Impact of Government Policy on Business Industry
Impact of Government Policy on Business Industry
The government makes laws and regulations touching on every single aspect of people’s lives. These laws range from when to take your child to school to how businesses relate to the government. It is evident that businesses cannot operate without control by the government. Unscrupulous business traders will enter the market and offer services and goods that are substandard to the consumers. Business policies that the government enforces will either stimulate the growth of the economy or necessitate for the reverse to happen. Good business policies expand the industry and create more jobs for the unemployed.
Government policies affect businesses positively. To stimulate growth of the economy, the government may decide to give medium level companies tax breaks. Tax breaks are instrumental for companies that are about to edged out of the market by unfair competition from foreign companies. They help businesses to reconsolidate and gain a competitive edge in the market. In addition to tax breaks, the government may offer incentives to small businesses. These are some of the business policies that affect businesses positively. Control of interest rates by the government has a positive impact on businesses. If the interest rates are not extraneous, businesses will flourish in the economy. Businesses are more likely to borrow when the interest rates are low in order to expand thus enhancing economic growth and consequently creating employment opportunities. This will result in spillover effects to other sector and households income. On the other hand, during an inflationary period, interest rates can be raised to reduce inflation to manageable levels. For example in 2010, the Australia Reserve Bank increased interest rates from 4.5% to 4.75% to curb inflation.
On the contrary, the government may come up with policies that hinder the operation of businesses. If the licensing procedures are tedious and cumbersome, aspiring business owners will find it difficult to establish businesses. Laws pertaining registration of companies may also have a negative effect on the economy .The registration process should not take unnecessarily long period. The government may formulate policies that may lead to collapse of businesses and the stagnated growth of the economy. Introduction of the carbon and mining taxes is a case in point. Australian businesses are burdened by huge taxes. The goods produced by these companies are very expensive compared to goods from other parts of the world. Unpopular government policies involving taxation have been the major reason for the collapse of businesses. The ruling party in Australia has embarked on scrapping the carbon and mining taxes. This move by the ruling party is anticipated to create additional jobs for the people and reduce the red tape costs for businesses.. The government argues that the taxes undermine the value of the currency and reduce the competitiveness of Australian good in the global market. The benefits resulting from the environmentally friendly taxation system are almost illusory yet, it has an adverse effect on both businesses and prices of goods.
Most business policies formulated by the government are made to grow the economy. Errors of judgment made by policy makers make the policies to have a deleterious effect on the economy. The policies may also fail as a result of corruption and fraud on the side of the government. The government should conduct thorough research and consult all policy makers when coming up with a business policy.
Bibliography
Abbott, T. (2010). Our Plan: Real Solutions for all Australians. Sidney: Liberal Party of Australia.
Collins, H. (2010, November 2). Australia Raises Interest Rates to Control Inflation. Retrieved January 25, 2014, from http://www.dailyfinance.com: http://www.dailyfinance.com/2010/11/02/australia-raises-interest-rates-to-control-inflation/
Hooke, M. (2013, December 14). AUSTRALIA’S CARBON TAX: A BILLION DOLLAR DEADWEIGHT ON MINING. Retrieved jan 25, 1024, from Minerals Council of Australia.: http://www.minerals.org.au/news/australias_carbon_tax_a_billion_dollar_deadweight_on_mining
