Question 1:
Since 2008, we can observe and note that the cash rate in Australia has seen a tremendous downturn till 2010, after which there was a positive turn for some time. But, soon in the year of 2012 we again saw a downward flow of cash rates recently touching all-time low of 2% in May 2015. The main reason for the drop of the cash rate was that the reserve bank of Australia still believes that the Australian currency is overvalued and to make it bring down to its actual value the rate cut was required. An overall assessment made for the current situation in Australia would be that the reduction in the cash rate would increase the export opportunities for the country and would act as fertilizers. The housing sector for the country has shown a good growth and this rate cut would also help in the easing of unemployment. The consecutive steps have been taken by Reserve Bank keeping in mind the fact that a lower exchange rate is needed for a balanced growth of the Australian Economy.

Cash rate graph (source: www.global-rates.com)
The Australian economy has constantly been altering cash rates as their monetary policy in the earlier years as inflation was never a big concern for the economy. We can further understand how the altering of cash rates will influence macroeconomic aggregates:

Aggregate Demand and Aggregate supply curve
From the shown diagram we can see that the demand AD1 is intersecting the supply AS1 in a flat area of aggregate supply. This situation is mostly seen when there is an excess economic capacity in the economy and minimal inflationary pressure. However, in the scenario of stagnated aggregate demand growth, there are high chances the economy might face a recession with a rising level of unemployment. In this situation to increase the aggregate demand the reserve bank of an economy lowers the interest rate to shift the aggregate demand