The Australian performance for the past three years is dominated by economic downturns. Recently, Australia is facing two crucial issues in their economy, those are increasing budget deficit and house affordability. In the long term, those two issues can deteriorate the economy. First, the increasing budget deficit affect to an increase in the Australian debt that may deteriorate the economic growth. Second, as the housing prices go higher and significantly overvalued, the Australian economic growth slowly and affect the Australian economy. The Australian government and The Reserved Bank of Australia (RBA) need to overcome new fiscal policy and monetary policy in order to maintain these issues. This essay will argue that government’s policies …show more content…
are inefficient to overcome the house affordability and increasing budget deficit issues. It will first outline about the trends in the Australian economic performance. Then, it will explain about how the house affordability and the increasing budget deficit affect the Australian economy performance. Subsequently, this essay will point out about the government budget for maintaining these issues. Eventually, it will outline about how efficient this policy to the increasing budget deficit and the house affordability. Over the past three years, Australia has experienced soft economic performance. The Australian economy performance is generally monitored by the macroeconomics objectives as an indicator. Those are economic growth, low level of unemployment, inflation and rising living standard. First, the economic growth is not performed well, because the GDP annual growth is below average, which fluctuates between 1% to 2%. The inflation rates are also below initial expectation, which is only stand for around 1.7% and it starts to reach deflation. Even though, the economic growth is declining, the unemployment rate remains stable at the point around 5.7 percent. The living standard also remains in the same rate. Nevertheless, the gap between the richer and poorer increases with almost 13-percentage point. The overall trends show that the Australian economy is in moderate level, but the GDP annual growth is below expectation. According to budget in 2016-2017, the Australian economic performance will be better, but there are only 2.5 percent growth compared to previous period. In addition, recently Australia has been facing two important issues, which are increasing budget deficit and housing affordability. If the government does not give the efficient policies for solving this problem, it can affect to a decline in Australian economic performance. One of the significant economic issue is that the house prices become extremely expensive and overvalued in the market. This lead affordability decreases in almost all regions of Australia, with the most unaffordability house prices is Sydney and followed by Melbourne, Canberra, Brisbane, Adelaide, and Hobart (Scutt, 2016). This caused the housing prices turn out to be a serious issue that the lower income earner is unable to afford to buy houses as the price exceedingly high. This will have a devastating impact on the Australian banks and the economy. Australia’s housing prices is providing numerous major issues for government and banks especially for economic impacts. As the housing prices are significantly overvalued, the Australian economy growth slowly. The reason of this because the economy relies upon the cities to drive economic growth and if they are not efficient, this becomes a drag on the Australian economy. As the Australia's housing prices extremely high, it is providing many economic challenges to banks and leads to several impacts in a nation. This form the Reserve Bank of Australia to pay attention for this issue and use its rights to construct a monetary policy. Monetary policy that RBA developed for housing prices in 2016 is that the RBA cut the interest rates on housing prices. Letts (2016) points out that The Reserve Bank of Australia has moved to head off fears about deflation, cutting its official cash rate by 25 basis points to a historic low of 1.75 per cent, and risking another politically charged spike in house prices and bounce in household debt. House prices remained at the forefront of policymakers’ minds, but a recent cooling of the market compared to the stunning growth of recent years led the central bank to believe the risks had lessened (Creighton & Palmer, 2016). Thus, the major purpose RBA cuts the interest rates is to decrease the house prices in the market. This monetary policy by RBA seems ineffective for a long term period to fall off the house prices, however, it works slightly. The RBA’s policy that cut interest rates is good news for the housing market, says REA Group chief economist Nerida Conisbee. The housing prices start to decrease because of lower interest rates. On the other hand, this policy does not work efficiently because the global investor is increasing supply of the property. The foreign investors utilize the monetary policy to buy a lot of properties in Australia as it has lower interest rates. As mentioned by Somasundaram (2016) that Chinese nationals have been the biggest foreign buyers of Australian property and these investors double down on the Australian property. This lead to demand for houses rise continually and construction company tends to build more houses. Consequently, the prices will stay stable at high prices as there is a huge demand in the market. Creighton (2016) reported that there will no collapse occurring in the housing prices any time soon, as global investors likely to buy properties in Australia. The second significant issue in the Australian economy is increasing budget deficit.
