Forecasting Methodology For A Forecasting Approach

In this report you will find current and past trends and target values for these indicators and the current macroeconomic policies of the Federal Government of Australia and the RBA.

Unemployment: As can be seen in Fig 3 below, the unemployment rate in Australia has recently dropped below 5.8%, which is the lowest it has been for over 20 months. This is despite the economy struggling over the previous 12 months due to a fall in investment in the mining industry. This has led to the Reserve Bank of Australia (RBA) reducing interest rates on two occasions in the past 12 months to encourage the non-mining sectors of the economy to fill this void and invest in resources, but some businesses are still reluctant to spend money. NAB economist Tapas Strickland said he expected strong jobs growth to continue into 2016, stating “ The forward indicators, such as jobs ads, suggest employment growth of 2% a year, and when you do the calculations, that implies 20,000 (jobs added) per month”. (Guardian, 2015).

Employment in Australia is on the rise with most people who are willing and able to work now having the opportunity to do so. Economists consider 5% unemployment which was the value in January recorded by the Australian Bureau of Statistics. Greater number of jobs created because of factors such as the mining boom and the recovery effect in Queensland because of the floods will further lower the unemployment rate. This will have the effect of consumers having more disposable income thus requiring an increase in long term interest rates.

The benchmark investment rate in Australia was last recorded at 2.25%. Investment Rate in Australia found the middle value of 5.13 percent from 1990 until 2015, arriving at an unequaled high of 17.50 percent in January of 1990. Inflation Rate in Australia averaged 5.21 percent from 1951 until 2014. Customer costs in Australia rose 1.7% during the time to the December quarter 2014, the slowest yearly pace in more than two years as petrol costs dove. Australian yearly inflation rate abated to 2.3% in the second from last quarter of 2014 from 3.0 % in the past period, determined by a fall in cost of electricity, after the removal of tax duty on carbon discharge beginning early July. An alternate key variable that impacts the business is the unemployment rate. While the unemployment is staying high it is normal that RBA will keep the investment rates and trade rates low. Unemployment Rate in Australia diminished to 6.30% in February of 2015 from 6.40% in January of 2015. Unemployment Rate in Australia found to be in between 6.91% from 1978 until

It is said that we are living in turbulent times. The Australia’s once-in-a-century commodity boom has reversed, leading many miners to cut back on investments and consolidate; which is expected to generate great social and economic hardship throughout these years. While more hope is casted into the construction sector, a cooling change blows in the housing market. Unemployment is tipped to rise and when it reaches a record high; consumption will continue to grow at a below-average pace, so business sentiment will remain fragile. Rather than fuelling the economy, the fiscal policy keeps straining it whilst the monetary policy will struggle to have an impact – indicating that the Australian economy is slipping downwards.

This report will detail the state of the Australia economy using key economic indicators, and provide an analysis and pinpoint any economic problems. Using this information it will further provide recommendations how to apply the monetary policy in the short and medium term to help the Australian government achieve its main economic objectives. Finally it will state the effects of these recommendations using three outlined economic criteria.

2011). A depreciating Australian currency is potentially inflationary, the depreciation of the Australian dollar lead to high Australian inflation rates, it cause a loss of export markets and reduce demand for Australian currencies. In this way, Australia’s inflation rates and costs are higher than its overseas competitors, at the same time domestic goods in Australia would be more expensive (Edge, K 2009). As well as inflationary pressures in Australia will increase, as imports would now be more expensive. This may increase pressure on the RBA to raise interest rates to defend its inflation target. With the result that Australian multinational corporations would cause it lost their overseas’ markets and customers, profit which from overseas would be decline and also pay for more interest

Marcio Alaor relates that the economic crisis that hit the world hard back in 2008 had a resounding affect on all the developed countries. However, Australia is a totally different story. Economists across the world are turning their attention to the country and wondering what is their secret. In fact, data released showed that the countries economy grew by a tremendous 2.5 percent, while other countries experienced major downfalls in the economy. The surprising fact is that this is the countries 25th consecutive year without a recession. Alaor relates that the world went through an economic crisis in the nineties. Australia was still able to keep their economic system growing.

Australia was thriving with an annual GDP growth rate averaging 3.01% until late 2008 to 2009 which plummeted to 1.73%4. They suffered the same fate as rest of the world, somewhat more insulated, with the impact of the Global financial crisis (GFC) after announcement of the collapse of Lehman Brothers. The clear evident impact of the financial crisis on most Australian households was the large decline in equity prices which had fallen by about 50% and dropped further in early 20095. Business and consumer confidence fell as a result of reduced wealth of Australian households. The same was observed in external demand i.e. demand for Australia’s

The demand for Australian exports varies for a variety of reasons. One reason is changes in commodity prices. Another is the terms of trade. These two variations tend to have an immediate impact on the AUD. A rise in commodity prices and an improvement in the terms of trade are generally expected to improve the Current Account Deficit (CAD). This will often result in an increase in the value of the AUD because of the expectation that the CAD will improve over the short to medium term.

Over the past five years the Australian dollar has significantly dropped in value, this holds significant impact for key areas in Australia’s international growth. Looking at charts from the past 5 years compared to the past 20 years, it was easy to see that the Australian dollar is currently sitting at an average rate, whereas from 2010 to 2013 the Australian dollar was at an unusual peak Pettinger, T. (2013). The International Monetary Fund’s latest forecasts show economic growth in Australia staying under 2.5% and below global trends in 2016 before a recovery over the next two years Gurrib, I. (2012). The significant factor in slower growth is the shrinking activity in China, Australia’s biggest export destination, which means fewer

Australian economy is ranked 5th in global ranking while in Asia-pacific regional ranking it’s ranked at 4th. The main components of Australian economy on which it’s based are retail trade 5%, manufacturing 7%, services (including finance) 58% and mining 7% and construction 9%. Currently Australia’s economy is growing at

Australia’s economy is considered stable and increasing slightly over the past couple of years. Its stability influences businesses to maintain the demand of goods and services. This can be analysed through unemployment rates remaining low with little movement, the GDP steadily increasing, and the inflation and interest rates remaining consistent. Overall Australia’s economy is doing well and looks to have a stable future because of the suggested economic indicators.

There is general consensus that the principal reason behind the strong Aussie dollar is that Australia currently fits the needs of one of the fastest growing regions in the world Asia. Australia’s strong Asian ties and Asia’s demand for our resources all work in the favour of the Australian dollar, and have helped sustain the rise of the Australian dollar against other leading currencies. The strength of the Australian dollar is not only a product of weaknesses in other major currencies. With low government debt, steady unemployment levels and a Triple A credit status, Australia’s economy is in a relatively healthy position, particularly compared with other major currencies including the Euro, US dollar and the Pound.

Over the past years, Australia has gone through many changes associated with their economy. In 1996, Australia was in a period of recession, but began to have economic growth in the years of 1997 through to the early 2000s. This growth of the economy was due to the weakening of the Australian dollar, which caused an increase in market shares in Australian exports. Because of the decrease in prices of Australian exports