Australia Post: Is snail-mail dead?


The headlines have always read…. “Australia Post: The most successful GBE in the country!” Over the decades it has become super efficient, multi- dimensional, from letter delivery to parcel post, from small daggy post office to super handy one-stop shops ( a post office, a bank of sorts, passport photos and applications, bills paid, ……and the list goes on).

“As a self-funding GBE with legislated community service obligations, Australia Post’s objective is to remain profitable while delivering reliable, accessible and sustainable postal services for the Australian community.”

Australia Post says that back in the 1980s almost all written communication was carried by the post. Today it’s less than 1 per cent. And most of it is bills or notices from various levels of government.

Read more:

Source:    Economics Editor, The Age  January 15, 2014

Fast forward to 2014… while the parcel delivery side of the business is increasingly busy, more profitable and competes with other global and local parcel delivery companies, the standard letter business is on serious decline and is now an unprofitable part of Australia Post and dragging down the business.

Why has this occurred? No guesses as to why! We are sending less letters, paying bills online and via BPAY rather than writing cheques and mailing them. We are emailing, texting, blogging, instagramming, skyping, facebooking, almost everything except actually writing letters and cards.

“Mail deliveries are plummeting at the rate of 4 to 5 per cent a year. Twelve years ago, Australia Post delivered an average of 2.2 local letters or bills to each street address daily. It is now 1.7 and on track to fall to 1.3 by 2016, and slide further.”

Read more:

Source:    Economics Editor, The Age  January 15, 2014

Read more:

Australia Post operates in 3 core markets:
-Letters and associated services
-Agency services and retail merchandise
-Parcels and logistics

Australia Post -Postal services-Fast Facts:

  • We deliver 82.6 million items every week
  • We deliver to 11.2 million delivery points
  • We deliver mail five days a week to 98.8% of delivery points
  • We deliver mail two days a week to 99.9% of delivery points
  • We maintain approximately 15,927 street posting boxes
  • 95.5% of domestic letters were delivered on time or early
  • The basic postage rate is 70 cents
  • We have Australia’s largest retail network with 4,429 post offices (including 2,561 in rural and remote areas). We have 2,895 Licensed Post Offices (LPOs), which make up two thirds of our retail network
  • Each year we perform 4.7 million identity services transactions and process 1.5 million passport transactions in our post offices
  • We are an agent for more than 750 businesses and government entities, including over 70 financial institutions
  • We have opened 33 superstores across the country. Here customers can access online shopping zones, 24/7 areas with self-service terminals, 24/7 parcel lockers, and dedicated travel zones      Source:

So… what’s next for Australia Post?

-Will Australia Post be privatised?
-Will letters be dearer to send?
-Will letters be delivered every day, as they are now or only a few times a week?
-Will businesses be charged more to send letters than households?
-Will the letter delivery service be sold off?

“Chief executive Ahmed Fahour has outlined his vision of Australia Post’s future after this week confirming 900 jobs would go as part of a restructure that will split its post and parcel businesses.

The job cuts reflect accelerating falls in demand in letter deliveries that will, in the next five to 15 years, result in 99.99% of mail being received electronically, he said.”

Source: Australian Associated Press, Wednesday 11 June 2014 12.44 AEST

The need for innovation is paramount:
-Parcel delivery on Saturdays
-Post offices staying open longer hours and on Saturdays (The first weekend in November saw the commencement of Saturday trading)

Delivering mail used to make Australia Post money. It now costs it $150 million a year. The loss is on track to blow out to $1 billion, and then perhaps $2 billion, far exceeding the profits from delivering parcels and making the organisation an albatross around taxpayers’ necks.

Read more:

But Australia Post is stuck with a government-imposed requirement to deliver mail five days a week to 98 per cent of Australian addresses. Changing it will require a government decision. It’ll mean taking on unions and the National Party.

Read more:

Unless the regulatory shackles are lifted on the timing and pricing of the delivery of letters, the organisation will continue to decline financially. And it will certainly be in no shape to be sold by the government.

Read more:

In the letters division, Australia Post is set to lose a cumulative $12.1 billion over the next ten years, according to a report commissioned by the government. That’s not a figure any government would want to slot into its forward estimates.

The cost of delivering mail has risen to around $1 per letter, as Australia’s 11.2 million addresses grow by 135,000 new delivery points each year. (AFR 20/11/2015)

Read more:

An Australia Post rescue package

Australia Post chief executive Ahmed Fahour has asked Malcolm Turnbull (Communications Minister) to present a rescue package to Cabinet before 2015 ends, based on the GBEs 2015-2018 Corporate Plan (not yet public) including a proposal for a two-tiered mail system and flexible ­pricing for delivery services.

