Task description: In this task, you will build a case study based on the article: RBA decision 7th August 2018
The RBA board meets 11 times a year (not in January) at the RBA in Martin Place, Sydney. Prior to the meeting, board members are provided with analysis of the economy and the financial markets by the RBA staff (prepared by the Economic Analysis Department). Among these analyses are the bank’s forecasts of future inflation, as well as the likely future path of economic growth overseas and domestically. RBA monetary policy decisions are based on these analyses as well as a range of other macroeconomic assumptions. In addition, scenarios are provided as to the likely macroeconomic outcomes if monetary policy was adjusted. The RBA meeting occurs on the first Tuesday of each month. After much discussion, a consensus decision is reached as to whether to leave interest rate unchanged or to adjust these rates. The instrument that RBA uses is the cash rate and, if an adjustment is decided, it will be to adjust the cash rate by 0.25 per cent, 0.50 per cent or 1 per cent. The most common adjustments are
0.25 per cent and 0.50 per cent. Since the last decade, the adjustment has been at 0.25 percent. With the unfolding of GFC, the RBA monetary policy response has been to cut the cash rate six times since September 2008 and cuts have been as large as one per cent. These cuts were designed to help Australia avoid the synchronised international recession, which hit all of the major economies in the 2008-2010 period.
Once the decision is made, the RBA Governor announces its decision and, if a rate adjustment is made, banks will potentially make changes to their interest rates the following day. RBA also publishes the minutes of its Board meetings two weeks after each meeting and provides
quarterly statement on the Monetary Policy. The RBA does not set this interest rate (as the commercial bank sets its mortgage rate), but it 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. If the RBA sells Treasury notes, the supply of excess reserves in the banking system decreases and the cash rate increases. Because of these changes in the cash rate, interest rates in general are influenced. In May 2015, RBA cut the official interest rate to 2.0 percent, which remained unchanged for a year. In May 2016, RBA governor announced a cut in cash rate by 0.25 basis point, to 1.75 percent, which remained unchanged until August 2016. The official cash rate since August 2016 has been at the historical low of 1.50 percent for 2 hours.
Question 1: Why does the RBA takes into account the domestic (Australian) and global (China, Japan, and USA) macroeconomic indicators (GDP growth rate, investment, household consumption, inflation, unemployment, and exchange rate) when making a decision whether to change (increase or decrease) or keep the official cash rate unchanged? Explain.
Question 2: Explain the main objectives of monetary policy. List and describe the main functions of money and the Reserve Bank of Australia.
Question 3: On 7-August-2018, the Governor of the RBA, Dr Philip Lowe, decided to leave the official cash rate unchanged at 1.50 percent as house prices continue to fall. Why did the RBA keep the cash rate unchanged for the last 2 years? Justify your answer with reasons and evidence.
Question 4: Illustrate and explain using the money market equilibrium model and monetary transmission mechanism how an increase in the cash rate from 1.5% to 2% would help to keep inflation within the target rate, and how a further decrease from 1.5% to 1 % in the cash rate would help to stimulate the economy. In particular, discuss the effect on household consumption, business investment, GDP, inflation and housing market. Describe the circumstances in which the RBA Board might increase the cash rate.
Question 5: Define economic growth. What are the determinants of long-run economic growth? Is the historically low interest rate of 1.50 percent (from August 2016 until the August 2018) sustainable to achieve long-run economic growth? Yes/No, justify your answer with reasons. Note: Students need to give their own views supported and justified by several references and examples.
To export a reference to this article please select a referencing stye below:
My Assignment Help. (2019). Principles Of Economics. Retrieved from https://myassignmenthelp.com/free-samples/econ11026-principles-of-economics.
"Principles Of Economics." My Assignment Help, 2019, https://myassignmenthelp.com/free-samples/econ11026-principles-of-economics.
