Recession In Australia Essay

First, we need to understand how the Great Recession occurred. It all started with President Ronald Reagan in the 1980s. Reagan was famous for his supply-side economic views (Amadeo 1). He used top-down economics meaning he used government intervention to give businesses tax breaks and subsidies to create economic growth. With this he also started a continuing phenomenon to deregulate Wall Street. He believed this would create vast economic growth and it did. But it created a bubble and it

The figure obviously had not return to pre-crisis level. Moreover, recent commodity prices had fallen significantly which will affect Australia’s short and long term economy.

In 2008 the Global Financial Crisis occurred and it significantly damaged the global economy. Although Australia had not been affected as badly as other countries like the United States and China, the economy was not as good as it had been. Although the events that led to the GFC were largely contained within the United States, without any input from the Australian Labor government, the government continued to invest in new infrastructure and ventures. This was seen as bad economic management by many. Given the circumstances, the public believed that the government should be saving money rather than spending it. The high spending rate of Labor governments in the past has resulted in major problems for the Australian economy, due to its dependence on the mining industry. An example of this would be the Whitlam government from 1972-1975, whose excessive spending on new infrastructure (free tertiary education and Medibank being the two best examples) came back to bite them when the Oil Crisis occurred, significantly damaging Australia’s economy . Historically, Liberal governments, while spending much less on infrastructure and even removing infrastructure put in place by previous governments, have had a much better economic track record. This was likely a huge factor that influenced the election

Around the time of federation in Australia, the term 'white man's country' could be used to describe the climate within Australia to a significant extent. During this period many were occupied with the welfare of the empire (5), and the declining birth-rate at the time left many deeply concerned about the success of the new nation (5). There was also apprehension about non-white immigration, particularly Asian (5, 12), and this saw the press publishing anti-Asian immigration material (7). Furthermore, in 1901 the newly federated Australia passed two significant pieces of legislation which express the 'white man's country' sentiment clearly. Namely, the 'immigration restriction act' which essentially prevented non-Europeans from entering Australia, and the 'Pacific Islanders repatriation

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.

Australia’s fiscal stimulus seems to have offset the effect of the financial crisis in 2008. It has decreased the income inequality in the immediate year and may have also reduced inequalities in the short term economic inequalities, but it is hard to tell as results

Unfortunately, the mortgages would take a turn for the worst; thus, resulting in investment funds lost and the inability to repay the loans that they borrowed from the banks (Isidore, 2008). Left with nothing, the banks were forced to declare the loans as unrecoverable, reduce the bank’s reserve, and limit their ability to generate new loans (Isidore, 2008). These actions destroy the economy because both businesses and buyers need loans to pay for investment expenditures and finance consumption (Isidore, 2008). An early problem was “ mortgage-backed security”. According to AP Economics 19 edition, “ Mortgage- backed securities are bonds backed by mortgage payments”(Brue). In order to create mortgage- backed securities, lenders begin by creating mortgage loans (Brue). When they do, the lenders combine hundreds of loans into one and sell them off as bonds; basically selling the right to regain all future payments (Brue). In the end, banks receive an individual payment for the bond. Bond buyers recover the mortgage payments as the gain on the investment (Brue). As first, it seemed like a good decision on the bank’s party because it moved any future default risk on those mortgages to the buyer’s bond (Brue). Unfortunately, they fail to realize that they had lent the significant amount of money they got from investment funds to selling bonds (Brue). Moreover, the banks bought huge amounts of

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).

But even if we understand the changes, how can we compare the before and the after? What are the best parameters in doing so? What phenomenon is followed globally? This just summarizes one aspect of the essay which is followed by policy recommendations by the author in the later half. Though with the limited knowledge of the subject and experience the author has suggested a policy recommendation which aims at resolving existing or possible budding economic issues for Australia.

George Santayana, a Spanish poet and philosopher said, "Those who do not learn history are doomed to repeat it." This quote applies to the Great Depression of 1929 and the Great Recession of 2008. There are many similarities between the two, like the causes, the actual events, and the aftermaths. Several factors led to the Great Depression, which were the following: overproduction by business and agriculture, unequal distribution of wealth, Americans buying less, and finally, the stock market crash of 1929. The Great Recession also had similar factors leading to it, like the housing “bubble” burst and less consumer spending. In both events, the Presidents enacted programs that they believed would help the American people.

Big and small businesses alike stagnated and declined without opportunities for new growth and investment, and individuals suffered as each lost his/her homes, savings, and livelihoods. The official US unemployment rate skyrocketed to a historic high since the 1980s and GDP decreased by almost 3%, the first time since World War II. The Obama Administration enacted expansionary fiscal policy in the form of the Stimulus Package, formally known as the American Recovery and Reinvestment Act of 2009 (ARRA), in reaction to the recession. The ARRA made it possible for the government to spend over 800 billion in infrastructure, tax cuts, and unemployment insurance, as well as other programs. The Fed lowered interest rates dramatically, and the stimulus package seemed to revive the US from what could have been a worse financial disaster than the Great Depression; however, the Obama Administration response to the Financial Crisis, although commendable, did not go far enough. Despite a steady decline in the US unemployment rate and increase in GDP, the ordinary American is still experiencing the dirty aftermath of the Great Recession. Nearly 10 years since the start of the great financial crisis, economists are still learning from the mistakes of the past and the US government must enact policies and regulations to prevent another collapse or near

After the optimistic forecast from the realstate that the houses value were going to increase, many institutions started to make adjustments to take profit from this trend. In some cases, prime mortgages were allowed for subprime borrowers to take. This might look like a great idea to financial institutions because the house values were rising: if a people (who in the first place couldn’t afford a house) stop paying their mortgages then the bank could sell the house for a value greater than the one at the moment of default. Everything was going well, so how is it that the crisis unfolded? Well, these institutions wanted to make more profit

Ever since the Recession of 2008, the process of acquiring employment has become extremely challenging and exhausting. After months of searching, a significant amount of job seekers are willing to accept any job offers that will allow them to put food on the tables. If you follow the United States’ economic recovery, you probably know that there are about 10.5 million unemployed Americans and constant debates about how to create more jobs. What you may not know is that there are actually four million open jobs waiting to be filled. So how is it possible and who is there to blame?

On the 26th of November 2001, the National Bureau of Economic Research, declared that after ten years of economic expansion, the United States was in a recession as of March 2001 (Coplan 9). During the last quarter of 2001, the United States experienced a terrible tragedy; the 9/11 terrorist attack. However, economists believe that even if the terrorist attack had not taken place, the recession would have still been present, but it did in fact delay recovery. The recession of 2001 was by far different than all the other recessions. It was in fact, better than other recessions because the 2001 only lasted a quarter. Real GDP barley changed and the unemployment rates slightly rose (Nordhaus 2). It was found that banks have improved their performance during the recession, they were prepared for the worst this time around. During the 1990s, risk management became an important factor for banking discipline. Using risk managements, it gives the economy a potential to increase the stability. Thereby, banks benefited from an environment that rapidly declined short term interest rates, which enabled them to borrow at a lower cost (Schuermann 2). These risk managements played an important factor during the recession while impacting the United States economy in a positive manner.

In March 2015, Greg Jericho published an article called Weak, weak growth and six things about the state of Australia’s economy that outlined how in the past 6 out of 10 quarters the Australian