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This essay provides a short but detailed description of the monetary policies for Australian banks. In addition to this general overview, the paper describes the banking systems' similarity to the federal reserve banking system of the United states. Looking at every aspect, from the country's central bank to the issues with inflation, the paper provides a glance at the system as a whole.
From the Paper:"Interesting even after 14 years, the same problem exists. RBA's targets for inflation still stand at 2-3 percent but Australia has not been able to meet it recently. As recently as end of the last month, inflation stood at 1.7 percent which is actually lower than 1.9 percent in July. 1 The role of monetary policy is to either control the supply of money or to expand it depending on the current situation of the economy. In Australia, government would want to adopt more expansionary measures in order to raise the inflation level because too low inflation indicates lower consumer spending. But for this paper, let us assume what will happen if Australia's inflation level actually went beyond the RBA targets.
"Australia has now become of the countries which actively target inflation. This framework was adopted because previous monetary measures had been unable to keep the inflation rate low (Agrawal2). Now the inflation is consistently low for some years which may be a cause of concern for the country but apparently Australia is still more concerned about the possibility of rising inflation than low inflation. Let us now assume what will happen if inflation actually goes beyond the 2-3 percent target set by RBA.
"What are the repercussions of low and high inflation? This is very critical question and one that must be understood in order to see why Australia might be concerned about high inflation and what needs to be done in expansionary or contracting market."
Sample of Sources Used:
- David Meredith and Barrie Dyster. Australia in the Global Economy: Continuity and Change (1999) Cambridge University Press
- Guy Debelle and Glenn Stevens. Monetary Policy Goals For Inflation In Australia. Reserve Bank of Australia. 1995
- "Inflation Rate to give RBA heart" August 31, 2009 http://business.theage.com.au/business/inflation-result-to-give-rba-heart-20090831-f4gw.html
Cite this Descriptive Essay:
Australia: Inflation and Monetary Policy (2012, January 29) Retrieved November 29, 2022, from https://www.academon.com/descriptive-essay/australia-inflation-and-monetary-policy-150158/
"Australia: Inflation and Monetary Policy" 29 January 2012. Web. 29 November. 2022. <https://www.academon.com/descriptive-essay/australia-inflation-and-monetary-policy-150158/>