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Low Wages and Salaries
Assessment 1: Report Overview For this assessment, write a 1000 word report on the issues below: Low Wages and Salaries
Your report should be structured as follows:
1. Introduction (200 words): Define the issue and use Australian research and statistics to explain how common it is, and the likely impacts of this violence (for instance, mental or physical health impacts, number of hospitalisations, and other indications of impact).
2. Theoretical section (800 words): Select TWO theories from the following list, and apply them to the issue: Liberal feminism, Marxist/socialist feminism, radical feminism, critical masculinities theory. You need to pick the most appropriate theory to help you explain the issue. Think carefully about the theories you select.
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Write 400 words on EACH theory, in which you briefly define the theory, and then describe how that particular theory would explain the issue you have selected. For instance, if you select Marxist/socialist feminism for the issue of sexual assault, then your 400 word paragraph needs to explain what Marxist/socialist feminism is, and present a Marxist/socialist feminist explanation for sexual assault.
Your bibliography should contain no fewer than EIGHT academic sources. Any media sources are additional to this.
Marking Criteria
1. Accurate and clear presentation
2. Further research and comprehensive understanding (AT LEAST 8 ACADEMIC SOURCES)
3. Logical and clear structure
4. Quality of written expression
5. Correctly formatted citations and bibliography.
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Inflation and Interest Rates
Overview
Solve three problems addressing inflation and interest rates affecting the financial environment, including the real risk-free rate, expected interest rate, detailed risk premium, and ratio analysis.
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:
Competency 1: Maximize shareholder wealth.
Compute real risk-free rate of return based on data presented.
Determine yield on 2-year and 3-year Treasury securities.
Competency 2: Evaluate the financial health of the firm
Assess the default risk of a corporate bond.
Context
There are different determinants of market interest rates. Try to answer such questions as, “What determines the shape of the yield curve?” and “How is the yield curve used to estimate future interest rates?,” which are important considerations for financial managers.
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Resources
The following optional resources are provided to support you in completing the assessment or to provide a helpful context.
Brigham, E. F., & Houston, J. F. (2016). Fundamentals of financial management (14th ed.). Boston, MA: Cengage.
Assessment Instructions
For this assessment, complete Problems 1–3 on inflation and interest rates affecting financial environment. You may solve the problems algebraically, or you may use a financial calculator or an Excel spreadsheet. In addition to your solution to each computational problem, you must show the supporting work leading to your solution to receive credit for your answer. Note the following:
You may need an HP 10B II business calculator.
You may use Word or Excel, but you will find Excel to be most helpful for creating spreadsheets.
If you choose to solve the problems algebraically, be sure to show your computations.
If you use a financial calculator, show your input values.
If you use an Excel spreadsheet, show your input values and formulas.
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Business Cycle Properties and Macro Forecasting of the Australian Economy
Executive Summary
Business cycle properties and the macro forecasting of the economy of Australia can be appropriately accomplished utilising the necessary parameters or economic indicators. Hence the ability to effectively use these economic indicators facilitates precise and accurate forecasting of the economy. Therefore, these economic indicators have been widely used in the process of forecasting the direction which is likely to be taken by a country’s economy.
In this report seven major economic indicators have been considered to enable forecasting of the Australian economy using judgemental approach. These economic indicators include: inflation rate; private final consumption; inventory investment; gross fixed investment, nominal exchange rate between Australia and the United States; unemployment rate as well as labour productivity. The utilisation of these economic indicators has played a significant role to facilitate forecasting of the Australian economy through their keen evaluation and detrending. Analysis Australian Economy
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Introduction
Conducting effective analysis of economic indicators of any country is one of the most appropriate ways of forecasting the future performance of such economy. This approach has often been used to predict the expected performance of the Australian economy in future for quite some time (Fisher, Otto and Voss, 1996). Hence the practice of utilising business cycle properties in the forecasting of the economy in Australia is widespread.
