Macroeconomic Policies And Their Impacts : Macroeconomic Assignment

Introduction and Background:

The Australian economy, the largest capitalist economy in the world, is largely dependent on the agriculture and mining industry. According to Pigou (2009), the country has maintained a steady economic growth rate only with the help of its successful economic policies. The government of Australia is successful to formulate diverse macroeconomic assignment policies which help the country to become an economically independent one. Here in this, a detailed report will be delivered on the different microeconomic policies of Australia and their specific impact on the overall economy of the country. For this assignment, the researcher will pick up one of the effective microeconomic policies and will evaluate its effect on the economy of the country. In this assignment, a detailed research will be conducted on the advantages and disadvantages of the carbon tax which was earlier formulated by the Gillard Government and at a later stage was revoked by the Abbott Government. The Macroeconomic Assignment will also discuss the very impact of carbon tax on the lives of the Australian people, on the trade and business of the country and on the economy of the country as a whole.
Macroeconomic Assignment

By following the concern for environment protection, the Gillard Government of Australia introduced a carbon tax in 2012. Spash (2012) revealed that the government has decided to charge minimum $23 for the emission of per tonne of carbon in the environment for that organisational Behaviour which use to emit as much as 25,000 tonnes of carbon dioxide or any other equivalent gases to the environment annually of Macroeconomic Assignment. The government has given relaxation to the transport and agricultural sector of the country. Apart from these two above said sectors, all entities come under this macroeconomic policy of the Australian government. The government has implemented the policy with a noble vision of minimising carbon emission to the environment and in that way stretched its hand of support towards the worldwide initiative of environment protection, but the very policy brought certain major sources of worry also. Adams (2013) argued that the implementation of this taxation policy imposed a direct impact on the operational cost of numerous business organisations, as the prices of various energy resources like gas, petrol and other fuels are increased radically by the additional cost that carbon tax brings with it. It also made a negative impact on the daily courses of life of the Australian citizen, as they had to face inflation in the prices of the commonly used goods. By evaluating the ill effects that carbon tax carries, the Abbott Government is compelled to repeal carbon tax in July, 2014.

Arguments in Support of the Policy Decisions:

Whitesell (2011) was of the opinion that environment protection is a matter of great importance to the respective government of each and every country of the world.  The ill effects of greenhouse gases are now clear to all. One can easily understand to what extent they can cause harm to human life and other natural resources. Carbon emission to the environment is now established as one of the root causes of global warming. By understanding the need of minimising carbon emission to the environment, the Government of Australia under the leadership of Julia Gillard has implemented a carbon pricing policy bearing the name Carbon Tax in July 2012. Australia is such a country whose per capita carbon emission is even higher than the US. The country delivers as much as 1.3% of the entire amount of global emission and is ranked at eleventh among the highest carbon emitting countries of the world (, 2014). With a vision to gain a control over this adverse situation, the Gillard Government has introduced the carbon tax. The government has imposed this taxation policy specifically for those entities which have the tendency to emit more than 25000 tonnes of carbon annually. It has proposed that initially the government would charge $23 on the emission of per tonne of carbon dioxide or other relevant greenhouse gases and in the following years to come, the tax rate would be restructured after conducting a market-based research (Oates, 2012). The Australian Government, by implementing a carbon tax, has fixed an objective in front of it which exposes that by 2020, the government will try to minimize the emission level of the country by 5% from what it has been in 2000. It had also set a long time goal of minimising carbon emission by 80% from that of 2000 before the end of 2050 (, 2014). The Australian Government has even given exemption to the Macroeconomic Assignment transport and agricultural sector of the country so that it cannot impose an added burden on the population of the country.

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The said policy undoubtedly bears certain effective advantages for the country as well as for the entire world. The main advantage that carbon pricing carries with obviously speak of the fact that with the help of this policy, the Australian government will be able to gain control over the overall carbon emission of the country and the said policy will undoubtedly be treated as a successful environment protection initiative of the government. Ekins and Barker (2012) thought that the implementation of carbon tax compels many organisations to reduce their energy usages. As carbon tax will render added burden to the operational cost of many organisations, they will surely try to minimise their usages of natural energy sources like gas, petrol and other fuels. The reduced use of energy sources will give the government a chance of energy conservation. The amount that the government will collect as revenue from the carbon tax can be used as a funding option with which the government can conduct various development initiatives for its people (Zhang, 2008). As the process of fixing tax amount for carbon emission is a simple one, the government will not have to bear a larger amount of administration cost for it (Goulder, 2012). In spite of having these advantages, the very tax has to be repealed in July 2014. The major reason behind why this tax has to be revoked lies in the fact that carbon pricing directly or indirectly causes trouble for the entire population of the country. Even after the repealing process is done, numerous business experts disclose their personal opinion in favour of carbon pricing and they think that the carbon tax should be reintroduced as it carries certain potential advantages for the country’s economy as well as for its people.

