INTRO INTO ECO

INTRODUCTION INTO ECONOMICS - CONTENT NOTES

Examine economic issues

• identify the opportunity costs involved in economic decisions made by individuals, businesses and governments at
local, state and national levels
• examine the ways that the economic problem affects individuals at different income levels
• examine the implications of unemployment and technological change using production possibility frontiers
• compare and contrast the ways that different economies deal with specific problems or issues

Apply economic skills

• construct and interpret production possibility frontiers
• distinguish between equilibrium and disequilibrium situations in the circular flow of income model
• explain how an economy might return to an equilibrium situation from a disequilibrium situation
• identify bias in media items on economic issues affecting the local, state and national economies
• identify key features of an economy through analysis of a variety of information types and sources
• work in groups to investigate aspects of economics and economies.

CONTENT

The nature of economics

• the economic problem – wants, resources, scarcity
• the need for choice by individuals and society
• opportunity cost and its application through production possibility frontiers
• future implications of current choices by individuals, businesses and governments
• economic factors underlying decision-making by:
– individuals – spending, saving, work, education, retirement, voting and participation in the political process
– business – pricing, production, resource use, industrial relations
– governments – influencing the decisions of individuals and business

The operation of an economy

• production of goods and services from resources – natural, labour, capital and entrepreneurial resources
• distribution of goods and services
• exchange of goods and services
• provision of income
• provision of employment and quality of life through the business cycle
• the circular flow of income
– individuals, businesses, financial institutions, governments, international trade and financial flows

Economies: their similarities and differences

• examine similarities and differences between Australia and at least one economy in Asia in relation to:
– economic growth and the quality of life
– employment and unemployment
– distribution of income
– environmental sustainability
– the role of government in health care, education and social welfare.

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INTRO INTO ECO

THE NATURE OF ECONOMICS

WHAT IS AN ECONOMY :
A collection of consumers, businesses and government that collaborates to produce, trade and
consume goods and services.

A SYSTEM OF EXCHANGE
- A system where goods and services are produced, sold and purchased for money.
- ECONOMY: Movement of money between people for good and services

GOODS SERVICES

Tangible Items (thing one can touch) Intangible items (cannot touch)
Eg. books, cars, roads Eg. Hire a plumber to fix the toilet, Advice on
what stocks to invest in.

WHY ECONOMIES EXIST:

1. Money earned in return for production of g/s (so people can produce goods)

2. Use money as a means of exchange (earn money in return)

3. Consumption (Use that money to buy things one wants)

~ Provide a means to exchange what one has, for what one wants (consumption) (we could not
spend our money or sell or get new things otherwise - no buying or selling).

~ Provide a means of employment to earn money in exchange for labour. (additionally allowing
good and services to get produced)

KEY TERMS

CONSUMPTION: Buying of goods and

services

GOODS/SERVICES: tangible & intangible

items that satisfy wants and provide utility

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The economic problem – wants, resources, scarcity

THE ECONOMIC PROBLEM: Unlimited wants but limited means to satisfy wants
‘How can society satisfy wants (individuals and communities) with limited resources available?’

~ We desire to satisfy ‘wants’ (material desires of individuals or community that provide pleasure
or satisfaction when consumed

~ Wants are ‘unlimited’ (People always want more than they have)

~ Give up money in exchange for satisfying wants

INDIVIDUAL WANTS COLLECTIVE WANTS

Good and services individuals buy and choose Goods and services that people desire in groups
by themselves (Use individually) or many people will use together (used in
groups)
Eg. Cars and clothes Eg. Parks and roads

~ Satisfying wants through consumption gives people utility

~ Economies exist to help people or groups of people gain utility by satisfying their individual and
collective wants.

