Role of Government in Mixed Economies Such as Australia

1768 WordsOct 8, 19998 Pages
Role of Government in Mixed Economies Such As Australia What role do governments have in modern mixed economies such as Australia? Using appropriate indicators (macro economic aggregates) outline the present state of the economy. In what ways is the Commonwealth government using fiscal and monetary policies to influence the Australian economy? What are the main features of the government's micro economic policy? Why is the government concerned about microeconomic reform? Synopsis: The role of government in Australia today has less influence on the market than they did a decade ago. It function now is to provide a stable internal and external balance under which the market can function. This is achieved through the use of fiscal,…show more content…
A boost in spending increases aggregate demand followed by an increase in retail sales but will also fuel inflation. Interest rate drops in the latter half of the year has not had much effect on the economy. Economic growth slowed to 3%, investment dell from 17% to 10% between 94/95 and 95/96, profit growth fell from 16% to 3%, unemployment rose from 8.4% to 8.8%, the growth of retail sales has slowed and both business sentiment and consumer confidence has fallen. This poor performance may be attributed to the reduction of government spending during the 96/97 budget. Only inflation managed to drop to the RBA's target of 2-3% underlying inflation. New figures released in early March 97 show an increase in retail sales and economic activity. This may be a response to the drop in interest rates from the previous year. Microeconomic reforms (MER) are initiatives taken by the government to improve resource allocation and efficiency. By doing so they improve productivity, international competitiveness, economic efficiency and long-run economic growth. A growing economy provides an environment in which the success of MER is high. The government uses macroeconomic policies to provide this type of environment. There are three main objectives to MER, they are: 1) To raise the supply potential of the economy. This will lead to higher economic growth, domestic demand and living standards. 2) Reduction in interference with price signals in the labour and product
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