Arguments against the Policy Decisions:

The Australian Government, under the leadership of Tony Abbott, has decided to repeal carbon tax on July 2014 on the ground that the said tax brings numerous troubles for the business enterprises as well as for the common people of the country. In a survey, it is found that as many as 75,000 business organizations have paid carbon tax in the financial year 2012-2013 and due to this addition of carbon tax, the business organizations have to bear an increased level of output cost (Hahn, 2013). The said business organizations did not prefer to spend the added production cost from their own pockets, instead they passed on the extra amount to their customers. Subsequently the customers, who are mostly the common people of the country, have to pay added amount of money for the same products and services. The increase in price of the products and services has a direct impact on the lives of the Australian population, especially of those who belong to the lower socio-economical layer of the society. As an implied effect of carbon tax, the general cost of living of the Australian consumers increased to a large extent. Harrison (2014) opined that immediately after its implementation on 1st July 2012, carbon tax no matter in a direct or indirect way was found responsible for the 0.7% increase in the Customer Price Index of the country. Apart from the increased price of household goods, there was a stiff rise in price discernible in case retail selling of gas, petrol and other petroleum products which worsen the situation more for the common man of the country. As electricity producing organizations largely make use of energy resources like coal and other organic materials, the increase in the prices of the natural energy resources compels them to enhance the electricity charges. On per unit of electricity consumption, the electricity providers increase its charges to that extent that it almost became unbearable for the middle and lower middle class population of the country (Harrison, 2014). If the focus of attention can be shifted towards business perspectives, it is found from researches conducted by the Australian Industry Group that all the business enterprises of Australia have to face at least 14.5% increase in their respective energy cost (Jotzo and Betz, 2014). It is found from the same research that as many as 49% of the entire business organizations of the country that means almost half of the business organizations operating within the periphery of the country encountered an immediate increase in their individual input cost. In case of manufacturing organizations, the percentage enhanced radically (Refer to Appendix). A unique information was collected by the research group which established the fact that a good number of organizations have increased their product prices in an assumption that the newly implemented carbon tax would bring adverse effects for them in the future course of time (, 2014). All these collected information did not bring good news for the overall economy of Australia. The implementation of carbon tax made a direct impact on the country’s GDP and the country’s national income was also affected to a great extent.

By analysing all these ill effects that carbon tax brought with it, the Abbott Government was compelled to revoke carbon tax with immediate effect. Though the Labour Party and the Greens voted against this repeal, the present government did not have to face enough trouble while passing the relevant bill in the Senate. By withdrawing the carbon tax, the Abbott Government ensured that the Australian population will start getting its benefit with immediate effect (Pearce, 2014). With the abolition of carbon tax, the Australian population will be able to enjoy an immediate relief from increased electricity charges. It is assumed that the electricity production cost will be reduced to a great extent, as prices of energy resources will follow a downward trend. The present government is expecting that before the finishing of the financial year 2014-15, it will be able to decrease the Customer Price Index by 0.7%, the exact percentage by which CPI was increased immediately after the implementation of carbon pricing. Even the Australian Competition and Consumer Commission (ACCC) has been given the responsibility to conduct a monitoring process on the gradual decrease in the pricing of the domestic products and services (, 2014). The annihilation of the carbon tax is estimated to bring favourable outcomes for the overall economy of Australia.

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Summary and Conclusion:

The above said macroeconomic policy renders a learning opportunity to the government of Australia. The implementation of carbon pricing is indeed necessary in order to introduce a potential environment protection measure, so that the ill effects of green house gases can be avoided. Carbon taxation policy undoubtedly brings certain potential advantages with it, but at the same time it carries certain ill effects with it. The ill effects that the carbon tax brings with it have a direct impact on the overall economy of the country. At the same it carries no good news for the common people of the country except that it can ensure no further damage to their already disrupted environment. By following the suggestions of the renowned economic researchers, a conclusion can be drawn on the issue by saying that carbon tax should be reintroduced by the government of Australia, but only after making certain necessary alteration to it. the said policy can bring enormous possibility for the country in years to come, if it reintroduced in a new format. Only then it can be said that the government has implemented a right approach to show its concern for the protection of environment and various natural resources.