© Cambridge University Press 2012 CHAPTER THREE INFLUENCES IN THE BUSINESS ENVIRONMENT Topic 1 Nature of business

© Cambridge University Press 2012 The economic cycle refers to the changes in consumer and business spending over a period of time. It influences: the level of employment and investment in an economy the profitability of business the amount of goods and services produced. The economic cycle

© Cambridge University Press 2012 The Australian Government makes use of three key policies to influence the level of economic activity in Australia: fiscal policy monetary policy microeconomic reform. Policies

© Cambridge University Press 2012 Fiscal policy is government actions, such as the use of taxation (revenue) and expenditure, that are intended to influence the level of economic activity in Australia. It mainly operates through the Commonwealth Budget. Policies (cont.)

© Cambridge University Press 2012 Monetary policy is actions taken by the Reserve Bank to influence the level of interest rates in the Australian economy. Policies (cont.)

© Cambridge University Press 2012 Microeconomic reforms are the policies developed by the government to promote greater competition within a particular industry. Policies (cont.)

© Cambridge University Press 2012 The two main sources of finance for business are debt finance and equity finance. Both of these are greatly influenced by the level of interest rates. As interest rates are the cost of borrowing money, increases in interest rate levels may reduce the amount of debt finance undertaken by a business. Finance

© Cambridge University Press 2012 Internal sources of finance; that is, finance provided by the owners. The owners can give the business capital or can contribute cash by buying shares. Also refers to any net profit reinvested in the business. Equity finance

© Cambridge University Press 2012 Geographic influences on Australia include: its location in the Asia-Pacific region population shifts from rural to urban areas population shifts from inland to coastal regions population shifts to warmer locations Geographic influences

© Cambridge University Press 2012 the increased average age of our population variations in the number of refugees and skilled migrants accepted into Australia the rapid economic growth of nearby Asian countries the increased international standing of Australian cities as hosts for international sports events. Geographic influences (cont.)

© Cambridge University Press 2012 Environment Protection Authority Australian Taxation Office Australian Securities and Investments Commission Australian Competition and Consumer Commission NSW Office of Fair Trading Federal and state institutions