Proposals include raising the price of stamps and introducing a two-tiered pricing system for letter delivery. This could consist of a priority system (with stamps costing $1.25-$2.00) that guarantees next day mail delivery to metro areas and second day delivery to metro and country areas. A regular system (with stamps costing $0.70-$1.00) would see mail taking an extra day or two to be delivered in the metro areas. Safeguards are set to be put in place for concession card holders so as not to disadvantage them.

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Retail “pop-up” psychology

pop up store 2 pop up store 3 pop up store 1

Over the past few years there has been a noticeable increase in online shopping from overseas real and virtual stores given the relative strength of the Aussie dollar. This has had a direct impact on domestic retail sales. Economics tells us that competition is a good thing, it drives down prices. So the result has been increased sales in local stores, earlier sales than the usual time periods and price matching to attract customers to local stores. With increased online purchasing and less shopping in traditional retail outlets, many smaller businesses have lost sales and profits, and have had to close down. Meanwhile, rising rents have driven out small businesses leaving many shops empty.

One novel solution to the increased number of empty stores and lack of willingness to sign long leases has been the rise and rise of pop-up stores. Temporary (meaning a few days, a week, a month or a few months), short-term stores set up for a range of reasons. For example: selling out stock or getting a foot hold in a new market or testing out certain product ranges, or well known stores trying out new locations or turning over their stock (eg: Myer has a pop-up site at Southern Cross station to sell last-minute small items) or online stores setting up short term to connect with their customers. There are also international brands seeking to increase brand awareness in Australia using pop-up stores. (eg: Japan’s UniQlo has set up in Swanston Street, Melbourne). There are lots of reasons businesses have taken to pop-up shops! (The Age. Pop-up stores back with a bang. Carolyn Cummins. 27/1/2014) In many cases, online stores also want to have physical presence. Pop up stores enable them to do so.

Businesses using the pop-up shop model may stay on in that store if they achieve short term success, or simply be happy to stay short term once their objectives are met. If business doesn’t do well then they are not stuck with a long term lease. Either way, pop-up stores help decrease retail vacancy rates.

Pop psychology?

Pop-up shops create a sense of urgency amongst customers to stop by and check them out.  (source: A temporary store, selling products at bargain prices with a high turn-over of stock attracts customers in to the store. “The pop up shops philosophy is ‘here today, gone tomorrow, be quick (and tell your friends)’. ( The sense of urgency that these temporary spaces offer along with unexpected locations and fit-out, sometimes guest appearances and entertainment, all add to the excitement for the customer.

Increased online shopping

Online retailing has changed the face of the Australian retail sector, representing a paradigm shift in the way consumers make transactions. While the industry is in its infancy, both technologically and monetarily, it has grown dramatically over the past five years, to become part of the mainstream consumer’s psyche. This has been aided by the equally rapid growth in internet and broadband penetration, combined with an acceptance of electronic commerce as a viable and safe alternative to traditional bricks-and-mortar retailing. The pace of technological change and ease of access has been a key enabler of the increased trend in online shopping.  (

In the year to November 2013, Australians spent $14.6 billion on online retail. This level is equivalent to 6.4% of spending with traditional bricks & mortar retailers (excluding cafés, restaurants and takeaway food to create a like-for-like comparison) in the year to October. (NAB data:

57%  Australian online shoppers have increased their level of spending over the last 12 months via mobile devices

55% Online shoppers indicated lower prices as the reason they shop online (up from 50% in 2011)

59% Online shoppers who purchased from offshore retailers indicated that lower prices were the main reason (up from 53% in 2011)


Some of the factors influencing online buying offshore are: lower relative prices offshore, increased variety and ability to compare prices here and offshore, increased use, uptake and familiarity with technology,  increased advertising using all mediums, ease of transactions, no import tax on goods valued less than $1000 brought into Australia,.


Read the PwC Pricewaterhouse Coopers report : “The rapid growth of online shopping is driving structural changes in the retail model” :  and then answer the following questions.

a) Explain which demographic you think dominates online purchasing?

b) Use the data to examine who does the most online buying, what is typically bought online and where it is bought from.

c) Research which online stores have set up temporary pop-up stores in Australia and which overseas brands have also done so.

d)  Survey ten people to find out whether and why they buy goods online.

e) Explain five advantages and five disadvantages of online stores and retail bricks and mortar stores.

f) Explain five advantages and disadvantages of pop-up stores for retailers and consumers.

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Disaster Economics

Unfortunately, natural disasters occur frequently around the world, often with tragic consequences. As an economics student it is important to consider the impact of natural disasters on the individual, communities, a nation, and at times the world.

