...n EFiscal policies can stabilize Australia’s economy by Leena Palekar The role of a government is to stabilize economy, or smooth out business cycles, as economic activity in a market economy tends to fluctuate considerably. Economic policy tools that are capable of influencing spending decisions of millions of buyers are government spending and taxes (fiscal policy), and interest rates and money supply (monetary policy). The following analysis shows how the Australian economy has used fiscal policies to smooth out economic fluctuations and reduce its impact on consumers. Fiscal policy uses changes in government spending and/or reduces taxes to influence the level of aggregate demand to impact the general direction of the economy. Governments use infrastructure projects for this purpose, which involve building or repairing roads, bridges, parks and public buildings during recessions especially when the construction industry...
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...AUSTRALIA’S ECONOMIC STIMULUS PLAN TABLE OF CONTENTS Abstract 1.0 Introduction……………………………………………………………………………………2 1.1 Background/ History of Australia’s Stimulus Plan……………………………………………2 1.2 Definition of Fiscal Deficit……………………………………………………………………3 2.0 Consequences of Australia’s Fiscal Deficit on the Economy…………………………………4 3.0 Implications of Australia’s Fiscal Deficit for the next 3 years………………………………..4 Abstract The 2009 economic stimulus plan helped Australia climb up the recession. This helped save the finances of Australia making it one of the strongest in the developed world. The A$40 stimulus package was amongst the biggest too in the whole world, this not only have positive effects on the economy but also led to persistent fiscal problems which are still persistent. One of the major Australia’s trading partners, China, is growing at very fast rate which needs to be controlled so as to reduce the company taxes charged to Australia’s mining companies. The 2009 economic stimulus package not only saved Australia from the recession but it also led to improved infrastructure, created investment opportunities which led to employment. However, it led to increased taxes and high exchange rates. 1.0 Introduction In 2008 the world experienced an economic meltdown that saw a collapse in economies and also businesses. Not only were the economic power houses with busy stock and housing markets suffer but also small economies. Some of the countries predicted...
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...of government economic management policies to the pursuing of economic sustainability This assessment task is broken down into four (4) unit activities to be completed at the end of each unit starting 23rd February 2015 and submitted to Moodle for draft feedback Unit Activities (What are the unit activities) • Introduction (economic objectives) / monetary policy • Fiscal policy • Micro Economic Reform (M.E.R) • Evaluation of the government's policy mix Tasks Your investigation must cover ALL of the following aspects: Week 1: Using economic data as support, outline the past (last 5 years) and current trends in Australia’s GDP Annual Economic Growth and the unemployment rate. Compare the changes in the macroeconomic policy and the achievement of Full Employment over the last 5 years using economic data trends. Introduction What is economic sustainability • briefly outline the main economic objectives of the Australian government (economic growth, full employment and price stability) • state the Australian government target rates for real GDP, unemployment and inflation Monetary Policy • Briefly define what monetary policy is and how it is implemented • Explain, in some detail, the macro policy change that has been implemented by the RBA (monetary policy) since July 2014. • Clearly explain how the policy should operate with regards to aggregate demand based on the above policy change • Briefly discuss one strength and...
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... including an analysis of Australia’s GDP growth rate since 2000 and the drivers of GDP growth in Australia. What are the implications of your outlook on monetary policy settings? Name: 1,500 Student No.: Word Count: MGSM845:ECONOMIC CONTEXT OF MANAGEMENT Term 2, 2013 The Australian resources sector plays a vital role in the Australian economy. The resources sector is the largest contributor to merchandise exports, a major contributor to GDP, a major employer, a major contributor to government revenue and investment. Other benefits such as its contribution to rural and regional development and technological development and environmental research are also significant. Australia has experienced significant GDP growth since the early 2000’s, it has effectively been a two speed economy where the strong mining sector growth has been offset by the reduction in the manufacturing sector. Following the global financial crisis in the late 2000’s, the Australian government fiscal policy placed significant pressure on the foreign exchange rate which lead to slowing of industries and sectors sensitive to such movements including tourism, local manufacturing, education and agriculture. Australian Gross Value Added (GVA) 2000‐2012 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 Agriculture, forestry and fishing Mining Manufacturing ...
