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Australian Economy - Assignment Example

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Australian Economy Name: Course: Professor: Institution: City and State: Date: Australian Economy Introduction The government of Australia works with the Reserve bank in managing fiscal and monetary policies in the country. The bank was created by parliament in 1960 under a legislation known as the Reserve Bank Act, which was proposed in parliament in 1959…
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Australian Economy
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Australian Economy

Download file to see previous pages... The government, on the other hand, utilizes fiscal policies to ensure the economy grows at stable rates. The Reserve Bank and the government have ensured stability in the economy of Australia using fiscal and monetary policies since November 2011. The fiscal policy is in form of taxation and government spending; while the monetary regulation is in form of the cash rate and open market operations. The government and the Reserve Bank have succeeded in stabilizing prices and economic growth through the policies. The bodies have not managed to achieve full employment and balance of payment. Performance of the Australian Government and the Reserve Bank in running the economy from November 2011 to November 2013 Price Stability Price stability is achieved when the annual rate of inflation in a country is zero. However, it is hard for a country to achieve a zero rate of inflation because of price and wage rigidities. Price and wage rigidities refer to those charges that do not decrease below certain levels, for example, salaries of executive officers in organizations. The Reserve Bank of Australia set an inflation target of two to three percent (Reserve Bank of Australia, 2013); after taking into account price rigidities in the economy in 2010. Other countries that target the same figure include Hungary, Mexico, Spain, Japan, and Canada among others. This means that the rate that Australia set is favorable and it is widely accepted in the world. The Reserve Bank set the low inflation rate target to avoid the undesirable consequences of high rates of price instability, which include uncertainty, unfair distribution of wealth, and increasing tax benefits for businesses (Reserve Bank of Australia, 2013). These effects, consequently lead to low annual economic growth rate. The bank has managed to maintain the target inflation rate since November 2011. Year January -March April-June July-September October-December Annual 2013 2.5% 2.4% 2012 1.6% 1.2% 2% 2.2% 1.7% 2011 3.3% 3.5% 3.4% 3% 3.3% Quarterly inflation rates since January 2011. (http://www.rateinflation.com/inflation-rate/australia-historical-inflation-rate) The above figures show the rates of inflation in Australia since January 2011. The study, however, aims at determining the average rates from November 2011 to 2013. These include all the quarters of 2013 and 2012, and the last section of 2011 whose rate was 3%. The rate has remained within the 2-3% range in all the relevant quarters of the study. This means that the Reserve Bank has managed to stabilize prices in the country by use of monetary policies. Unemployment Unemployment is the inability of a qualified person to fail to secure a job at the prevailing wage rates. The unemployed people are willing to take jobs at the given wage rates, but they fail to find jobs in the market. Unemployment leads to undesirable consequences in the economy, for example, it lowers the per capita income, increases dependency, and leads to theft and prostitution among others. The government and the Reserve Bank have failed to ensure low rates of unemployment in the country since 2011 because of the instability of some sectors in the economy. Long term unemployment has remained above 5% in the country since October 2011; whereas the velocity was below that amount before this period (Chua, 2013). This means that the management of unemployment has been inefficient, and this pulls down the economic growth ...Download file to see next pagesRead More
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