In particular, three approaches are essentially used in the forecasting of a country’s macroeconomics such as: judgemental forecasting, statistical forecasting, and model forecasting. However, judgemental forecasting which is going to be used in this report analysis involves gathering various kinds of data and information from official sources, to aid future macroeconomic forecasting activity on the basis of one’s informal judgement concerning the way in a country’s economy works (Evans, 2009).
Analysis Australian Economy
However, there are certain properties of business cycles which enable them to be effectively used in combination with other economic indicators in the forecasting of the economy (Evans, 2009). For instance, the business cycle properties used in facilitating the forecasting of the Australian economy include: aggregate economic activity fluctuations; business cycles are not periodic but recurrent; business cycles contraction/recession and expansion/boom meaning they have a trough and a peak both of which act as the turning points; business cycles are indicative of economic activity persistence and also business cycles have comovements of many macro variables (Edey, 5).
Thus, the significance of conducting this empirical analysis of the Australian economy is to reiterate the fact that as an economist whether in the government or private sector, often analysis of economic information, data and policies will be inevitable in order to enable the process of making informed managerial or economic decisions (Fisher, Otto and Voss, 1996).
Therefore, this report will specifically consider certain economic indicators as means of forecasting Australian economy such as inflation rate, private final consumption, inventory investment, gross fixed investment, nominal exchange rate between Australia and the United States, unemployment rate and labour productivity.
Analysis
Inflation rate
Analysis Australian Economy
Table 1: Analytical measures of consumer price inflation (CPI)
Quarterly
The rate of quarterly consumer price inflation (CPI)
Mar 1996
0.4
Jun 1996
0.7
Sep 1996
0.3
Dec 1996
0.2
Mar 1997
0.2
Jun 1997
-0.3
Sep 1997
-0.4
Dec 1997
0.3
Mar 1998
0.3
Jun 1998
0.6
Sep 1998
0.2
Dec 1998
0.5
Mar 1999
-0.1
Jun 1999
0.4
Sep 1999
0.9
Dec 1999
0.8
Mar 2000
3.8
Jun 2000
3.7
Sep 2000
0.3
Dec 2000
1.1
Mar 2001
0.8
Jun 2001
0.3
Sep 2001
0.9
Dec 2001
0.9
Mar 2002
0.7
Jun 2002
0.7
Sep 2002
1.3
Dec 2002
0.0
Mar 2003
0.6
Jun 2003
0.5
Sep 2003
0.9
Dec 2003
0.5
Mar 2004
0.9
Jun 2004
0.5
Sep 2004
0.4
Dec 2004
0.8
Mar 2005
0.7
Jun 2005
0.6
Sep 2005
0.9
Dec 2005
0.5
Mar 2006
0.9
Jun 2006
1.6
Sep 2006
0.9
Dec 2006
-0.1
Mar 2007
0.1
Jun 2007
1.2
Sep 2007
-0.3
Dec 2007
0.1
Mar 2008
0.5
Jun 2008
1.0
Sep 2008
0.5
Dec 2008
0.9
Mar 2009
0.6
Jun 2009
0.7
Sep 2009
0.4
Dec 2009
1.6
Mar 2010
0.9
Jun 2010
0.6
Sep 2010
0.0
Dec 2010
0.1
Mar 2011
0.5
Jun 2011
0.9
Sep 2011
0.6
Dec 2011
0.0
Mar 2012
0.1
Jun 2012
0.5
Sep 2012
0.4
Source: The Australian Bureau of Statistics (ABS)
Inventory investment
Inventory investment in the business cycle refers to the inventories as all materials such as finished goods that are business owned and work in progress, whether at business locations or elsewhere. The business holds these items anticipating selling a product. However, inventory investment is usually regarded as an additional contribution to GDP. Fluctuations in inventories which an often phenomenon plays a significant role in the amplification and exacerbation of the business cycle as well as continuing to significantly affect GDP growth negatively at times of economic downturn (Evans, 2009).
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Gross fixed investment
Gross fixed investment involves the entry records totalling to business spending based on fixed assets, such as machinery, factories, dwellings, equipment and raw materials inventories, which are essential in providing the basis for production in future (Evans, 2009). Therefore, gross fixed investment is measured gross asset’s depreciation including investment that is necessary as a mere replacement of scrapped or worn-out capital.
