Use Of Macroeconomics In The Australian Economy

Australia’s economic status can be assessed using a range of economic indicators such as unemployment rates, Gross Domestic Product (GDP), inflation rates and interest rates. The economy can affect Australian business’s greatly causing them to flow through the business cycle. The business cycle purpose is to describe the overall trends of the economy and can show growths of high or negative. The four stages in a business cycle are: expansion, this is when the economy has high demands; peak, this is the turning point of the expansions before the economy falls down. A contraction is when the demand for goods and services are low; and trough, is the opposite of a peak. To evaluate Australia’s current economic status factors such as unemployment

This report will show an overview of the current state of the Australian economy and its management by the Federal government through examining economic indicators such as economic growth (GDP), unemployment, inflation and trade.

An indication of the overall impact of fiscal policy (FP) on the state of the economy is the fiscal outcome. The three possible outcomes include a fiscal surplus (positive balance where government expenditure exceeds revenue), fiscal deficit (a negative balance where government revenue exceeds expenditure), and fiscal balance (a zero balance where total government revenue equals expenditure). The main aim of fiscal policy is to achieve fiscal balance, on average, over the course of the economic cycle. The Howard Government targeted a fiscal surplus of 1% of GDP, whereas the current Rudd Government has raised this target to 1.5% of GDP,

The government may also use monetary policy in order to contain economic growth. Monetary policy refers to changes in interest rates in order to influence aggregate demand and economic activity. Monetary policy is conducted by the Reserve Bank of Australia, who use domestic market operations in order to change interest rates. If the RBA takes a loose monetary policy stance the RBA will purchase Commonwealth Government Securities in secondary bond markets. This increases the cash in the markets, and therefore pushes the overnight cash rate down. Interest rates will be lowered, which will result in higher consumer demand as the cost of interest on mortgages and credit card repayments will decrease. On the other hand a tight monetary stance results

Monetary policy is the regulation of the money supply to influence variables such as inflation, employment, and economic growth. Fiscal policies, on the other hand, use the ability to tax and spend in order to influence those same variables (McEachern, 2014, p. 57). A blend of both of these policies is essential for improving the economy when a recession has occurred.

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.

The fiscal policies refer to the way in which the government affects those activities in the economy of a country. The major common fiscal policies that occur in the economy are the government expenditure and the level of taxation and they are usually advocated by the Central Bank of the country. The fiscal policies are a strategy that relates to the monetary policies that are used by the central bank of a country to control level of money supply in the country. The fiscal policies have a lot of influence on the money supply in the economy.

Fiscal policy is a macroeconomic management tool that involves the use of the Commonwealth Government’s Budget In order to achieve the government’s economic objectives of. The budget is the tool of the government for the exercise of fiscal policy, it shows the government’s planned revenue for the next financial year. By varying the amount of government spending and revenue, the government can alter the level of aggregate demand, which in turn will influence economic growth, environmental sustainability, distribution of income and wealth, internal stability (inflation and unemployment) and external stability (current account deficit, foreign liabilities and the exchange

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.

Monetary policy is the national macroeconomic regulation and control of two basic policies. It’s mainly work by implementing expansionary policies to adjust the relationship between social total supply and total demand. They have emphasized particularly on, and closely linked. And it must handle the relationship accurately and correctly. According to the actual situation and using the monetary policy, coordinate and flexible, to give full play to its due role. The government should ensure sustained, rapid and healthy development of national economy. The country to adjust the social capital supply and demand should as far as possible to avoid administrative interference, and should use economic means to guide, when the monetary policy effect is not obvious, fiscal policy should play a leading role.

Monetary policy, ‘The government’s policy relating to the money supply, bank interest rates, and borrowing’ (Collin: 130), is another tool available to the government to control inflation. Figure 4 shows, that by increasing the interest rate (r), from r1 to r2, the supply of money (ms) is reduced from Q1

Monetary policy is the mechanism of a country’s monetary authority (usually the central bank) taking up measures to regulate the supply of money and the rates of interest. It involves controlling money in the economy to promote economic

Monetary policy takes central part in discussions on how to promote low inflation and sustainable growth in the economy. Monetary policy operates as a tool to reduce prices during inflation and enhance growth in recession times. Its basic objective is improvement of price stability and achievement of high employment levels in the economy. Thus monetary policy not only fosters economic prosperity but also safeguards people’s welfare.

| Advocates of active monetary and fiscal policy view the economy as inherently unstable and believe that policy can manage aggregate demand, and thereby, production and employment, to offset the inherent instability. When aggregate demand is inadequate to ensure full employment, policymakers should boost government spending, cut taxes, and expand money supply. However, when aggregate demand is excessive, risking higher inflation, policymakers should cut government spending, raise taxes, and reduce the money supply. Such policy actions put

Monetary policy involves manipulating the interest rate charged by the central bank for lending money to the banking system in an economy, which influences greatly a vast number of macroeconomic variables. In the UK, the government set the policy targets, but the Bank of England and the Monetary Policy Committee (MPC) are given authority and freedom to set interest rates, which is formally once every month. Contractionary monetary policy may be used to reduce price inflation by increasing the interest rate. Because banks have to pay more to borrow from the central bank they will increase the interest rates they charge their own customers for loans to recover the increased cost. Banks will also raise interest rates to encourage people to save more in bank deposit accounts so they can reduce their own borrowing from the central bank. As interest rates rise, consumers may save more and borrow less to spend on goods and services. Firms may also reduce the amount of money they borrow to invest in new equipment. A