Overseas: In the past twelve months there have been many natural disasters around the world, for example: typhoons in the Philippines and India, tornadoes and bushfires in the USA, droughts in parts of Africa, earthquakes and floods in China, cyclones in Bangladesh and hurricanes in Mexico.

In Australia, we have just experienced extreme heat (with consecutive days of 40+ degrees Celsius temperatures) in many states, causing devastating bushfires to occur.



The scale of impact of a natural disaster will depend on a range of factors such as: the size of the disaster and its duration, the geographic area affected, the size of the population living in that area, the time of day it occurred and the structure of the economy.

Losses and costs

Natural disasters cause significant losses. When a disaster strikes, it will devastate capital resources in an area and thus impact on the economy. The infrastructure impacted on could be schools, hospitals, roads, bridges, utilities (gas, electricity, water), as well as the physical capital of people and businesses: homes, factories, buildings, machinery and the like.

Natural disasters cause significant costs due to the need to manage the disaster, minimise its after effects and undertake fixing up the devastation caused.

The economic costs can be material and non-material in nature, with the latter being much harder to measure. This can also mean that some of the costs associated with disasters are not included in our measure of economic activity and production.

The concept map below outlines some of the possible costs associated with a natural disaster. This framework doesn’t cover all possible disasters nor does it cover every possible cost. However, it is a framework that enables the wide range of economic costs to be considered. (Source: Australian Journal of Emergency management. Winter 2001)


Study the concept map and then use examples to distinguish between the following types of costs:

a)      Tangible and intangible costs

b)      Direct and indirect costs

Estimating the financial cost of disasters is complex given the need to quantify losses. A news headline in May 2013 read: Natural disasters have cost the global economy $2.5 trillion since 2000. Increased globalisation has led to some disasters causing supply chain problems in the global economy. A more inter-connected world means that the impact of some disasters is felt far more widely than just the country the disaster occurred in. “In a world of ongoing population growth, rapid urbanisation, climate change and an approach to investment that continually discounts disaster risk, this increased potential for future losses is a major concern.” (M.Wahlstrom. 16/5/2013)

c)       What are the cost estimates on the economy of the recent bushfires in Australia?

Super Typhoon Haiyan in the Philippines 2013

ABC TV Foreign Correspondent documentary: The Super Storm shows the devastating impact this typhoon inflicted on the Philippines. Watch the documentary and then answer the questions below.

Use the concept map above and your knowledge from the documentary to compile the following lists:

a)      The personal costs of the typhoon

b)      The social impact of the typhoon

c)       The effect of the typhoon on small communities

d)      The material impact of the typhoon

e)      The non-material impact of the typhoon

f)       The impact on employment and incomes e.g.: tourism, fishing, farming

g)      The impact on non-government organisations

h)      The impact on the government of the Philippines

i)        The impact on the Australian government

 Reactive and proactive disaster measures

It is often argued that much money is spent on disaster recovery and not enough on avoiding and/or minimising the impact of disasters. Some major disasters have prompted action to significantly lessen future losses, such as tsunami warning systems, mobile messaging systems warning of imminent bush fire danger and cyclone shelters. However, it is also argued that perverse incentives are also at work, which means that in some cases, people move to and live in areas that are disaster prone. Poor people in parts of the world moving to cities to find work and yet living in areas where there is increased risk of dying due to floods and mudslides. People moving to coastal areas to be near the sea where storms and floods are a higher risk. Insurance costs may not fully reflect these risks and people may still want to take the risk in the knowledge that government assistance will occur in the event of a disaster.

a)     What responsibilities do individuals have in risk management?

b)     What can the government do to lessen private sector/individuals risk taking? i.e minimise

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The HEAT is ON!

The Heat is ON!

I’ll confess right now that I really dislike summer as a season and I hate the heat! However, extreme heat is even worse and has such a big impact on consumers, producers, the government and the economy.

Consider the impact of the four consecutive days of between 42 and 43 degrees Celsius just experienced in Melbourne. Here are some effects felt in the past week.

a)      Add to the list below and find newspaper articles to support your view.

  • increased health problems and risks to human life
  • increased demand for medical and para-medical services
  • higher water usage and lower dam levels
  • higher electricity usage
  • higher risk of electricity overloads and power blackouts
  • risk to fauna and pets
  • gardens ruined
  • worker productivity falls, increased lethargy, less hours worked,
  • some labour resources reallocated to fighting fires
  • livestock killed
  • increased transport problems- overheating vehicles, train system breakdowns,
  • agricultural losses- decreased farm output (livestock and crops)
  • decreased outdoor activities
  • increased indoor activities- shopping centres, cinemas, ice skating,
  • increased visits to the beach, public pools, museums, art galleries, bowling alleys,
  • increased sales of fans, portable air conditioners,  ice-creams, cold drinks, air-conditioners, ice blocks,
  • decreased sales for florists, hot foods,
  • infrastructure problems- roads crack, train lines buckle,
  • water safety- risk of increased bacteria in hot weather
  • bushfires- damage to infrastructure, flora, fauna, housing, businesses, and loss of life

b)      Explain how you and your family coped with the extreme heat.

c)       What types of goods and services experience an increase in demand?

d)      What types of goods and services experience a decrease in demand?

e)      Explain the impact on prices for each of the above.

f)       Draw demand and supply graphs to illustrate each situation listed in the above questions.

