• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month
Page
  1. 1
    1
  2. 2
    2
  3. 3
    3
  4. 4
    4
  5. 5
    5
  6. 6
    6
  7. 7
    7
  8. 8
    8
  9. 9
    9
  10. 10
    10
  11. 11
    11
  12. 12
    12
  13. 13
    13
  14. 14
    14
  15. 15
    15
  16. 16
    16
  17. 17
    17
  18. 18
    18

Australia has had one of the strongest economies in the world in recent years, more competitive, open and vibrant than ever.

Extracts from this document...

Introduction

Contents 1. Introduction 2 2. Methodology 2 3. Economic Objectives 2 3.1 Economic Growth 2 3.2 Internal Balance 3 3.2.1 Full Employment 3 3.2.2 Price Stability 3 3.3 External Balance 4 3.4 Standard of living 4 4. Economic Indicators 4 4.1 Gross Domestic Product (GDP) 5 4.2 Inflation 6 4.3 Unemployment 7 4.4 Current Account Deficit 8 5 Macroeconomic Policies 9 5.1 Monetary Policy 9 5.1.1 Monetary Policy at work in our economy 9 5.2 Fiscal Policy 10 6.2.1 Fiscal Policy at work in our economy 11 5.3 Effectiveness of Australia's Policy Mix 12 6. Economic Outlook for the future 14 6.1 Coincidental Indicators 14 6.2 Leading Indicators 14 6.2 Indicators relating to government objectives 15 7. Conclusion 15 8. Bibliography 17 1. Introduction Australia has had one of the strongest economies in the world in recent years, more competitive, open and vibrant than ever. Australia's strong economic performance over the past decade has been rooted in strong growth, low interest rates and low inflation. It has also been the result of an aggressive and lively private sector, a skilled, flexible workforce, effective macro-economic management and on going micro-economic reform. This management and reform takes the physical form of government policies known as monetary and fiscal policy, and government initiatives relating to micro-economic reform. (Australia Now, 2003) 2.0 Methodology In researching the Australian economy my main source of information was the internet. Online I found many informative articles and interviews which have proven invaluable in my discussion of the economy. I also utilised books from our school library, classroom notes, textbooks and human sources to further my understanding of the Australian economy. After having compiled all of my research I designed a detailed plan of my analysis and set about writing it. 3.0 Economic Objectives In order for the government and economists to assess the effectiveness of our fiscal and monetary policy, they must consider several factors. ...read more.

Middle

(Alcorn, 2003) 5.1 Monetary Policy Monetary policy aims at influencing the level of interest rates in order to achieve the desired economic objectives of a country. Monetary policy is today effected by the Reserve Bank of Australia (RBA) which is independent of government control. Whilst in theory this may be seen to be true, the bulk of employees sitting on the board of directors are government appointed. (Bulmer, 2003) Australia's monetary policy aims to ensure that inflation remains low and that the swings of the business cycle are kept under control. Ultimately, monetary policy is aimed at ensuring internal balance by stabilising aggregate demand and controlling inflation. (Bulmer, 2003) 5.1.1 Monetary policy at work in our economy In 1993 the RBA adopted a target for monetary policy. This target was to maintain underlying inflation to a rate between 3 and 4 percent, and it is argued the government has done well to realise this objective (Fig. 9). The early 90s saw a high inflation rate, predominantly as a result of the 90/91 recession. CPI remained fairly constant, around the 2.5% mark until the mid 90s. Fears of an accelerated inflation figures in the period between 1994 and 1996 prompted the Reserve Bank to raise interest rates (See Fig. 8). The cash rate stood at 7.5% at the end of 1994. Until 1996, it stayed at this level - the RBA then declared the inflation had fallen enough, and with the slowing down of the Australian economy in 1996, the RBA cut the cash rate back to 6% in an attempt to encourage economic growth. In 1997, the RBA cut back the cash rate a further 1% to 5%, where it remained until late 1998. This was a move to try to increase growth further than previous expansionary moves in 1996 had allowed, however it did not have the effect the RBA were looking for. ...read more.