KEY TERMS

UTILITY: Satisfaction from gaining good

and services

INDIVIDUAL & COLLECTIVE WANTS

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The need for choice by individuals and society

ECONOMY: ECONOMICS: Study of choices

The IMPORTANCE OF CHOICE:
● Choice is important in solving the economic problem as if the best choices are made, the
best possible use of the limited resources so as many wants can be satisfied as possible
(consumption)
Good choices: Most satisfaction from resources (limited resources -> Areas of most value))

ECONOMIC PROBLEM: WHOLE ECONOMY

INDIVIDUALS: Provide money in exchange for g/s

WHOLE ECONOMY: Satisfies more wants if it increases outputs

- Output is limited due to limited inputs
- Every economy has a limited supply of land, labour and maching, therefore economic
problem applies to the whole economy

THE 4 KEY ECONOMIC ISSUES:

ALL ECONOMIES MUST ANSWER
- Choices economy makes as a whole decide how limited inputs can create outputs

● WHAT TO PRODUCE?
Which g/s (what people want to buy)
● HOW MUCH TO PRODUCE?
Make everything the right proportion for people to consume them - produce too much: wastage
● HOW TO PRODUCE?
What mix of inputs wil be used to make the output? AIM: EFFICIENCY & LOW COST -
Labour or machinery?
● HOW TO DISTRIBUTE PRODUCTION?
Who consumes g/s? - higher income buys more.

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opportunity cost and its application through production possibility frontiers

OPPORTUNITY COST:
The value of the next best alternative we give up when we make a particular choice over another

INDIVIDUALS
● Every Time an individual makes a choice, they give up what they would have got from the
alternative choice.
● Eg. $10 to buy a subway and thus gave up other goods that could be bought for $10 (eg.
magazine)
The opportunity cost of the sandwich is the magazine (lost value of the magazine from spending $10
on the sandwich)
● Not what we paid - value of next best thing chosen w/ resources available
● The OC of magazine is higher than the OC of the sandwich as sandwich is valued more
MAKING CHOICES:
People’s choices should minimize opportunity cost, it means choosing alternative where forgo as
little of happiness as possible (choose alternative to give up AS LITTLE as possible)

BUSINESS
● Combination of inputs to produce outputs
● OC= Profit from producing next best alternative

Eg. Apple is deciding to release a new iphone, ipad or mac (can only choose 1 - limited resources -
limited amount of staff)
Profits: Iphone ($20b), Ipad ($13b), Mac ($15b)

Best alternative = iphone (greatest profit)

Next best = Mac (Apple gave up $15b and therefore $15b = OC)

GOVERNMENT
● Money to spend on a range of investments

Eg. $5 billion left to spend (spend on hospitals, schools, roads, welfare?)

Whichever option chosen - an alternative is given up (OC)

Trade off

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THE PRODUCTION POSSIBILITY FRONTIER (PPF)

PPF = Graphical representation of all possible combinations of production limited by available
resources of the economy (possible choices of various combinations of two alternative products
that can be produced, based on available resources)
- Point C represents a particular combination of oil and
leather where the economies resources are used to full
capacity. (120,20)
- Point A represents a different choice, where all
resources are completely used (160,0)
An economy at A but wants to move to C. In order
to get the 20 units of leather, it would have to give
up (OC) 40 units of oil. The opportunity cost of
obtaining the 20 units of leather is 40 units of oil.
- When an economy attempts to reach a point
outside the PPF - it cannot actually reach that point
as it does not have enough resources.
PPF LINE - Maximum possible output
SLOP = OC (rise/run)

- If resources are not being fully used, then the

economy is operating at a point within the PPF (eg.
point A)
- Making less than what we could if utilising all
resources as best as possible
- Point A is an inefficient allocation of resources (as
more could be produced with workers and machines -
satisfy more wants
- Point UNDER the PPF = unemployment
(resources not being used to full potential)
- Points ABOVE the PPF = unattainable due to
resource constraints & represent the economic
problem at work.
- Points ON the PPF = Optimal (full employment of
resources)
Shows what amounts of each good can be produced when using all inputs (A choice needed to be
made about where to sit on PPF)
Factors affecting PPF:
§ New technology: More output with same resources
§ New resources: More input More output (e.g. immigration population expansion) & Unemployment:
Under-utilised resources total output < max output (Maximum satisfaction of wants is not achieved with
minimum opportunity costs)