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The growing interdependence of Australia & China

The rise of Asia, particularly China, is changing the world and has had a huge impact on the Australian economy, lifting our standard of living to one of the highest in the world. Despite the global financial crisis (GFC) of 2008–09, the debt crisis in the eurozone, and recessions in Europe, Japan and the US, Australia managed to avoid a recession during the GFC. Australia has low inflation, moderate economic growth and an enviable unemployment rate compared with our major trading partners.

The strength of the Australian economy is in large part due to its strong ties with Asia, particularly China—our largest export market. Australia also has strong trading relationships with other Asian countries, including Japan, Korea, Indonesia and India. In 2012 the International Monetary Fund predicted Australia to be the best-performing major advanced economy in the world over the next two years.

According to an Australian Government report, Australia in the Asian Century: White Paper (October 2012):

‘Within only a few years, Asia will not only be the world’s largest producer of goods and services, it will also be the world’s largest consumer of them. It is also the most populous region in the world. It will also be home to the majority of the world’s middle class.

The Asian century is an Australian opportunity. As the global centre of gravity shifts to our region, the tyranny of distance is being replaced by the prospects of proximity. Australia is located in the right place at the right time—in the Asian region in the Asian century.’


Year 11 VCE Economics allows you to grab the “teachable moments” and engage students in current domestic and world events. Unit 2 gives teachers the flexibility to create a topic on a global issue.

Hence, the scope to do an in-depth unit of work on China. Students to examine a vast number of areas related to Australia and China. The following issues try to step out the different stages of the investigation:

The New Medicis

1  Key events in China

Construct a timeline of key events in China’s economic and political history. Use the following BBC timeline to select major turning points in China’s history since 1949:

Part 4:  Triumph and Turmoil

2  Different perspectives and roles of economic decision-makers in China

Use a series of documentaries to learn about, and then write about, life in China. Write a series of short journal entries in the first person that explain the current views of various economic decision-makers in China (for example, government, businesses, consumers, farmers, women, rural households, families). (Approximately 300 words for each view)

Write a journal entry in the first person that describes the views of four of the following people:

  • a member of the Communist Party of China (CPC)
  • the President of the People’s Republic of China
  • a rural or urban person living in poverty
  • a Chinese business investor
  • a Chinese worker or manager
  • a Chinese businessperson
  • a wealthy Chinese person
  • a young women planning to start a family
  • a rural person who has moved to the city for work
  • a young person wanting to get an education and work.


  • ‘The Ka-Ching! Dynasty’, Foreign Correspondent, ABC, 7 February 2012: (summary, transcript and video)
  • China: Triumph and Turmoil, SBS, 2012, three-part documentary series (shown on 1, 8 and 15 August 2012). It is available on YouTube in four parts:

Part 1:

Part 2:

Part 3:

Part 4:

3  General country comparison between Australia and China

The Human Development Index (HDI) is a comparative measure of life expectancy, literacy, education, standards of living, and quality of life for countries worldwide. It measures wellbeing, especially child welfare. In 2012, Australia ranked number 2 in the world on the HDI, while China ranked number 101.

With reference to the HDI for 2012 and International Human Development Indicators (see references below), compare, contrast and then explain the substantial differences between the HDI ranks of the two countries. (Create a table for data comparison and write 300 words to complete this question.)


4  The recent performance of the Chinese economy and the Australian economy

Compare and contrast the general economic performance of Australia with that of China.

Select and interpret five tables and five graphs using the websites below. (500 words)

(click on Please select a country to view in the drop-down box to the right of the home page and select Australia, then Economy: Australia—repeat for China)


5  Importance of China to the Australian economy, the Asian region and the world economy

China has been, and at present remains, the manufacturing powerhouse of the world. It has become the world’s largest trading nation, is one of the world’s biggest lenders, and has the world’s largest population. China’s economic growth and development over the past two decades has been enormous. From 1979 to 2010, its average annual GDP growth was nearly 10 per cent.

