Background forceful rule of law in Australia protects the

Background 

Australia is one of the wealthiest Asia–Pacific countries and its
economic expansion has last for more than two decades. It becomes visible from
the 2009 global recession relatively undamaged, but stimulate expending by the
previous Labor government generated a fiscal deficit that has continued under
following Liberal governments. Australia is outstanding in the area of
services, technologies, and high-value-added manufactured goods
internationally. The important sources of exports are mining and
agriculture.  

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The forceful rule of law in Australia protects the property rights and
helps to diminish corruption. Those enforcement of contracts are reliable and
the expropriation is very uncommon. Australia’s strong political environment
supports transparent and well-established political processes, a firm legal
system, competent governance and also the independent bureaucracy. The judicial
system operates independently and even-handed. Moreover, anti-corruption
measures are generally effective. 

From the view of government size, the top income tax rate of Australia
is 45 percent, and the flat corporate tax rate is 30 percent. Besides, there
are also other taxes such as value-added tax and a capital gains tax. On the
whole, 27.5 percent of the total domestic income is the total taxes burden of
Australian. On the other hand, government spending is equivalent to 37 percent
of total output (GDP) over the past three years while the budget
deficits equal to 2.8 percent of GDP. Moreover, 36.8 percent of GDP
is the public debt. 

Furthermore, Australia’s regulatory system is one of the most
transparent and efficient management system all over the world and it is
benefit to entrepreneurship. There are only three procedures to take to launch
a business. First, the labor market is well substantiated by the modern and
flexible employment code. Secondly, the Reserve Bank of Australia is sensible
to the slowdown in growth among the country’s trading partners, and lastly, the
inflation remains below target levels.  

Lastly, the open market of Australia is less emphasized on trades. The
total value of exports and imports is equal to 41 percent of GDP. The average
applied tax rate is 1.9 percent. Some regulations obstruct agricultural trade.

Therefore, most state-owned organizations have become privately-owned. Foreign
industries compete on equal terms with domestic banks and other financial
institutions in Australia’s highly developed and competitive financial
system.  (The heritage foundation, 2017) 

 

 

SWOT
Analysis of Australia 

SWOT analysis is a business strategy tool that we normally use
to know and determine our businesses’ strength, weakness,
opportunity and its threat when we face some crisis in our
businesses. Hence, SWOT stands for strength, weakness,
opportunity and threats. Strength and weakness are the
internal factor as we need to determine them within the organization.

Opportunity and threats are the external factor. Strength makes
our businesses to survive for a long time and we have the ability to
compete with others competitors too.  SWOT analysis helps
us to know the weakness of the company so that we can improve it and produce
more goods and services to our customers. Moreover, opportunity is where we get
a chance to develop our business in the market place, earning as many profit as
we can whereas threat is that we will be kicked out from the
market easily because our products might be substituted by
other similar goods. Therefore, we need to change the weakness into strength
and threats into opportunity. (http://www.marketingteacher.com/swot-analysis/).  

The strength of Australia is it owns a strong and elastic economy
because of the stable macroeconomic fundamental and
demonstrated the resilience to external shocks. Besides, Australia is
deliberated to have a sound policy economy policy where vital policy changes
from mid 1980s to turn of the century. Australia is strongly focuses on reforms,
low inflation, a housing market bloom, growing ties with China which have led
to its 16 years of expansion. Due to the low employment that many people do not
get their job, it caused reformation in labor market. If we want to
start a business in Australia, we must regard to the weaknesses
which is over taxes and tariffs by the government. It
causes the changes in duty rates and also the mixed tariffs increase
unpredictability, like the invisible hand. Furthermore, Australia has an
inconsistent customs administration system and it is limited for foreign
equity. The licensing and residency requirements restraint the ability of
Australian services providers to conduct business. Many companies take
the advantages of the opportunity to reduce the liability through
their goods.  Australian dollar is likely to grow the
economic value. Australia largest
economy threat is China because it is a very powerful
country. Thus, Australia and China are a two-team first of all
boom and gloom. There is a sharp increase in demand and the
supply is constraint due to the underinvestment in mineral
production and associated infrastructure and some unexpected effects of the
global financial crisis. (https://www.youtube.com/watch?v=LgJ1uPxYyjw).

Despite, Australia is putting in their effort to improve their weakness and
defeat the threat. 

 

 

Market
economy system 

The economic system of Australia is free market system which can be
defined as the individuals and sellers make economics decision using a price
mechanism. This system is often referred as ‘laissez-faire’ which means to let
individual do as they choose. The growth of the economy of Australia is
remarkable and it is among the first five developed countries of the
world. Apart from that, Australia is also an outstanding country in the
international trade. Australian Securities Exchange (ASX), the dominant stock
market of Australia ranked top eight largest stock market in the
world. (FinanacialDictionary.Net,
2015). The four main constituents of the Australian economic system are
trade, manufacturing, services and finance. The fundamentals of the
Australian economy were further modified at the beginning of the 21st century.

