Are reserve requirements set by the government or the RBA, or some other regulatory body? (maybe APRA?)
From my understanding reserve requirements are restrictions and guidelines that must be met for deposits and loans by financial institutions and consumers.
e.g. the decreasing maximum LVRs for home loans for particular suburbs in Sydney and Melbourne.
Thanks
Hey there,
sorry for the late response to your question. Reserve requirements isnt something that you really have to know for this course but APRA is the main regulatory body that used to impose heavy restrictions but have since started to decrease their regulation and involvement in the market. There are still regulations in place tho.
Good luck for the exam!!!
Isaac
Hi, does anyone have info on china and the international business cycle? I know they implemented a stimulus package as a response to the gfc, but idk where to find info on the effects of the package
Hey there,
So in terms of China and the stimulus in the GFC - there isn't exactly hard stats on the specific outcomes of that policy. Mainly because there were many responses to the GFC and the effects of it can't just be attributed to that one stimulus (monetary policy e.g.). However if you were looking at that; I would use the stats on growth around 2008-2009 and say that it didnt go into negative growth like other countries due to these expansionary policies. In terms of the international business cycle - look at changes in GWP over time especially around the GFC if you want to link it to China.
Hope this helps; sorry I dont have a bank of statistics - I was too lazy when I did my HSC
Isaac
Hi, does anyone know whether fiscal or monetary policy have a shorter time lag? I think fiscal has a longer time lag for implementation, whereas monetary has a longer time lag for the effect after implementation to take place. but in 2014 q24 "explain the limitations of both fiscal and monetary policy in addressing economic slowdown", the sample answer seems to assume time lag means time lag for implementation... (so does time lag automatically mean time lag for implementation?)
Hey there,
so the answer actually makes the same distinction tha tyou made. If you look at the first paragraph on fiscal policy limitations it says that the 'implementation of fiscal policy is subject to time lags' meaning that it has an implementation lag due having to pass houses of parliament etc. Whereas monetary has a short implementation lag but a medium term impact lag (usually 6-8 months) as the suggested answer says. So you are both correct
thanks Sophie for the input as well!!!!
Good luck !!
Isaac
This is probably a dumb question but in this sentence:
"Monetary policy can also be used. Lowering the cash rate can affect the term structure of interest rates across the economy, reducing the cost of credit."
what does "term structure" and "cost of credit" mean?
Thanks in advance!
Hi there,
so a term structure is just how long the loan lasts so for instance a 2 year loan with interest paid annually... or interest paid monthly - those are all parts of the term structure. The cost of credit on the other hand is the relative cost of borrowing money - this is directly correlated to the interest rate since you have to pay back interest when you borrow the money. So basically the sentence means that when you use expansionary monetary policy to lower the cash rate, you essentially you reduce the cost to consumers and businesses to borrow money (since less interest has to be paid) i.e. incentivisng borrowing to stimulate the economy
Hope this helps, good luck
Isaac
Can someone please answer this question
Assess the effectiveness of government policy in Australia in attempting to improve the BOGS in recent times?
Thanks!
Hey Cat,
What a question - so you would firstly look at the factors that affect BOGS and current issues with BOGS - so things like international competitiveness, narrow export base, exchange rates, things like that (not exhaustive list, just things off the top of my head) then in the same paragraph that you talk about how they affect BOGS, you would assess the impact of a policy to remedy that. So for example, international competitiveness - talk about how they affect inflation and the exchange rate through monetary policy in order to maintain competitiveness.
Alternatively you could look at it in terms of fiscal, monetary, microreform and say how those have all affected BOGS - this is a weird question and I'm sorry my knowledge of the syllabus has dwindled a bit but that's how I would go about it.
Good luck!!
Isaac
"Analyse the impact of changes in the global economy on Australia’s Balance of Payments. In
your response, you should refer to the economic information provided. "
Hello, so in questions where it asks for "changes in the global economy" what sort of things can we talk about, im confused and stumped because it is so broad
Hey so in terms of changes in the global economy; I would look at things like the GFC, commodity boom, China's industrialisation, global downturns (Euro crisis) --> choose a few of these and then say how this affects BOGS + PYA + NSY + KFA etc. so like how global economic activity affects our exports --> give an example like china's industrialisation and high growth which increased demand for our iron ore exports resulting in a surplus on BOGS etc.
It's incredibly broad - i think i read a practice essay on this that was over 1500 words - so choose really important global shifts and say how they would affect accounts on BOP.
GOod luck!!!!