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Economics Assignment Question
Prepare a report on the current state of the Australian economy and its management by the Federal government by examining the following four economic indicators – economic growth (GDP), unemployment, inflation and trade?
Economics Assignment Solution
The substantial living standard of Australia and its well-being are well compared all over the globe which reflects the Australian economy as successful and well-managed. However, the economy of Australia has slowed down recently due to the collapse of the prolonged boom in the mining industry. As per the data of the Reserve Bank of Australia (2016), the growth of the Australian economy is at 3.3% presently and the inflation rate is 1.3%. The population in Australia stands at 23.9 million which is growing at the rate of 1.3% annually and the unemployment rate is at 5.7% till June Quarter 2016. The service industry contributes majorly by 65% in the GDP of the Australian economy and mining and manufacturing together contribute to 24.5%. This report presents the current state of the Australian economy by understanding the economic indicators, current macroeconomic policies of the Federal Government and the Reserve Bank of Australia. In light of these aspects, the report will outline the policy recommendations that will assist to achieve targeted growth, inflation, trade outcomes and unemployment. The current macroeconomic policies of Australia are discussed. In Australia, the fiscal policy conduct is focussed on the Charter of Budget Honesty Act 1998 that imposes on the government of Australia to set an official requirement reporting against the fiscal policy of medium term. In the Budget of 2016-17, the Australia Government proclaimed the fiscal policy of the medium-term that allows the flexibility to retort to the economic conditions that are ever-changing. In Australia, edging the monetary policy is the sole responsibility of the Reserve bank of India. The board of RBA decides the cash rate in order to achieve the objectives that are set as per the Reserve Bank Act 1959. The objectives include maintaining full employment, stability in Australian currency, economic prosperity, Australian community welfare. Since 1983, Australia has a floating exchange rate. The market forces decide the dollar value of Australia. The exchange rate of the Australian dollar has depreciated in recent five years. However, the depreciation is welcomed by the RBA as the weak dollar will stimulate the growth of the economy.
As per the findings of the report, the macroeconomic policies of Australia at this juncture are appropriate. The monetary policy of Australia has functioned well in maintaining a stable and low inflation rate. Secondly, the fiscal policy of Australia indicates the government’s intention to increase the external debt with the view to stimulate economic growth. However, the increase in debt will affect the financial stability of the Australian economy due to an increase in potential risk……………..