Solution Code: 1AEAJ
This assignment falls under Macroeoconomics which was successfully solved by the assignment writing experts at My Assignment Services AU under assignment help through guided sessions service.
Provide forecasts for the variables listed below by inserting a number in the grey boxes. In submitting Part A of the assignment you must submit the entire document to Blackboard. Note that Part A of the assignment will be marked in conjunction with Part B.
Your task for Part B of the assignment is to write a commentary and discussion piece on the economy similar in nature to that which would be written by a macroeconomist from a major bank or consultancy. I would like you to outline your opinion on the state of the economy. Please complete your assignment by writing in the grey box provided below. Some instructions on how to go about completing Part B of the assignment are list below. Please follow these instructions.
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Australia is a resource rich nation open economy and has shown massive economic progress during the last two decades. But the economy is facing several economic challenges since last three years. Since Australia embraced globalization and adjusted its economic liberalism, the economy is closely interconnected with the global economy. As a consequence, major global events affect the Australian economy to a significant extent. Some of the key global events are:
Most significant risk that could cause a leftward shift of the aggregate demand curve is the fall in consumption expenditure and business investment. Since the domestic income is falling with a subsequent fall standard of living, household are likely to defer the consumer spending. Consumption expenditure is the key component of aggregate demand- thus a fall in consumption expenditure will lead to fall the aggregate demand and shift to leftward.
Another important factor that would shift the aggregate supply curve to the left is the low productivity growth. According to Krugman, productivity is everything in the long run. Productivity is considered as a fundamental source of economic prosperity. But productivity growth has found to be worst in the recent years in australia. It would definitely shift the aggregate supply curve to the left ( Fabri J, 2016).
The falling commodity prices mean shrinking the tax receipt for federal government. As an immediate effect the budget deficit is becoming worse year after year, the government has to either increase the tax or the cut the government spending. Ultimately it will further pull the economy towards recession. But the investment in non -resource sector has increased significantly. Despite the end of mining boom and the complete shutdown of automobile manufacturing, the long term economic outlook is optimistic. The economy has undergone huge structural transformation – from a resource based economy to a service economy. The earnings from service exports like tourism, higher education and health care is expected to outpace the loss in income from mining exports. Domestic labor market has improved to some extent as well as the consumer sentiment has bounced back.
Economists are on the view that Australia is doing much better than other commodity based economies. The deputy governor of the Reserve Bank, Dr Lowe is also optimistic about the long run economic outlook and believed that Australia has proved to be resilient than expected. While commodity prices have come down by 40% and even the mining investment has shown a sharp fall of 40%, the economy managed to expand at a reasonable pace. Diversity and flexibility of modern Australian economy will help to withstand the massive fall in commodity prices and will exhibit a rapid pace of economic growth in the long run. (Wade M, 2016).
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