Explain four reasons why China is so important for Australia economically, the Asian region and the global economy. (150 words each)


6  An explanation of aggregate demand-side factors and aggregate supply-side factors influencing China

Select two aggregate demand-side (AD) factors and two aggregate supply-side (AS) factors influencing China’s economic growth. Research and then explain the theoretical link that your selected factors could have on the current and/or future rate of economic growth in China. Select two from each column. You may choose other relevant AD/AS factors to explain. Discuss any other choices with your teacher. (Approximately 200 words for each factor)

Aggregate demand-side factors Aggregate supply-side factors
Consumer confidence Push for greater   efficiency/productivity
Government spending on   infrastructure China’s push to   liberalise its exchange rate
China’s push to   liberalise its exchange rate China’s push to liberalise   its interest rates
China’s push to   liberalise its interest rates Labour force   participation rate
Level of disposable   income Foreign investment   rules affecting China
Credit growth Geopolitical events   (e.g. climatic, political, economic)
Economic growth of   China’s major trading partners Tariff rates
China’s population   growth Labour costs

7  Negotiating an Australia–China Free Trade Agreement (ACFTA)

Write an article for The Economist magazine on the importance of an Australia–China Free Trade Agreement (FTA) and the recent challenges involved in the FTA negotiations. (Approximately 600 words)

Your answer should cover:

  • the difficulties associated with negotiating an FTA
  • China’s concerns about trade and investment in Australia
  • Australia’s concerns about trade and investment in China
  • Australia–China economic links and policies.


8. Australia–China trade relations

a.  A currency pact

The Australian dollar is now the third currency in the world (after the US and Japan) that can be converted directly into the Chinese renminbi (yuan). This represents a major new agreement between China and Australia. This is a huge advantage for Australian and Chinese businesses as it means they will not have to first convert currency into US dollars and then into renminbi or Australian dollars. With China’s currency increasingly important in the Asian century, this agreement further promotes business with China, our number one trading partner.

Explain the benefits for Australian businesses of being able to trade Australian and Chinese currencies directly. (150 words)


b.  Annual formal trade negotiations

In April 2013, the then Prime Minister, Julia Gillard, successfully negotiated to hold annual formal talks between Australia and China’s senior leadership teams. This represents a new partnership agreement between our two countries, focused not just on economics, but also on peace and stability.

Explain two reasons why this new formal partnership received such broad praise from all groups and parties within Australia. (150 words)

References one-with-china-deal-20130409-2hjjw.html

9. Policy action taken by the Chinese government

Asia–Pacific Economic Cooperation:

            The Age:

             The Australian:

            The Australian Financial Review:

            Business Review Weekly:

             Herald Sun:

            New Internationalist:

           Prof Ian Lang,  The New Medicis.

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Think like an Economist


The Masters of Money documentary series (aired on SBS, February 2013) provides an excellent introduction to three important Economists who have shaped our economic thinking. Furthermore, the views on these economists are discussed in a historical context as well as in light of recent world events. This enables us to hypothesize and hear the varied views of current leading economists around the globe. The series is very engaging, topical and informative and is a useful resource for Economics teachers and students.

Students would benefit from gaining an understanding how Economists think, and learning about how economic theories have evolved over time.

Episode 1: John Maynard and Keynesianism (13/2/2013)
Episode 2: Hayek and the Free Market (20/2/2013)
Episode 3: Karl Marx and Marxian Economics (27/2/2013)
A few ways to use this fantastic series:

Part A: Questions and tasks linking the documentary Masters of Money to specific units and areas of study in Economics.

Part B: A student and class based set of tasks culminating in a Conference on Famous Economists

i)                    Biography of a famous economist

ii)                   Class Conference

iii)                 Summary exercise  

Part A: Questions linked to the VCE Economics course

Unit 1: Economics: Choices and Consequences

Area of Study 1: ‘A market system’

The nature and distinctive features of economic systems

1. Economics is classified as a “social science”. Discuss comments made by each of the three economists in the documentary that support this classification.

2. Distinguish between the following pairs of terms:

     a. capitalism and socialism

     b. market and non-market (planned)

3. Outline the key characteristics of Australia’s market capitalist economy.

4.  Describe how the three basic economic questions are answered in a market capitalist economy, a market socialist economy, a non-market (planned) capitalist economy and a non-market(planned) socialist economy.

5. Karl Marx predicted that capitalism would collapse. However, this did not occur and many former non-market (planned) and market socialist economies have adopted market capitalism. Research and discuss the process of change in at least one country that has undertaken this transition and given up central planning.

6. Karl Marx would say that capitalism is the cause of great economic evil. Discuss three advantages and three disadvantages of a market capitalist economy.

The degree of market power

  1. Some economists would argue that the profit motive drives the economy forward, while others would say that greed and the profit motive divides society and promotes inequality. Explain two disadvantages and two advantages of firms having market power.