According to data on trading economics, the budget deficit in Australia happened since 2008. Pash (2016) stated that Australia deficit currently is sitting on 41.7 billion dollars, 4.3 billion dollars higher than expectation. It will be estimated that Australia deficit will reach almost $ 129 billion in 2018/2019. An increase in budget deficit leads to the raise in Australian debt that affect Australian economy to be under threat. Australian debt recently is A$ 400.89 billion, increases significantly for about 32.16 billion dollar from 2015. Janda (2016) reported that Australia is the biggest AAA country since 2009 that has the highest increasing debt. An increased debt affect to the decline in the Australian economic reputation. As Janda (2016) points out, Australian sovereign rating decline one point downgrade from AAA to AA+. The deteriorates of the Australian economic reputation influence the investor confidence. As the time went by, the Australian economic growth will decline because there is no revenue to be gained from the investor. In consequence, the only possible method to pay the debt is raising tax for future generation. According to Wood and Daley (2014), an increase in $40 billion deficit will affect to tax burden $10.000 for
households. Government introduced new policies in the Federal Budget 2016 in order to reduce the deficit. There are two main policies that they used; cut the spending and boost the economic growth. In government expenditure, they will cut unnecessary spending, such as close carbon tax compensation. According to Federal budget 2016, it will affect to the reduction of the deficit from $37.1 billion to a deficit of $6.0 billion. Furthermore, the important long-term method to reduce the deficit, according to the government is to boost the economic growth. In this Budget, the government will cut the tax for small business by 1.5%. The purpose is to increase the percentage for small businesses and increase the employment that will boost the economic growth. When there are rise in economic growth, there will be more investor from overseas. In consequence, the government will get more revenue and balance their budget for paying their debt. By using these policies, the government estimate that the budget deficit will decrease significantly in the next 5 years to reduce by 41%. Nevertheless, in the Federal Budget 2016, it has been argued that the government does not give appropriate fiscal policy for reducing the budget deficit. Donohoe (2016) argues that the government spending is not appropriate for this issue. Many government spending is used for economic growth, but many experts is doubtful that it can reduce the deficit. Blumer (2016) claimed that the reason of this doubtless, because the government policy in the past only keep spending for boosting the economic, but the result is below expectation. There are only slow in economic and deteriorates in Australia budget deficit. Their budget deficit estimation is also always far from estimation. According to Brinsden (2016), there will be almost $21 billion difference between government and the reality in 2019/2020. Moreover, according to Pash (2016), the deficit is only about revenue and expenditure. With the fell in revenue because of low commodity price, and the inappropriate government spending in budget 2016, the deficit and Australian debt only will get worse. As a result, it is more harder to get the budget back in balance. According to Blumer 2016, Australian is unlikely to get positive balance in the next four years. It also has been predicted that, the 1 dollar that Australia got, will spend for 1.25 dollar. In conclusion, the Australian economy for the overall trend is satisfactory, however, there are slow economic growth. In addition, there are two major issue that will terrifying the economic growth. Those are increasing budget deficit and house affordability. In order to solve these issues, the RBA creates monetary policy for housing prices by decreasing the interest rate. and the government creates fiscal policy for decreasing budget deficit by cutting the spending and boosting the economic growth. However, both of these policies are not efficient. The reduction in the interest rate influence the housing prices to slowly decreases, despite, it will start to rise afterwards because of global investors. In decreasing budget deficit, government spending for boosting the economic growth and reduce the budget deficit is not efficient, but only deteriorates the Australian debt. Therefore, it needs new development policies and more adjustment of current conditions for these issues.
Throughout Eveline Adomait and Richard Maranta’s Dinner Party Economics there is continuous discussion surrounding the problems that economies face around the world and the various methods that can be used to alter the state of the current economic conditions. Changes in consumer spending patterns can become a problem for the economy as a whole, potentially resulting in over-inflation or recession. Implementing discretionary policies such as monetary policy through changing interest rates, and fiscal policy through taxation and government spending, makes it possible to fix these economic problems.
This paper aims to discuss the Short-Term and Long-Term Impacts of the Great Recession and
A balanced stance on fiscal policy was targeted by the Government in response to the global recession between short and long-term policies. These measures involved bonus payments to low and middle-income Australians to insta...
The Australian Budget is an annually published document which details the Federal Government's plans to affect the level of economic activity, resource allocation, and income distribution through the use of fiscal policy. It describes the framework which the government intends to follow during the next financial year which will result in the attainment of their objectives. The budget is a publication of the government's plans regarding the use of fiscal policy, and is published to parliament and the general public on “budget night”, so as to allow open dissemination about the status of public finances and to promote transparency in Australia's fiscal policy.
Every day in New York City, hundreds of people walk past a huge digital billboard with giant numbers across its face. Each person who walks past this billboard sees a slightly different arrangement of numbers, growing larger every second. This board is the National Debt Clock, representing the over 14 trillion dollars currently owed by the United States. While some people claim that the national debt is caused by the falling economy, most maintain that the debt itself causes the poor economy (Budget Deficits 2007). Rising debt leads to higher interest and investment rates, and cuts into our national savings. Ignoring the national debt leaves the major burden of paying it off to later generations, while meanwhile allowing our country’s economy to further drop and our dependency on other nations to rise.
The national debt surfaced after the revolution when the United States government had to borrow funds from the French government and from the Dutch bankers. By 1790, the U.S. government accumulated millions in debt, but no one knew precisely how much. The Constitution mandated that the new government take over the debts of the old government under the Articles of Confederation.
