Australian Economy Essay Example | Topics and Well Written Essays - 2000 words

Australian Economy - Essay Example The prediction was that the central bank of Australia would be forced to bring into play an expansionary monetary policy that would have rates of interest lowered to 2.5% from 4.25% so as to trigger growth. (Foley, 2009) Just before looking at this policy, it is of essence to explain vividly what a monetary policy entails. The situation in the world since year 2008 has been very serious and many economies including North America and Europe experienced a major economic downturn. Generally, the whole world was experiencing one of the most serious economic recessions. Australia as an economy has been said by most economic analysts to have defied this downturn. However, it has been affected as well by this situation, to mention the least. Governments, through their central banks, use both monetary policies and fiscal policies to control the stability and growth of the aggregate economy. This study is about both of these economic policies and more particularly in the context of the Austra lian economy. The study will first tackle each of these policies in general to create an understanding of the same before narrowing down to the Australian situation. Monetary policy will be the first to handle before going on to the fiscal policy. Monetary policies are usually about two major categories. These are expansionary and contractionary monetary policies. An expansionary policy is generally an open-market buying while a contractinary policy is about an open-market sale. An expansionary policy involves lowering of rates of interest while a contractionary policy escalates interest rates. Increased interest rates (contractionary policy) mean that borrowing from banks will be more expensive and thus, there will be minimal borrowing, which reduces currency supply in a given economy. A reduction in interest rates (expansionary policy) means that borrowing from banks will be easier due to the low rates of interest. Thus, this increases currency supply in the economy. Graphs can be utilised to illustrate what has been explained earlier concerning monetary policies. This is as shown below; Figure 1: Monetary policies illustrated in graphs Interest rates S0 S1 Interest rates S1 S0 D D Bank Reserves Bank Reserves Expansionary policy Contractionary policy As shown by the arrows, an expansionary policy involves a lowering of the rates of interest and thus, a rise in the supply of currency while a contractionary policy does exactly the opposite. S0 shows the original currency supply while S1 is the new supply. D is the demand curve for currency. (Baumol and Blinder, 2010 pp270, 271) Despite the criticism by the International Monetary Fund, that Australia was using a bad approach (in year 2010) to the inflation levels by using a monetary policy that was based in inflation targeting, the Reserve Bank of Australia continued using this approach. At this point in time, the bank was applying a contarctionary policy. The Reserve Bank usually targets a range of inflation o f around 2-3% while making these decisions of the monetary policy. It was to utilize the rates of interest so as to slower the overheating of the Australian economy. In 2010, the inflation target ranged between 1-2%. In order to control the condition of the recession effects, the Reserve Bank was applying a

International relations - foreign policy Essay Example | Topics and Well Written Essays - 1500 words

International relations - foreign policy - Essay Example Countries, big and small alike, have internal domestic policies. Concurrently, they also have foreign policies. These policies are bases of the values and interests that are crucial in guiding how these particular governments act or behave with regards to certain international issues. Policy, here referring to a certain course of actionAccording to Feigert, Graebner, Papademetriou, Mangone, Ransom, Wilson, Wolfe, Piper & Terchek, foreign policy is the foreign component of public policy. (1983) Simply defined, public policy is the choice or the stance that particular governments adopt with regards to certain issues in country. (Dye, 1972) That said, while public policy is concerned with the domestic issues and policies to be implemented within (inside) state borders, foreign policy on its part is concerned with policies that are to be implemented without (outside) the countries borders. (Feigert, et al, 1983) Foreign policy plainly put is the policy that is formulated and adopted by s tate governments for the purposes of governing its relations with other countries in the international arena. The most important thing to note about foreign policy is that it is primarily concerned with state interests. State interest could be in either, political, military and/or economic terms. The reason why a country would like to implement certain policies with regards to other countries has to do with what it stands to gain more than anything else. Shah (2001) posits that every nation/country is in possession of a foreign policy. The reason why foreign policy is important is because it ensures that the needs of the nations/countries are represented in the international community. During the cold war countries mostly used foreign policies as a way of furthering their national interests and agendas. In the course of furthering these agendas, the interests held dear by other nations in the international community did not matter much and were disregarded. In most cases this often led to resentment between different countries with different issues to push forth. (Shah, 2001) The conduct of foreign policy then involves balancing between substitute policies and their perceived costs and benefits. (Feigert, et al, 1983) At the end of the day, countries more often than not, adopt the policies that are most favorable to them and are in sync with what they may want to achieve (national interest). It could be security needs or economic growth. (Shah, 2001) Traditionally, the conduct of foreign policy has often been the duty of the national governments. Nonetheless, other actors within the state realm are involved in the conduct and formulation of foreign policy. These are the smaller regional states and provinces within a nation/country. For this reason, there is always advocacy and lobbying for the type of issues and interests that should be part of foreign policy and which respective government should focus on. This way these state actors are able to influence foreign policy decisions. Despite this, some governments wield such immense powers such that they lo ck out these state actors such as regional states and provinces out of the formulation and consequent conduct of foreign policy. Take the case of India for example. As per the Indian constitution, the central federal government, the executive, is granted all the powers in the land necessary for the conduct of both domestic and foreign policies. Still, even though these actors are given lesser powers, but powers nonetheless by the Indian Constitution, the regional states in India have little or no autonomy. The consequence of this is that their roles are usurped and the central government makes all the crucial decisions with regards to foreign policy. (Dossani & Vijaykumar, 2005) As countries conduct foreign policy they involve themselves in such activities as diplomacy, negotiations, bargaining, cooperation or even coercion, bullying, lying and intimidation. Depending on what their interests are at the end of the d