Max capacity - cannot make more output

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Future implications of current choices by individuals, businesses and governments

- In making economic choices today, we can influence economic outcomes in the future
In a general sense, an economy as a whole can choose between:

● Producing goods that satisfy consumer ● Goods that will increase our productive
demand IMMEDIATELY (consumer capacity in the FUTURE (capital goods -
goods) such as machinery)
○ Capital goods allow us to satisfy
the wants we want now, in the
future by expanding our ability to
produce

➔ In the long run, an economy that focuses

more on the production of capital goods will
increase its productive capacity and experience
a higher level of economic growth

➔ A country that is producing at a higher

point on the frontier will, in the long term be
able to satisfy its consumer wants better than a
country at a lower point on the frontier

➔ The country choosing to produce more

capital goods now is making the choice to forgo
satisfying some wants today, in order to satisfy a
greater number of (consumer) wants
tomorrow
Trade-off between producing consumer goods & capital goods

Economic decision making has future implications

INDIVIDUALS BUSINESS GOVERNMENTS

Eg. Individuals choose to go Business must choose to focus on one Eg.Gov may choose to give
without a holiday or extravagant area of business activity over another. highest priority in its spending
lifestyle and instead take out a They have limited FOC & other to satisfying immediate needs eg
resources so must focus on products
mortgage and purchase a house. which likey max. profits. increased welfare benefits &
healthcare and provide less
In long term, home ownership Eg Many business that invested funding to eg. education.
improves an individual's in communications and IT
financial security as they will decade ago achieved In long term, result in lower
not have to pay rent & also have extraordinary financial success level of economic growth as
an asset to pass on country has lower skills in
workforce

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KEY TERMS

CONSUMER G/S: Items produced for

immediate satisfaction of individual &
community needs & wanta

CAPITAL GOODS: Items that have NOT

been produces for immediate consumption
BUT will be used for the production of
other goods

Economic Factors Affecting Decision Making

INDIVIDUALS

AGE INCOME ATTITUDES TO FAMILY FUTURE

Young and Higher income RISK CIRCUMSTAN PLANS &
retirees spend a ➝ More saving, Can you afford CES EXPECTATION
large proportion more to lose big on Children require S
of income consumption investments? spending Ensure
individual has
enough money
for future

In general:
More income + fewer expenses = more consumption
● But people consider future income and expenses too
● Factors change over time as individual wants are always changing
● Factors affecting how much people save and spend
spending, saving, work, education, retirement, voting and participation in the political process

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BUSINESS – pricing, production, resource use, industrial relations

PRICING MARKETING COST ETHICAL INDUSTRIAL

STRATEGIES STRATEGIES MINIMISATION ISSUES RELATIONS
Big objective - When activities of
Tradeoff between $ set to appeal to increases profits & the business Decisions
prices target market depends on impact the
regarding staff
Higher resource environment &
society
Make more per unit Higher quality Pay more -
Sell less units ($$) equipment Extra costs to
Lasts longer preserve encourage better
Lower
More productive environment preformance
Make less per unit (output)
Sell more units More expensive Or sacrifice
environment to Or minimum
Lower quality save money wage
Cheaper
(but) more likely to Pay to prevrent
break/fail harm to society
-mining companies
pay to repair &
prevent damage

GOVERNMENTS influencing the decisions of individuals and business

The main way gov makes economic decisions - determining patterns of spending & taxation

● Why? Gov makes things more/less expensive

eg. tax on cars
● Items bad for society - tobacco, illegal drugs - tax to discourage

● Collective wants (benefit all of society)(what society wants)

● Where gov spends its money and gets its taxes from
● Spending & taxation policies have impacts on individuals & businesses

