Assignment on Macroeconomic Environment of Australia

Running head: MACROECONOMIC ENVIRONMENT OF AUSTRALIA
Macroeconomic Environment of Australia
Name of the Student
Name of the University
Author Note

MACROECONOMIC ENVIRONMENT OF AUSTRALIA
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Table of Contents
Introduction......................................................................................................................................3
Macroeconomic goals of the Australian economy..........................................................................3
Current trend in economic growth.............................................................................................3
Gross Domestic product (GDP)..................................................................................................3
Inflation rate...............................................................................................................................3
Unemployment rate.....................................................................................................................3
Exchange rate.............................................................................................................................3
Government debt.........................................................................................................................3
Other macroeconomic indicators...............................................................................................3
Stage of business cycle................................................................................................................3
Objectives of monetary policy.........................................................................................................3
Functions of the Reserve Bank of Australia..............................................................................3
Limitations of the monetary policy.............................................................................................3
Justification for unchanged official cash rate..................................................................................3
Implications of changes in the cash rate in future....................................................................3
Definition of economic growth........................................................................................................3
Determinants of long-run economic growth..............................................................................3
Effect of low interest rate............................................................................................................4
Conclusion.......................................................................................................................................4

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Introduction
The Australian government has been striving to attain the triangular goals of domestic
poise, external poise and financial growth under a single economic framework. These triangular
objectives are aimed at retaining the sustainable financial growth. Several studies conducted in
the concerned ground have asserted that the Australian economy is greatly influenced by the
overseas business cycle. The economic growth does not approach good signs even though
holding the inferior inflation rate and controlling the corpus of the foreign debts and liabilities.
The paper has strived to investigate impact of the macroeconomic signs, including, GDP,
business cycle, inflation and unemployment on the Australian economy. According to the
statistics, the Reserve Bank of Australia (RBA) has implemented various macroeconomic
stabilization monetary policies to recover the economic progress of Australia. However, most of
the policies have brought negative impacts on investment, consumption, public expenditure,
housing market and the broader economy. This has triggered a great challenge for the macro-
economic policymakers. On this account, the RBA Governor has decided to keep the cash rate
unchanged to maintain the target inflation and unemployment rate of the Australian economy, as
stated in the monetary policy of December 3, 2019. The data source has revealed that the official
cash rate has reached the historical low level of 1.5% in May 2019 with respect to August 2016.
However, the monetary authority has planned to reduce the cash rate to 0.75% in October and it
would remain same till December 2019.
Macroeconomic goals of the Australian economy
Following the Global Financial Crisis, the macroeconomic goals of the Australian
Government have been evolving around the inflation pressure and unsustainable economic

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growth (Doherty, Jackman & Perry, 2018). According to the economic theory, GDP,
employment, exchange rate and government debt to GDP ratio are considered as the fundamental
parameters to judge the macroeconomic condition of Australia.
Current trend in economic growth
Figure 1: Economic growth trend in Australia (January 2017 – July 2019)
Source: Source: (Tradingeconomics.com, 2020)
The figure 1 states that the economic growth has slipped down tom 0.4% in July 2019 as
compared to 0.6% of the last quarter. The reported figure has also missed the target rate of 0.5%.
This discouraging economic expansion is considered as the outcome of diminishing government
expenditure and household consumption. The economic growth has been expanded by only 1.7%
through out the third quarter of the year. Therefore, this can bring regressive impact on the
country’ goods and services, which is in turn, affects the per capita income of Australia. The
GDP per capita has been reported to fall by 3.5% (approximately) from 2018 to 2019.