Essays on Macroeconomic Policy in Australia Case Study

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The paper "Macroeconomic Policy in Australia" is a perfect example of a micro and macroeconomic case study.   The macroeconomic policy of any country is determined by the inflation rate, unemployment and economic growth rate. The percentage of inflation in the developed world ranges from 2.5% to 3%, following a recession in 1991. Whereas in other major countries they have a low rate of inflation of 2% or less per annum, Norway whose rate is 2.5% per annum is an exemption. For the past ten years, both core inflation and unemployment rates have gone slightly above the target of 3% per annum.

It can be viewed as if they have opted to have a high rate of inflation target thus being saddled with a high average inflation rate. The investors seem to have given into this rate which is interesting. Australia ranges among the highest with a 3% inflation rate per annum over the last 5-10 years. Consumer inflation is usually way above 3.5% though slightly. Inflation over the last 5 years has not been good nor has it worked well for the Australian economy (Lewis, et al, 2010).

It had nothing to do with monetary policy or fiscal policy prior to the financial crisis and also notwithstanding multiple media claims. Australia has had a slow development of its securitization markets and banking system that was 10-15 years behind the US and 5 years behind the UK. Australia’ s trading mix and exposure to Asia, strong population growth, extraordinary resources and luck associated with the housing cycle were running 3-4 years ahead of their peers. Inflation thus has been lower than expected making it much more stable although subdued in range industrialized economies.

For example, those economies which do not have explicit inflation targets, it is suggested that the fundamental change has occurred in the inflation process. The type of shocks that influenced inflation previously seems to have less influence. Currency depreciation generated an increase in inflation in Australia since it has a small open economy (Garnett & Lewis, 2010).

References

Hubbard, G., Garnett, A., Lewis, P. and O’Brien, A. (2013), Essentials of Economics 2nd Edition. Pearson Education, NSW. (Hubbard)

Lewis, P., Garnett, A., Treadgold, M. and Hawtrey, K. (2010) The Australian Economy:Your Guide, Pearson Educational, NSW. (Lewis)

Garnett, A. And Lewis, P.(2010), ‘The Economy’, in Aulich, C. and Evans, M. (eds), The Rudd Government, ANU E Press , Canberra.

Garnett, A. and Lewis, P.(2008), ‘The Economy’, in Aulich, C. and Wettenhall R. (eds), Howard’s Fourth Term, New South Wales, University Press, Sydney.

Gordon, C. and Valentine, T. (2009), Economics in Focus: The Global Financial Crisis, Pearson Education, NSW

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