Economics U4 AOS2 AS policies definitions

AS policies definition

Include a wide ragne of goveremnt stratergies designed to make supply conditions more favourable for individuals, firms, and industries that produce g+s, making them more willing and able to expand output and grow productive capacity

budgetary policy used to affect aggregate supply

budgetary outlays to improve education and training which help make supply conditions more favourable by having the change, increasing the quality+quantity of resources, increasing labour force productivity, expands productive capacity, decreases unit labour costs, decreases cost of production, increases willingness + ability of firms to produce shifting AS right

Tafe example of budgetary policy to affect AS

• This funding seeks to boost Australia's technical and dynamic efficiency, lower business costs, and expand our productive capacity

Permanent Free TAFE (2026)

• Funding

  • More than 1.6 billion to 2034-25

• Scale

  • At least 100,000 free Tafe and VET places each year from 2027

• Legal base

  • Underpinned by the free TAFE act 2025

• Targeting

  • Priority fields with high national or state demand and cohorts facing barriers to training

• Wider system

  • The national skills agreement provides up to $12.6 billion over 5 years

 

Mechanism: skills to aggregate supply

 

1. Access: lower fees increase enrolment in priority training

2. Skills: successful completion raises the quality of labour resources

3. Productivity: workers produce more per hour and firms fill skill shortages

4. Costs: unit labour costs and capacity constraints ease

5. Outcome: productive capacity and AS rise; competitiveness can improve

 

How free TAFE supports the goals

• SSEG

  • Higher productivity and fewer bottlenecks lift potential GDP

• Full employment

  • Skills matching reduces structural unemployment and improves participation

• Price stability

  • Greater labour supply in shortage areas can reduce wages and cost pressures

• International competitiveness

  • Lower unit costs and better quality support exporters and import-competing firms

 

Living standards and equity

• Material gains

  • Better employment, incomes and productive capacity can lift purchasing power

• Non-material gains

  • Confidence, social connection, purpose and job satisfaction may improve

• Equity

  • Removing fees can widen access for groups facing financial barriers

• Qualification

  • Benefits depend on course quality, completion and access to suitable jobs

Immigration definition

when people enter and settle into a country that they are not a native of

The policy of skilled immigration to affect aggregate supply

The policy of skilled immigration seeks to increase efficiency, grow productive capacity and expand aggregate supply. it involves growing the size of our labour force in a country with an ageing population. This can help to ease skills shortages, grow productivity and keep wage costs lower.

Current statistics on skilled immigration

Skilled migration: 2026-2027 settings

• Permanent program: 185,000 places

Skill stream

• 132,240 places - more than 70% of the program

Points-test reform

• designed to select better educated, higher-skilled and younger migrants

Recognition reform

• 85.2 million to accelerate trade skills assessments and occupational licensing

Purpose

• Improve matching and move skilled workers into shortage occupations faster to reduce structural unemployment

skilled migration on population, skilled migrants on participation, and skilled migration on productivity

Skilled migration on population (aging)

• Australia has an ageing population which can lead to capacity constraints

• Skill migration increases the population of Australia and fills the gaps left by our ageing population

Skilled migrant on participation

• Almost 100% of skilled migrants will enter the labour market

• Thereby increasing the labour force participation rate

  • Labour force / working aged population

Skilled migration on productivity

• Skilled migrants bring unique skills and knowledge and innovation into Australia

• Fills the skill shortage (structural unemployment reduces)

• Increases competition for jobs

  • This means an increased labour market productivity

Impact of skilled migration on AS, macroeconomic goals, MLS and NMLS

Impact on AS and our goals

• Increases the willingness and ability of Australian businesses to produce

• Increases the productive capacity

• Increases the AS curve

• Achievement of our goals

  • (It does support elements of key goals yet if asked to discuss the program as an AS policy, bringing a different perspective is good)

Impact on material living standards

• To the extent that immigration alleviates skills shortages and improves our international competitiveness = increase in growth and jobs in the Australian economy (improves MLS)

• Some industries may face a decline in incomes and some Australians may lose their jobs (decrease in MLS)

• Puts a strain onto access to infrastructure due to more population (schools, green spaces, hospitals, etc) (decrease in MLS)

Impact on non material living standards

• To the extent that immigration brings new cultures and improves the multiculturalism and acceptance in Australia (increases in NMLS)

• Potential pressures on the existing population (decrease in NMLS)

trade liberalisation definition

the removal of barriers to trade like tariffs, quotas and subsidies to local industries. Involves signing of free trade agreements (FTA's)

The policy of trade liberalisation to affect aggregate supply

Trade liberalisation seeks to increase compeition and efficiency and hence grow aggregate supply. It involves gradually reducing levels of industry protection from import competition. Trade liberalisation includes cutting tarriff rates, aboloshign import quotas, signing more bilateral and regional free trade agreements, easing other types of restrictions on imports and capital flows.

Negative impacts short term of trade liberalisation

Broadly negative impact in the short-term

• Local industries are exposed to overseas competition (via the removal of tariffs)

• Loss of subsidies

• Domestic businesses are forced to downsize or even shut down

 

• Job losses hurt the goal of FE

• Decrease in productive efficiency due to wasted labour resources

• Hurts our international competitiveness as we loss protection (e.g. overseas CoP are relatively lower)

 

• SSEG -> GDP will slow due to increase spending on overseas g/s and decreased spending on local g/s

• AS growth will decrease (decrease in AS curve growth)

• Cheaper g/s from overseas coupled with the decreased prices of local g/s (in order to compete) and the decrease in AD = downward pressure on prices = better able to achieve LSI

Broadly positive impact in the long-term

• As firms adjust to the new level of competition they must innovate and increase productivity in order to survive

• This improves productive efficiency as resources get reallocated and productivity improves 

 

• There is an increase in international competitiveness as businesses decrease their prices or improve the quality of their offerings

• There is an increase in AS (and the AS curve)

• Helping to achieve all 3 macroeconomic goals

Trade liberalisation - short term: adjustment can hurt

Competition: less efficient protected firms may downsize, restructure or close

Employment: job losses can increase structural unemployment in affected industries and regions

Demand: spending may shift toward imports, reducing demand for some local output

Offsetting gain: cheaper imported inputs can lower production costs immediately for other australian firms

Living standards: lower prices help consumers, but income losses are concentrated

Trade liberalization - Long term: resources are reallocated

Exit/entry: resources move from less competitive industries toward areas of comparative advantage

Productive efficiency: surviving firms lower costs to compete

Dynamic efficiency: competition increases pressure to innovate and improve quality

Scale and inputs: larger markets and cheaper technology can raise productivity

Outcome: productive capacity, AS ad international compeitiveness can rise

Trade liberalization - effect on the three macroeconomic goals

Growth: may slow during adjustment, then strengthen as productivity and export opportunities rise

Full employment: structural unemployment may rise initally, retraining and labour mobility shape the longer run result

Price stability: cheaper imports and stronger competition reduce price and cost pressure

Sustainable growth: depends on resilient supply chains and whether enviromental costs are properly priced

Living standards: distribtuion

Material gains (increase)

• lower prices, greater choice, higher export income and productivity can lift purchasing power

Concentrated costs

• Displaced workers and communities may experience lower income and insecurity

Non-material effects (decrease potentially mixed)

• job loss can reduce wellbeing, while wider cultural and product choice may increase it