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COVER SHEET

Group: Strength

Group Members

ID Name Surname Mobile Tutorial Time

4509241 Rajdeep Kaur 0469786884 5-6 pm

4490617 Ambica Isukapatla 0452342452 6-7 pm

4366373 Kisha Vadhyaphal 0490072485 6-7 pm

Business Economics

PART-A

Introduction

The Intergenerational report is published by the Australian Government to examine the long-

term feasibility of the present Governmental policies and the impact of the variations in

Australia’s population size and age profile on the economic growth, workforce and public

finances for the next 40 years. This essay will discuss the challenges and opportunities facing

the Eyewear Industry as per the Intergenerational Report with respect to the three drivers of

economic growth-Population, Participation and Productivity.

1) Population

Population affects the performance of eyewear industries in Australia. A large portion of

population now require spectacles and a few need contact lenses for proper visualizations, but

sunglasses are an essential consumer goods to protect from country’s hot climate and high

ultraviolet (UV) levels. The central cause of wearing glasses is to protect the population from

eye disease. Young generation spend most of their time in front of TV, computers, mobile

phones which effects their eye sides and a huge portion of audience use eye glasses to avoid

the blindness. Consumers prefer to wear spectacles with designer frame which convert it from

a medical necessity to a fashion statement. With the arrival of contact lenses consumers feel

more comfort and it improve the performance of eyewear industry(Ehrlich and Holdren,

1971). In Australia 61% people use ether glasses or contact lenses. Australia's ageing

population familiar with the concept of technology, and they prefer to buy products online.

The falling economic climate caused many consumers to migrate online to achieve lower

prices, convenience and a wide availability of products. There are about 11 million people in

Australia who require prescription glasses and, with an ageing population the market is

expected to grow by at least 2 per cent a year. The global financial crisis has seen more

customers change their buying habits and switch to more affordable brands like Prada, Gucci,

and Ray-ban etc(Ehrlich and Holdren).

Rajdeep, Ambica, Kisha (4366373) Page 1

Business Economics

Under this situation the use of eye wears increase with in recent years. According to

Appendix 1, the use of different products having fluctuations with the change in age group. It

also shows that the use of glasses is more than the lenses about more than lenses. Total use of

lenses, glasses or no wearing is 5%, 56% or 42% respectively. But with the change of age

glass wear comforts are increases.

Eyewear in Australia offers a complete guide to the size and shape of the market at national

levels. It provides the sales information to identify the industries driving growth and also

identifies the leading company’s strategies to analysis the market. The whole industry covers

strong growth all around such as wholesales, retails area, stores sales etc. and this growth also

calculated in profitability. In this market spectacle frames create more sales as compare to

lenses, cause behind the arrivals of designer frames which become the preference of every

generation or gender(Taylor, 2002).

The future performance of eyewear in Australia will be impacted by increased competition,

online retailing and forceful price promotions. Volume growth is expected to pay costs value

growth as average unit prices experience a steady decline due to consumers’ pursuit of the

lowest prices. Australia’s population is ageing at a rapid rate and, as the median age

continues to increase, so will the rate of those with vision enhancements and the need for

vision correction products, supporting volume and value growth in the future.

2) Participation

Participation of the Ageing population will be a challenge for the eye wear glass industry. As

the population of aged grows, the employment rate in the workforce is expected to decrease.

This decreases the labour supply to the market. The aged have developed an image that they

have no employment opportunities in the market due to which they refuse to take part in the

workforce actively(Booth et al., 2000). When people do not work, the income rates they


Business Economics

receive will be less due to which they cannot afford to purchase the eyewear products. As the

aged population increase the need for the eyewear goods increase, the industry will produce

more goods. However, as the income rates reduce, the sales of the products reduce resulting

in a surplus of goods. This tends the market to reduce the prices.

