Assignment

Length: 2000 words.

Learning Outcomes Addressed

• Demonstrate knowledge of the basic structure of the market system.
• Apply theory to explain how the market system operates in an economy.
• Identify and define the basic terminology used to describe economic processes.
• Examine the influence of economic concepts and variables within basic business operations.
• Analyse the role of government and economic forces in determining change in the economic system.

TASK

On January 15th 2016 the Sydney Morning Herald has published an article discussing Australia and the potential threat of recession in 2016. Australia as many other countries is still fighting the slowdown in economy caused by the Global Financial Crisis that had hit the United States in 2008 and soon after took global dimensions.

Due to the immediate actions done by the Howard Government at the time, Australia was able to avoid recession as such. But nevertheless many industries and businesses have been impacted by the economic downturn and are still recovering. There are few areas discussed in the article on how Australia addressed the issue of the recession. The purpose of this assessment is for you to evaluate the actions of the Australian Government and their overall impact on Australian economy.

The following question has to be addressed:

1. What was the main cause of the Global Financial Crisis (GFC) and why it has spread internationally? Do you believe that it could have been prevented?

Choose two of the following questions:

2. One of the tools Australia and many other countries have used to fight the recession trends was to cut cash rates. The Reserve Bank of Australia has itself cut the cash rate from 6.75% in January 2008 to 2% in January 2016. Why do you believe central banks all over the world are using this tool to fight the recession in their economies? Do you believe it has been efficient in Australia and globally?

3. Many governments have increased their government debt when fighting the economic slowdown. Why governments have spent more and even got into debt in order to fight the slowdown in economy? Do you believe it is an efficient tool in order to fight recession trends? When the Government debt can become a national problem? Give an example of a country where the government debt has caused major issues within its economy. Do you believe that the government debt is a real issue in Australia?

4. Analyse and explain why the Australian federal budget went from expected $19.7b surplus in January 2008 to the expected $35.1b deficit in January 2016? Can this be a real issue in a long run? Analyse and explain why yes or no.

5. As per the article, the unemployment rate has risen from 4.2% to 5.8%. Do you believe the rise in the unemployment rate is a real reflection of unemployment in Australia? Explain why yes or no with the reference to the unemployment rate measurement process. How is Australia doing with post GFC unemployment levels comparing to the rest of the world? How is Australian Government addressing the unemployment issue at the moment?

6. The article has mentioned the slow down in the Chinese economy and its impact on Australia. Why do you believe Australia cares so much about what is happening in China? What is the connection to the Australian economy? Give examples from history where you can demonstrate the impact of Chinese economy on Australian economy. Which areas of the Australian economy are usually impacted?