Price controls in Australia (Essay Sample)

Price controls in Australia
Student’s name:
Institutional affiliation:
Price controls in Australia
Price controls can be defined as government restrictions on prices, which can be charged for either goods or services in a market. In Australia, the government has severally been found to utilize the element of price control in control of most of its financial obligations ranging from pricing of commodities and services to the wages of its workers. The intent of implementing price control emerges from the need to maintain relatively affordable staple foods and goods, so as ensure prevention of the scenario of price gouging in times of shortages, to slow inflation and to insure minimum income for the providers of particular goods or minimum wage (Anderson, 2009). Similar to the forms of price control used in Australia, there are generally two forms of price control which include the price ceiling, which is the maximum price to be regularly charged, and price floor, which is the minimum price to be regularly charged.
In Australia, price controls have historically been a part of the larger incomes policy package, which also employs wage controls as well as other elements. Although controls of price are at times used by the Australian government, some economists subsequently agree that the price controls do not accomplish what they are purposely intended to do and therefore, are entirely to be avoided. Price controls have been used for a long time in Australia ranging from price control of commodities, wages of employees and price controls on electricity among others (Anderson, 2009).
Background
Price control was for the first time introduced in the late 1930s. Therefore, for almost a decade prices in Australia remained fixed by the government officials, instead of those who are directly affected. Those who are directly affected in this case include the buyers and sellers who operate in the free market economy. During the prewar of that started in the late 1930s, a strict and comprehensive control over price level was subsequently imperative. After the end of the war, there was a continuation price control by some degree that had been necessary due to a widespread shortage of various kinds of goods in relation to effective demand across the entire Australia (Mills, 1994). Despite the notable improvement that took place in the supply of the many commodities in the two and half years of peace since the august of 1945, where government price fixing remained on an unnecessary wide and detailed basis.
Price control during the earlier time, particularly during the period of the war from the late 1930s had four main objectives. These included; to firstly prevent profiteering out the period of war, to assist in the concentration of the resources that highly essential during the war period, to assist in the distribution of goods in short supply emerging from the war, as well as equitably among the community, and lastly the most fundamental, to control price inflation and cost, which would have followed extreme shortages of goods, as well as services brought by large scale purchasing for war purposes. It is essential to understand that price control does not necessarily prevent inflation (Green & Rodriguez, 1999). On the contrary, it only prevents the inflation subsequently showing itself in a rapidly rising spiral of prices and costs, and thus avoids the economic disequilibrium as well as chaos, which would otherwise inevitably result. However, inflation will still remain to be there.
Pros of price control
Throughout the Australian government has used price controls on many occasions in the form of maximum prices. In the case of Australian government, the use of maximum prices as a form of price control usually ensures that price does not rise above a specific price level. The main advantage of this method of price control is that it easily leads to lower prices of commodities and services for consumers.


Although this method of price control may at times lead to lower supply, it is the best initiative the government can take to avoid cases of skyrocketing prices of goods or services across the country.
In Australia, price ceilings are the most common across the country, and therefore seen advantageous in price controlling method. This practice has typically been used since the ancient times in government establishments such as the Roman Empire. A price ceiling is commonly described as government sanctions that prevent suppliers from setting prices of the core resource higher than the price usually determined by the government (Rockoff, 2002). In addition, price ceiling consequently alters market supply as well as demand. Based on an economic point of view, the supply of much a certain product is available in a marketplace will likely decrease as the prices significantly decrease (Singh, 1998). This is one of the main advantages of pricing control. The demand in this case represents the public longing for a specific product and will gradually keep increasing as the price decrease.
Price ceiling is crucial as it helps in preventing supplier from engaging in issues of price gouging as well as charging outrageously high price for limited services or goods simply since they are able to. The cases of price ceilings are beneficial for keeping affordable cost of living, particularly during the period of high inflation. In this case, inflation describes the trend of having an increase in prices for goods or services in a certain period of time (Goldring, 1998). It is during high inflationary periods, prices increase faster than the incomes or wages of people, which gradually reduce the purchasing power of the Australian dollar. This makes price ceilings necessary for the entire Australians to maintain their living standards. An example of the disadvantages of price ceiling as a method of pricing control it is used in the control of housing rents across the entire country of Australia (Gillespie, 1991). Prices affect prices of other basic commodities such as bread across the entire nation, as the government control prices of various commodities across Australia.


Source: /ib-economics/microeconomics/161-revision-notes/1766-price-controls-maximum-and-minimum-price
Australian consumers and producers meet together on particular price, which is commonly based at the specific point where the supply curve rightly intersects with the demand curve, usually referred to as the equilibrium. This is an advantage to the consumers considering that commodities or services will be availed at conventionally affordable prices. Issues of regulations of private marketing entities that likely change prices of goods and services, making them unaffordable for people are completely minimized by government’s price control. However, as the economic instability occurs, then production cost of suppliers that increase as prices of raw materials subsequently increase (Sioshansi, 2006). As a result, the point of equilibrium is changed as well as that of the price, but the Australian government in some instances interferes and creates a market disequilibrium through imposition of price controls on goods such as bread, petroleum products among others.
Pricing control of the government in Australia also alleviates the burden of consumers in their expenditure. The government has severally taken a precaution in the implementation of more effective mechanism that determine the best prices for the commodities that need to be affected. For instance, commuters that take up the largest percentage of the country’s population, as well as motorists would benefit from the stable prices of petroleum products. In the case of price control on Australian petroleum products, through the seemingly good news imposing petroleum products free, a sign of relief is likely to be felt by the consumers. They will certainly be assured that the stability of the price of commodities or products, like the case of oil, will likely be characterized. Therefore, there will subsequently be no need for consumers to pay higher prices on aspects linked to the transport sector such as fare (William et al, 2012). This means that people will be able to make necessary settings for other important element in their lives.
Pricing control makes citizens feel more secure. Knowing that the government would impose a price freeze on any commodity that is likely to be overpriced, give the general public to have confidence in the government. In Australia, consumers fell more protected due to stable pricing of their commodities as well as services, which implies a low cost of goods and services such as petroleum oil, transport among others (William et al, 2012). In this regard, where there is an increase in the cost of production and costs related to se...