According to the IGA 2015, with the increase in aged population the supply of the workforce

decreases with the increase in demand. This results in a lack of people to produce goods due

to which the minimum wage reduces to a massive level (Appendix 1). In Australia, 50% of

the population being aged, 40% the middle age people age 16-65 and rest 10% 0-14, the

participation in the workforce will be only the middle age population who go by the trends

and purchase contact lenses rather than eyewear glasses which are cheaper(IGA, 2015). The

aged population would spend their money in services rather than buying goods which reduce

the sales of the eyewear glasses which are surplus. Therefore, competition of contact lenses

and increase in the need of services will reduce the revenue of the eyewear glass industry.

This will be an opportunity; if retirement age is increased to 75 from 65then the supply of the

labour to the industry can increase the minimum wage above equilibrium that helps the

industry sell the surplus goods(Economics, 2001). The age group that buy contact lenses as

an importance to trend are less in number compared to the aged, the number of people who

would buy the eye wear glasses would be more. If the retirement age is increased then the

income earned would enable the increasing aged to afford the goods. Eyewear industry has an

inelastic demand. Even though the aged participation affects the income of the individual,

the need for eye care and reduced prices can increase the sales of the eyewear glasses. As the

population of skilled a healthy aged is expected to increase, the skilled workers who produce

the good increase as well which benefit the sales of the industry.

There are several myths related to older workers in relation to their working habits and

learning abilities. Based on research conducted in Australia however, these myths do not

represent the reality. For instance, the myth that older workers are less flexible and adaptable

was proved to be inaccurate by the Drake management research group(Adair et al., 2013,

Thompson et al., 2013). The research group found that employees over the age of 45 were


Business Economics

generally more adaptable and flexible about their working hours and conditions at their

workplace compared to younger workers. If the Australian employers realize the fact that

most myths are untrue, they would certainly encourage older workers to participate and

contribute to the Australian workforce. Consequently, this creates opportunities for older

workers to generate income and sponsor their own optical needs. This in return benefits the

eyewear glass industry.

3) Productivity

The decrease in productivity growth rate of ageing population in Australia since the 1990’s

can serve to be an opportunity for the eyewear industry because the reforms of 1990s inspired

the businesses to implement and make the most of new and improved technologies including

the ones implanted in new capital like for instance Information and Communications

technologies and thus the most of the companies have become paperless and are doing most

of their work on the computers which means employees are spending more time on the

computers now-a-days and also they are getting older. However, it has been noted that a

long-term staring at the computer screens can cause eye strain, tired eyes headache, muscle

aches and some other symptoms of Computer Vision Syndrome (CVS). According to the

American Optometric Association (AOA), vision-related health complaints are very common

among the computer workers. Studies suggest that 50-90%of employees working on the

computers experience visual symptoms of Computer Vision Syndrome (CVS) which includes

blurred vision, eye irritation and double vision. A study carried out by the University of

Alabama at Birmingham (UAB) School of Optometry has found a direct link between vision

of computer workers and their productivity at the workplace. Studies have shown that the

businesses can increase their profits by facilitating their employees with vision care benefits

and computer glasses which will help them to enhance their productivity, reduce the amount

of mistakes done by them and also the amount of their disability claims. According to Kent

Daum, OD, PhD, the study’s chief investigator, enhancing the visual status of employees

using computers can result in a high level of productivity among the workforce and also an

enhanced visual comfort. Thus, the demand for eyewear glasses is expected to increase as

more and more companies with computer workers will buy the safety glasses for their


Business Economics

employees due to the vision they face due to their increasing age and due to their long hours

spent on computers with the ultimate purpose of profit maximisation and cost effectiveness

which will cause a demand curve to shift to the right due to the macroeconomics influences.

Conclusion

Overall it can be seen that, ageing population will be an opportunity for the ageing

population because with the increasing age the people suffer more from the eye diseases and

their eyesight starts getting weak, gaining the participation of the ageing population will be

an opportunity for the eyewear industry because as the people grow it becomes difficult in

participate more in the economic growth and the productivity will be an opportunity as well

due to the increasing need of eyewear glasses to increase the productivity of the ageing

employees.


