (OEA)
4. Prohibited closed shops and preference for unionist clauses in employment contracts.
5. Restricted the role of the Australian Industrial Relations Commission (AIRC) to the certification of
union Certified Agreements and the administration of the award safety net system
6. Simplified unfair dismissal provisions
The WRA divided workers into three streams:
The industrial award system or Award Safety Net:
1. Covered workers unable to negotiate under individual or collective enterprise agreement
2. Covered around a third of all workers
Certified Agreements:
1. Usually in force for three years
2. Represented workers represented by unions in pay negotiations
3. Also covered a third of workers
Australian Workplace Agreements (AWAs):
1. Covered wage increased negotiated by individuals, without trade union involvement
The Workplace Relations Amendment Act 2006 (WorkChoices)
-Created a national industrial relations system
-Changes included
A reduction to five minimum conditions
annual leave
personal/carers leave
compassionate leave
parental leave, and
maximum ordinary hours of work.
-The Howard government predicted by giving more flexibility in hiring and firing that higher employment
growth and labour productivity would occur
-The Australian Fair Pay Commission(AFPC) replaced the AIRC in setting minimum wage and working
conditions and setting the minimum wage for low paid workers
-Unfair dismissal provisions were not applicable to businesses with up to 100 workers
The Workplace Relations Amendment ( A stronger Safety Net) Act 2007:
The Fairness Test:
-Introduced to ensure workers were fairly compensated for lost or modified conditions when moving to an
AWA
-Only applied to workers earning less than $75,000 per year
-Only applied to agreement to lodged after the May 2007
The Workplace Authority:
-To administer workplace agreements
-To apply the fairness test to the main types of agreements
Workplace Ombudsman:
-To enforce compliance relating to minim pay rates and conditions
Prohibited new AWAs
Introduced the No Disadvantage Test which applies to all workplace agreement made after the
introduction the Transition Act.
Reinstated unfair dismissal laws from the commencement of the new legislation in 2010.
1. Prohibited new AWA's
2. Introduced the NO disadvantage test which applies to all workplace agreement mas after the
introduction of transition act
3. Reinstated unfair dismissal laws from the commencement of the new legislation in 2010
Workplace Relations Amendment ( Transition to Fairness) Act 2008:
The Forward with Fairness policy in this amendment was aimed to remove the unpopular features of the
Work Choices legislation
Five major changes included:
1. Prevention of the making of new Australian Workplace Agreements from commencement of the
Transition Act
2. Prevention of changes in AWAs unless the Workplace Authority deemed that the agreement did not
pass fairness test
3. Creation of a new workplace agreement called Individual Transitional Employment Agreements
4. Introduction of a new No Disadvantage Test
5. Unfair dismissal always were reinstated with the new system
The Fair Work Act 2009:
Contained five major elements:
1. Replaced the AFPCS with ten National Employment Standards
2. New Modern Awards which contain the NES to simplify the previous award system
3. Revised enterprise bargaining arrangements must be approved by Fair Work Australia and must pass
a No Disadvantage Test.
4. Streamlined protections dealing with workplace and industrial rights
5. Fair Work Australia and the Fair Work Ombudsman replaced the AIRA, AFPA, Workplace Authority
and the Workplace Ombudsman.
The NES:
1: Maximum weekly hours of work
2: Request for flexible working hours
3: Parental leave and related entitlements
4: Annual leave
5: Personal/carers and compassionate leave
6: Community service leave
7: Long service leave
8: Public holidays
9: Notice of termination and redundancy pay
10: Fair work information statement
The National Employment Standards (NES):
The safety net under the Fair Work Act 2009 is made up of:
1: The National Employment Standards (NES)
2: Annual adjustments to the National Minimum Wage
3: The system of Modern Awards
The Safety Net protects employees from the loss of minimum pay and conditions. The ten National
Standards replaced the five protected under Workchoices.
The ten NES of the Safety Net:
1. Maximum weekly hours of work for fulltime employers is 38 hours plus reasonable additional
overtime
2. Ability to request for flexible working arrengements
3. Parental leave and relted entitplements, 12 months unpaid parental leave
4. Annual leave, 4 weeks of holidays for fulltime workers
5. Personal/Carer's compassionate leave, up to 10 days paid personal leave and 2 days unpaid
6. Community service leave, unpaid leave including jury duty
7. Long service leave, given in relevance to the award covering the employee
8. Public holidays: provides pay for public holidays
9. Notice of termination and redundancy pay, employees given written notice of their termination
10. Fair work information statement
The National Minimum Wage:
The National minimum wage provides a safety net for anyone not covered by an award. It is determined by
Fair Work Australia. The Minimum Wage Panel, part of Fair Work Australia, is required to consider both
economic and social objectives when determining the minimum wage. It considers performance and
competitiveness of the national economy.
