ECON1001 - Reconciliation Of Economic And Environmental Challenges - Royal Commission - Regional Economic Integration - Economics Assessment Answer

ECON1001 - Australian Banking Secor - Regional Economic Integration - Economics Assessment Answer

Assessment Task:

PART ONE     

Background and ‘rules of the game’ 

There is a choice of four topics to choose from: 
1)    The reconciliation of economic and environmental challenges (especially climate change) in the 21st Century; 
2)    The Australian banking industry in the aftermath of the Royal Commission inquiry and policy recommendations; 
3)    The alleged excessive market power of the US tech giants (e.g. Google,  Facebook, Uber) and the competition and other challenges for national governments; and  
4)    Regional economic change and challenges and opportunities for local businesses. 

PART TWO  

Below is a detailed explanation for each of the questions.  You choose one topic only to investigate and write about. 

Topic one 

The reconciliation of economic and environmental challenges (especially climate change) in the 21st Century

In this topic you discuss the main economic instruments that have been proposed to help address the challenges of climate change. The main instruments are:  
•    Emissions reduction fund: Subsidies paid to carbon-intensive industries (including some agricultural producers) to help them transition to less carbon intensive production methods (the current Liberal National Government in Australia is proposing this scheme). 
•    Carbon Taxes: A tax on CO2 emission. (This was implemented in Australia in 2012 before it was dismantled in 2014 by the current government; also done in parts of Europe and Canada.)
•    Cap and Trade system (also called an ‘Emissions Trading Scheme’): A central authority allocates or sells a limited number of pollution permits. Polluters hold permits equal to their emissions. There is an incentive for those that cut their emissions to sell unused permits to polluters who want to increase pollution or cannot cut theirs so easily.  

• Briefly outline the advantages and disadvantages of each method. The use of economic diagrams will strengthen your answer (see below for the relevant weeks). Also read Ch. 15 Hubbard et al. for an introduction to some economic instruments used to control pollution. Numerous other contemporary elementary textbooks on microeconomics will discuss these and likely have some useful diagrams so check the library shelves. 
• Make an argument for the method that you think would be most effective to help Australia address this challenge and meet its international obligations of lowering C02 emissions. 
   

Topic Two  

The Australian banking industry in the aftermath of the Royal Commission inquiry and policy recommendations

Traditional economic theory suggests that if there is adequate competition then the government should have a minor role in regulation. In the Australian banking sector,  this regulation is conducted by three main authorities. The Reserve Bank of Australia (RBA) is the underpinning main authority for this sector. The RBA’s  role is to provide services to the banks in the form of trading financial assets with the commercial  banks to control the interbank interest rate (determined by the  level of bank reserves), as well as to act as banker of last resort (i.e. if banks cannot borrow reserves from other banks then they can borrow from the RBA). The two other main authorities are ASIC and APRA which check that banks are operating within the law and following regulations.
 
Prior to the recent Royal Commission into the Banking Sector,  it was argued by some economists, and most bankers, business leaders and politicians,  that market forces operating within this regulatory framework were enough to ensure adequate competition between Australia’s large four banks and the other competing players (e.g. credit unions and building societies). Adequate competition (in theory) means that consumers have choice, have information  on competing substitutes and will not get ‘ripped off’. Yet the recent Royal Commission called this belief  into serious question. 

With this background established, the main argument for this topic is: 
In the light of the Banking Royal Commission findings, how can the adequate balance be found between the right of financial corporations to make a profit and to fulfil their corporate legal obligations to serve their shareholders, while at the same time having a corporate social responsibility to prioritise their customers’ interests  over short-term corporate profits?

Topic Three

The alleged excessive market power of the US tech giants (e.g. Google and Facebook) and the competitive threats and other challenges for national governments

‘Tech giants’ (collectively  called the FAANG firms in business-speak - Facebook, Apple, Amazon, Netflix, Google) would likely  argue that  they should be allowed  to make a profit just like other firms in other industries, as long as they satisfy their legally required tax obligations and keep within the laws of the nations they operate in.  They should not be subject to new layers of regulation to handle complaints about social media and alleged search bias. 
Uber is also criticised for tax evasion and unfair practice, such as driving out local firms, as well as their practice of exploiting their contractors.

Question

Do you agree or disagree with the arguments that new legislation is not required for these giants? In other words, are existing competition laws (say in Australia or other countries) adequate to tame these digital giants? Explain why?

Topic Four

Regional economic change and challenges and opportunities for local businesses 

Economic change at the local and regional geographic scales is simply a result of market forces. Therefore governments (whether local, state or federal) should largely keep out, other than their traditional roles of providing macroeconomic stability and some infrastructure and legally enforceable property rights. Do you agree or disagree?  (In other words, if a local shop closes down, or if a farm goes broke,  then one might argue that it is the owner’s problem and the  government has no direct responsibly or role to play, other than the Federal government offering some social security support during periods of  unemployment or illness.)

This is the broadest topic of our set. It is also one where many of us can see the impacts first hand. For example, possibly you have noticed closed-up shops in your local area and wondered why it happened. Was the shop’s failure due to the owner’s lack of skills or foresight, or were there external forces that caused this?  

For example, outside NewSpace on Hunter Street, there are a number of empty shops. Perhaps they closed because they did not keep up with a changing business environment, or possibly other factors such as the disruption to Hunter Street due to the light rail construction, and lack of adequate nearby parking had an influence. I do not know the answer to this – maybe you can find out if you choose this topic? As another example, perhaps your family lives in a regional farming community and has been adversely affected by drought or other factors such as nearby mining activity. Does the government have a role to help in these cases, considering that it has many other competing demands? If so, what should that role be and how could it be made effective? 

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