Business Economics

PART B

China Australia Free Trade Agreement:-

Introduction

Prime Minister Tony Abott and President Xi Jinping have declared the results of

interventions for the China-Australia Free Trade Agreement (ChAFTA) on 17 November

2014. This agreement has opened up endless opportunities for Australia. Australia’s largest

export market is that of China for goods and services covering nearly one-third of the total

exports, and a developing source of foreign investment. This agreement will result into 95%

of the Australian exports to China as tariff-free. This essay will discuss the industry that will

be benefited by this agreement and the one that will be disadvantaged by the removal of

tariff.

Tourism-A benefitted industry from the Free Trade Agreement

It has been said by the Trade and Investment Minister Andrew Robb that the Tourism

Industry of Australia will be the one most benefitted by the China FTA. China has been the

second largest inward market with more than 750,000 arrivals in the last financial year and

also the biggest means of Tourism expenditure.

Key outcomes:-


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Through the high investigated thresholds for private Chinese investment, ChAFT will guide

the rising Chinese investment in Australian Tourism industry. Investment in tourism

infrastructure will also be inspired by the Innovative new Investment Facilitation

Arrangements which will assist in meeting the demands of 1.5 million Chinese who are

estimated to visit Australia by 2022-23 and contribute more than $10.2 billion to Australian

economy.

Due to the strengthening business and study links with China through ChAFT, business and

study related travel is also expected to grow significantly. Besides ChAFT, A Work and

Holiday Arrangements have also declared that they will permit 5000 Chinese and workers

and visitors annually which will cause a rise in demand of tourism services and provide

support for the growth of particularly rural Australia where Chinese Tourism is considerably

expanding.

Moreover, under ChAFT, the Australian Tourism Service providers will benefit with the

assured entry to the developing tourism market of China. For instance, Australian service

suppliers have been granted a guaranteed freedom China to establish, refurbish and run a

fully owned Australian hotels and restaurants in China and also to create subsidiaries and

render travel services, hotel accommodations and tours to domestic and foreign travellers in

China directly.

ChAFT will enhance the government’s obligation to support the

Australian Tourism Industry further higher through:-

A noticeable financing of $143 million annually to Tourism Australia.

An amount of $43 million will be granted to the Infrastructure Programme that will help to

increase the demand of Tourism Industry.


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Moreover, the China Approved Destination Status (ADS) scheme will be granted $10

million.

By communicating the advantages of investments focusing on Tourism in various journals

like Australia Week in China and Australia Business Week in Indian events.

By awarding Tourism as one of the five investment preferences of Australia from now.

Thus, ChAFT will tend to increase the Government’s obligation to the Tourism Industry to

provide more jobs, more investment and economic opportunities for communities across

Australia.

Economic effects on the industry

With the agreement being fully implemented, the Australian economy will flourish with the

increased job opportunities for the people in Australia because as more and more people will

travel to Australia from China the demand for their accommodation and other basic

necessities like food will increase which will lead to an increase in demand for labour in

order to provide the better services to visitors. Moreover, with the government decision of

adding up 77 educational institutions providing the education to international students, more

and more students from China will travel to Australia for study purposes which are expected

to be more motivated and productive than the current Australians as per the Intergenerational

Report 2015 which will lead to an increase in Income of the people that can ultimately lead to

an increase in GDP and also the increased growth rate of Productivity which is seen to be

decreasing since 1990 as per the Intergenerational Report. This agreement will increase

investment opportunities because as the Tourism industry will grow rapidly the investors

would start investing more because of the advantage of assured benefits associated with the

rapidly growing industry. However, there are also chances that the study related to Tourism

and hospitality may again be included in the skilled occupation and eligible for skilled

migration because of the increased requirements of labour or varieties of the skills to provide

the excellent services as it was in the past but was eliminated due to the increase in the labour

supply. Thus, the agreement will result in a tremendous economic growth.


Business Economics

The idea of free trade is that it leads to a net benefit but surely does come along with a few

casualties. Free trade has always taken consideration of the big picture of competitive

advantage and the inefficiencies are swept aside. The critics of these ideas are that if a

manufacturer cannot give results in optimal price and value for product then the competitors

in the other part of the world will dominate the market and bankrupt the enterprise of the

home country.