-In July 1
st
2010, an increase of $26.12 per week for all employees on Modern Award minimum wages
-The National Minimum Wage was increased from $543.78 per week or ($14.31 per hour) to $569.90 per
week or ($15 per hour)
Modern Awards:
Modern awards provide a set of minimum wages and working conditions for employees specific to their
industry job classification and occupation
Main contents of Modern Awards:
1. Minimum wages
2. Types of employment such as full time or part time
3. Arrangements for when work is performed
4. Overtime rates of pay
5. Penalty rates of pay
6. Annual wage or salary arrangements
7. Allowances and leave related matters
8. Superannuation provisions
9. Procedures for consultation, representation and dispute settlement
Enterprise Bargaining under the Fair Work Act 2009:
Enterprise Agreement: Workplace agreement that is made between one or more employers and a group of
employees or a trade union representing a group of employees
Enterprise agreements can include:
1. Rates of pay for employees
2. Employment condition such as hours of work
3. Consultative mechanism
4. Dispute resolution procedures
5. Dedication from wages for any purpose authrised by the employee eg: superannuation
Good Faith Bargaining: Good faith bargaining means when employers and employees attempt to reach and
agreements in good faith
Elements of good faith bargaining includes:
-Attend and participate in meetings
-Must respond to proposals made by other party
-Must give genuine consideration tp proposal
-Refrain from unfair conduct
Single Enterprise Agreements: Involves a group of employees and a single employer or two or more
employers (joint venture) in a single enterprise
-Single interest employers can make a single enterprise agreement with the employees employed at the time
the agreement is made
-The single enterprise agreement is made when a majority of the employees of the employer or each
employer vote to endorse the agreement
-Agreement may run up to four years and has to be submitted to Fair Work Australia for approval
Multi- Enterprise Agreements:
-Two or more employers that are not all single interest employers may make an enterprise agreement known
as a multi-enterprise agreement with a group of emploees or trade unions
-The multi-enterprise agreement is when a majority of the employees of at least one of the employers votes
to endorse the agreements
-May not run no longer than four years and must be submitted to Fair Work Australia for approval
Greenfields Agreements:
-Involves genuinely new enterprise that one or more employers are establishing or propose to establish and
who have not yet employed persons necessary for the normal conduct of the enterprise
-These agreements can be either a single or enterprise agreement or a multi-enterprise agreements
-It is made when the agreement is signed by each employer and each relevant employee organisation or trade
union that the agreement covers
-This also has to be submitted to the Fair Work Australia to be approved
The NO Disadvantage Test (NDT) and the Better Off Overall Test (BOOT):
NDT ensures that the agreements does not or would not, on balance, result in a reduction in the overall
terms and conditions of employment of employees covered by the agreement
BOOT involves a comparison between the agreement and a relevant Modern Award to determine whether an
employee would be better off under the agreement
Individual Agreements:
From January 1
st
2010 there is no legislative provision for making individual workplace agreements
Employment Contracts for High Income Earners:
High income earners use common law contracts and may include annual salary, bonuses or profit
entitlements, fringe benefits and salary packaging arrangements
The reason for common law contracts is to exclude income earners from modern awards which are aimed at
providing a safety net for low income earners as high income earners do not need a safety net
Individual contractors such as in building and constructions as well as information technology are covered by
Independent Contractors Act 2006 and some general protection though Fair Work Act 2009
The key difference between common law contracts and enterprise agreements are that common law
contracts are made individually and they cannot remove or trade off minimum award conditions such as
penalty rates
Unfair Dismissal:
The Fair Work Act 2009 reinstated unfair dismissal provisions for small businesses with over 15 employees
However in such events, claims could not be made unless they had not completed 6 months of work
For small businesses with less than 15 employees, at least 12 month experience is needed before they can
make an application for unfair dismissal
Dispute Resolution Procedures:
The traditional mechanism for solving trade disputes between employees and employers is though the system
of federal and state industrial tribunals. These produce conciliation and arbitration services if collective
bargaining fails to resolve an industrial dispute between an employers and employees
Collective Bargaining:
1. Involves conflicting parties attempting to reach an agreement through direct negotiation by their
representatives
2. No third party or umpire in this situation
3. If no agreement is reached, a conciliator may be used
