Impact of Monetary & Fiscal Policy on Australian Economy

This report examines the role of financial intermediaries and assesses the impact of government and monetary policies on the Australian financial markets. It discusses measures taken by the Reserve Bank of Australia (RBA) to stabilize an overheating economy, including depoliticizing the economy, privatizing banks, and reappraising the currency, while also considering potential issues that may hinder their success. The report defines fiscal policy, highlighting taxation and spending as primary tools, and proposes actions the government can take to improve a deteriorating economy, such as improving infrastructure and amending trade policies. Ultimately, the report concludes that a combination of fiscal and monetary policies is essential for maintaining economic stability and combating fluctuations, referencing Keynesian theory on contractionary fiscal rules to address demand-pull inflation.

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Financial market and Economic principles
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Executive summary
The purpose of this report is to elaborate the role of the intermediaries in the financial markets;
assessing the changes and the impacts of the government and monetary policy on the Australian
financial markets. Also, it explains the measures taken by the Reserve Bank of Australia to
stabilize the economy over an overheating economic environment. Discuss the issues which may
influence the success of these measures. Furthermore, it illustrates the action that can be taken by
the government to alleviate this issue when there is a sudden downturn.

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Contents
1.0 Introduction................................................................................................................................3
2.0 Measure uses by reversed bank of Australia to stabilize the economy.....................................4
1. Depoliticize the economy......................................................................................................4
2. Privatize the banks................................................................................................................4
3. Reappraise your currency.....................................................................................................4
3.0 The primary fiscal policy tool used by the government............................................................5
1. Taxation................................................................................................................................5
2. Spending................................................................................................................................5
4.0 Action to be taken by the government to improve a deteriorating economy.............................5
2. Improve infrastructures.........................................................................................................6
3. Amending advanced trade policy.........................................................................................6
6.0 Reference...................................................................................................................................7

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Financial market and Economic principles
1.0 Introduction
An overheated economy is a situation whereby there is good economic growth is experienced
over a long period and the action which will lead to high levels of price increases. Fiscal policy
is the government decisions regarding taxation and spending. Apart from government spending
is pursued funding scientific research and arts, building infrastructures, national defense, and
providing safety security for the citizens; also in stabilizing business cycle. The fiscal policy uses
to slow the depreciating growth cease the economy in the free fall and catalyst a regaining. For a
government, to upturn spending, it needs to generate extra aggregate demand in stabilizing an
economy, (Becker 2017)
2.0 Measure uses by reversed bank of Australia to stabilize the economy
The following are the measures used to stabilize overheating economic environment
1. Depoliticize the economy: this is the mostly target by politicians since it succeeds the
ability to issue rewards to their followers. Though, in Australia it is more politicized than any
other economic sector which has been revealed to be harmful for the last two years. Generally, in
Australian, three-quarter of the investment sectors involves the political influence, semiofficial
payoff, and government decision. Thus, this is the primary cause of the economic depreciated so
rapidly. In most cases, the corrupt politicians interfere with the project towards their point of
interest.

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2. Privatize the banks: over the years, Australia has been fears of awaiting financial crisis.
The government tries to inflate thousands of billions of dollars to the large companies, financial
institution, and banks system remains insecure.
3. Reappraise your currency: A year ago a group of guests from the United States asked you
to allow the currency to increase in value without good reasons, (Bernanke, Antonovics, and
Frank, 2015)
3.0 The primary fiscal policy tool used by the government
Fiscal policy is how the parliament and other ranked official elected to implement the economy
by mean of taxation and spending. This policy is employed in aggregation with monetary policy
which is amended by the central banks.
Primary fiscal policy tools are illustrated as follows;
1. Taxation, for instances property, sales, income, and the capital achieve from the investment.
The income provided by taxes attain by government funds.
2. Spending. Like public works projects, transfer of payment, government salaries, and
subsidies. Anyone who gets the funds will spend more money hence increases economic growth
and the demand, (Van den Berg, 2016).

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4.0 Action to be taken by the government to improve a deteriorating economy
Below are some of the actions to be;
1. Improve information.
Information is precious for enabling effective marketing. The government should improve
information technology to enhance online marketing and smooth communication locally.
2. Improve infrastructures.
Upgrading the infrastructures can be the most significant government role in raising marketing.
These markets infrastructures include well-maintained road, rail, well-facilitated market, health
facilities and availability of water. Centralizing the points of market-sale like auction yards,
require to be well located and designed.
3. Amending advanced trade policy
The government should take into consideration a trade policy to ensure that trade is going on
smoothly and in a well-organized manner. This will be of great significance to low-income
families since its offers goods and services at affordable price. Therefore, it will initiate
economic growth and lower the level of poverty internationally and locally.

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5.0 Conclusion
This report revealed that the fiscal and monetary in most the countries are combined to combat
the fluctuation of the economic and maintain its stability. An overheating condition is a
distinctive result which has raised the level of the inflation depreciating the efficiency of the
future economy. Keynesian theory state that a contractionary fiscal rule is amended when the
demand-pull inflation is faced in the economy, (Lusardi, and Mitchell , 2014, pg.5-44).

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6.0 Reference
Becker, G.S., 2017. Economic theory. Routledge.
Bernanke, B., Antonovics, K. and Frank, R., 2015. Principles of macroeconomics. McGraw-Hill
Higher Education.
Lusardi, A. and Mitchell, O.S., 2014. The economic importance of financial literacy: Theory and
evidence. Journal of economic literature, 52(1), pp.5-44.
Van den Berg, H., 2016. Economic growth and development. World Scientific Publishing
Company.