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Outline and Instructions:

In this assignment you will be asked to do two things. First, forecast certain macroeconomic variables prior to their official release. Second, discuss your forecasts, the significance of the data for the economy and develop an opinion and commentateabout certain economic issues.

The total weight of the assignment is 25% of your final mark. The assignment has two parts. Part A requires you to submit some forecasts. This has to be done before the data is released, so note the submission time for this part of the assignment. Part Bis the main part of the assignment. It contains a number of questions on macroeconomic topics. Many of these can be started immediately. One question, asks you to discuss your forecasts in Part A and how accurate they were. This obviously needs to be done after the data is available.

In submitting Part A answer the required questions and post the whole assignment to Blackboard. In submitting Part B, include your earlier answers for Part A and submit the whole document to Blackboard.

To successfully complete this assignment you will need to undertake some research. Your lecture notes and textbook will be useful in this regard, particularly in understanding the definition of the variables to forecast in Part A. For Part A and B it is highly recommended that you make use of the information sources listed in the Appendix in developing your thoughts on the domestic and global economy. Add any resources you cite to the reference list at the end of this document. Place your answers to the question in grey boxes. Adjusttheir size as necessary but make sure you keep to the word limit.

1. Part A: Macroeconomic Forecasting

Question A.1.

Provide forecasts for the variables listed below by inserting a number in the grey box. (Note: this question will be evaluated as part of Question B.1)

Country


   Variable Data source or where the data can be found Release or forecast date Forecast




Australia


CPI (y/y % chg. in 2016Q1) ABS (http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0)

27-Apr-16 0.5

Unemployment Rate (%of labour force, seasonally adjusted, March 2016) ABS (http://www.abs.gov.au/ausstats/abs@.nsf/mf/6202.0)

14-Apr-16 5.8

ASX200 Share Index (http://www.bloomberg.com/quote/AS51:IND)

27-Apr-16


(end of day) 4850

Australian Dollar vs US Dollar (No. of USD to buy 1 AUD) (http://www.bloomberg.com/quote/AUDUSD:CUR)

27-Apr-16


(end of day) 0.7

2. Part B: Macroeconomic Analysis

Question B.1:

Discuss how your forecasts compared with the actual numbers, any errors and why? What are the implications of the data for fiscal and monetary policy makers in Australia and in particular, is the data likely to lead to a change in monetary or fiscal policy settings?

Question B.2.

Briefly outline how the global economy, and recent global economic events, have impacted and are impacting on the Australian economy?

Question B.3:

730_Macroeconomic Analysis.jpg

Referring to Figure 1.7 in the textbook (Dornbusch, Bodman, Fischer and Statz, 2013) and lecture notes; at what point do you think the Australian economy is at in the business cycle?In your answer outline whether you think the economy is performing above or below potential GDP, what the normal level of GDP and CPI growth is, what you think is the natural rate of unemployment (NRU) and why.

Question B.4:
Discussone major risk to the Australianeconomyfrom the demand side and one major risk on the supply side. That is, discuss two events which, were they to occur,would negatively affect aggregated demand (AD) and aggregate supply (AS) respectively leading to higher unemployment. Also, discuss your assessment of the probability of each event occurring.

Question B.5:
What is your expectation regarding the performance of the Australian economy over the next 10 to 20 years with regard to GDP growth?How will it perform compared with the previous couple of decades? Discuss with reference to the growth drivers such as; technology, population and ageing, physical capital, human capital and natural resources?

Assignment Part B

Variable

Actual Data

CPI (y/y % chg. in 2016Q1)

1.3% y/y

(-0.2% q/q)

Unemployment Rate (% of labour force, seasonally adjusted, March 2016)

5.7%

ASX200 Share Index [end of day on April 27]

5,181

Australian Dollar vs US Dollar (No. of USD to buy 1 AUD)  [end of day on April 27]

0.7591

In Q1 of Part B you are asked to evaluate how accurate your forecasts were. On some variables you may have done quite well while on others perhaps not so well (I did great on the unemployment rate but terribly on the ASX200 and AUD).

Have a think about why you were wrong; what were the developments in the economy you didn't expect? With regard to the second part of Q1--the implications of the data for policy--you may want to have a look at this news article which discusses the CPI result, which was quite a shock.

(http://www.smh.com.au/business/the-economy/australia-sees-deflation-for-first-time-in-seven-years-20160427-gofuws.html)

Also there is a lot of additional discussion of the CPI results in the media, which may also be useful for your research.

We have now also covered all the material in lectures, which will be useful in formulating your assignment answers. Remember the idea of the assignment is to write a topical and contemporary piece of commentary on the Australian economy.

So address the question and try to provide some insight into the issues facing the Australian economy based upon the material in lectures and your knowledge and research. Also note you need to keep your responses to each question within the 200-word limit. This will be enforced.

Macroeconomics, Economics

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