ECON 11026 - Australian Government’s Fiscal Policy & Economic Recovery Plan, Macro-Economic, Functions of RBA Monetary Policy, Interest Rate - Economics Assignment Help

Assignment Task -                 
 

Task Description: In this task, you will write an essay dealing with macro-economic objectives, functions of RBA monetary policy interest rate decisions in 2020, and the Australian Government’s Fiscal Policy October 2020 budgetary measures for the economic recovery plan from the Covid-19 pandemic. Guiding questions will help you structure your response. Do not forget to apply the DADA framework, using data-tables and graphs to support your response by applying theory to real-life economics. A marking rubric is posted on the Moodle site, 

Since January 2020, the COVID-19 coronavirus has gradually spread to all the countries  resulting in a global public health emergency/crisis impacting all sectors of the economic activities: agriculture, mining, manufacturing, and services (including financial services). It has  impacted households, businesses, jobs, production, distribution, import-export, and consumption. To stop the spread of the virus, regulations such as social distancing, closing borders, grounded airlines, working from home, have all disrupted national and global supply chains, trade, travel, international education, hospitality, tourism, and transportation. 
In response to the COVID-19 pandemic, RBA has taken measures through monetary policy tools to support the financial system and the Australian economy. RBA policy decisions are based on a range of domestic and international macroeconomic assumptions and economic conditions.

The RBA does not set the mortgage rate (the commercial bank does), but RBA continuously influences the rate through its daily financial operations in the money markets. If the RBA buys Treasury Notes, the supply of excess reserves in the banking system increases and the cash rate falls and vice versa. In May 2015, RBA cut the official interest rate to 2.0 %, which remained unchanged for a year. In May 2016, the RBA governor announced a cut by 0.25  basis point, to 1.75 %, which remained unchanged until August 2016. The official cash rate since August 2016 has been at the historical low at 1.50 % until May 2019. In June 2019, RBA dropped the cash rate to 1.25 %, followed by 1% in July 2019 and a further cut to 0.75% in  October 2019, remaining unchanged until February 2020.

 
In March 2020, the RBA board responded to the global coronavirus health crisis twice: on the 3rd of  March to cut the official cash rate to 0.50%, and on the 19th of March RBA further cut the rate to 0.25%, to a historically low of 0.1% in November 2020, announcing a revised monetary policy package, complementing the Australian government’s COVID-19 income support package and the October budget 2020-21 economic recovery plan. Global health Coronavirus pandemic means global expected growth will be slower with rising unemployment, falling productivity, financial market volatility with falling income, and increasing government debts.  Australia is technically in recession since the second quarter when GDP fell by -7 %. Together these policies will support jobs to create full employment, business investment, income,  inflation target, contain the spread of the virus, and achieve sustainable long-term economic growth and recovery. 
 

Question 1: List, define, and explain the key macro-economic goals, and provide an overview of the Australian economy in the current COVID-19 global pandemic? Note: Discuss with tables and graphs the main macroeconomic indicators for the Australian economy.  Conduct research on the current trend in economic growth, GDP, inflation rate,  unemployment rate, exchange rate, government debt, and other macroeconomic indicators using multiple sources. 

Question 2: Define, draw, and explain the four stages of the business cycle, focusing on the current stage of the Australian economy. Discuss the circumstances under which contractionary and expansionary fiscal and monetary policies are applied. Draw a graph and explain. 

Question 3: Explain the main objectives and functions of the RBA monetary policy. Discuss the effect of the transmission mechanism of RBA’s monetary policy low-interest-rate supply of credit in supporting the economy and financial system in response to Covid-19, on household consumption, business investment, employment, exports, and housing market for economic recovery. Note: Students need to do some research on RBA  monetary policy decisions in 2020. Graphs/tables can be obtained from the ABS and  RBA websites for 2019-2020 to see the trends when answering this question. 

Question 4: Explain the main objectives and functions of Australian government fiscal policy. Discuss the Australian government income support and October budget 2020-21 to  stimulate economic recovery from the negative economic impact of the global pandemic? 

Question 5: What are the determinants of long-run economic growth? Is the expansionary monetary policy response of RBA, to coronavirus driven recession sustainable to meet macro-economic objectives and long-run economic growth for Australia? Or complementary fiscal policy of the Australian government is also required for economic recovery and long-run economic growth? Yes/No, justify your answer with reasons,  using several references

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