Table 2: Gross fixed investment rate and percentage
Year
Investment
Per cent Change
1996
24.318
-1.91 %
1996
24.318
0.00 %
1997
23.855
-1.90 %
1997
23.855
0.00 %
1998
25.98
8.91 %
1998
25.98
0.00 %
1999
26.129
0.57 %
1999
26.129
0.00 %
2000
24.803
-5.07 %
2000
24.803
0.00 %
2001
23.19
-6.50 %
2001
23.19
0.00 %
2002
24.825
7.05 %
2002
24.825
0.00 %
2003
26.618
7.22 %
2003
26.618
0.00 %
2004
27.038
1.58 %
2004
27.038
0.00 %
2005
27.855
3.02 %
2005
27.855
0.00 %
2006
27.549
-1.10 %
2006
27.549
0.00 %
2007
29.259
6.21 %
2007
29.259
0.00 %
2008
29.541
0.96 %
2008
29.541
0.00 %
2009
27.853
-5.71 %
2009
27.853
0.00 %
2010
27.592
-0.94 %
2010
27.592
0.00 %
Source: The Australian Bureau of Statistics (ABS)
Nominal exchange rate between Australia and the United States dollar
The nominal exchange rate is the value at which a currency of one country exchanges with that of the other country. For instance the nominal exchange rate between the Australian and United States dollar is the value at which the Australian dollar exchanges with that of the United States. The nominal exchange is an economic indicator because it implies the strength of the local currency against other global currencies.
The higher the demand of the local currency, the higher the value meaning the economy is stronger. As shown in the table below outlining the quarterly exchange rates between the Australian and United States dollar from the year 1996 to present it is evident that there is significant variation even though there is a gradual progressive decline in the value of the Australian dollar against the united stated dollar. This may imply a weakening of the Australian economy against that of the United States.
Table 3: Exchange rate between Australian dollar and the US dollar
Quarterly
Exchange rate between Australian dollar and the US dollar
Mar 1996
0.7793
Jun 1996
0.7890
Sep 1996
0.7924
Dec 1996
0.7965
Mar 1997
0.7865
Jun 1997
0.7455
Sep 1997
0.7198
Dec 1997
0.6527
Mar 1998
0.6634
Jun 1998
0.6135
Sep 1998
0.5945
Dec 1998
0.6139
Mar 1999
0.6293
Jun 1999
0.6596
Sep 1999
0.6536
Dec 1999
0.6538
Mar 2000
0.6055
Jun 2000
0.5986
Sep 2000
0.5433
Dec 2000
0.5540
Mar 2001
0.4890
Jun 2001
0.5075
Sep 2001
0.4923
Dec 2001
0.5106
Mar 2002
0.5316
Jun 2002
0.5648
Sep 2002
0.5435
Dec 2002
0.5662
Mar 2003
0.6036
Jun 2003
0.6674
Sep 2003
0.6801
Dec 2003
0.7500
Mar 2004
0.7589
Jun 2004
0.6889
Sep 2004
0.7147
Dec 2004
0.7790
Mar 2005
0.7719
Jun 2005
0.7636
Sep 2005
0.7615
Dec 2005
0.7337
Mar 2006
0.7159
Jun 2006
0.7433
Sep 2006
0.7480
Dec 2006
0.7913
Mar 2007
0.8070
Jun 2007
0.8487
Sep 2007
0.8827
Dec 2007
0.8816
Mar 2008
0.9180
Jun 2008
0.9626
Sep 2008
0.7996
Dec 2008
0.6928
Mar 2009
0.6873
Jun 2009
0.8114
Sep 2009
0.8801
Dec 2009
0.8969
Mar 2010
0.9159
Jun 2010
0.8523
Sep 2010
0.9667
Dec 2010
1.0163
Mar 2011
1.0334
Jun 2011
1.0739
Sep 2011
0.9781
Dec 2011
1.0156
Mar 2012
1.0402
Jun 2012
1.0191
Sep 2012
1.0404
Source: Reserve Bank of Australia
Unemployment rate
The Australia’s unemployment rate which can be seasonally adjusted increased to 5.4 per cent in September, according to the Australian Bureau of Statistics (ABS) results that were released on October 11. However, there has also not been a widespread unemployment rate in Australia and as ABS reports in September there was an increase in the number of people employed from 14,500 to 11,511,900 as a result of full-time employment increase.