4. Disadvantage is more protracted industrial disputes if an agreement cannot be reached
Conciliation:
1. A third party or a conciliator or mediator tries to get the conflicting parties to agree to a settlement
2. If a settlement is achieved, the agreement becomes legally binding on both parties and becomes
written into the enterprise agreement for Modern Award
Arbitration:
1. Is where a third party or arbitrator makes a binding decision on the parties to a dispute
2. The arbitrated settlement alters the Modern Award or enterprise agreement and is legally binding on
both parties (employer and employee)
Arguments For and Against Centralised Wage Determination:
Arguments for:
Comparative wage justice: Is the belief that workers who have similar skills and jobs in different industries
should receive the same award wages
-This helps to keep the real wages of low income earners and workers with minimum bargaining power
-Certainty for wage earners because wages are adjusted regularly, without workers resorting to industrial
actions
-Eg of centralised wage determination = Prices and Incomes Accord in 1983
-Led to wage indexation which is adjusting wages to changes in the cost of living
-Equity
-Allows for setting of minimum standards
Arguments against:
Comparative wage justice and wage indexation institutionalised inflation by largely ignoring importance of
productivity as a wage fixing principle
Wage indexation can contribute to higher inflation outcomes because of rising wage costs
Wage increases unrelated to productivity improvements tended to flow on from one occupation or industry
to another, and leads to permanent real wage overhang where wages growth outstripped productivity
growth in the Australian economy
-No real flexibility
Arguments For and Against Decentralised Wage Determination:
Decentralised Wage determination is highlighted by direct negotiations of employment contracts between
employees and employers at enterprise of industry level, this may involve collective bargaining or individual
bargaining
Arguments For:
1. It is more flexible in operation and likely to lead to more efficient allocation of labour in the labour
market
2. Wage increases usually reflect improvements in productivity
3. Increased incentive for employees to undertake skills and training and education to gain higher wages
and less likelihood of cost inflation
4. Employers have a greater incentive to demand and hire labour, hence unemployment would fall
Arguments Against:
1. The market determines wage outcomes based on workers productivity and skills, leading to widening
of wage and income inequality in labour market due to a strong system of minimum wages and
working conditions
2. Eg: Employees with greater bargaining power, skill and productivity may achieve higher wages then
employees with less bargaining power
3. Leads to greater labour market segmentation
4. Industrial dispute maybe protracted during period of wage negotiations if an agreement cannot be
reached between the conflicting parties
5. The federal government does not have a formal prices and income policy to control wage outcomes
and muse use monetary policy and higher interest rates to control wages growth
Arguments For and Against individual Wage Determination:
Arguments For:
Flexibility for employers and employees and the opportunity for highly skilled and qualified workers to earn
higher incomes
Arguments Against:
Low skilled workers with low bargaining power there is a risk of receivable below minimum wages and
working conditions for employers if a safety net of legally enforceable minimum standards is weak or absent
Education, Training and Employment Programs:
The federal government was expected to provide $32.9 billion in 2010-11 in recurrent and capital funding for
programmes provided by the Department of Education
Included expenditure on government and non government schools ($16.3 billion), tertiary education ($8.1
billion), Vocational education and training ($2 billion) and student assistance ($5.1 billion)
Additional allocation of $930 million on specific funding for school education in the form of school
infrastructure as part of the Nation Building and Jobs Plan
Expenditure in vocational and training area was forecast to remain stable in 2010-11
Increased government spending on higher education in the 2009-10 Budget reflected the response to the
Review of Australian Higher Education
Expenditure on labour market assistance to job seekers and industry in the 2010-11 budget estimated at $2.5
billion over five years though Jobs and Training Compact
In 2010-11 budget $661.2 million was allocated to the Skills for a Sustainable Growth strategy based on
education and training places
National and global context for environmental management
regulations
market-based policies
targets
international agreements
Environmental management policies are desigend to adress environmental sustainableit issues such as
preservation of natural environments adressing pollution, and climcate change, and managing the use of
renewable and non-renewable resources
ES is included under microeconomic policies because these policies are igned to influence the behavior of
individual household, businesses and industries