My Assignment Help (2019) Principles Of Economics [Online]. Available from: https://myassignmenthelp.com/free-samples/econ11026-principles-of-economics
[Accessed 07 July 2020].
My Assignment Help. 'Principles Of Economics' (My Assignment Help, 2019) <https://myassignmenthelp.com/free-samples/econ11026-principles-of-economics> accessed 07 July 2020.
My Assignment Help. Principles Of Economics [Internet]. My Assignment Help. 2019 [cited 07 July 2020]. Available from: https://myassignmenthelp.com/free-samples/econ11026-principles-of-economics.
Chicago referencing is one of the most common referencing styles used in various papers and academic documents. Students studying in academic institutions need to be well-versed with the Chicago format citation as many colleges and papers demand such referencing style. Our citation generator tool has gained immense popularity owing to corrected Chicago style references generated in few seconds. The best part is that it can produce chicago referencing for books, blogs, articles, journals, e- newspapers along with all types of other academic documents. It produces detailed and precise citations, strictly in adherence to Chicago style Referencing Rules. Now get over chances of improper referencing that can lead to charges of plagiarism.
Answer: Introduction The analysis of housing market of UK is an interesting aspect for several reasons. Housing market in UK holds a pivotal position in the economy. As compared to other European nations UK has a much higher owner occupation rate. In 2011, UK’s owner occupation rate was 70% as compared to a rate of 45% in Germany and 56% in France. The housing price in UK has constituted a steady upward trend in the last few years. The ...Read More
Answer: Background of the study The topic for the proposal is the apparel consumption in Australia. The rise in online apparel retailing is taking away the profits of the local retail apparel shops in Australia. The apparel retail comprise of the sale of women’s, men’s and infant’s wear. The revenue growth from the online retail business is about 15.1 percent which is a threat for the local retailers as customers are shiftin...Read More
Answer: 1. (A) Name of point B is inefficient. Name of point A is efficient. Name of point D is unattainable. 10 units of machinery is the opportunity cost of producing 10, 000 more tons of rice when the economy of Nepal is operating at point T. (B) (B1) Discovery of fertilizer would increase the output of rise given the amount of other things will take the economy of Nepal to PPF2. (B2) Discovery of steel would increase the production of ...Read More
Answer: Impact of COVID-19 on the Australian economy Australia is renowned as the fourteenth largest economy in the world that has the total Gross Domestic Product of about 1.69 trillion Australian dollars in 2019. It follows a mixed market economy which is one of the most developed in the world. The economy has already faced an economic loss due to the bush fire that took place in the beginning of 2020 and had been struggled to balance its e...Read More
Answer: 1a. Figure 1: Trend in monthly cash rate in Australia (Source: rba.gov.au 2020) The trend in monthly cash rate target of Australia shows that there is an overtime declining trend. In order to give the economy necessary stimulus through monetary policy, Reserve Bank of Australia continuously lowered the cash rate with cash rate declines sharply from 14.00 in August 1990 to 0.75 in January 2020. RBA adjusted the cash rate with...Read More
Just share Requriment and get customize Solution.
Our writers make sure that all orders are submitted, prior to the deadline.
Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.
Feel free to contact our assignment writing services any time via phone, email or live chat.
Our writers can provide you professional writing assistance on any subject at any level.
Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.
Get all your documents checked for plagiarism or duplicacy with us.
Get different kinds of essays typed in minutes with clicks.
Calculate your semester grades and cumulative GPa with our GPA Calculator.
Balance any chemical equation in minutes just by entering the formula.
Calculate the number of words and number of pages of all your academic documents.
Our Mission Client Satisfaction
I\'m very pleased with my dissertation report. My Assignment Help was very helpful, and they were quick in response to every question asked.
i got a really good grade, im really happy with the resolution i got also the price was very good
Good solution for my statistics final project. It met all the requirements and helped me get a good grade.
Thanks you all for everything. I were in a hard time with getting my assignment done and i really thankful for it.