The Reserve Bank of Australia - Essay Example

Student’s name Course code+name Professor’s name University name Part A Government of Australia plays very important and crucial roles in building the Australian economy. One of the roles is to implementing of monetary policy in order to maintain stable economic growth (Adelman and Cynthia 2001). The Reserve Bank of Australia is the only recommended institution which is mandated with formulating and implementing the monetary policy. In Australia, the monetary policy involves short term interest management to maintain strong domestic economic objectives. The Reserve Bank of Australia ensures stability of currency, and also economic stability and growth. The Australian Reserve Bank Act of 1959 enumerates the objectives of monetary policy which the government is implementing through the Reserve Bank. The set objective by the Act includes; i. Australian currency stability ii. Full employment maintenance in Australia iii. Economic prosperity and well being of the Australian people The currency stability in most cases is regarded as price stability. The government is responsible for ensuring the Australian dollar is stable in terms of purchasing power of both goods and services (Irma 2003). In order to maintain the medium term price stability, both the Government and the Reserve Bank agreed to keep the inflation rate low at around 2-3%. This allows the natural short run variation of the economic cycle and maintenance of a clear bench bank performance over time. In this way, the government has a role in economy management. Another important role which the government of Australia plays is wealth distribution. The government is concerned with fair distribution of wealth among the members of society hence each and everyone can get source of income and a means of living (Irma 2003). Wealth distribution is done though taxation where high income earners are heavily taxed compared to low income earners while the government distribute basic social amenities to those who are not able to get them from private sectors due to high cost involve. Taxation Institute of Australia is the body responsible for advising the government concerning tax issues. The Australian government also creates employment opportunities to its population as a means of wealth distribution --- a role of allocating resources. To that regard, the government should ensure that the scarce resources efficiently located as much as possible. Through adequate resource allocation, the government will ensures that each and everyone should access to a reasonable services which includes healthcare, transport and education. In creation of enabling business environment within the Australian, the government is responsible for giving adequate security to its citizens and investors which is actually done through Standard business reporting Commission (SBR) --- an institution with a multi-agency initiative that will simplify business-to-government reporting (Adelman and Cynthia 2001). In addition, good security is a basic requirement for any state that wishes to attract investors in their country. The Australian government through its police force is task with the role of providing security (Adelman and Cynthia 2001). The government is also task with enacting laws and regulations which are able to promote ample business environments. Some of the laws include; taxation and contract laws. Australian Prudential Regulation Authority is yet another organization responsible for regulating the banking sector and other financial instruments within the country and the Australian government uses this body to regulate banking sector for fair play and wealth distribution. Part B In July 1st 1944, at the helm of the Second World War II, allied countries convened in Bretton Woods to come up with the new international monetary system and policy (Bretton Wood System). This was as a result of breakdown of the interwar gold standard and the destruction of economic policies that made leaders see the necessity of coming up with a new cooperative of trade arrangement and monetary body as a means of peace and prosperity in the world (Solomon 1992). The outcome of this conference also known as Bretton Wood Agreement contains issues like adjustable peg exchange rates system creation and the establishment of two giant financial bodies and organization which would maintain cooperation between countries for economic development and well-being. By the end of the Bretton wood conference, the participants drafted the international agreement and charter which later formed both the International Monetary Fund (IMF) and the World Bank. Three years later, the Bretton Wood Conference and the International Trade Organization was formed in Havana Conference. In the Bretton Wood Conference, member assigned World Bank its formal name as the International Bank for Reconstruction and Development and this gave it its main function of financing the economic development of the member countries. The first loan of the bank was extended towards reconstruction of the Western Europe which was destroyed by the Second World War II (Michael and Barry 1996). After the recovery of the western countries to sustainable economic path of self sufficiency, the banks changed its development agenda towards the world poorer nations where the bank loaned more than $330 billion towards development. One of the key purposes and aim of the World Bank is to promote social and economic progress in the third world countries through improving the productivity of those countries so that the citizens of those nations can live full life (Michael and Barry1996). The World Bank was also very important of creating peace and stability in Europe and bringing to an end to the World War II. The International Monetary fund (IMF) was assigned different purpose in the Bretton Wood Conference by the international community. In its establishment, the decisions of the participants of the conference were necessitated by the unresolved financial problems which caused the great depression of the 1930 (Solomon 1992). There was unpredictable variation in exchange rates of different nations and create stable exchange rates. The IMF was formed as a voluntary cooperative and it attracts its membership from the nations which are prepared in a spirit of self interest enlightened and to relinquish some measures of sovereignty of the country by abjuring practices injurious to the economic well-being of its fellow members’ states as well as overseeing its members' monetary and exchange rate policies and a guardian of the code of conduct (Solomon 1992). Philosophically committed to the orderly and stable growth of the world economy, the IMF is an enemy of surprise. Both the International Monetary Fund and the World Bank are the product of the Bretton Wood Conference and both helped in restoring the world peace and rebuilding the War torn areas to recover to the growing economic path. References Adelman, Irma, and Cynthia Taft Morris (2001) Society, Politics and Economic Development- A Quantitative Approach Hopkins Press Irma Adelman (2003) The role of Government in Economic development: University OF California AT Berkeley Michael D. Bordo and Barry Eichengreen (1996) The Role of International Organizations in the Bretton Woods System Solomon, R. (1992) The International Monetary System, 1945-1981: An Insider's View, New York: Harper and Row. Read More