Inflation in Australia has picked up significantly and by more than expected. Over the year to September
Question:
Inflation in Australia has picked up significantly and by more than expected. Over the year to September 2022, the consumer price inflation rate was 7.3 per cent, the highest it has been in more than three decades. It is expected to peak around 8 per cent at the end of 2022, before starting to decline in early 2023 (RBA, 2022).1 The Reserve Bank of Australia (RBA) has increased the cash rate target several times reaching currently to 3 per cent. The Board judged that now was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy post-pandemic.2 However, Australia's top economists are divided about how to tackle the galloping inflation with some economists view that Australia should be able to tolerate an inflation rate of 8% or higher.3 Some economists also argue that beyond rate rises, Government should take some actions to bring consumer price inflation down by adjusting taxes and spending.
Question:
Explain the intended effect of the Reserve Bank's monetary policy and illustrate your explanation with an appropriate graphical analysis (use aggregate demand and supply (AD/AS) model).
What kind of monetary policy did the RBA implement given the economic state you have identified? Discuss the policy's theoretical foundations and the primary goals it seeks to accomplish?
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey