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The Australian Economy

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The Australian Economy
Review the relative importance of the floating exchange rate and fiscal policy on the Australian Economy in the past twenty-(20) years.

Introduction The Australian economy is one of the most stable globally and the floating exchange rate has played an important role in maintaining that stability. This essay seeks to assess the relative importance of the floating exchange rate and fiscal policy on the Australian economy over the past fifteen-(15) years. In order to do so, it looks at the history of the Australian economy over that period, how it has performed and what has changed significantly. Then it reviews the history of fiscal policy over that time and its contribution to the economy. Following on from that it assesses the role that …show more content…
It achieves this not only by reducing the competitiveness of Australia’s exports, reinforcing the monetary policy setting. Furthermore, the higher dollar also enables the wider community to benefit as it enables all Australian companies to minimise the cost of imports, further dampening inflationary pressures.

Management of the two-(2) Speed Economy One of the most important economic issues for the Australian economy going will be the management of the (2) speed economy. This relates to the relative strength of the mining sector compared to the remainder of the economy. With strong demand for Australian mineral exports, particularly from China the price of minerals on the world markets have increased along with demand. In fact, RBA analysis shows that Australian GDP growth now most closely mirrors that of China, compared to an historical correlation with the US (Figure 5). Furthermore, with Chinese growth averaging 9% per annum (RBA, 2010), this has placed pressure on inflation and forced the RBA to increase interest rates to soften domestic …show more content…
Savage, J & Libich, J (2010), Tethering the fiscal sow: Monetary Policy that keeps pork in the sty, Policy, Spring 2010, Vol. 26 Issue 3, p14-19 Scott, A (2008) “Making Fiscal Stimulus Effective During Downturns”, International Monetary Fund, 2 October 2008 viewed at www.imf.org/external/pubs/ft/survey/so/2008/res100208b.htm Swan, W (2010) “Economic Reform for Working People”, Address to the Whitlam Institute and The University of Western Sydney 15 July 2010, Department of the Treasury, Australian Federal Government viewed at http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=speeches/2010/023.htm&pageID=005&min=wms &Year=&DocType The Economist Online, 2010, “Gillard gets out of a hole”, 2 July 2010 viewed at
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