Question

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Background information: Evaluate the International Macroeconomic context of Australia's 2020 economic performance – current policy challenges and likely future directions. Is Australia well positioned to recover in 2021?

Question: Explain in 500 words using The RER and internal and external balance- automatic mechanisms of adjustment- Where is Australia currently on the SWAN diagram - possible policy interventions?

Answer 1

Australia has one of the highest growth rates of developed world and being the world's 13th largest economy in 2019 Australia GDP growth amounted to 1-8%. According to the update by IMF forecast from 14th April 2020 due to outbreak of covid-19 GDP growth is expected to fall to 6 to 7% in 2020 and pick up to 1.6 % in 2021 subject to the post pandemic global economic recovery.

In 2019 the inflation rate in Australia was around 1.6% period that is expected to decrease 1.4% in 2020 and increase again to pre pandemic levels of 1.8% in 2021 according to the latest world economic outlook by IMF.

IMF evaluatesheet 2019 government dept and 40 1.8% accepting to be 42.3 % and 41.3 % in 2020 and 2021. The IMF expects unemployment rates due to covid-19 rate currently being estimated to increase 27.6 percent in 2020 and even more in 2021 reclaiming 8.9%

Australia is not bad in a shape but it will take time to recover.The RER and internal and external balance

The effects that covid-19 have had on internal balance has been a significant increase in under employment and unemployment this has been partially evident in the tourism and also in aviation, unlikely tradable goods in Australia cannot export due to unemployment. In other words Australia is operating to the IB schedule similarly external balance which is concerned with credible goods is likely to be in the trade surplus meaning Australia is exporting more than it is importing at the present time that's how it is going. Therefore the quantity o of tradable goods exceed the conception of tradable goods so the remaining portion is able to be exported.