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THE OPERATION OF AN ECONOMY

Production of goods & services from resources - natural, labour, capital and entrepreneurial
resources

FACTORS OF PRODUCTION (LLCE)

Resources & inputs used to make goods & services

LA N D LA B O U R CAPI TAL ENTERPRISE

All naturally Productive efforts of Machines used to Organising all factors
occurring materials workers to make g/s produce output of production to
used in production produce g/s
process

Includes: What determines ‘Produced means of Entrepreneurship:

● Water labour supply: production’ ● Risk takers
● Oil ● Size of pop. who supply
● Forests Capital goods not products to a
● willingness to
& produced for immediate market to make
● Space to locate work consumption BUT to be a profit
a business Which in turn, depends used in the production
on of other g/s ● They combine
land, labour
● Birth and death How to get capital? and capital in
rates Payment for capital = ways that
● Immigration money to buy machines produce
valuable output
● school leaving
Machinery
● Age ● Tools, factories,
● Training computers
● Age of
retirement Infrastructure
● Capital owned
by the
community
(GOV) (eg.
railways, roads,
RENT: Income schools)
someone receives for ● Help
providing natural businesses
resources operate

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Distribution & exchange of goods and services

Distribution: How we decide how much of the economy’s output each person receives
● Distribution of output dependent on WHO provides the FOP
● Those who contribute the most FOP, receive most output (rewarded output according to how
much contributed)

Market economies distribute g/s based on the individuals contribution to the production process - the
larger the contribution, the greater amount of output received
- Earn money from FOP - used to buy output

HOW MUCH TO PRODUCE?

- Quantity & quality of FOP determines how much we can produce
DISTRIBUTION OF G/S
· Individuals contribute to production process Market economy provides them with income Income is used to
obtain goods and services
o Factors influencing income
§ Scarcity of resource and level of demand
§ How much they work
§ Skills and expertise
§ Educational qualifications
§ Bargaining power with employers
o Income is redistributed by government through taxation (social welfare)

EXCHANGE OF G/S

· Money is used as a medium of exchange

· Prices are indicators of the relative value of goods and services
· Exchange occurs in a market economy

PROVISION OF INCOME

· Individuals are paid rewards for their contribution (Wages, Rent, Interest, Profit)

· Final Income = Income – Taxation (Direct and indirect)

· Government redistributes income

The System of Distribution in market economies:

ADVANTAGE DISADVANTAGE

Encourage to contribute to economy’s output Inequality & Unfairness for disadvantaged

● Work harder groups (unable to contribute)
● Better skills ● Illness
● Age
● Disability

Why GOV provides welfare payments

KEY TERM - GDP: Total amount of g/s produced

in economy in a given year (sum total)

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Provision of employment & quality of life through the business cycle

BUSINESS CYCLE

Fluctuations in the level of economic growth due to domestic or international factors

Economy follow a repetitive up and down cycle of growth
(y=growth, x=time)

E X PA N S I O N ⬆
- Economy tends to grow fast for a few years
- Fast growth, high consumption, production and
investment

CONTRACTION ⬇
- Economy tends to go through a few years of of
contraction or slow growth, with less activity, before
recovering

Economic Problem
- We want lots of activity so that we increase output → implications for quality of life

Causes of the business cycle

Why doesn’t the economy grow at a stable rate?

● When there is a peak in activity, people are confident, but it cannot last forever

● Eventually, individuals/consumers get worried about economy not being able to sustain the
boom (because it has been growing too fast for too long)

Concern that economy cannot sustain growth → Save, invest less, reduce consumption
↓
Recession
(as people expect bad times ahead. It reduces economic activity)

● Recovery begins when recession bottoms out and people get optimistic again & cycle repeats

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Impacts and Labelling of the business cycle

B O O M → Sustained periods of above average economic growth

● People confident in economies well being

● Everyone gets more wealthy = bull markets
Eg ‘The mining boom’ → a result of China purchasing many resources such as coal and iron ore from
Australia. Saw significant increases in growth, assisted by demand from China.