Moreover, there was also an increased in the unemployed people by 38,800 in September only. Therefore, the ABS monthly aggregate of the number of hours worked, it is evident that a considerable number of hours are used at work at work places in both part time and full time employment places. In addition, according to the Australian Bureau of Statistics (2012) the labour fore participation rate which can be seasonally adjusted increased to 65.2 per cent in the month of September.
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Table 4: Australia unemployment rate
Quarterly
Australia unemployment rate
Mar 1996
8.2
Jun 1996
8
Sep 1996
8.3
Dec 1996
8.4
Mar 1997
8.4
Jun 1997
8.2
Sep 1997
8.1
Dec 1997
7.9
Mar 1998
7.9
Jun 1998
7.7
Sep 1998
7.3
Dec 1998
7.1
Mar 1999
6.7
Jun 1999
7
Sep 1999
6.5
Dec 1999
6.6
Mar 2000
6.2
Jun 2000
6
Sep 2000
6.3
Dec 2000
6.5
Mar 2001
6.9
Jun 2001
6.8
Sep 2001
7
Dec 2001
6.4
Mar 2002
6.5
Jun 2002
6.3
Sep 2002
6.2
Dec 2002
6.1
Mar 2003
6.1
Jun 2003
5.8
Sep 2003
5.5
Dec 2003
5.4
Mar 2004
5.5
Jun 2004
5.4
Sep 2004
5.1
Dec 2004
5.2
Mar 2005
5
Jun 2005
5.1
Sep 2005
5.1
Dec 2005
4.9
Mar 2006
4.8
Jun 2006
4.7
Sep 2006
4.6
Dec 2006
4.4
Mar 2007
4.3
Jun 2007
4.2
Sep 2007
4.2
Dec 2007
4.1
Mar 2008
4.2
Jun 2008
4.3
Sep 2008
4.6
Dec 2008
5.7
Mar 2009
5.8
Jun 2009
5.7
Sep 2009
5.3
Dec 2009
5.4
Mar 2010
5.1
Jun 2010
5.1
Sep 2010
4.9
Dec 2010
4.9
Mar 2011
4.9
Jun 2011
5.2
Sep 2011
5.1
Dec 2011
5.2
Mar 2012
5.1
Jun 2012
5.1
Sep 2012
5.4
Source: Reserve Bank of Australia
Labour productivity
Improved labour productivity usually leads to a strong gross domestic product (GDP) result. For instance, in the second quarter of 2011 there was a tremendous increase in the labour productivity in Australia by 1.5% leading to an adjustment of the inflation. Thus labour productivity can be described as generated output in a single hour of work which is being undertaken.
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According to Australian Bureau of Statistics (2012) from which the data used to generate graph below was obtained the month of June 2011 recorded a tremendous fell of national labour productivity which represented the second worst annual performance of the labour productivity since the year 1996. A high labour productivity implies increased production at reduced cost a phenomenon which is very appropriate for the economy growth.
Private final consumption
Private financial consumption and especially the private financial consumption expenditure have been widely used as an essential economy indicator. Thus, it can be used in forecasting where the economy is headed.
Table 4: Private consumption expenditure volume index in Australia
Period
Private consumption expenditure volume index in Australia
2005-06
122.3
2006-07
127.2
2007-08
131.9
Seasonally adjusted
2006-2007DecemberMachJune
126.9
128.3
129.0
2007-2008SeptemberDecemberMarch
130.4
132.0
132.7
2008-2009JuneSeptemberDecember
132.5
132.6
132.7
Source: The Australian Bureau of Statistics (ABS)
Conclusion
In conclusion, the business cycle properties in addition to the judgemental forecasting approach utilised in this report can be effectively used to predict the future economy performance in a precise manner.
