The paper "Australia’ s 2015 Economic Situation" is a perfect example of a micro and macroeconomic case study. The Australian economy is in a transition phase as investors shift their capital allocations from resources projects such as iron ore to other sectors of the economy such as services and agriculture. According to RBA (2015), the country continues to record economic growth rates that are below trend in the last few years, a factor that has resulted in rising unemployment rates in the country. This is evidenced by fluctuating GDP figures with the ABS reporting a 2.3% GDP in 2014 with a mere 0.5% growth in the economy in the last quarter of 2014 (RBA, 2015).
As a result, Tom Allard of the Sydney Morning Herald reports that there seems to be a consensus in the market that Australia’ s economy is weak and needs interventions in order to spur it back into a growth trajectory. Australia’ s economic growth rate for the year 2015 is projected to reach 2.5 %, while the inflation rate is expected to be around 1.7% (RBA, 2015). The unemployment rate will average 6.4% while the services sector is projected to make the highest contribution to overall output (Common Wealth of Australia, 2014). RBA (2015) further notes that interest rates remain at historically low levels hence financing costs for business investments remain low.
As a result, in February 2015, RBA decided to hold interest rates at the previous month’ s rate of 2.25% in an effort to foster economic growth. However, in light of the fact that GDP growth rate remains low and may slump further, there is a likelihood that RBA may further reduce the cash rate to a new historical low of 2% in an effort to provide the much-needed liquidity to jumpstart economic growth.
This is further evidenced by Glenn Stevens, RBA’ s governor signaled in his March 3rd Monetary Policy statement that the RBA board is considering further reductions in the cash rate as available economic information indicates that Australia’ s economic growth rate is below expectations. The following report presents an analysis of the latest economic situation in Australia with advice to company directors on what needs to be done to enhance their profitability.
The report further outlines a forecast of the expected cash rate movements in 2015 based on current and expected economic performance.
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Australia Bureau of Statistics. (2015). 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Dec 2014. Retrieved April 1, 2015, from http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/5206.0Dec%202014?OpenD 0cument.
Commonwealth of Australia. (2014). Statement 2: Economic outlook. Retrieved April 1, 2015, from http://www.budget.gov.au/2014-15/content/bp1/download/bp1_bs2.pdf.
Kohler, M., Manalo, J. & Perera, D. (2014). Exchange rate movements and economic activity. RBA Bulletin, March, 2014. Retrieved April 1, 2015, from http://www.rba.gov.au/publications/bulletin/2014/mar/5.html
Pack, C. (2015). The Australian Economy and Financial Markets. Reserve Bank of Australia. Retrieved April 1, 2015, from http://www.rba.gov.au/chart-pack/pdf/chart-pack.pdf.
Reserve Bank of Australia. (2014). Economic Outlook: August 2014. Statement on Monetary Policy. Pp. 69-76. Retrieved April 1, 2015, from http://www.rba.gov.au/publications/smp/2014/aug/pdf/eco-outlook.pdf
Reserve Bank of Australia. (2015). International economic developments. Statement of Monetary Policy, pp. 5-12. Retrieved April 1, 2015, from http://www.rba.gov.au/publications/smp/2015/feb/pdf/intl-eco-dev.pdf