Reserve Bank of Australia (2010). Minutes of the monetary policy meeting of the board – 3 August 2010. Retrieved August 20, 2010, from http://www.rba.gov.au/monetary-policy/rba-board-minutes/2010/03082010.html.
"Australia." Economy: Population, GDP, Inflation, Business, Trade, FDI, Corruption. N.p., n.d. Web. 2 Dec. 2013. .
The U.S budget deficit over the years has been a problem but lately the deficit has shrunk. However, what made the U.S budget deficit get to where it is today and what will it be like in the years to come. Throughout the past the U.S has operated under a deficit. This means that the U.S Spent more money than it was taking in. The cause of the excess in spending was different depending on which year. Some of the causes were war, increase in spending , and economic downturns. There were different acts passed to try and control the deficit problem. The deficit at the present time is declining. This decline is due to the improving economy, sequester, and a tax increase on high-income households. The big factor that went into the decline in the deficit for 2013 was the payment that Fannie Mae and Freddie Mac made. The deficit decline in the present time may make some think the U.S could get out of debt but it has been projected that the U.S deficit will start to increase once again.
The Commonwealth Bank is accused of breaching the money laundering laws. The Bank is one of the biggest and leading in the financial sector. The allegations tend to show that the bank’s compliance system failed to detect the alleged breaches. The allegations are serious because they have created a public relations issue that has drawn attention and interest of different stakeholders and publics. Some of the consequences evident as a result of this issue are that investors have dumped the bank’s shares leading to falling in price by about 4%. From a public relations perspective, this is an issue that has to be addressed immediately in order to protect or repair the bank’s reputation and image from damage. The discussion in the report shows that
Everyone has their own political leaning and that leaning comes from one’s opinion about the Government. Peoples’ opinions are formed by what the parties say they will and will not do, the amounts they want spend and what they want to save. In macroeconomic terms, what the government spends is known as fiscal policy. Fiscal policy is the use of taxation and government spending for the purposes of stimulating or slowing down growth in an economy. Fiscal policy can be used for expansionary reasons, which is aimed at growing the economy and increasing employment, or contractionary which is intended to slow the growth of an economy. Expansionary fiscal policy features increased government spending and decreases in the tax rates as where contractionary policy focuses on lowering government spending and increasing tax rates. It must be understood that fiscal policy is meant to help the economy, although some negative results may arise.
A referendum has been a relatively effective mechanism in facilitating the shift of power from the States to the Commonwealth. The referendum (section 128) is a concept that aimed to change the wording in the Australian Constitution to give the commonwealth more specific powers. This is done through the passing of the constitutional alteration bill through parliament. Since federation, all citizens have the right to vote in referendums with any proposed changes either being accepted or rejected by the people. The way this works is that the Governor general authorises a referendum and this referendum must meet dual criteria in order to be successful for instance, the federal criterion which is having a majority of states and democratic criterion; having a majority of voters. The Commonwealth has tried to use the process of the referendum to shift power. For example, the referendum for Constitutional Alternation (Aboriginals) in 1967 aiming to remove racial discrimination, such as including them in
Australia has had one of the most outstanding economies of the world in recent years - competitive, open and vibrant. The nation’s high economic performance stems from effective economic management and ongoing structural reform. Australia has a competitive and dynamic private sector and a skilled, flexible workforce. It also has a comprehensive economic policy framework in place. The economy is globally competitive and remains an attractive destination for investment. Australia has a sound, stable and modern institutional structure that provides certainty to businesses. For long time, Australia is a stable democratic country with strong growth, low inflation and low interest rate.(Ning)
According to askheritage.org the Washington Post reported that the national debt is no longer unsustainable. It seems like national debt is not government’s high priority anymore. However, there are plenty of reason why reducing the national debt should be the most urgent problem that the president and congress should address in 2017. The effect that the national debt can have on the economy is tremendously impactful. Cost of living will rise because the government will find a way to collect money by putting higher interest rate on anything from credit card from house mortgage. There will be a generational inequality because by not being responsible for the current generation’s debt, people are giving burden of reducing debt to our next generation which will threaten their standard of living and retirement plan. It cause slower wage growth. Instead of making productive investments, money goes to buying government debt. The debt have huge impacts on fiscal policy. Economicshelp.org defines fiscal policy as a policy involves the government changing the levels of taxation and government spending in order to influence Aggregate Demand (AD) and the level of economic activity. The federal debt cause reduction of fiscal flexibility. Between 2008 and 2013 the GDP increased from 35 percent to 70 percent due to the Great Recession. Because of high debt, our government is not
Several financial statements have been prepared to describe the causes of this current financial failure. There are a variety of factors that has resulted in the explosion of this financial crisis. Downfall of the US housing market; highly benefited financial dealings and a low interest-rate promoting borrowings, have all contributed to the recession monetary market. Let us now consider these various reasons in a little detail.