Question: How did government policy and private institution affect market performance and consumer behavior in Australia?
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Answer #1:
Generally, the part of government policy that most influences the economy is Fiscal Policy which is the amount of money that the government is prepared to invest in projects like new roads, rail, hospital and Building the Education Revolution type projects. These are looked upon as positive Fiscal Projects as they go on generating funds by keeping people in jobs and/or training for jobs.The positive fiscal policy was they type that Kevin Rudd used giving people $900.00 each so that they could go out and spend it. This is a one - off boost to the economy if people spend it but has no long term benefit to the local economy and if the goods and services purchased are made overseas like HD TV's made in China or a holiday in Thailand then the money spent is of no benefit to the local economy or very little in the case of the HD TV.
The other form of economic policy that impacts upon us is Monetary policy. this is controlled by the Reserve Bank. They set the interests rates. This in turn determines the interest rates that the banks and credit unions charge on home loans. The government does not control this no matter how much they may like to skite about it and accuse the other side of having higher rates and costing voters more in mortgage payments during elections. The RBA makes its' decisions on interest rates based on people's spending, international economic conditions and domestic economic performance - especially the housing and mining performance.
Wages policy flows from this as the unions tend to apply for an increase in the basic rate of pay once the increased interest rates and the increased government spending - this is inflationary if it is not managed properly and forces up the cost of living - forces up the cost of living to the extent that people can't live on the old wage and need more dollars to cover basic survival. Government is involved in this by setting wages policy and providing the arbitration courts and tribunals that determine these wages.
It is also involved in the fiscal side of things by setting taxation policy which can make or break business. If tax is too punitive business have cash flow problems and can't functions and if there is not enough tax revenue the government can't provide the services that the federal government is mandated to do through the Federal Constitution. These are Defence, Health and Education along with the States, Transport etc.
I hope that this helps clear the air on government involvement in economics.
Cheers!!!!
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I hope that these sites give you some insite into Macroeconimic policy.
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