 2. Explain the opinions that Keynes, Hayek & Marx would have in regard to the existence of oligopolies operating in the Australian economy.

 3. Distinguish between the terms market failure and government failure. Explain which economists would argue that market or government failure exist. Provide two examples of each within the Australian economy.

 The role of markets

 1. “Markets, left to their own devices, will ultimately allocate resources efficiently.” Explain what is meant by this statement.

2. “Government subsidies to producers manipulate the market price.”

a. Discuss two examples of subsidies being used to improve living standards.

b. Discuss two arguments against government subsidies.

3. Hayek was adamant in his sentiment that meddling with the market distorts price signals. Explain how the price mechanism operates in a perfectly competitive market.

 Area of Study 2: ‘Economic issues’

Economic growth

  1. Discuss three economic costs and three economic benefits of economic growth on Australia’s material and non-material standard of living.
  2. According to Hayek, governments should not prop up failing businesses. Explain two economic costs and two economic benefits of governments propping up failing businesses.
  3. Explain how Keynesian economics would work to support the economy during an economic downturn.
  4. Provide specific examples of G1 and G2 spending that the Australian government used to lift aggregate demand and stimulate the level of economic growth during the GFC. (see
  5. Discuss the importance of consumer and business confidence as demand side factors that have a significant influence on aggregate demand and economic growth.

Creation and distribution of wealth and income

1.Karl Marx was of the view that capitalism was productive but inherently unfair. Outline three aspects of capitalism that Marx saw as its failings.

2.The income gap between workers and owners of businesses was a major concern for Marx. He said that while the owners of resources get richer, the workers get poorer. What measures exist in the Australian economy to redistribute incomes and ensure greater equity?


 1. After WW1 a number of countries experienced hyperinflation.

a. Define what is meant by hyperinflation.

b. Discuss what caused hyperinflation to occur.

c. Explain the impact of hyperinflation on households, firms and governments.

d. Copy and paste 3 photos from google images depicting the impact of hyperinflation on daily life.

 2.In the 1970s the rate of inflation globally rose significantly. Research what aggregate demand and aggregate supply factors might have caused this to occur.

 Unit 2: Economic Change: Issues and Challenges

Area of Study 1: ‘Population, employment and change’

1. Explain how Keynesian economics would work to decrease the high level of unemployment during a recession.

2. Hayek believed that any attempt to intervene in markets would have unintended consequences and make problems even worse than they already are. Discuss how the economy may self-correct in a period of recession.

3. It seems that “governments spending their way out of recession” was successful during the GFC. Explain this statement.

4. Classical economists said that wage cuts would increase job creation and stimulate economy activity. Discuss the costs and benefits on the economy of cutting wages for workers.

5. Keynes was quick to point out the multiplier effect of economic actions such as the government stepping in to lift government consumption and investment expenditure. Explain what the multiplier effect is in terms of job creation.

 Area of Study 2: ‘Global economic issues’

International economic relations

  1. Keynes would question the austerity measures being forced upon weaker Eurozone countries. Explain what austerity measures are and why Keynes suggests that such measures are not the solution to the crisis.
  2. There is much debate about the benefits of free trade. Discuss the views of Hayek, Marx and Keynes to the general reduction in tariffs and increased move to free trade between nations and regions.

Development economics

  1. “Global income inequality reflects the rich world exploiting the poor world.” Discuss this statement.

 2.“The new pool of cheap labour is located in poorer countries around the world.” Explain the costs and benefits of this for developed countries and developing countries.

 Economic Globalisation

 1.“Today, the global economy is still struggling.” What do Marx, Keynes and Hayek suggest could be done to stabilise the global economy.

  1. “Keynes was convinced that economies needed institutions to force them together to cooperate.”  Work in pairs to prepare a PowerPoint presentation for your class on the workings of one of the organisations listed below.  Include the following- history of the organisation, aims and role of the organisation, members of the organisation, activities of the organisation,)
    1. International Monetary Fund (IMF)
    2. World Bank
    3. United Nations (UN)
    4. Organisation for Economic Cooperation and Development (OECD)

Part B: A Famous economists Conference 

TASK ONE (Homework):

 The obvious starting point would be for students to prepare a short (400-500 word) biography on one famous economist. In order to learn about their thinking they need to understand something about their background.

From experience, I think it is easier to allocate an economist to each student (or a few students) and depending on class size increase or decrease the number of economists studied. This will help concentrate the class conference on a few famous economists and give students a more in-depth understanding of the chosen economists.

It is really useful to cover a broad range of ideas and therefore ensure that for your class conference you have a number of students representing each economist.