Conclusion

Unfortunately, Australia's CAD will only increase in 2004, as a result of a drop in exports and an expected rise of 10% in imports (Allan, 2003). This will obviously create a budget deficit which will lead to greater foreign debt. As a result of this, fiscal policy is likely to adopt contractionary policy. Monetary policy should remain fairly constant for the moment. As the economy reaches its peak and begins to decrease, however, the RBA will adopt an expansionary stance in relation to monetary policy, and will lower interest rates. In relation to the final government objective, therefore, CPI will decrease initially as a result of a break in the drought and the return of agricultural goods to lower prices. In the longer run, however, as the RBA ease monetary policy, CPI will rise once more. (NOIE, 2003/Anderson, 2003) 7. Conclusion As has already been discussed, the Australian economy has experienced a sustained period of recovery over the last ten years. This recovery period is nearing its end, suggesting that the economy is nearing a boom period. The indicators of GDP, CPI, Unemployment and CAD have been discussed and with exception of the latter, have all been found to be strengths of the economy. Arguably, with careful fiscal policy management in the future, CAD can also become a strength for Australia. In terms of monetary and fiscal policy, the RBA and government respectively are doing an excellent job of managing our economy, with the exception of foreign debt, which fiscal policy needs to target in the future. The future seems to be bright for Australia, with growth expected in spite of the recent drought. This can be attributed to a lively and productive housing and construction sector, which form a solid foundation on which our economies growth is built. Unemployment is also set to improve as is the price stability of our economy. As previously mentioned, however, CAD is still an area of concern. Ultimately, however, the Australian economy is headed in the right direction and should remain a world-competitor for years to come. 8. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Economics - Classical School of Thought, Keynesian School of Thought, Supply Side School of ...

    He said, "The basic long-run objectives, shared, I am sure by most economists, are political freedom, economic efficiency and substantial equality of economic power...I believe-and at this stage agreement will be far less widespread - that all three objectives can best be realized by relying, as far as possible, on

  2. Macroeconomic Objectives and their impact on Business Activity

    This means they might search for another job to tide them over until they can successfully return to their jobs. ASDA recruits temporary workers to help with the Christmas season so could therefore benefit from the seasonal unemployment caused by another industry by recruiting the unemployed to work for them over the Christmas period.

  1. Supply side policies and its economic impact.

    This might lead a casual observer to conclude that high European unemployment is a product of the "social welfare state", which puts weight on solidarity but at the cost of productivity and economic efficiency. Yet it is too hasty to claim that Europeans have erred too far in the direction

  2. Why has Nucor performed so well in the past?

    Hold Up History predicts an increasingly volatile cycle of poor performance driven by industry structure, company behavior and investor response. Investors may no longer see the TSC industry as a long-term investment but as an opportunistic speculation. The increased risk and volatility may raise the cost of capital for steel companies, making investment in more efficient manufacturing capability difficult.

  1. An Empirical Investigation into the Causes and Effects of Liquidity in Emerging

    This marked a period just after the Asian crisis had ensued, mid-1997 whilst continuing to impair growth throughout 1998. In the summer of 1998 there was also economic and political crisis in Russia. This coupled with the devaluation of the Brazilian real in Jan 1999 marked a period of 3 years of solvency and liquidity problems in emerging economies.

  2. Critically evaluate the perceived competitive starategies of the five clothing retail outlets, namely Edgars, ...

    ( Narayanan et al 1985). Accordingly to Johnson & Scholes ( 1999) political factors influencing the direction of a firm include monopolies, environment protection laws, taxation, taxing policies, foreign trade regulations, employment and government stability. South Africa TEXTILE AND APPAREL INDUSTRY INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S.

  1. Discuss the policy options the Australian Government can use to achieve external stability

    separately as an indicator of external stability even though it is a component of the CAD. In Australia, large persistent deficits on the net income component of the CAD can obscure our view of Australia's trade performance and international competitiveness.

  2. PEST and competitive analysis facing by confectionery organisations

    There could be bans, quotas or a high tariff on imports into other countries i.e. there where strict standards that English chocolate had to meet before it could be imported into Holland a few years ago. Economic Environment Analysis of the economic environment will centre on changes in the macroeconomic and their effects on business and consumers.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work