Applied Economics: Economic Growth Trend and Fiscal-Monetary Policy in Australia

Running head: APPLIED ECONOMICS
Applied Economics
Name of the Student
Name of the University
Course ID

1APPLIED ECONOMICS
Table of Contents
Economic growth trend in Australia..........................................................................................2
Fiscal and Monetary policy in Australia....................................................................................2
References..................................................................................................................................5

2APPLIED ECONOMICS
Economic growth trend in Australia
Mar-2011
Jul-2011
Nov-2011
Mar-2012
Jul-2012
Nov-2012
Mar-2013
Jul-2013
Nov-2013
Mar-2014
Jul-2014
Nov-2014
Mar-2015
Jul-2015
Nov-2015
Mar-2016
Jul-2016
Nov-2016
Mar-2017
Jul-2017
Nov-2017
0.0
0.5
1.0
1.5
2.0
2.5
Economic growth
Quarter
Rate of growth
Figure 1: Trend in economic growth of Australia
(Abs.gov.au, 2018)
The economic growth in Australia has undergone a cyclical fluctuation over. Gross
Domestic Product in the first quarter of 2016 grew at a rate of 1.1 percent. This is the fastest
growth rate since the third quarter of 2012. Market had been expecting a slow year on year
following the downward revision of economic growth in the fourth quarter of 2015. The two
quarter of negative GDP indicated a technical recession in the economy between 2011 and
2017. It has been almost a century since the Australia had been in a recession. The main
drivers of economic growth in Australia are final consumption expenditure of the household
and export (Cravino & Levchenko, 2016) The contribution of consumption and exports are
0.4 percent 1.1 percent respectively. In addition to household consumption expenditure,
government consumption expenditure contributed 0.2 percent of GDP. Factors significantly
influencing Australian GDP include cyclical fluctuation in commodity prices like minerals,
agricultural export and energy.
Fiscal and Monetary policy in Australia
Monetary policy refers to the policy related to interest rate. The figure below shows
Australian cash rate from 2001 to 2018. As evident from the figure, RBA was undertaken
strategy of a loose monetary policy from 2011 to 2017. RBA set the cash rate to a lower level
in order to have the intended effect (Yates, 2016). There is a gradual downward trend in the
cash rate with cash rate now set at the lowest level of 1.25 percent.