Impacts
➔ Lower savings, higher spending → hire more workers for higher output = lower
unemployment

➔ Businesses: Capital investment, product more → increased quality of life (people

consume more + find more work easily)

➔ Booms coincide with: Inflation = price rise

Consumer demands grow too fast for businesses → business increase prices & people buy less
(makes economic problem worse)

Followed by…

T R O U G H S → Downturns or periods of ‘recession’

If worse: RECESSION → 2 consecutive quarters of negative economic growth (output shrinks

for ½ a year)

● Everyone gets less wealthy = bear markets

Eg. ‘Global financial crisis of 2008’ → Aus experienced a downturn but did not have a recession -
only declined for 1 quarter (growth negative) not 2

Impacts
➔ People worry about job security → Save more consume less

➔ Businesses forecast lower demand → less investment into capital equipment

➔ Businesses forced to lay off workers → Unemployment rises

Less production & consumption of g/s → Increased unemployment & quality of life lowered

RESPONSES

Boom - bust cycle

Problem: Instability & uncertainty of when economies booms & busts are going to occur → consumers and
business less confident about their spending/saving/employment decisions
↓
GOV & RBA (reserve bank)
- Attempt to make the ‘boom - bust cycle’ less volatile (liable to change rapidly) - avoid instability
by ‘smoothing’ cycle → Booms smaller & recessions less deep
From this, economy tends to grow at a more table trend than it would without Gov. intervening

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The 5 Sector (firms) Circular Flow of Income

A model that describes the operation of the economy & the linkages between the main
sectors/groups in the economy
● Shows the flow of money in the economy

L E A K A G E S (outflows) I N J E C T I O N S (inflows)
● Activities that remove money from the ● Activities that add money to the circular
circular flow of income flow of income
● S, T, M (imports) ● I,G, X (Investment, Gv spending, Export)

FINANCIAL SECTOR (Private Sector) Eg. Organisations -Banks, Super funds, credit unions

● Institutions which borrow & lend money - intermediaries between savers & borrowers of $
● Savings - Take individuals deposits - saving instead of spending - LEAKAGE
● Investment - People borrow $ & spend in capital investment - INJECTION
○ The balance of savings and investment - determines whether financial system adds/takes away
from economic activity

GOVERNMENT SECTOR (Public & Domestic) Eg. Levels of Gov- Cwealth, state & local

● Taxation - Imposes taxes on consumers & businesses to satisfy collective wants - LEAKAGE
● Expenditure - Uses tax revenue to undertake in various Gov spending -$ on welfare, education, &
health creates jobs - INJECTIONS
○ The amount of gov spending against taxation - determines whether gov causes injection or
leakage to economy
● Difference between Taxation - Expenditure - ‘budget balance’ - gov tries to control eco act. To
smooth out business cycle

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INTERNATIONAL SECTOR

● The impact trade has on injections & leakages

● Imports - Aus consumers purchase something from overseas, sending $ overseas so cannot be spend in
our economy - LEAKAGE
● Eg. Aus buys luxury car from Germany
● Exports - Aus sells to an economy overseas & MONEY is given in return - INJECTIONS
● Eg. Aus sell coal to China - injects money into Aus economy - Aus busin. Receive revenue
○ The amount of exports & imports determines whether trade is a leakage or injection (trade
surplus for Aus economy)

What the model predict for economy

EQUILIBRIUM DISEQUILIBRIUM
The economy is in a stable state (neither growing The economy growing at an unstable rate (will
or shrinking) expand or contract)

EXPAND

● As people get wealthier - spend more on

imports, are taxed more and have more
● Equilibrium occurs in the circular flow money to save
of income when the sum of all leakages ● Leakages gradually rise - so net injection
is equal to the sum of all the injections (inj - lea) will shrink overtime until eco
to an economy reaches equilibrium