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Worth of money
Why is money worth more today than at a point in the future? If someone wants the use of your money, should you lend it or invest it in the company? What kinds of risk apply if you lend it? If you invest it? What moral issues are involved?
Introduction
In determining whether money is worth more today or in future the ‘time value of money’ concept must be considered which states that money received today is worth a lot more that the same amount of money in the near future due to the ability of saving this amount and earning interest . Alignment of financial goals and the investment or lending policy is required in order to ensure the chosen option is beneficial in the long term (Advani, 2006). In determining whether to lend or invest money the risks and benefits of both options must be evaluated and the best option implemented.
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When lending money the lender expects to receive their principle amount and any interest that has arisen from the loan .The major risks possessed in lending may be a default of both the interest payments and refusal to pay even the principal amount .The terms of the lending arrangement ma not also be beneficial due to the interest charges agreed (Advani, 2006).
Worth of money
Before making an investment it is important to evaluate the type of investment that best suits the funds available and the risks involved. The investment idea must match with the individual’s financial objectives. The risk associated with investing is a rapid drop in share prices if one has invested in the stock market a decrease in interest rates if one has invested in bonds and other forms of investment.
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Conclusion
Worth of money
Financial goals of the individual should be the key consideration before they decide whether to lend or invest .A risk analysis is also important as it helps in making a sensible decision on the option that is more suitable. The best option should help the individual increase their asset value.
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Transactions cost economics
Firm v market, transactions cost economics (TCE), make-or-buy dilemma, vertical boundaries of the firm, vertical chain.
Firms are important when contracts are incomplete, and firms make large specific investments. Firms are complex, a nexus of contracts where management take the view that vertical integration is useful for assuring input supply in an uncertain world. However coordination can be a problem in vertical chains yet management need to obtain economies of scale and size in production in order to be profitable. A critical task for management is to define the boundaries of the firm by determining what to make and what to buy.
Transaction Cost Economics and Vertical Boundaries of a Firm
Introduction
The conditions under which businesses are being done are dramatically changing, with the continuous infrastructure improvement marked by communications, transportation and technologies, as well as revolutionizing the environment of business operations and stakeholders of business institutions as well as the interactions with suppliers, competitors, customers and other stakeholders (Williamson, 2002).
Therefore, given the above changes in infrastructure, vertical integration turns out to be a logical option for firms due to the tremendous increase in market size and the demand of product thereby allowing high-volume production. Hence, with the continuous telecommunications technologies and production advancements, one of the most significant firm’s strategic decisions is defining their boundaries under the circumstances which they consider using market rather than using internal organization in coordinating exchange (Milgrom & Roberts, 1992).
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This essay provides a keen examination of the key characteristics of Transaction Cost Economics (TCE), as well as analyzing the role that co-ordination plays in a vertical chain with the use of the issue tree. The essay has two parts where the first part starts by describing the TCE followed by the reviewing of the assumptions and the role of TCE. The second part provides a discussion of the role played by co-ordination in a vertical chain while the final part provides a conclusion of the essay.
The key characteristics of transaction cost
Milgrom & Roberts (1992) defines transaction cost economics as the search, bargain, monitoring, enforcing as well as other cost not in direct relation to production of both services and goods. The use of the principle of TCE has been extensive and managers utilize it to determine the goods and services’ which are needed in a production process for make-or-buy decisions. Williamson (1981) states the assumptions of TCE as bounder rationality which referring to the rate as well as storage limits on the individual’s capacities for retrieving, storing and processing information without errors.
