Macroeconomic Policies

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Macroeconomic policies are policies that affect the economy as a whole with the aim of minimizing fluctuations in the business cycle. Macroeconomic policies are made up of two types of policies, these including both monetary implemented by the Reserve Bank of Australia and fiscal policies administered by the government. The implementation of these policies has a significant and vital role in the achievement of multiple economic objectives. These including; Full employment of labor resources, sustainable economic growth and inflation, environmental sustainability, equal distribution of income and wealth and external stability Macroeconomic policies have an immense role in achieving major economic objectives in Australia. A major economic objective which the Australian economy aims to achieve through the implementation of macroeconomic policies is full employment of labor resources (factor market) (at the Natural rate of unemployment), and hence diminutive levels of unemployment in the economy. Unemployment refers to a situation in the economy where individuals over the age of 15 without a job want to work (actively seeking full time or part time work) but are unable to find a job, and as a result labor resources in an economy are not utilized. The Australian labor market is extensively dynamic, constantly responding to alterations in technology, demography and the economy, thus affecting the level of demand and supply of labor. Australia’s employment and unemployment levels have fluctuated largely over time as a response to alterations in the Australian economy, demography and technology, as portrayed evidently over the past decade. Therefore, in order to alleviate these fluctuations and achieve full employment of labor resources and thus economic growth and stability the employment of macroeconomic policies and monetary policy administered by the government and Reserve Bank of Australia is vital. The Australian unemployment level has constantly fluctuated over the past decade constantly increasing and decreasing. Throughout the 1970s the Australian economy experienced stagflation, whereby the economy experienced increased levels of inflation and low economic growth, thus elevating the rate of unemployment to over 6 %. Further increasing by 2% in 1980 and another 3% in 1990 during the recession. The rate has gradually decreased from the period of 1990 reducing to 7.4% in 1998-9 to an average rate of 3% between 1999 and 2008 due to higher rates of sustainable economic growth and structural reform in the factor market. However this altered in the second half of the year after the Global Financial Crisis (GFC) whereby the Australian economy experienced rising levels of unemployment with unemployment levels increasing to 5.8% whereby The size of the labor force was 11,425,300 persons, and 662,900 were classified as unemployed from 4.3% in July. A major cause of unemployment during this period was the deficiency in aggregate demand (AD=C+I+G+(X-M)). This deficiency may lead to a rise in cyclical unemployment (unemployment that occurs due to a downturn in the level of economic activity) as the demand for labor is derived from the demand of the final output that is the product. Evidently seen in the GFC (2008) which saw the decline in aggregate spending and economic activity. To address the increasing unemployment as a result of an economic downturn, directed the government to introduce expansionary measure in the 2009-10 budget. The Federal budget aimed to support 210000 professions and saw the implementation of re skilling programs in attempt to lower the duration of unemployment. Alike to further attain lower levels of unemployment the government has continued to initiate re-skilling programs alongside other policies to reduce the level of unemployment apparent in the economy in response to amendments in the economy. The current rate of unemployment is 4.9 %. The Australian economy due to the implementation of various...
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