Manufacturing Industry- Disadvantaged Industry with the

removal of tariffs

There are many sectors that Australia is succeeding in terms of exports which exclude the

FTA with China. The Australian economy stands to be the loser in the manufacturing and

service sector in the FTA deal(Adams et al., 1994). Chinese exports to Australia are, with no

doubt, improving by the day but at the same instance the other side of the coin is to be judged

whether, does this or not, refuge the manufacturing of Australia. For instance, within the

manufacturing sector, the Furnishing Industry Association of Australia has the biggest threat

for demolition of business if the Chinese move into the business with cheap but good quality

furniture(Mai et al., 2005).

Australian manufacturing sector has various industries under it which are strongly affected by

the Free Trade. The metal production industry fears negative effects as the free trade and no

barriers on imports is hammering the production of the home country. Textiles, clothing,

footwear, furniture and other manufacturing have excessive imports compared to the exports,

which affects the economy(Clarke and Gao, 2007). China has effective and cheap

manufacturing in the machinery and equipment sector. Small sectors of manufacturing with a

count of 50 or less employees will face a huge loss in the trade as the demand will decrease

for home production as the imported products will be available cheaper.

An FTA with a trading partner, who is not the lowest cost producer risks creating trade

diversions, and a country shifts its focus on buying from efficient and low cost goods country

whose goods are subject to tariff towards the less efficient and high cost economy FTA


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country where goods are not subject to tariff(Onselen, 2013). According to Australian

Manufacturing Workers Union, even in the best case scenario, Australia would suffer a net

job loss of 7,000 including 22,000 lost jobs in manufacturing(Stanford et al., 2007). The

simulations indicate that a further job loss of 170,000 will increase the unemployment ratio.

The entire section of manufacturing which consists of textile and apparel will be virtually

wiped out. To balance the economy, manufacturing sector needs to be at a stable position and

can be possible only when there is balance of trade(Stanford et al., 2007). The statistics surely

don’t state the balance as equal considering the previous FTA agreements show only 10% of

exports when compared to imports.

The highest amount of competition that Australia faces is from China. An FTA agreement

with the highest competitive country will bring a lot of advantages but at the same time kill

the market slowly; creating unemployment in areas in which goods are imported and the

labour in the country is lost at a rapid rate(Hufbauer and Schott, 1992). You can see the

statistics in the Appendix 3.

Appendix 4 shows the manufacturing growth rate in each country where China has the

maximum growth rate.

This factor of manufacturing will affect the economy of Australia if the manufacturing is

cheap and affordable. This takes the labour rate down, increases the unemployment.

Manufacturing is a massive part of the Australian economy and many people make a living

out of it. This simply means that China will dominate the economy of Australia within the

coming years in manufacturing of goods and services.

This certainly is a strong disadvantage to the economy of Australia, but like the two sides of a

coin, is highly advantageous for China.

Conclusion


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Though China’s growth rate has slowed down it is still expected to grow at a steady pace and

eventually become the world’s largest economy by 2020. Australian exports will play a major

role in fuelling China’s enormous resource needs. On the other side cheap imports from

China will help propel Australia’s consumption. Canberra however has to make sure that

cheap imports from China shall not prove to be a detriment to the Australian domestic

manufacturing industry. Therefore, Australia should refrain from removing all of its tariff and

non-tariff barriers on products which form a core of the manufacturing industry and which

provide jobs to a large population. The ChAFTA should not be seen only in a negative light.

It will definitely stimulate a lot of growth in tourism sector for Australia. This is because

Chinese people form a large part of inbound tourism for Australia mostly for holiday and

education tourism. Therefore, this agreement will remove a lot of obstacles for the inbound

tourism. In addition the outbound tourists will also be at an advantage because Australians

have increasingly shown propensity to travel to China, and this subsequent cultural exchange

will help forge stronger relations between the two countries and eventually help the

Australian economy.