Federal taxation and state taxation are two main components of taxation in
Australia. The new improved tax system was beneficial both for the producer and
the consumer. The main reason behind the remarkable growth of the Australian
economy is the stable government and massive natural resources. (Compare Infobase Limited,
2017). 

The resources and goods are owned by individuals and private firms in a
market economy. Private ownership permits people to obtain and use the
resources as they choose. Another characteristic of free market system is
freedom of enterprise and choice that involve limited government and authority.

Firms are free to produce goods and services and the consumers are free to
choose goods and services, they desire. ?Mr. Rouse, May 2011 ?. Consumers tend to purchase
what they want and goods that they are able to afford it. There is no
doubt that producers will maximize their profits rather than fulfilling
the needs of consumer. (Bertell Ollman, Oct
2015). Thus, money becomes a part of necessary in our life as people are
forced to produce goods and to sell it in order to get
profits. (Cindy Grigg, 2017).  

The merits of a free market system are it
encourages sellers to produce quality goods. Since the
profits of manufacturers depend on the number of sales, they will produce more
quality goods in order to obtain greater revenue. Secondly, free market
system also encourages competitiveness. A healthy competition will be
established among the sellers that are selling the same commodities. Sellers
will tend to improve the quality of goods and sell it at an equitable
price for in order to survive in the competition. Lastly, an
adequate production of goods. Producers will ensure that they are able to
satisfy the wants of the consumer because they can determine what products are
workable through market system. (connectusfund.org,2015) 

The demerits of a free market system are the results of having inferior
products. The production will easily result to mass produce as the
manufactures pay more attention on making profits. By ordinary, mass produced
commodities are of low quality because the producers used to put in more
efforts to supply the consumer needs and thus pay less attention on the quality
of the products that they produce. (connectusfund.org,
2015). Secondly, inflation and unemployment rate increases. Producers
could not make profits if the consumers cannot afford to buy the merchandise
that they have produce. Therefore, inflation and
unemployment occur to lower down the cost of production. Lastly,
unequal of distribution of wealth and income. The rich get richer and the poor
get poorer, many absolutely and the rest in relation to the rapidly growing
wealth of the rich. Egalitarian social relations become impossible with such a
gap between the rich and the poor. People with a lot of money begin to think of
themselves as a better kind of human being and to look down upon the poor,
while the poor feel a mixture of hatred, envy and queasy respect for the
rich. (Bertell Ollman, Oct
1999). 

  

 Market Failure 

The economic growth of a nation increases when the nation develops well
in politics, economy and social. However, if the government does not manage the
system properly, the entire country will face problems which is known as market
failure. Market failure happens when the country or the government does not
allocate the resources efficiently. They fail to use the scarce resources to
produce the goods and services to satisfy people’s unlimited wants. Or, they do
not use up all the given resources to produce certain goods and services
wisely. The government or private firms fail to plan on resources allocation.

There are many types of market failure in the market and they are
externalities, unequal of distribution and income, the power of monopolies and
others. 

Although Australia undoubtedly is a strong and rich country that ranked
in the Top 20 all over the world, it still faces market failures. The first
market failure that Australia confronts is negative externalities such as
pollution. Australia has the cleanest and freshest air in the world yet due to
the private firms fail to handle with the toxin substances after producing,
pollutions occur everywhere. For air pollution, the two types of obnoxious
gases that contribute to global warming and climate change are carbon dioxide
and methane. Australian waters are contaminated by small and tiny
plastic bags because the people litter anywhere. A rise in the
salinity of soil is the situation where the salt in the ground increases to the
surface due to over irrigation and the loss of native vegetation
that costs Australia loss ?3.5 billion annually. ?https://www.coolaustralia.org/pollution-is-everywhere-primary/ ? 

Besides, Australian society has the income inequality which means the
poor become poorer and the rich become richer. There are
also two poorest districts in the
Northern Territory suffered from high income inequality. These
are the immense region that surround Darwin, called “Daly, Tiwi, West
Arnhem” (ratio of 5.2) and the “East Arnhem” region
(5.3). Other than that, the equalised median household income is A$1756 fortnightly for the whole of Australia.

The district with the lowest median income was ” Daly, Tiwi, West Arnhem” in the Northern
Territory is A$1020 fortnightly. Hence, the income between the whole Australia
and Northern Territory is A$736. The area
of Melbourne City has the most unequal incomes in Australia in which top 20%
have an income that is 8.3 times as high as those in the bottom 20%.

The ratio of inequality of Adelaide City to Sydney Inner City is 5.5 to 4.8. ?Hubert Wu, Australian National
University and Harvard University ?.  

