APPLIED MACROECONOMICS QUESTION ANSWER 2022

Running head: APPLIED MACROECONOMICS
Applied Macroeconomics
Name of the Student
Name of the University
Author note

APPLIED MACROECONOMICS1
Table of Contents
Answer to Question 1......................................................................................................................2
Answer to Question 2......................................................................................................................4
Answer to Question 3......................................................................................................................6
Answer to Question 4......................................................................................................................8
Reference List................................................................................................................................10

APPLIED MACROECONOMICS2
Answer to Question 1
Reasons for slowing down of the Australian economy
In 2018-19, the Australian economy slowed down due to a severe drought and housing
downturn (Turner et al., 2016). The performance of the Australian economy weakened because
of the continuous reduction in the interest rate and expectation of further decrease since last year.
The Reserve Bank of Australia (RBA) twice cut the benchmark rate of interest to the lowest level
to 1.00 percentage point. The first-rate change was followed by the two consecutive rate cuts of
25 basis points since August 2016 (Streeck, 2014).
Figure 1: The adjusted nominal GDP growth
Source: (abs.gov.au, 2019)

APPLIED MACROECONOMICS3
Figure 2: Impact of Trade war on Australia
Source: (Assets.kpmg, 2019)
There are several other reasons for which growth has slowed. The US-China trade war
resulted in the slowdown of global economic growth, which affected potential recovery in home
investments and business of Australia. The escalation of tariff imposition between two developed
economies weighing on the economic growth of Australia as well as the other countries of the
world. The number of newly constructed building decreased, and housing sentiment in the
different parts of the nation weakened because of the sizable price reduction in the housing
sector of Melbourne and Sydney. The impact of the price reduction will be significant as both are
the largest markets of Australia (Herndon, Ash and Pollin, 2014). The price reduction in the
housing sector affected the household income growth and consumer spending. As, the value
reduction in housing sector, which is the most significant asset increased wary of consumers by
decreasing the value of other purchases.