 These are the Economists I have used in the past but they can easily be added to:

Adam Smith

Friedrich Hayek

Milton Friedman

John Maynard Keynes

John Kenneth Galbraith

Joan Robinson

Karl Marx

 TASK ONE: Present a 1-2 page typed biography on the Economist allocated to you. Be sure to include the following:

  1. the country they were born in & date of birth/death
  2. family background
  3. place and level of education
  4. occupation/s and employer/s
  5. friendships and/or influence of other Economists
  6. Name and date of major published works
  7. Overview of main economic theory/ies

TASK TWO (one week):Hypothetical- Famous Economists Conference


 Students are to undertake extensive research on the economic thinking and rationale, ideas and theories of the economist allocated to you.  Once you have completed this research you need to meet with the other students in your class who have been allocated the same economist. Together, you need to imagine that your economist is alive today. Discuss and form opinions on what he or she would say about a range of current domestic and global economic events and situations.  You should then meet with your teacher to discuss your views. At the conference you will be able to use your research and notes to contribute to the topics of discussion.

 Teachers could ensure a few things have been done to allow for an informative conference:

a)      Have Economists name stickers in large letters available for the day so everyone can identify easily who is present

b)      Have a photo of each of the Economists you have chosen on a single PowerPoint slide on screen during the conference or a series of A3 sized photos of the Economists on display in the room

c)       Have a list of topics/questions you will discuss

d)      Ensure the classroom is set up in a horseshoe shape with you as Chair in the middle so you can see everyone and control the discussion

 Irrespective of when you hold this conference, students need not and will not have an in-depth understand of economics, given their commencement of this subject in Year 11. Nevertheless, challenging them to read, research and discuss their understanding of their economists views in light of topical issues will extend their learning and, from experience, remain a memorable task that they will enjoy.

Conference (a double lesson-100 minutes):

 *Students should bring their notes, writing paper and pens to the conference.

* Teacher: As your Economists arrive in the classroom ask them to get and display their name sticker on them and sit next to that or those Economists with whom they share similar views. This is interesting as they should end up with some introductions and discussion with each other to sort this out, as well as being seated in the spectrum of thinking from totally laissez faire economics (Adam Smith) to the other extreme of communism (Karl Marx).

 Start the conference by asking each Economist to introduce him/herself and the major contribution that was made to economic thinking. After a general introduction, guide the discussion to the some or all of the topics listed. Ideally every student will get a number of chances to contribute to the conversation. If this is not the case, invite comment from certain people.

Possible topics to choose from, discuss, add to and seek Economists’ opinions on:

 General themes relevant to Australia and global economy:

  • Greece should exit the Eurozone.
  • Austerity measures in Europe will simply make the economic crisis in Europe worse.
  • The Australian government should NOT have introduced a carbon tax.
  • The Rudd government did the right thing by implementing expansionary budgetary policy to prevent Australia from going into a recession during the GFC.
  • The government should NOT subsidise the Australian car industry.
  • Budgetary policy is more important than monetary policy.
  • Unions distort the allocation of resources and have too much power in Australia.
  • Free markets improve people’s lives.
  • In the last few decades most countries have adopted market capitalist economies and planned (non-market) economies have collapsed. Why is this?
  • Stong, rich countries typically exploit weak, poorer countries.
  • Creating jobs is the way to increase economic activity.
  • The RBA should step in and depreciate the Australian currency.
  • Free trade will benefit all economies.
  • The Australian government should privatise all GBEs
  • The private sector should run all schools in Australia.
  • The Melbourne City Council should introduce a congestion tax for the Melbourne CBD.
  • If water had a market price we wouldn’t have a shortage of water in the first place.
  • Affluenza is the cause of many of our economic woes.
  • The minerals in the ground belong to all Australians and therefore the Australia government has a right to tax miners.
  • Imported goods under the $1000 GST free threshold should also be taxed.
  • The 10% GST is too low in Australia.
  • The supermarket duopoly in Australia should be prohibited.
  • The Taxi industry needs to be totally deregulated.
  • Unemployed people should only receive the Newstart allowance for 6 months.
  • Victoria’s desalination plant is a total waste of taxpayers’ money.
  • Should firms outsource labour?
  • Capitalism caused the GFC.

  Task Three:Post Conference (1 lesson)

 Students are to write a summary of the key theories of each economist who attended the conference. These summaries should be on the sheet provided.

