Australia's Economic Analysis: Cash Rate Impact and Trends

This report analyzes the impact of Australia's cash rate from 2008 to 2019, highlighting the Reserve Bank's strategy of reducing the cash rate to stimulate economic growth and employment. The analysis explains how lower cash rates impact household spending, investment, and the exchange rate...Read More

Corporate finance

Table of Contents
INTRODUCTION...........................................................................................................................1
REFERENCES................................................................................................................................2

INTRODUCTION
Interpretation- From the analysis it has been reflected that the cash rate in Australia over
the years had been declined that is from 2008 to 2019. This means that commercial banks of
Australia, over the years had taken more and more loans which in turn induces the reserve bank
of Australia in cutting down the cash rates from 6.50 to 0.75%. The major reason behind cutting
down the cash rate is to boost the economy of an Australia as it resulted to increase the
employment and this in turn leads to create stabilisation in many of the established markets, said
as the brighter look for resource segment that supports growth (Effects of cash rate, 2018).
Decrease in the cash rate had highly impacted the economy as it stimulated the household
spending and the investment through wealth maximisation and increase in the cash flow of the
households. Lower value of the cash rate leads to depreciate an exchange rate which in turn
results in higher net exports and the imported inflation. Decline in the cash rate by the reserve
bank of Australia leads brings price stability, economic prosperity, full employment and the
welfare of an Australian people.
It has ben predicted from the assessment that in the coming years, Reserve bank in
Australia will be dropping down its interest rates through 1 point by the series of the 4 rate cuts
in the future periods. Through it is been estimated that by the mid of the year 2020, reserve bank
will cut down the cash rate to 0.5%.
1

REFERENCES
Books and journals
Effects of cash rate. 2018. [Online]. Available through:<https://www.rba.gov.au/statistics/cash-
rate/>
2