Question

Describe the Australian federal government and RBA’s responses to the Covid-19 crisis and evaluate the effectiveness of the fiscal and monetary policy implemented so far.?

Answer 1

Australian government provided $17.6 billion economic support package to encourage investment to provide job opportunities for unemployed people It also delivered $2.4 billion health package to protect all Australian people. It provides $669 million to expand Medicare subsidised telehealth services for all Australian to access quality health care while at home It also funding ho,w delivery of most prescription medicines for those unable to get their local pharmacy. To reduce the risk of Covid 19 spreading through international level,it imposes travel restrictions and screening travellers who arrive in Australia and ensuring their quarantine Reserve Bank of Australia reduced cash rate twice in March 2020 to 0.25 % to boost the cash flow into business and to households. The banks stands ready to purchase Australian Government bonds to increase money supply. It provided a Term Funding Facility for banking system to support Lending to business. Through this facility household and business firms can access credit at cheaper funding costs. RBA has been injected substantial extra liquidity into financial system through its daily market operations. The expansionary fiscal and monetary policies highly impacted Australian economy. By promoting investment and job opportunities through reduction in cash rate and stimulus packages by federal government , it increased the investment level and production in the economy. Thereby it offered various job opportunity to unemployed people and it results increase in general income level. It boosts the aggregate demand for good and service sin Australian economy. Thus it increase the production level to offset the increase in aggregate demand. It increase the aggregate supply in the economy