The economic condition of a country is determined by both the factors that are out of the managing capacity of its governing body and directly implemented macroeconomic policy. The main purpose of this study is to assess and describe current economic situation of Australia and the macroeconomic strategies implemented by the government to endeavour and uphold a level of sustainable development. This study reveals that the Reserve Bank Australia’s (RBA) wants to maintain the present currency rate at 4.5%. The study also delineates the present relative steadiness of the Australian economy and present macroeconomic position as motivating. Australia has reached a verge of using fiscal policy to alleviate the macroeconomic effects of the Global Financial Crisis. Since the debt of Australia is very small in comparison to the international standard, the country could well afford to do the job. “Even after several years of sizeable fiscal deficits, the net federal debt is still less than 10 per cent of GDP” (Weber 2012, p. 3). The essential characteristic of a well-organised fiscal system is its capability to guide and direct funds from depositors to borrowers. Banks and deposit takers offer this function, allowing deposits and granting the debt into investment markets. Offering this loan to borrowers, they function typically at longer maturities. In this process of effective financial intermediation, depositors and other borrowers should have a satisfactory degree of confidence that their money is safe.
Introduction
The economic condition of a country is determined by both the factors that are out of the managing capacity of its governing body and directly implemented macroeconomic policy. The main purpose of this study is to assess and describe current economic situation of Australia and the macroeconomic strategies implemented by the government to endeavour and uphold a level of sustainable development. This study reveals that the Reserve Bank Australia’s (RBA) wants to maintain the present currency rate at 4.5%. The study also delineates the present relative steadiness of the Australian economy and present macroeconomic position as motivating. Australia has reached a verge of using fiscal policy to alleviate the macroeconomic effects of the Global Financial Crisis. Since the debt of Australia is very small in comparison to the international standard, the country could well afford to do the job. “Even after several years of sizeable fiscal deficits, the net federal debt is still less than 10 per cent of GDP” (Weber 2012, p. 3). The essential characteristic of a well-organised fiscal system is its capability to guide and direct funds from depositors to borrowers. Banks and deposit takers offer this function, allowing deposits and granting the debt into investment markets. Offering this loan to borrowers, they function typically at longer maturities. In this process of effective financial intermediation, depositors and other borrowers should have a satisfactory degree of confidence that their money is safe.
Success of the Australian Government and the Reserve Bank of Australia
The Current Economic Situation of Australia
The condition of the Australian economy is on stable position. Although the world has faced a lot of crises, the Australian economic condition is still in a sturdy position that shows a positive economic future. The record of annual growth rate in GDP is 3.2%, which is equivalent to the 30 year average growth rate. The GDP is predicted to boost up to 3.75% or 4% during the financial year 2011-2012. According to the Australian Government (2010), “The Government acted quickly and decisively during the global financial crisis by introducing the bank guarantees to secure Australia’s financial system and support access to credit” (p. 4).
Abbildung in dieser Leseprobe nicht enthalten
(Source: Weber, 2012)
Figure 1: Real GDP Growth
External Comparison
After the beginning of the global financial crisis, the Australian government performed a continuous and impressive GDP growth in relation to other comparable countries. The government of Australia managed to escape technical depression, achieving 1% positive growth in the 2008-2009 fiscal years, where much of the OECD was in a downturn. Figure 2 shows the Australia’s relative economic success (Australian Government 2010; Reserve Bank of Australia 2010).
Abbildung in dieser Leseprobe nicht enthalten
(Source: Weber, 2012)
Figure 2: International GDP Growth
Australia’s Economy through GDP Components
The total of the last domestic production of services and products is GDP that can be explained by the equation given below:
Equation 1: GDP [Abbildung in dieser Leseprobe nicht enthalten]
Where, C= Consumption; I= Investment; G= Net government fiscal activity; and (X-Q) = Net exports.
Expenditure
As a major indicator of economy, expenditure or consumption plays a vital role in any the country’s economy. In June, Australia’s retail expenditure raised up to 0.8%, which shows a drift of moderately rising confidence in Australia. This is marked through an increased household savings rate, up 1.3% in May 2010 (Reserve Bank of Australia 2010). More than 1.5% of Australia’s GDP growth is offered by the consumption growth.
Net Exports
The GDP has been affected by the net exports with the current account deficit. It fell from 16 billion to nearly 6 billion during the first quarter in the year of 2010. Australia is handling a rare trade surplus that has added a 0.4% extra to the June quarter’s GDP growth. It caused a large demand for Australian mineral exports.
Depositor Protection in Australia
In Australia, depositors get the assurance that their funds are safe by Depositors in the authorised deposit-taking institutions (ADIs). There is a solid system of prudential regulation and supervision that ensure sound administration at individual institutions. Thus, the problems in ADIs are unusual. Furthermore, depositors get benefit from sturdy protections in case the ADI fails. They can claim their assets of an unsuccessful ADI ahead of other unsecured creditors. It is known as a depositor’s preference. With the introduction of the Financial Claims Scheme (FCS), depositor security arrangements were made stronger in 2008, through which the Australian Government guarantees the timely refund of deposits up to a predefined cap. According to Turner (2011), “This cap was temporarily set at $1 million per person per ADI, when the FCS was introduced and is scheduled to be set on a permanent basis at $250 000 per person per ADI from 1 February 2012” (p.1).
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- Quote paper
- John Mutunga (Author), 2012, Developing and understanding of Australia's economy over the last two years, Munich, GRIN Verlag, https://www.grin.com/document/269375
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