Activity 12(b)

1.  MRPs are any government reforms that are designed to improve the structure operation and efficiency of markets or industries in Australia such that productivity, international competitiveness and living standards are enhanced.

2. This refers ta government reforms that are designed to improve productivity (which of course includes MRPs more generally) having a major role to play in reducing pressure on the government’s budget deticit. [This is because improvements to productivity lead to longer run increases in economic growth which helps to raise government tax revenue and reduce government welfare expenditure.]

3. MRPs are distinct from macroeconomic policy because MRPs focus on particular industries, sectors, markets or enterprises within the economy when seeking to lift the national output. In contrast, macroeconomic policy (including monetary and budgetary policy more generally) seeks to influence ‘macroeconomic’ variables (such as interest rates) when seeking to lift national output.

4. This is because economies are dynamic, changing every day in response to normal market pressures. For example, the structure of industries will change in response to changes in technology, such as the changes that have taken place in the telecommunications industry over the past couple of decades in response lo advances in information technology. Many firms have withered in the new environment, while many others have prospered. This is not been a result of MRPs.

5. Tariff reductions have resulted in cheaper imports, which increases competitive pressures facing domestic businesses. Some businesses to fail in the newly competitive environment, other businesses remain viable by restructuring in an cffort to reduce prices and retain market share. Typically, the restructuring leads to more output from existing (or even fewer) resources, meaning that productivity and efficiency increases, allowing prices to fall (or growth in prices to be minimal), which has the potential to filler through lo have a tavourable impact on many other parts ot the economy. Consequently, the cost structure of the economy falls, enabling more goods and services to be produced (i.e. productive capacity is enhanced).

6. There are clear costs associated with MRPs. This includes the dislocation caused within many industries, including job losses and the widespread negative impact on some lilies (including mental health issues). Some of these ‘costs’ (e.g. job losses) may 0 the longer term, MRPs are pursued because the costs (many of which are short-nature) are expected Lo be oulweighed by the longer ler benefits.