The government plays an important role in the economy. By implementing subsidies, cutting taxes, introducing welfare programs, funding education and providing merit goods, the Australian government causes a GDP growth.
In order to encourage investors to start running a business, the government gives a certain value of money. This effects the GDP growth positively, as the forming of another business results with increased …show more content…
The welfare programs involve cash payments to disadvantaged individuals or families with lower salary or income than the average, individuals with disability, old age pensions etc. The Australian amount of welfare payments is equal to 19.5 percent of our Gross Domestic Product, while the Swiss amount of financial payments is about 20 percent of the total GDP.
Initially, both governments spend a certain amount of resources to education. The Australian Government provides funding for schools, both government and non-government. The total amount of school funds is equivalent to 5.1 percent of the total GDP. In contrast, Switzerland is relatively small country and has relatively lower number of schools and universities (12), therefore the funds are lower. Consequently, the return of education funding to the economy effects with a future employment, salary, and skilled personnel. This will also result with quality life and therefore, higher GDP.
Australian government is providing the citizens with merit goods. Merit goods are defined as goods and services provided free for a benefit of a community or a society by a government. For instance, free vaccinations for every child is a merit good of the health care, because this service might be expensive if provided by private …show more content…
In a labor market, when the wage rate is at the equilibrium level, the quantity of labor supplied equals the quantity of labor demanded, meaning that there is neither a shortage of labor nor an excess of labor. So when a minimum wage is set above the equilibrium wage, there is an excess of labor. The demand for labor determines the level of employment, and the excess of labor is unemployment, as shown on the figure.
Lower GDP is caused by decrease in consumer confidence and reduction in demand. To reduce demand, companies are lowering the number of workers due to conservation of money. Such actions need to be prevented by governments as it leads to decreased GDP level.
Additionally, unemployment is not a major issue in Switzerland because the supply and demand nearly meet the equilibrium level, while in Australia the unemployment rates are constantly rising. The unemployment rate of Switzerland in 2014 was 2.9%, which makes an approximate number of unemployed people of 232 000. Unlikely, Australia’s unemployment rate, in 2014, was 6.4