RBA In Australia's Financial System

Determining the cash rate by the Reserve Bank of Australia establishes a number of different factors for the Australian economy. The RBA is responsible for controlling monetary policy and ensuring that Australia’s financial system is stable. In light of recent events that have impacted economic growth, the RBA has maintained a 2.0% cash rate, which affects the overnight rate for loans to commercial banks. Previously held at 2.25%, a decrease by 25 basis points brought down the cash rate to 2.0%, an all time low in the past decade. The RBA held an expansionary stance to promote investment and spending in the local economy in order to drive growth. It is recommended that the RBA maintain the current cash rate of 2.0% in light of consumer confidence

With the consistent increase of property prices and more personal debt than ever before, we assume that there’s a housing bubble in Australia. The statistics show that from 2008 till now, property prices have been going up as a result of increased mortgage debt. When it slows down, that could cause a property crash. We are sure that there’s a housing bubble, but we cannot confirm when it will finally burst although a few area in Australia has already met a decrease of house prices. There are 3 indicators of the housing bubble in Australia.

This has been the result of inflationary pressures due to excessive consumer demand, and a world increase in oil prices, the RBA’s primary objective is to contain inflation at 2-3% whilst also achieving sustainable growth. The current increases in interest rates will result in lower aggregate demand as consumers have less disposable income. This results in reductions in inflationary expectations, and a decrease in the demand for imports. Furthermore higher rates of interest will encourage overseas investment into Australia, thus resulting in an increase in the demand for the Australian dollar. An increase in the demand for the AU$, and a decrease in its supply due to less import expenditure will result in an appreciation of the AU$ in forex markets. Overall this results in depressed economic activity and lower levels of growth. However the RBA has been able to increase interest rates in order to contain inflation while maintaining economic growth. This is because the global economy has continued to grow at record pace, with strong growth in the US and China, and the recovery of Japan and Europe. Consequently demand for Australian exports has remained high, thus creating opportunities for increased production and subsequent economic

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

Booms, busts, recessions, and growth; all of the preceding terms are characteristics of a typical market economy. There are times when an economy can flourish spectacularly and there are times when it can fail miserably. Consequently, it is the responsibility of a nation’s central bank to manage these fluctuations through conducting effective monetary policy. The following paper will assume the perspective of the Reserve Bank of Australia (RBA) and critically analyze the past, present, and future of the Australian economy while considering specific sectors.

When the financial market is disrupted, the Federal Reserve can provide shot term credit to the financial institutions that can not find source of funding. Then the financial crisis may mitigate and the financial system could get well.

The Reserve Bank of Australia (RBA) has left the cash rate unchanged at 1.5% and this has not been changed since august 2016 (Lowe, 2018). The RBA has left it unchanged as the low level of interest rates is continuing to support the Australian economy. The housing markets in Sydney and Melbourne have slowed. Nationwide measures of housing prices have changed little over the past six months, with prices having recorded falls in some areas. As seen in graph 1 in 2018 the forecast for Melbourne, Sydney and Brisbane are that housing prices will drop but in 2019 they will rise again. If the RBA were to raise interest rates home owners with mortgages would be in great financial trouble and the housing market may crash. This is why the RBA is not

We observe appreciation within the Australian rate of exchange once an increase in commodity prices occurs and an improvement in Australia's terms of trade. In 2008, we observed commodity value indexes collapse, leading in successively to sharp decreases within the Australian dollar. As commodity costs have surged once more, this has caused farther appreciation of the Australian dollar. Lower inflation in Australia is another catalyst for appreciation of the currency. Over the years, an accrued demand for Australia's exported product and services has been indicative of Appreciation. As a significant exporter of natural products, Australia's terms of trade and future (long term) export performance are powerfully influenced by the costs of these products. With these costs currently over thrice their value held at the beginning of the resources boom in 2003, this has provoked speculative investment within the Australian dollar. When there are expectations prevalent, that the currency will appreciate based on speculation of the other changes in the domestic and global economy, we are sure to see this causing an actual appreciation in the Australian currency. Additionally Depreciation can be a consequence of a decrease in Australian interest rates or increase in overseas interest rates. Depreciation will occur when there is deterioration in investment opportunities in Australia or

This paper focuses on Australia’s business cycle. It explains factors of Australia’s business cycle, the rise and fall and how these have changed over time. This paper shows and demonstrates the key features of Australian business cycles during 2010-2015. It, specifically, identifies the chronologies in the nation’s classical cycle (expansions and contractions in the level of output) and growth cycle (periods of above-trend and below-trend rates of economic growth). Which presented an assessment of where Australia’s economy, in the past, current and future.

The interest rates of Australia have gained some increase after a large decrease over the past year. As the figure shows Australia’s interest rate in December is the highest in recent months even though it is incomparable to the rates of past years. In 2007 the interest rate started as 6.25 it increased in August up to December. In 2008 higher interest rates were acquired. The rates started from 7.00 but lost its momentum in September until December. In 2009 the interest rates was lower than the December 2008 rates. Some improvements were seen in the latter part of the year. The interest rates of Australia is just like its money market, both have experienced some difficult time and are on the path to recovery. A probable reason for the past

So to encourage investors the RBA would have to increase interest rates making borrowings more expensive, but because of the inverse relationship high interest rates has with demand in Australian economy it would also mean a slow in domestic income and consumption and consequently higher unemployment. (Foster, 2013)

It has been observed that the Australian economy has and still is in some areas experiencing a downturn. Consumers are more incline to constrain their spending for most of 2008-09.

The Inflation rate in Australia at the moment has been growing as a steady rate, but it hasn't been too drastic to cause any serious concern. The CPI Indicator for the year 2011-2012 has shown an increase of

The main reasons for the drop-in housing loan interest rates is because the Reserve Bank’s altered them to create a low inflation environment in the Australian economy.