In addition, the main problem that leads to market
failure is the monopolies power in Australia. The obstacles increase when the
business is controlled by monopoly power. Buyers or consumers are given
the free hand to enjoy the advantages given when they pay for
the unconscionable prices and the private companies take over the profit.

For example, Australian government or the authorities are looking for a
clean and harmless environment but yet the supply of gas is not sufficient for
its people to consume as most of the rights have been taken over by
big companies and the companies bought the rights to exploit.

(Ian Verrender,
March 2017) . 

 

 Government Intervention 

Government
intervention refers to the government affects the economic activity and the
allocation of resources. Government is designed to intervene in voluntary
market activity by its nature. The common types of government intervention
include taxes, subsidies, price controls, and control over government spending.

The general premise for government intervention is that voluntary decisions by
customers and businesses fail to achieve efficiency or other goals that is
important to the society. (https://definitions.uslegal.com/g/government-intervention/) 

Government impose taxes because they want to raise the government
revenue and to narrow the income distribution gap.  Taxes can be
classified into direct tax and indirect tax. For instance, the Tech
Giant, Google and Facebook are paying the tax in Australia. This has made
the tax system in Australia raise to A$2 billion from the
multinational companies. (Zlata Rodionova, 21 March
2017) 

Another
type of government intervention is subsidy. Subsidy is the amount of money
that government give to the industries in order to decrease the price of
necessities goods and increase the producers’ income such as
farmers. Subsidies also used to encourage consumption of merit goods and
achieve equitable distribution of income. In order to increase our country’s
income, the government also give subsidy to lower the price of exports. A
new statement shows that the firms which explore coal and energy are
subsidies by Australian taxpayers about US$35 billion each year in the form of
direct spending and tax breaks.  (Sue Lannin,
November 2014) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reasons for Government
Failure 

Government failure occurs when the government interventions in the
economy causes the inefficient allocation of resources and decline in
economic welfare. Government failure happens due to many reasons.

Politician in the countries may not have enough knowledges or information
about the types of services they want to provide to their
people. Politicians may not be the experts in their department but they
concentrate on their political ideology. Another reason why government
faces failure is due to lack of incentives. People who work for
government they do not get any rewards, thus they will not be motivated to
improve the services and cut costs that lead to inefficiency.   

Market economy system is good but not a perfect way to allocate the
resources because the quality of goods is very poor. Since the private firms
purposely want to maximise their profit, they choose to use the lowest cost
method to produce the goods and sell it at a higher price to the consumers. Not
only that, the authorities do not want to produce goods and
services like merit goods because merit goods will not bring profit to them.

The price of merit goods is not determined by price mechanism and it is given
to those who need it only. (Prateek Agarwal, August 2017). In addition,
the community is lack of social welfare and there are no government
services. In Australian community, because of them using market economy
system, none of the government goods and services are provided to low
income people. (Rachelle, April 2013). 

The government should improve the market outcomes by distributing
wealth from the rich to poor so that the income is equality. The government
can tax the rich people to pay more taxes and the taxes that have
received from the high-income people can used to help the poor. The
government should produce more public goods as public goods are
non-excludability and non-rivalry. Every person should be charged the
same amount if they consume that goods or services. (Jesal Shethna, July
2016). Government should also enforce the law by restricting them to sell
their products at a higher price. The government authority can punish those who
violate the rules so that they will not take over the rights in the
market. (Jesal Shethna, July
2016). The government and the private firms can change the market economy
system into mixed market system so that people have the chance to choose the
goods and services they prefer. In Australia, the government
ensure that the goods and services are always produced in the lowest price to
make sure the poor can afford the basic things. Australian government determine
the most efficient choice that benefit the society. For instance, the work
of the Production Commision focuses on achieving gains in efficiency in support of the overall
national interest. (http://www.ncoa.gov.au/report/phase-one/part-a/2-2-what-should-governments-do.html) 

In the ‘real world’, all economies combine the
elements of capitalism and socialism. The private sector co-existing alongside
the public sector in the mixed economy system. Taking United Kingdom as a
reference of a remarkable mixed economy country, the government emphasize
mostly on the market system because it has high level of efficiency in
responding the demand of the consumers. However, decisions like military
spending and public education are made by the UK government. (Business Case
Studies, 1995-2017). United Kingdom government
allowed the free market system in business activity while the command economy
in the areas of defense, welfare, and education. The government also provides
free healthcare to their people. (Kimberley Amadeo, September
2016). Through the mixed economy system, United
Kingdom government are able to regulate in areas where there is market failure
efficiently. With the stable government management and the mixed economy system
in United Kingdom, the government of United Kingdom are able to ensures the maximum
standard of living for population as a whole. (Joanne Adams, October 2015). To
conclude, the mixture of both capitalism and socialism is the best way to
protect the welfare of people and to benefit the growth of business activity of
a country.