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
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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
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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