Economic Policies for Reserve Bank of Australia Article 2022

Running head: ARTICLE REVIEW
Article Review
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ARTICLE REVIEW1
Introduction
This essay aims to critically review the news article on 3rd July, 2019 on Sydney Morning
Herald. The name of the article is “RBA calls on government to do more to boost economy”.
The focus of the essay is to discuss the various economic aspects of the article and relate it to the
relevant theories of macroeconomics and microeconomics. The concerned article mainly
discusses about the economic policies that Reserve Bank of Australia (RBA) take to boost the
economic growth of Australia.
Critical review of the article
The article moves around the statement of the RBA Governor Philip Lowe-“not rely on
monetary policy alone”. RBA cuts the interest rate by 0.25 points to 1 percent (Bagshaw and
Wright 2019). The rate is said to be the one of the lowest interest rate fixed by any central bank
of a country. The cut in interest rate is done under the monetary policy by RBA (Auclert 2019).
As per the article, the Dr. Lowe has asked the government of Australia to support the monetary
policy taken by the RBA with suitable implementation of fiscal policies. The objective of the
policy of the RBA is to lower the unemployment rate and an in increase wage growth (Mucuk,
Edirneligil, and Gerçeker 2017). The economy of Australia is suffering from a slowdown. The
households are consuming less and thus inventory pressure on the economy is piling up. Poor
trade relationship between US and China has been impacting the business sector adversely and
causes business confidence to fall. Consequently, many investors are not spending enough
capital and sitting idle. Hence, this is the time for the RBA and the government for Australia to
act. Hence, the Dr. Lowe urged the government to take fiscal policy measures and reduce tax rate
to boost the economy. The current unemployment of Australia was 5.2% then as per the article.
Dr. Lowe was of the belief that the unemployment rate should decline to 4.5% or less. According

ARTICLE REVIEW2
to him to boost the economy of the country, low unemployment rate is necessary. The concern
raised by Dr. Lowe regarding the slowdown in the economy was convincing as the economic
growth rate was low. Dr. Lowe was afraid that the cut in interest rate would not be sufficient to
generate the required amount of catalytic effect to boost economy in a way that both employment
rate and wages rise. Hence, the tax cut rate policy seems to be supportive enough to generate the
power to boost the economy to the required level. The argument of Dr. Lowe regarding use of
interest cut and tax cut policy concurrently is valid as using both would have neutralizing effect
on inflation. This is because rise in inflation due to tax cut would be nullified by fall in inflation
due to cut in interest rate and keep the inflation rate under control.
The model of aggregate demand (AD) and aggregate supply (AS) under the theory of
macroeconomics explains the policies used in the article best (Gaspar 2018). The policies about
which the article discussed are monetary policy and fiscal policy. The monetary and fiscal
policies are used to impact the macroeconomic factors that ultimately impact the economy of the
country and influences the economic growth of a country (Borio and Zabai 2018). Hence, in the
article it can be observed that the objective of the policies taken by the RBA was to influence the
unemployment and wages. Both wages and unemployment are macroeconomic factors that have
direct effect on the economy of the country. The article showed that during slowdown in
economy it is feasible to use monetary policy and fiscal policy to pull the economy out of the
adverse condition. Hence, from the contextual ground the article is completely relevant.
The policy used by the RBA to improve the economic condition of Australia is
expansionary monetary policy. These policies are used to increase the money supply such that
the aggregate demand increase due to increased consumption that further caused due to rise in
disposable income (Ndou and Mokoena 2019). On the other hand, the cut is tax rate is an