Measurement of inflation CPI (doesnt include

mortgage interest rates, consumer credit charges)

-Misleading volatile prices + one-off factors
-Underlying inflation = trimmed means, weighted mean
Trends in inflation Avg . 2.7% from 1996 to now,
recession in 1990s lowered inflation
-Strong inflationary p. in 05-08, due to high global
prices + operating at full capacity (u. inflation 5%)
-GFC reduced consumer confidence, lowered demand
for labour = reduced inflation
-Future: in the middle due to slowdown from China but
low exchange rate = imported inflation
Monetary policy (Increase to 7.25% in March 2008
from 5.5% throughout 2005) with headline inflation at
4.5% in March 2008 reduced to 3.75% by Jan 2009
-Remember pre-emptive use of monetary policy
-Decreased from 2.75% to 2.5% in Aug. 2013, inflation
increased to 2.7% in Jan 2014
Fiscal Policies Budget deficit of 3.4% of GDP in 2011
decreased inflation from 3.6% in July to 3.4%,
September

Current Stats (March): Headline (2.9%), underlying

(2.65%) (weighed = 2.7, trimmed = 2.6)
-CPI (Change from DEC to MAR) = 6.7% tobacco,
4.1% automotive fuel, 6% secondary education
-Offset by -4.3% furniture, -3.3% international holiday
Trends in inequality:
-Age: 45-49 earn most (1337), 15-19 lowest (228)
-Gender: Women earn 2/3rd of women
-Family: Couples earn most, single person and single
parent worst off (761), for wealth, same thing except
large difference between single parent and single person
-Geography: ACT highest (1315) , TAS lowest (944),
Wealth: Sydney (419k) higher than regional (342k)
-Education, Ethnic, Occupation
Social Benefits: People work harder and more social
mobility
Social Costs: Social class division, poverty
Reason for inequality: Perpetuating poverty cycle,
difference in attributes, wealth generates income and no
everyone has same access to network
Causes: General developments in economy + changes in
labour market
Stats: GINI (0.34, 2011) = increasing (0.306, 2003)
For wealth, GINI = 0.61 (2002), from (0.64, 98)
-Median income (765), Mean (848)
-Median wealth (340k), Mean (563k)
-Indigenous Income (398)
-Superannuation increases wealth of lowest quintile by
22%

Causes of inflation Demand-pull, cost push,

inflationary pressures, imported inflation, govt policy
induced, monetary supply induced
Effects of inflation constraint on Economic growth,
distorts e. decision, increases wages, increases income
and wealth inequality, increases unemployment in longterm, reduces international competitiveness, depreciates
exchange rate, reduces interest rates, benefits of inflation

Microeconomic $11.6 billion Infrastructure Growth

Package outlined in 2014-2015 Federal budget to boost
infrastructure investment by state govt (i.e. $60 billion
committed by NSW govt to ease the burden of
congestion and improve productivity
Microeconomic - $820 million to expand access to
higher education
-Japan-Australia Economic Partnership Agreement
reduced tariffs on Australian agricultural exports up to
2019%
Measuring inequality Lorenz Curve + GINI
coefficient (currently 0.37)
-GINI = A/A+B
Sources of income: Wages, Rent, Earnings from capital,
profit and transfer payments
-Wealth: Property and superannuation
Economic Benefits: increased education, ppl work
harder and longer, workforce more mobile,
entrepreneurs accept more risk, potential for higher
savings
Costs: Reduced utility, reduce e. growth, creates
conspicuous consumption, created poverty + increased
welfare support

Policies: Increase in TFT from 6k to 18.2k, , Increase in

compulsory superannuation,
Federal Budget: 10k subsidy to hire matured aged
employees, paid parental leave
Monetary Policy: Influences cost of borrowing
Microeconomic reforms: Privatisation of GBEs
Other assistance: National Disability Insurance Scheme
+ Household assistance package in 2013-2014 budget