The Australian dollar has continued on a roller coaster ride over the past few months after a period of relative stability above parity against the greenback. While the exporters are cheering the devalued AUD, tourists are cautiously watching the money markets.
Task: Answer the below questions
1. What is monetary policy and what are the objectives of monetary policy for the RBA?
2. Market numbers
a. What is the current Australian unemployment and inflation rate?
b. Have these numbers been stable or volatile over the past few years?
c. What is the current RBA cash rate?
d. Compare the current RBA cash rate with a major bank's mortgage interest rate.
3. Many Australians who have retired are not happy about low interest rates. Why is this so?
4. What is the monthly financial benefit for a household with a $300,000 mortgage over 25 years of a cut in their mortgage rate from 6% p.a. to 5.5% p.a.? (use a loan calculator online from one of the major banks)
5. In recent times the four major banks have not followed exactly the RBA's adjustments to interest rates. Do you believe that this may undermine monetary policy? Justify your opinion with reasons.
6. What is the RBA target inflation rate? How does the RBA attempt to achieve this rate? Is the current inflation rate above or below the RBA target?
7. What is deflation? What are the negative consequences of an economy trapped in a cycle of deflation?
8. Who does and doesn't benefit from a low Australian dollar? Explain with examples