However, the key characteristics of TCE would be discussed in terms of relationship specific assets, as well as the concept of fundamental transformation of rent, hold-up and quasi-rent (Milgrom & Roberts, 1992). Moreover, relationship specific assets are a set of investments or assets which are made towards supporting a given transaction particularly for improving efficiency of the given transaction whose redeployment to another transaction is not possible without incurring cost or affecting the asset productivity. Besanko, Dranove, Shanley & Schaefer (2010) described the key characteristics of CTE as well as the relationship specific asset which takes four forms discussed below:
1. Site specificity: These investments in assets can be referred to as the located side-by -side with the aim of taking advantage of efficiency in processing while making it economical to transport as well as minimizing inventory cost. Willamson (1981) provides an example of location of this as successive stations in check-by-jowl relation to each other in the attempts of economizing of the transportation and inventory expenses.
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2. Physical Asset Specificity: Assets that are particularly tailored to a specific transaction in both physical properties and engineering. Willamson (1981) gives an example of a situation whereby specialized or unique resources are needed in a component.
3. Dedicated Assets: this is a situation whereby an investment is not necessarily profitable, in equipment and plant induced by a contract or promise of a buyer.
4. Human Asset Specificity: a set of know-how, skills as well as information acquired by a group of workers or workers who have valuable significance inside a particular transaction relationship compared to when it is outside of it. Milgrom & Roberts (1992) states that, this is likely to occur through a process of learning or by doing. Moreover, Besanko, Dranove, Shanley & Schaefer (2010) brings the fundamental transformation associated concepts of assets specific relationship as rent, holdup and quasi-rent problems.
The vertical boundaries of a firm and the role of coordination
Generally, the flow of goods occurs along a vertical chain, that is, from the component parts and raw materials to manufacturing through distribution and finally retailing. Williamson (2002) observed that, in making decisions on firm boundaries, managers and entrepreneurs weigh the internal production benefits against the risks and costs of using markets.
For instance, in the oil and gas industry, the vertical chain of petroleum products is from crude oil which is the raw material being explored and produced, to storage and/or transportation through vessels and pipelines to a refineries for processing to various other petroleum products such as diesel, petrol, aviation fuel and other associated products. This also involves later storage and distribution of the finished petroleum products to various channels for retailing.
Irrespective of the position of a firm along the vertical chain, it has to define boundaries of the firm as well as the firm as a pool of experience, abilities and knowledge in addition to undertaking stages in which the application of the existing capabilities occur. In the attempts to resolve the associated make-or-buy decisions, there must be a comparison of the benefits as well as cost of using the market compared to performing the activities in house by the firm.
Besanko, Dranove, Shanley & Schaefer (2010) reiterates that a firm uses the market mainly due to the fact that the market firm are in most cases very efficient because of the exploitation of the learning curve and economics of scale as well as eliminating bureaucracy, and vertical integration of a firm makes links with products in adjacent stages that are within the value chain as well as internalizing exchanges taking place in open market.
Milgrom & Roberts (1992) states the cost incurred as a result of the use of the market as well as the reasons which makes the firm to embrace vertical integration such as the poor coordination cost between the vertical chain steps, asymmetric information and transaction cost.
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Coordination is the management of the business activities dependencies (Besanko, Dranove, Shanley & Schaefer, 2010), and thereby make it a core aspect of the market utilization within the vertical chain. This implies that in coordination a set of two or more actors are involved in performing economic activities or exchanges in order to ensure goals are achieved within the vertical chain (Williamson, 2002).
Using the issue tree in Figure 5.4 pp144 Besanko as guide for the critical role played by coordination in the vertical chain and how firms make or buy decision; the use of the market firm as well as vertically integration are very essential. Therefore, this implies that coordination arises in using the market, and the following of the issue tree would be achieved in using the market.
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Conclusion
In this essay there has been identification of the key characteristics of TCE in terms of its relation asset specific as well as evaluating the assumptions of bounder opportunism and rationality. The discussion of the vertical chain as well as the essential role that coordination plays, have also been discussed in the essay.
References
Besanko, D., Dranove, D., Shanley, M. & Schaefer, S. (2010). Economics of strategy, 5th ed. Hoboken, NJ: John Wiley& Sons.
Milgrom, P., & Roberts, J. (1992). Economics, Organization and Management. Englewood Cliffs, NJ: Prentice-Hall.