The main policies to influence are regulations and market based pricing polciies designed to influence
behavior and usage
Regulations:
The traditional policy for achieving environmental goals
-Laws or rules they may prohibit actions that could cause environmental damage eg: littering
-May specify how something is produced or consumed eg: mining techniques
-May impose requirements on the quality of goods eg: the Fuel Quality Standards Act 2000
-Can require firms and individuals to follow certain environmental procedures eg: The protection of World and
National Heritage Sites
Market-based policies
-Are policies that involve finale incentives or disincentives (such as subsides and txxes) to influence the
behavior of business and individuals
-Environmental problems arise because of market failure ie where environmental costs and benefits
(externalities) are borne by society but not taken into account by consumers and businesses in the market
-A market based response is to levy tax or fee on production that is approximately the same as the
environmental cost associated with the economic activity. This would move the supply curve to the left,
increasing market price and decreasing the amount consumed
-Internalising the externality where consumers pay for environmental costs
-Taxes tend to be preferred by governments to influence behaviors because they raise government revenue
which can then be used to fund environmental programs
-Subsidies are grants given by the government to procedures which aim to reduce production costs and
encourage environmentally beneficial activities
Targets
-The aim of targets is to provide an understandable and tangible foal for environmental sustainability. Targets
will be decided based on what is desirable for the environment and what is achievable and will be influenced
by the factors that contain in the government in other decision making situations such as economic factors
and political influences
The Australian government uses a variety of targets to guide the environmental polices including:
-Mandatory Renewable Energy Target (MRET) of sourcing 20% of Australias energy from renewable sources
eg: Solar by 2020. This target is enforced by legislation with responsibility given to the electricity generators
-Water for future, with plans to address urban and rural water challenges
-Under the Kyoto Protocol binding target have been set for 37 industrialised countries and the European
Union to reduce their greenhouse gas emissions. These amounts to an average of 5% against 1990 levels over
the five year period 2008 to 2012
International Agreements:
Australia is involved in the environmental conventions of:
-UN Montreal Protocol to limit CFC emissions to protect the ozone layer
-UN Word Heritage Convention to protect World Heritage Areas
-UN Framework Convention on Climate Change (UNFCCC)
-UN Ozone Layer and Biological Diversity Conventions
-UN Antarctic Treaty and UN Law of Sea Treaty
Kyoto Protocol:
UN Kyoto Protocol to limit carbon emissions into the atmosphere
The government ratified the Kyoto Protocol to limit CO2 emissions at the UN Framework Convention on
Climate Change in Bali 2007
This agreement attempts to adopt wide targets for reducing greenhouse gas emissions
The Australian government has committed to reducing Australias carbon pollution to 25% below 2000 levels
of 2020
However such an agreements was not reached during the Copenhagen Conference in 2009 due to widespread
disagreement between advanced, emerging and developing countries
The major difference between Kyoto Protocol and the UNFCCC is that Kyoto Protocol commits signatories to
reducing their emissions, whilst UNFCCC encourages industrialised countries to reduce their emissions
The UNFCC argues that industrailised countries are principally responsible for the current high levels of
greenhouse gas emissions in the atmosphere as a result of more than 150 years of industrial development
The Kyoto Protocol places a heavier burden on advanced countries to reduce their emissions under the
principle of common but differentiated responsibilities
Through the Kyoto Protocol and other agreements with USA, EU, Japan and Australia, they promote
developing nations such as China and India to be involved
The Kyoto Protocol offers additional market based mechanism for reducing carbon emissions:
-A system of emissions trading known as Carbon Market
-The clean development mechanism for development alternatives sources of energy
-Programmed for the joint implementation of measure to reduce carbon emissions
Australias Environmental Performance:
Australia has had a high per capita CO2 emission in 2005 than Major OECD countries other than USA
Australia also has had more endangered species than all other seven OECD countries
Australia has also experienced prolonged periods of drought than the other seven OECD nations but has
attempted to implement systems to reduce irrigation and restore the health of major river systems
Australia being a net exporters and producer of energy sources such as coal and oil has committed to reduce
greenhouse gas emissions by ratifying the Kyoto Protocol and the Carbon Emissions Trading Scheme
The Clean Energy Initiative was also introduced to develop low emissions and renewable technologies to
create a low carbon economy