Real GDP growth for Australia

Part A:

Name of country: Australia
Indicator 1 from Group A: Inflation

Presentation (2 marks)

Consumer Price Index (CPI) Growth for Australia

Figure 1: Australia’s Consumer Price Index growth rate over past five years
Comments and observations (Maximum 7 lines) (4 marks)
Australia aims to achieve an inflation rate of 2 – 3 per cent on average, in the long run, according to the RBA (CEIC, 2019). However, in this five years, inflation has been continuously low. A determinant of this trend is the increased competitiveness from globalization; which leads to a perceived lower price, thus, consistently lower prices in sectors, especially retail. Consequently, wage growth has remained stagnant, further reinforcing low inflation outcomes. To meet the target inflation rate, government spending stimulus and interest rate cuts must be implemented.

Indicator 2 from the same Group A (or B): GDP

Presentation (2 marks)
Real GDP growth for Australia

Figure 2: Australia’s real GDP growth rate over past 5 years
Comments and observations (Maximum 7 lines) (4 marks)
As seen in figure 2, in 2018 the GDP growth dropped to a low annual growth of 1.4 % (CEIC, 2019). This drop is consistent with the decline in Australian housing prices. When housing prices fall, it reduces household confidence and effectively causes reluctance in consumer spending. Prior to this drop, Australia experienced roughly 3.2% GDP growth per year since the 1990’s (Tang, 2018). Since the drop occurred in 2018, it suggests Australia may be going into a recession after 28 years of growth. To avoid this, action must be undertaken and stimulation of the economy through fiscal policy is needed.

Max. of two pages for Part A (anything more than 2 pages will not be assessed)
End of Part A

Part B: Policy Brief
In Part B, the overall page length cannot exceed three pages
For the best possible grade, it is necessary to follow the instruction closely. Any deviations will result in marks taken away.
Assignments are graded against marking criteria that incorporate the requirements set out in the ‘Policy Brief Instructions’. Failing to appropriately include all the requirements outlined in the instructions typically precludes the awarding of top marks.

Recommendations (3 marks)
Provide minimum 2 to maximum 4 recommendations with maximum of five lines are permitted for this section.
Guide: Each recommendation should be stated as a clear course of action for the government /organization to pursue. Be precise with your recommendation and the likely impact on the economy but be concise. Avoid generalities and ambiguous statements. Do not explain or seek to justify your recommendation in this section. Do not describe the consequence of your policy recommendation. Do not state conditions or caveats for your recommendation.

(2 recommendations)
1) Fiscal policy
2) Monetory policy

Economic rationale (15 marks)

Begin this section with a short outline of the context for the brief, the summary of the problem identified in Part A, and any other issues that you think useful.
Guide: This should set the scene for the reader and should provide the reader with sufficient background information to understand the purpose of the brief.
In recent five years, inflation has been continuously low due to the increased competitiveness from globalization aswell as wage growth remaining stagnant thus further reinforcing low inflation outcomes. To meet the target inflation rate of 2 – 3 per cent on average, in the long run, according to the RBA (CEIC, 2019), government must implement interest rate cuts aswell as government spending stimulus.
As seen in figure 2, in 2018 the GDP growth dropped to a low annual growth of 1.4 % (CEIC, 2019). This drop is consistent with the decline in Australian housing prices. When housing prices fall, it reduces household confidence and effectively causes reluctance in consumer spending. Prior to this drop, Australia experienced roughly 3.2% GDP growth per year since the 1990’s (Tang, 2018). Since the drop occurred in 2018, it suggests Australia may be going into a recession after 28 years of growth. To avoid this, action must be undertaken and stimulation of the economy through fiscal policy is needed.

Use the remainder of this section to present economic justifications and the rationale behind your recommendation(s). In your discussion, you should;
• highlight any trade-offs entailed in your recommendation(s)
• raise any additional issues if implemented.
• point out the feasibility of the policy implementation (your recommendation(s) need to be realistic)
You can discuss the economics rationale for all your recommendations together or separately for each recommendation. It should be decided by the students as in what format they can present their argument effectively.
In the end, narratives should form a logical argument supporting your policy recommendation.
Guide: Incorporate all information required to support your recommendation in this section, regardless of whether or not the same information has been included elsewhere in the brief. Do not assert facts that are unsupported by either the narrative or the diagnostics conducted in section A.

NOTE: Remaining 4 marks come from the literary presentation of the report (See Rubrics for details)

Max. page is 3 pages for Part B (anything more than 3 pages will not be assessed, but you may attach a one-page of reference list after the 3-page limit)
End of Part B