Australia Economic Progress Report

RMIT University
MACROECONOMICS
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Australia Economic Progress Report
Current Events
In Australia, the cash rate has been held at 1.5% by the MPC (Monetary Policy Committee)
since 2018. All through 2018, it was expected that MPC would increase the cash rate by 25
bps. However, this has not materialised as the concerns about both global growth and
domestic growth have amplified. This is evident from the latest MPC minutes released in
March which highlight the impact of US-China trade war along with slowing growth in
China. In other parts of the world also, growth is slowing with Australia being no
exception(RBA, 2019). This has led to a change in policy stance which potentially could lead
to lowering of cash rate to 1.25% later this year.
This lowering of cash rate would be transmitted in the system in the form of reduced interest
rate. The impact of the same is represented as follows (Barro, 2017).
 The demand for loans would increase which would give a boost to aggregate demand.
This in turn would lead to higher consumer spending. This would improve the
capacity utilisation levels and lead to new private capital expenditure. Also, there
would be a lowering of unemployment since new jobs would be created.
 On account of higher aggregate demand in the short term, there would be an increase
in the inflation rate. This could potentially have an impact on the currency exchange
rate also.
GDP Highlights
The relevant chart obtained from excel is pasted below.

With regards to the most recent quarter, consumption categories with the highest growth rate
are as follows.
 Transport Services
 Insurance and Other Financial Services
Labour Market Highlights
The relevant chart for the unemployment rate comparison of the two genders and combined is
obtained from excel and pasted below.