Struggling household sector weighs on GDP outlook A struggling household sector - which is garnering the smallest slice of the nation's economic pie

Struggling household sector weighs on GDP outlook A struggling household sector - which is garnering the smallest slice of the nation's economic pie in decades - is casting renewed doubts over official predictions of a near-term rebound from a first-quarter dip in growth. Hampered by a series of headwinds in the opening months of the year, including bad weather that slowed both construction work and export shipments from northern Australia, annual growth faltered to the weakest pace since the 2009 downturn. Citigroup analyst Joshua Williamson said the accounts showed the wages share of GDP was at the lowest level since 1964....... "The flip side of the weak wages share is the highest profits share of GDP since December 2011," he said. "Hopefully the recent rebound in profits will feed into a stronger appetite for hiring and investment but so far the signs remain at best mixed." Author Jacob Greber Source: Financial Review, June 7 2017: http://www.afr.com/news/economy/strugglinghousehold-sector-weighs-on-gdp-outlook-20170607-gwmgdd

4. Given the information in the above article, what components of GDP have been affected? How would this affect Aggregate Demand? Using the AD/AS framework, and assume that the economy was originally in the long run equilibrium, show what happens in both the short run and the long run. Including a graph in your answer (4 marks) - Maximum number of words 250