AUSTRALIAN ECONOMIC POLICY

Australian Economic Policy



Australian Economic Policy

Global Economic Condition

The past 5 years (2007-2011) witnessed multiple crisis point in the history of financial market. Initially started with subprime mortgages which uncovered the flaws of derivative markets and a year later, a big investment banks went bankrupt including Layman Brothers (USA). After the bankruptcy, the notion all banks were 'too big to fail' could no longer be supported. Oil prices sky rocketed and to cope up with the rising commodity prices, bank increased interest rates. In May 2010, IMF along with European Union approved a package for Greece, but, later on, it was found out that problem was not just solvency of banks, but, in fact, solvency of the banks. The debt crisis spread through the European Union and includes Ireland, Portugal, Spain and Italy. Apart from these countries, sovereign debt also became concern for many of the other countries. In Ireland, the problem started when the government announced the one year guarantee package for 6 Irish banks. This guarantee was extended consecutively for another two years because banks were unable to raise finances to level down the debt. Ultimately Moody's downgraded the banks debt to Junk Status. In Portugal, government overspent on development projects without any clear focus which raised the wages and bonus for state officers rather than any infrastructure developments. In May 2011, Euro zone also approved bailout package 78Bilionn Euros for the Portugal. However, the economic conditions are recovering quicker. (Statement of Monetary policy, 2010)

The issues of sovereign debt and banking problems pose serious setbacks to the confidence of financial markets. There has been a high level of volatility in all over the world. The new focus is towards the downside risk of the global growth. Even though, many steps have been take to restore back the confidence but difficult decisions still lie ahead. Public spending has to be cut down to a great extent in all welfare countries. This won't come easy for them as they will shift their respective budget towards more sound investments than spending it on public good. This will ultimately result in shaken consumer confidence in the advanced economies.

The situation in Asia is far better. China has been witnessing positive growth for last one decade with slight decline in 2010. Central banks and governments have announced austerity measures to get the situation under control. Rising inflation and interest rates have tightened the credit market. Unemployment is on the surge all over the world. Overall, global economic growth seems dim in the current scenario until the further serious steps have been taken.

Australian Economy

Australia is one of the strongest economies in the world today. In the wake of recent financial crisis, and downgrading of major economies including USA, there are concerns if the Australia is better than others. Even the savings trend in Australia is taking strong hold rather than investment.

Fiscal Policy Analysis

In 2009, the global economy experienced the greatest downturn since the Great Depression which had inevitable repercussions for every country ...