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...Australia's Fiscal policy, based on the changes of the current federal budget, viable for a stronger economy? This essay aims to illustrate, the success of Australia’s fiscal policy implemented by the current federal budget and its effects for the long-run. In relation, do these strategies provide sufficient evidence that ensures Australia’s “position of strength in the world economy” and if they are considerably better, in comparison to other international economic environments? I will focus primarily on the government’s expenditure on investment to boost the economy and the resulting effect it has towards the productivity, innovation and competition for Australia. The 2013-14 Budget, which illustrates a reduction in taxes of about $ 17 billion and an increase in expenditures of $ 24 billion, is strongly coherent, increasing aggregate demand by about 3 per cent. This process of fiscal expansion has been possible given the low Australian government debt that allows restoring an even budget by 2015 – 2016. There are several fiscal challenges directed to the 2013 Federal Budget. One particular Domestic challenge involves the importance on maintaining fiscal and monetary policy alignment. The previous federal budget 2012-13 fails to preserve alignment between fiscal and monetary policy. As a contractive fiscal policy lead to a decreasing aggregate demand by about 2%, the Reserve bank was cutting interest rates to stimulate demand. Thus, it is a challenge to keep a coherent fiscal and...
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...Study Center Sydney Faculty of Business Assessment item- 3 Class: ECO130– Business Economics Lecturer- Dr. Harpreet Kaur Student Name- Sidharth Shanker Student Number -11511309 Due Date - 30/09/2014 Answer-1 Frictional unemployment occurs when people seek new jobs or when they decide to switch their existing jobs (Deepashree & Agarwal, 2006, p.7.4). In other words frictional unemployment is the time required for people to search for a new job. Frictional unemployment is usually short-term and does not affect the public policies or social welfare. In contrast, structural unemployment is occurred as a result of people’s inability to match their skills with existing job opportunities. The reasons for structural unemployment could be the changes in structure of the nation’s economy, which is a result of changing tastes and demand conditions or from changed production processes. Finally, cyclical unemployment occurs mostly during recessions when there is a lack of job opportunities (Arnold, 2013, p.140). Full employment occurs when the economy operates at an unemployment rate which is equal to the sum of seasonal, frictional and structural unemployment rate. In other words full unemployment could also be defined as the unemployment rate in an economy without the cyclical unemployment. This is because cyclical unemployment varies with the business cycles (Hall & Lieberman, 2012, p.556). Furthermore, even when the economy is at full employment there...
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...Name: Pradeep Essay: “The Australian government has been running with too large a fiscal deficit during the past 4 years particularly in light of their projections for the Australian economy which were made when the first stimulus package was announced in 2008". Discuss this assertion and the consequences of this fiscal deficit on economic activity during the past 4 years. What are the implications of your analysis for Australia's fiscal policy during the next 3 years? EXECUTIVE SUMMARY Global Financial Crisis (GFC) evolved from its origin in subprime mortgage crisis of United States and affected almost every country in the world. Australia entered into GFC with a strong position, as compared to the other OECD countries. Australian government implemented stimulus packages in order to deal with the situation. This reports looks at the consequences of the fiscal deficit on economic activity and its implications for Australia’s fiscal policy. Its direct impact on Australia was small – mostly increases in bank borrowing costs The case for fiscal stimulus was based on Keynesian model, which proposes a short term government spending to stimulate the economy during the recessionary period. However, Basic Keynesian model assumes that the exchange rate is fixed. The analysis shows that significant contributor for GDP (expenditure) was net exports over that period, not the consumption. This increase in demand was due to the depreciated Australian dollar and the strong demand...
