BUS702 Economics sample assignment 2

BUS702 Economics sample assignment

BUS702 Economics Sample assignment

Executive Summary

In this paper, we would be discussing the insights of the Australian economy along with the needs to understand the strengths & the weakness, which can help to understand the Australian RBA  structure and the various policies and framework of operation. One can also identify the need of the various outcome with respect to the need of the framework that can also be identified with regards to the risk-based supervision that needs to also identify the various risk ratings that are working in an institutions in terms  the supervisory response that also needs to align and work with regards to the progressing  changes in terms of defining the economic conditions

Table Of Contents

Introduction………………………………………………………………………………………………………………..4

RBA & RBA Tools…………………………………………………………………………………………………5

Current Economic Indicators………………………………………………………………………………………6

Inflation & Deflation…………………………………………………………………………………………………8

Deflation Bugbear……………………………………………………………………………………………………….9

Conclusion……………………………………………………………………………………………………………….10

References………………………………………………………………………………………………………………11

Introduction

There is also a need for the various RBA tools such as the macro-prudential supervision that needs to work within Australia works only on the approval of the APRA. There is also a need of the APRA which is only working agency that has even the power to act with respect to the direction change or determining the behavior (with respect to the various entities subjective to achieve the macro-prudential outcomes. During the essential terms of the prices fall along with the scenario of the production slows it would also lead to low inventories which need to be liquidated. There is also a need of the Demand drops along with the need of the unemployment increases assuming the need of the recession it is also believed that there is a need to also cease to expand and work for the need of the GDP which has also allowed a negative consecutive quarter. This result in the rate of unemployment which can rise along with the need for the housing prices decline

Body

1) What role does RBA play in Australia? Discuss the tools available at the disposal of RBA to carry out its functions.

The role of the Reserve Bank of Australia is to be a central point of the monetary policies and called Australia’s central bank. It came into the existence under the Bank Act 1959. During this, the Bank also evaluated the various nation’s monetary policy along with the handling of the issues related to its currency (Blyth, 2015). Under the foster financial system stability along with the ability to handle the nature of the safety and efficiency related to the payments system. Under the influence of the foster financial system stability, it also allows for the rationality of the promotion of safety and efficiency with respect to the payments system.

There main tool such as the APRA exercises needs to ensure that there is also a various stability that requires to work with the cycle the intensity with respect to the supervision along with the need of the backed up with respect to determining the APRA’s prudential tools such as the need to have a capital along with it exercising the need to have a direction powers . One can also identify the need of the various outcome with respect to the need of the framework that can also be identified with regards to the risk-based supervision that needs to also identify the various risk ratings that are working in an institutions in terms  the supervisory response that also needs to align and work with regards to the progressing  changes in terms of defining the economic conditions. The Reserve Bank is also influential and has control over Australia’s monetary policy. It is important to share that there is also a need of the Monetary policy which includes the fresh and the working of the interest rate in terms of the overnight loans which are aligning and working in the money market (‘the cash rate’). It would also allow to bring in the cash rate influences with respect to the interest rates that can also ensure stability to the economy which is also affecting the need of the behavior with respect to the borrowers and lenders. it is also important that there also needs to have an economic activity that works to control the rate of inflation (Bordo, 2017).

It is also essential that there is also a need of the monetary policy which can work as a  Bank in order to ensure a maintain price stability along with the functionality of the full employment with respect to the economic prosperity along with the need of the welfare for the Australian people. In order to have a statutory objectives, which needs to align and work for the Bank in terms of determining of the ‘inflation target’ along with the stability of the consumer price inflation which has averagely grown in terms of the economy to 2–3 per cent along with the working of the  average in terms of the medium term. It is essential to also allow and control inflation that can also ensure that there is a need of the value of money along with it encouraging a new encourage in terms of the strong and sustainable growth related to the economy over the longer term.

2) Discuss the current economic environment (inflation and interest rates) in Australia, monetary policy employed by the central bank, and the effects of those policies on financial markets including asset values and yields.

The current RBA has a positive and encouraging economic environment that has allowed the left the cash rate towards a significant low of 1.50%, it is a result of the market expectations.
It is important for the Bank’s decision which also needs to work with the inflationary pressures along with the need for wage growth. The statistics show that inflation has risen from the 2.0%–3.0% during the Q2, but it is stabilized and moderate with respect to 2.1%. It is also determined that there is also a need for the Weak wage growth along with the stabilize the strong competition related to the retailers that are also aligning the need for the prices in check. It is also essential that there is also a need for wage growth which can allow the need of the skills shortages with regards to the certain areas (Cecchetti,2017). Essential there is also an RBA with respect tot he inflation which can allow a time one-off declines with respect to the administered prices.

The Bank reaffirmed its view that the economy is on track to grow slightly above 3.0% on average in both 2018 and 2019, boosted by rising investment in non-mining businesses and public infrastructure, as well as by sustained growth in resource exports. However, elevated debt levels, sluggish wage rises and easing growth in the housing market could weigh on household spending. Overall, the pick-up in economic activity has yet to feed through to stronger inflationary pressures.
Subjectively there is also a need of the downside risks which has also resulted in the slowing growth in China along with the need of the trade protectionism in the U.S has a serious repercussion effect on them which have resulted in the guidance (Friedman, 2017). During the  wage growth is has also allowed the gain momentum along with the inflation is forecasted to pick up on the years of the 2019 and 2020, It is also determined that the RBA would also ensure that there is also a need for the current monetary policy with respect to the short-term and hike rates that requires a need to have a monetary tightening.