CONTRACT

● Shrinking eco - less income - less saving,

taxed, imports
● Leakages gradually fall until eco reaches
equilibrium - stops shrinking

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Further examples of injections and leakages in each sector

Individuals & businesses are INTERDEPENDENT (depend on each other)

BUSINESSES - Individuals supply:

○ resources required for the production process
○ Consumption of the g/s produced

INDIVIDUALS - Businesses
○ Produce g/s their demand
○ Provide income to buy the g/s

B U S I N E S S E S (Private sector)
● Sector of all business firms engaged in the production and sale of g/s. Concerns all activities
involved with buying FOP, and using them to produce and sell g/s

I N D I V I D U A L S (Private sector)
● Individuals supply FOP’S (input) such as labour & enterprise to businesses, which they use to
produce g/s.
● As a reward for supplying resources such as labour and enterprise to firms, individual receive
incomes in the form of rent, wages, interest and profit

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ECONOMIES: THEIR SIMILARITIES & DIFFERENCES

Economic Growth & Quality of Life

· 4th largest economy when compared to Asian economic region (China GPD 2014 US B$10360 AU-1454
· Top 6 = Group of 20
· Asian economic region = Fastest growing economic region since WWII
o 1st Phase: 1950s and 1960s = Japan’s rapid industrialisation
o 2nd Phase: 1970s and 1980s = South Korea, Singapore, Hong Kong, Taiwan
§ Pursued growth strategies (competitive labour costs + growing export markets, particularly for
manufactured goods)
rd
o 3 Phase: Emerging and developing economies
§ Average annual economic growth of 7.5% (China, Indonesia, India)
§ Newly industrialised economies: 5.7% (SK, Singapore, HK, Taiwan)
§ Developed economies = 1.8% (Japan)
§ Industrialisation = V. rapid economic growth, slows down once finished
· Australia’s average economic growth = slower than most Asian economies
o Achieved industrialisation + high living standards before WWII (3.3%)
· Quality of life: Measure of welfare based on more than just economic output per capita
o Human Development Index: A measure that takes into account income, life expectancy adult literacy and
educational levels

Employment & unemployment

· Australia’s unemployment rate = 6.2% → Lower than unemployment rates of Indonesia and Philippines
→ Higher than rates of fast-growing economies (Japan, Korea, Singapore)
·AU’s employment patterns: similar to most advanced economies
o Majority (<75%) employed in services industries (retail, business, real estate)
o Manufacturing and construction = Substantial number of jobs
o Agricultural sector: smaller than previous decades (<5%)
· Less developed economies: Large proportion of workforce in agriculture (Indonesia: 51%)
o Process of mass urbanisation People moving from rural to urban areas for work

Distribution of Income

Pure market economies: Unequal distribution of income → Who own resources/have most skills > People who lack
resources
Agricultural developing economies: Unequal distribution
o Divisions between urban and rural populations
o Concentration of land ownership amongst wealthier group
Mixed economies: More equal distribution of income → Government intervenes for redistributing income (progressive tax)
· General industrialised economies: Relatively equal distribution (Japan, NZ, AU)
· Fiercely pro-market economies: Skewed distribution (Singapore, Hong Kong)
· Other Asian economies: Relatively unequal (poor and rural/wealthier urban areas)
GNI index - AUS 32.8 CHINA 54.7 less equal

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Environmental Sustainability