Name Date of Birth/Death Key economic theories and beliefs
Adam Smith 1723-1790  
Karl Marx 1818-1883  
John Maynard Keynes 1883-1946  
Friedrich Hayek 1899-1992  
Joan Robinson 1903-1983  
John Kenneth Galbraith 1908-2006  
Milton Friedman 1912-2006  

 General Resource List:

Great Economists and their Times – The Federal Reserve Bank of San Francisco

 How influential economists changed out History

 Timeline of Famous Economists- Bized Keynes versus Hayek

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Pricing Carbon in Australia

Environmental Economics: in 2010 I wrote a section on this blog (see further down) under the heading of Environmental Economics. It was a hot topic domestically and globally. Since then, Australia has moved from various proposals on how to price carbon to an actual price on carbon in the form of the Carbon Tax, which commenced on 1/7/2012. This section updates the previous one.

 The Carbon Tax

Set at $23 per tonne of carbon emitted, the carbon tax quantifies the value of the marginal external cost of each tonne of carbon firms emit into the atmosphere and yet do not build in to their costs of production. The tax impacts on price in the hope that it will then impact on the quantity of carbon emitted.  The carbon tax now prices carbon, adds to firm’s production costs, IS incorporated into their pricing and will be passed onto consumers through increased prices. The cost of carbon is now internalised.

The carbon tax will create disincentives for all firms that emit carbon. The tax will send the signal to firms that if they hope to avoid the tax then they will need to reduce emissions through innovation and invention via a more to greener and cleaner energies.

 How does a Carbon Tax work?

  • Aim of the tax is to reduce greenhouse gas emissions
  • The carbon tax is an environmental tax on carbon emissions SET by the GOVERNMENT (so the market determines how much it will pollute)
  • This tax is levied on producers, distributors and users based on emissions=the 500 major companies (ie those that emit >25,000 tonnes of carbon per annum from a single plant/factory.)
  • Examples of big emitters; mining companies-BHP, Rio Tinto, aluminium, glass, steel producers, natural gas retailers, etc…
  • Government has set a price on polluting per tonne on carbon=$23 per tonne
  • In order to reduce their tax costs, people/businesses/utilities will attempt to use LESS energy derived from fossil fuels.
  • Individuals might switch to public transport, replace old light bulbs with compact fluorescent lamps (CFLs)
  • Businesses might increase energy efficiency by installing new appliances, updating older heating/cooling systems
  • Utility companies (gas, electricity, water) might invest in clean coal technology
  • Alternative energies become more attractive to use
  • THEREFORE: the carbon price will, over the long term, reallocate the economy’s resources and facilitate structural change AWAY from high polluting emitting industries and TOWARDS more carbon efficient industries. Eg:
    • Shift away from coal to solar
    • Shift away from oil to biofuels
    • Shift away from new to recycled

The Emissions Trading Scheme (ETS)

ABC TV 7.30 Report on the Announcement of our ETS being linked to the EU carbon trading market

How does a Emissions Trading Scheme (ETS) work? (a market based system) 2015 and beyond

  • The Australian government’s preferred method of reducing  carbon emissions is via an Emissions Trading Scheme (ETS)
  • An ETS makes emitters pay for the right to emit carbon
  • The government sets a CAP on the total emissions allowed, i.e. it decides how much pollution will occur (but the MARKET determines the price of pollution)
  • Permits to emit are sold, so that large firms can emit a certain amount of carbon per year
  • Producers are paying a price per tonne of carbon emitted
  • The total amount of permits=National cap decided on by Government
  • Emitters that do not have enough permits must EITHER BUY more permits from other carbon emitters OR cuts their emissions
  • Emitters that have not used up their allocation of permits can SELL them or save them for  the future.
  • CARBON TRADING is the buying and selling of permits on the open market
  • The market will be linked to the European Unions Scheme
  • The $15.00 floor price (from 2015) set earlier by the Government has been scrapped. The price will now FLOAT.
  • A carbon emissions cap too low will make the price too high
  • A carbon emissions cap too high will make the price too low
  • If the price of permits rises too high, the government can issue new permits
  • The number of permits is reduced each year and then gives the signal to reduce pollution as the cost of buying permits and polluting rises.

The Government established a number of principles for pricing carbon

  1. It must be revenue neutral on federal finances (50% revenue raised goes to consumers; 40% to industry and 10% to the Clean Energy Finance Fund
  2. It must be able to lead to a reduction in emissions
  3. It must be simple, fair and flexible
  4. It must take account of the impact on industry

Government Compensation

Part of the carbon tax package includes a compensation package for industries that are adversely affected by a shift to a low carbon emitting entities and for low income consumers affected by higher electricity prices and other prices that rise as a result of the carbon price.

Features of the package:

  1. Compensation to households and pensioners to offset higher prices
  2. Tax cuts for taxpayers up to $80,000 income per year
  3. Funding for renewable energy, low pollution and energy efficient technologies
  4. Government funding to support jobs in high pollution industries eg: steel and coal

The Household assistance package (Budget outline of Household assistance) (Household assistance package Ad.)

Spoof Ad on Household assistance packag 


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