3) In the article, “Is the deflation bugbear heading down under?” (Fensom 2017), economist Paul Dales is quoted as saying, “an average inflation rate of around 2 percent or below could mean that many economies, including Australia, are just one recession away from deflation. In other words, the next economic shock might not need to be very large to push inflation below zero”. Explain the connection between recession and inflation. Why is deflation so dreaded? Comment by drawing on the experiences of other countries that have experienced deflation.

We as consumers and industry people always dread the idea of the deflation trap, which has a more severe repercussion effect than the inflation (Haberler, 2017). it is believed that there is also a resultant of the Lower-than-expected inflation ensuring a need of the real burden of debts. It has also resulted in the various Lenders benefit, which has resulted in the need of the more likely to save and allowing the borrowers to also demand with respect to the overall. There is also a need for the bit of inflation with respect to the economic growth which has allowed the growth and around 2-3% a year. But during the time of the prices begin to fall eventually due to the economic downturn one believes that there is also a result of the deflation which can cause more severe effects and can also cause an even deeper along with the need of the severe crisis. During the essential terms of the prices fall along with the scenario of the production slows it would also lead to low inventories which need to be liquidated. There is also a need of the Demand drops along with the need of the unemployment increases assuming the need of the recession it is also believed that there is a need to also cease to expand and work for the need of the GDP which has also allowed a negative consecutive quarter. This result in the rate of unemployment which can rise along with the need for the housing prices decline. One can also work for the Inflation which is thinking of the positivity or the general rise in the prices with regards to the goods and services over a period of time.

4) In the article, “Is the deflation bugbear heading down under?” (Fensom 2017) leverage dynamics are discussed. Use this as a starting point to explain how leverage matters for the economy

It is also determined that there also needs to have tools & techniques with respect to the Reserve Bank of Australia (RBA) which has purposefully resulted in the official interest rate existence of the 13th consecutive month towards the record-low 1.5 percent. The role of the Leverage with respect to the investment strategy is to ensure that there also needs to be a use of the borrowed money — which can allow the purpose of the various financial instruments along with the borrowed capital which can result in the increase the potential return along with the increased investment. It is important that there also needs to have a Leverage which can result in the debt a firm which can allow the use of the financial assets (Nidhiprabha, 2018).

One needs to understand from the perspective of the RBA Governor Philip Lowe who have accounted that there also needs to be an inflation and wages growth with respect to the outlining of the “remains low towards the most countries”. This allows an inflation pick with regards to Australia outlining the need of the “pick up gradually in terms of defining the economy strengthens”.

It is important to ensure that there is also a sensible alignment in between the ANZ and NAB that are determining RBA that will allow the need of the increasing interest rates during the year of 2018. There also needs to be an alignment of the Westpac who have not unexpectedly hike until 2020 in terms of the reasons such as the slow growth and weak inflation.

There also needs to have a central bank who is currently ensuring that there also needs to put up a target of an inflation rate with regards to the figures growth from 2 to 3 percent which can allow a quick fix of the situation” on average, over time,”. One can determine that there also needs to be a constructive consumer price index (CPI) which reflects that there is a 1.9 percent rise during the time period of the 12 months in the month June quarter 2017 along with the medical and hospital services in relation to the percent of 4.1.

In relation to the interest rates with respect to the central bank balance sheets, we are also ensuring that there is also a need of the normalization phase, which can also follow the timeline of the shareholder returns which can also normalize. It is important to also align and quantify which would help in the elevated leverage and also increase in terms of the 50 percent towards the mixing of the proportion of total shareholder returns with the quantitative easing (Fensom, 2017).

Conclusion

It is equally important to also allow the debt levels which have recorded high worldwide. It is important to align the leverage driver in terms of the association of the returns that are also now exhausted along with the factors of the productivity growth which have also stalled. Towards the end of the global competitive intensity, one can also bring in the disrupters along with it aligning the need of the technology which can also work and progress continues to the dampening inflationary forces that can work with respect to the slowing part of the central bank tightening.

There also needs to have an over the long term along with the progress of the normal total shareholder returns average that has estimated a need of 5 percent to 6 percent per annum. There also needs to progress to recalibrate their expectations.

References

Blyth, M. (2015). Will the politics or economics of deflation prove more harmful?. Intereconomics50(2), 115-116.

Bordo, M. D. (2017). The Operation and Demise of the Bretton Woods System; 1958 to 1971 (No. w23189). National Bureau of Economic Research.

Cecchetti, S. G., Feroli, M., Hooper, P., Kashyap, A. K., & Schoenholtz, K. (2017). Deflating Inflation Expectations: The Implications of Inflation’s Simple Dynamics.

Friedman, M. (2017). The quantity theory of money. The new Palgrave dictionary of economics, 1-31.

Haberler, G. (2017). Prosperity and depression: A theoretical analysis of cyclical movements. Routledge.

Nidhiprabha, B. (2018). Economic Crises and the Debt-Deflation Episode in Thailand. Asian Economic Bulletin, 15(3), pp.309-318.

Fensom, A. (2017). Is the deflation bugbear heading Down Under? – Morningstar.com.au. [online] Morningstar.com.au. Available at: https://www.morningstar.com.au/stocks/article/Is-the-deflation-bugbear-heading-Down-Under/8994 [Accessed 1 Sep. 2018].

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