Business Economics

PART-C

Date/Time Activity Description Reflective learning notesName/Names of members who completed activity

19/05/2015 Population Researches, read articles Rajdeep Kaur

18/05/2015 Participation Video clips, journals Ambica Isukapatla

18/05/2015 Productivity Company research on productivity issues Kisha Vadhyaphal

20/05/2015 International trade Australian tourism sites Kisha, Ambica

We hereby declare that we have completed the above activities and each member of our group has equally contributed to the group task.


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Names

Rajdeep Kaur

Kisha Vadhyaphal

Ambica Isukapatla

References

Australian Government- Department of Foreign Affairs and Trade,

http://dfat.gov.au/trade/agreements/chafta/Pages/australia-china-fta.aspx

Gary Heiting, 2004, Worker Productivity and Computer Vision Syndrome, American

Optometric Association, viewed 15 May 2015,

http://www.allaboutvision.com/cvs/productivity.htm

ADAIR, T., TEMPLE, J., ORTEGA, L. & WILLIAM, R. 2013. Age discrimination in the labour market: experiences and perceptions of mature age Australians.

ADAMS, P. D., DIXON, P. B., MCDONALD, D., MEAGHER, G. A. & PARMENTER, B. R. 1994. Forecasts for the Australian economy using the MONASH model. International Journal of forecasting, 10, 557-571.

BOOTH, M. L., OWEN, N., BAUMAN, A., CLAVISI, O. & LESLIE, E. 2000. Social–cognitive and perceived environment influences associated with physical activity in older Australians. Preventive medicine, 31, 15-22.

CLARKE, A. & GAO, X. 2007. Bilateral Free Trade Agreements: A Comparative Analysis of the Australia-United States FTA an the Forthcoming Australia-China FTA. UNSWLJ, 30, 842.

ECONOMICS, A. 2001. Population ageing and the economy.

EHRLICH, P. R. & HOLDREN, J. P. 1971. Impact of population growth.


http://www.allaboutvision.com/cvs/productivity.htm

http://dfat.gov.au/trade/agreements/chafta/Pages/australia-china-fta.aspx

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HUFBAUER, G. C. & SCHOTT, J. J. 1992. North American free trade: Issues and recommendations, Peterson Institute.

IGA. 2015. Australia in 2055 [Online]. Available: http://www.treasury.gov.au/PublicationsAndMedia/Publications/2015/2015-Intergenerational-Report [Accessed 18th May 2015].

MAI, Y., ADAMS, P., FAN, M., LI, R. & ZHENG, Z. 2005. Modelling the Potential Benefits of an Australia-China Free Trade Agreement, Department of Foreign Affairs and Trade Canberra.

ONSELEN, L. V. 2013. Why Abbott should dump Free Trade Agreements [Online]. Available: http://www.abc.net.au/news/2013-10-08/vanonselen-why-abbott-should-dump-ftas/5008478 [Accessed 20th May 2015].

STANFORD, J., CONROY, P. & WORKERS' UNION, A. M. 2007. The Potential Employment Impacts of an Australia-China Free Trade Agreement, Australian Manufacturing Workers' Union.

TAYLOR, H. R. 2002. Eye care for the community. Clinical & experimental ophthalmology, 30, 151-154.

THOMPSON, S., GRIFFIN, J. & BOWMAN, K. 2013. The ageing population: new opportunities for adult and community education.


http://www.abc.net.au/news/2013-10-08/vanonselen-why-abbott-should-dump-ftas/5008478

http://www.abc.net.au/news/2013-10-08/vanonselen-why-abbott-should-dump-ftas/5008478

http://www.treasury.gov.au/PublicationsAndMedia/Publications/2015/2015-Intergenerational-Report

http://www.treasury.gov.au/PublicationsAndMedia/Publications/2015/2015-Intergenerational-Report

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Appendices:-

Appendix 1

Appendix 2


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Figure1: supply and demand graph showing the participation and income of

the growing population

Appendix 3:


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Appendix 4:


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