· AU: ↑ Environmental qualities (↓ water/air pollution, ↑ efficient industrial processes)

o Poor record of preserving biodiversity ( megadiverse, ↑ species than others)
§ >50 birds/mammals have become extinct over the past 2 centuries, one third of the global total
§ 1700 animals/plants at risk of extinction
o Low water productivity ($US of economic output/m3)
§ AU = $38, relatively low compared to Japan ($53) and South Korea ($47)
§ Higher than NA ($27) and avg. East Asia and Pacific region ($13)
· China: V. ↑ air/water pollution, widespread health problems (pollution, toxic chemicals)
· Climate change: Emission of greenhouse gases (CO2, NO, CH4)
o 14/15 warmest years = 21st century
o Ice thickness has decreased 40% since 1960s
o Extreme weather events occurring with greater frequency
o Avg. global temperature = ↑ between 1.0 and 5.4 degrees in this century
o Consequence of rising temperatures: Rising sea levels, ↑ harsh weather events, ↑ threats to economic health, food
security, human health
· Difficult to achieve international agreement on how to reduce greenhouse gas emission
o 2009: Copenhagen Convention (confine global temp increases to <2 degrees Celsius)
o No binding international agreement to reduce greenhouse gas emissions
§ Previous = Kyoto Protocol, 1997-2012
· Australia: Reduce carbon emissions to 26-28% of 2005 levels by 2030
o Direct Action Initiatives: Grants for businesses for project that lower carbon emissions
o 17 tonnes of CO2/person (>50% than Japan/Korea, >70% average adv. economies)
· Asian economies also face unique problems
o Indonesia: Significant contributor to climate change (deforestation)
o China’s CO2 emissions: Major impact on climate
o India: Poor urban planning, outdated infrastructure
o Domestic policies + greater global cooperation required

GOVERNMENT INTERVENTION

MARKET ECONOMY PROBLEM AREAS (MARKET GOV RESPONSE: Taxes to discourage & subsidies ($) to
FAILURE) encourage
Income Distribution (Inequality)
● To create fairer society & look after people Economic Stability
● To smooth out sharp fluctuations in the
GOV RESPONSE: Progressive tax & welfare payments
economic cycle
Resource Allocation ● To ensure stability in the economy & financial
● To provide g/s that would not otherwise be provided by system
private sector
● To restrict production of harmful goods (make illicit GOV RESPONSE: Macroeconomic policy
drugs illegal)

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The role of government in healthcare, education and social welfare

ASIAN ECONOMIES
o Market economies: East Asia, e.g. Japan, Korea, Singapore, Indonesia
§ Promote development of competitive export sectors and rapid industrialisation
o Planned economies: Asian continent e.g. China, Vietnam, India, Cambodia
§ Reduced govt. control over economic decision-making
AUSTRALIA -Market forces in agriculture, mining, construction, and manufacturing. Government for telecommunications,
aviation, banking, and insurance
o Recent decades: Reduced role through deregulation and privatisation policies
H EALT H CAR E
o Australia: Well-established system of universal health care (Medicare)
§ 6.3% of GDP spent on health care
o Developing economies: Rel. undeveloped public health systems, reliance on private health care
§ Diseases of poverty: poor water and sanitation
§ Lifestyle diseases: obesity, diabetes, and cardiovascular diseases
§ Serious respiratory disease problems (high rate of smoking)
· 20% (AU) vs 50% (China, Indonesia, Korea)
E D U CAT I O N
o Australia: Universal free education for primary and secondary (1/3 attend private schools), HECS for repaying
student loans
§ Above average funding
o Asia: Compulsory primary school, most schools being run and funded. Schools become voluntary during high
school years (increased private funding)
§ Education = Culturally significant (Intl. surveys of maths/science = strong education systems in
Singapore, Korea, Japan, other East Asian countries)
o Low govt. spending reflects larger reliance on private contributions, e.g. Korea/Japan
o Dev. countries: Low govt. spending = greater competition for scarce govt. resources
S O C IAL W E LFAR E
o Australia
§ Greater assistance level: Min. living standard for people unable/looking for work
§ Unemployment benefits, pension, disability/family payments, paid maternity leave
§ Trend = restricting social welfare by tightening eligibility
· ‘means’ test, limiting benefits for people w/other sources of income
§ Aging population: Govt. faces growing pressure to sustain social welfare (providing other priorities, e.g.
health care, education, and infrastructure)
o Asian economies
§ Demands for social welfare will increase

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