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...Name: Jane Holman Student Number: 220034259 Unit: MM 302 Assignment: Assignment one - essay Due Date: 20 August 2010 0 Introduction The following report goes into detail about the governments involved in a market economy, the government influences four main areas in the economy which are; enforcing antitrust laws, preserving property rights, providing a stable fiscal and monetary environment and preserving political stability. Also the report will cover why there can never be a truly ‘free market’ economy, where there is absolutely no government intervention. Market Economy In a market economy, the majority of a nation’s land, factories, and other economic resources are privately owned, either by individuals or businesses (Wild, Wild & Han 2010:151). It is also an economy in which prices of goods and services are freely set based on the laws of supply and demand which are unfettered by interference from a government or other outside bodies. A market economy at its basic is an economy run entirely by the market itself (McGuigan 2003:1). In contrast to a market economy is one which follows the Keynesian principals which is an economic theory which advocates government intervention, or demand side management of economy by increasing money supply or by actually buying things on the market itself, they believe that this will achieve full employment and stable prices (Web finance 2010:1). Market economy has come to be accepted as a norm across the world with many developing...
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...Essay Plans Macroeconomic Policy Introduction Macroeconomic policies refer to policies directed at stabilising the aggregate level of economic activity or output. The fundamental rationale for government macroeconomic intervention is to stabilise fluctuations in the business cycle. Through the conduct of such ‘counter cyclical’ or ‘stabilisation’ policies the government seeks to achieve three major objectives. • Economic growth that is sustainable in delivering rising real incomes whilst minimising inflationary pressures and the current account deficit as a percentage of GDP; • Internal Balance, which is characterised by full employment and price stability; • External Balance, which involves financing import expenditure with export income, stability of the exchange rate, and minimising the levels of net foreign liabilities and net foreign debt as a percentage of GDP. Other objectives include ensuing that the benefits of economic growth are enjoyed by all groups of the population through an equitable distribution of income, as well as ensuring that economic growth and development is ecologically sustainable such that it meets the needs of present generations without compromising the ability of future generations to meet their own needs. Macroeconomic policies operate on the demand side of the economy since changes in the settings or stances of fiscal and monetary policies will impact on the growth of aggregate demand. • If AD exceeds AS at the full employment...
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...has strengthened since the early 1990s recession, with the result that in constant price terms investment as a share of Gross Domestic Product (GDP) reached a record level in 1996-97. Surveyed business intentions and continuing favourable economic fundamentals point to ongoing strong growth in the period ahead. As a result, capital stock growth in recent years has recovered to above average rates, and is forecast to continue to strengthen. Coupled with improvements in the efficiency with which the capital stock is used, this strong growth in the capital stock provides the foundation for sustained strong growth in activity and employment. Australia accesses foreign saving through either borrowing (debt) or greater foreign ownership of Australian activities (equity). Foreign direct investment (FDI) is one form of the latter. For official measurement purposes, FDI is regarded as an equity interest of 10 per cent or more in an enterprise. A direct comparison of trends in FDI and capital expenditure (investment) is inappropriate. The latter reflects expenditure associated with the creation of new fixed assets (both related to equipment and machinery and to buildings and infrastructure development) or the accumulation of stocks of finished products and work in progress. FDI can be directed towards the acquisition of existing assets as well as to the acquisition of new...
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...seems as though this may become a reality in the 2014 Budget, with implementation beginning within 18 to 24 months at an initial rate of 4 % on the supply chain. The plan to overhaul the tax system has begun to gain momentum as the government deals with an increasingly weak economic outlook, combined with global uncertainty. While not at the emergency levels of many advanced Western European economies, Malaysia has not run a structural budget surplus since the Asian Financial Crisis hit in 1997. Federal government debt as a percentage of Gross Domestic Product (GDP) currently sits at 55.4 %.1 For the time being, this is manageable, but it is the government’s ability to reign this spending in, as well as lack of budgetary reform that has led ratings agency Fitch to downgrade Malaysia’s credit outlook to negative this year. The government’s recent 20 sen cut to the fuel subsidy and increasing speculation of a GST framework to be included in the upcoming budget can be seen as evidence that they are trying to remedy both structural and cyclical economic challenges. Furthermore, for far too long there has been an overdependence on the revenue generated from oil and gas dividends, which currently account for over a third of total government revenues. 2 A GST offers a single unified system where the tax burden is equally shared between the services and manufacturing industries, whilst simultaneously broadening the tax base. This will help to minimise tax exemptions as well as the compounding...
