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Australia Monetary Policy Essay

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Monetary policy remains an important tool in realizing economic goals of most countries for

decades. Such goals are realized by controlling the money supply through this policy. It is

however used only at the disposal of the central banks of each nation. Moreover, the government

is not permitted from using it as they are always expansionary biased. Thus, they would forever

use easy monetary policy with the intention of winning over people’s votes (Brue, Jackson,

McConnell, McIver & Wilson, 2011).

In Australia, the Reserve Bank of Australia (RBA) controls the monetary policy. It controls the

money supply by determining the cash rate. The cash rate is the interest rate charged on

overnight loans transactions involving the commercial …show more content…

They include:

(A)INTERNATIONAL ECONOMIC DEVELOPMENTS.

We realize that the economies growth rate has been rather subtle globally by the end of August

this year. Economies of developed nations have begun to recover from the downfall caused by

the economic crisis of 2008. The economies of developing nations, however, recovered at a

much slower pace. In the Asia-Pacific region, GDP growth is rather stable. This is experienced in

China due to the slowdown in their industrial sector, construction activity and infrastructure

investment (www.rba.gov.au,2015). This has severely affected Australian exports due to

decreased demand for iron ore from China. The implementation of easy monetary policy and

increased government bond issuance has thus assisted their GDP growth

rate(www.rba.gov.au,2015). Several other sectors have however improved as well. For instance,

residential property improved extensively this year. The Japanese growth rate has improved due

to the prior depreciation of ¥ and increase in consumption tax (www.rba.gov.au,2015). Country

specific factors have also affected growth in GDP in the Asia-Pacific region as in the case …show more content…

India and several other economies, however,

continued growing further. Most of the central banks in this region have implemented

accommodative monetary policy to turn the tide.

As for the USA, the economy has grown over the year mostly due to the low prices of crude oil

and the dollar appreciation against foreign currency through this year. The low price of oil

improves its exportability.

The Eurozone is recovering gradually. Greece’s condition did not affect the growth. However,

the recent migrant crisis seems capable of having a positive and negative impact on the Eurozone

GDP growth in the nearing future (Huffingtonpost.com,2015). Thus, easy monetary policy used

in slow growing economies will increase their demand for Australian exports. If easy monetary

policy is implemented in Australia, it will increase their profitability by trading with these

trading partners. This would boost their economy.

Commodity Prices

The commodities market have declined over the months as well. Weakness in Chinese demand

has thus reduced this further (www.rba.gov.au,2015). Most importantly, the price of crude oil

has declined drastically during the second half of 2014(investing.com,2015).. This

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