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...attracts high levels of foreign investment. It includes extensive reserves of coal, iron ore, copper, gold, natural gas, uranium, and renewable energy sources. A series of major investments, such as the US$40 billion Gorgon Liquid Natural Gas project, will significantly expand the resources sector. The country also has a large services sector and is a significant exporter of natural resources, energy, and food. Key principles of it’s trade policy include support for open trade and the successful culmination of the Doha Round, (aimed to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules), for multilateral trade negotiations, particularly agriculture and services. The economy grew for 17 consecutive years before the global financial crisis. Subsequently, the government introduced a fiscal stimulus package worth over US$50 billion to offset the effect of the slowing world economy, while the Reserve Bank of Australia cut interest rates to historic lows. These policies - and continued demand for commodities, especially from China - helped the economy rebound after just one quarter of negative growth. As a result of an improved economy, the government could return to budget surpluses as early as 2015. It was one of the first advanced economies to raise interest rates as well, with seven rate hikes between October 2009 and November 2010. The Gillard government is focused on raising the economic productivity...
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...Population growth presents the Australian government with many challenges. The changes to the demography of the country will mean slower economic growth as a result of high public demand. It has been argued that population growth is advantageous however, most people would believe that overpopulation has a negative impact on the liveability of Australian cities. The purpose of this essay is to demonstrate that the population growth has had a negative consequences on the liveability and stability of Australian cities. In particular it will focus on the impact of population growth on the liveability and its effect on household incomes, government expenditure and safety of cities. A significant rise in housing costs as a result of population...
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...Keynes, a Cambridge University economist and a government advisor, and Friedrich von Hayek, an Australian professor of economics, introduced two contrasting view points on the economy. Since the end of World War II, their ideas have dominated in the economic science up to date. After World War II, a major question on the government’s appropriate role in the economy has erupted. Keynes established concepts that called for a large role of the government in the economy. He alleged that the government had an obligation to use an approach of boosting the economy during a depression. On the other hand, Hayek felt that the government did not have to intervene during an economic depression because the forces of demand and supply and laissez-faire would bring equilibrium. Keynes’ book called Treatise on Money created a basis on his policies. Hayek, together with Gunnar Myrdal, received the Nobel Prize for economics in 1974 for their pioneering effort on the theory of money and economic variations. Haynes has criticized Keynes’ work in many of his books standing by his principles; for example, in his famous book called Against Keynesian Inflation published in 1974 (Hoover 86). Keynes based his argument on the presence of a central body that could use monetary, fiscal, and other physical mechanisms carefully to ensure a balance in the economy. He argued the government should use the fiscal policy to manage the comprehensive demand and ensure employment opportunities. He believed that the...
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...Analysis 1. Weighted Average Cost of Capital 19 2. Net Present Value 20 3. Scenario Analysis 21 PART III – Conclusion: Investment Decision 23 References 24 Appendixes 26 PART I – Analysis: Australia vs. China A. Country Analysis I. Economic Environment Australia Australia is a market oriented financial system which includes the world’s 13th largest economy and the 9th highest per capita Gross Domestic Product (GDP), with almost two consecutive decades of growth and the unemployment rate falling to a generational low. As a result of nearly three decades of structural and policy reforms, Australian’s economy has proven to be a competitive player in the increasingly integrated global markets. In terms of country risk, Australia’s favorable attitude towards private enterprise and its well-protected property rights incent growth and propagate stability conveying comfort to international investors that its government will not take actions that adversely affect the value of companies operating there such as expropriation. Australia's economy is dominated by its services sector; yet, it is the agricultural and mining sectors that account for the bulk of Australia's exports. Australia's...
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