The Objectives of Economic Policy
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Chapter 13- The Objectives of Economic Policy
13.1 Introduction
• Major objectives of economic management
o Economic growth
o Internal balance – UE and inflation
o External balance – CAD and foreign liabilities and exchange rates
13.2 Objectives of Economic Management
• Economic Growth – measured by GDP
o Increase in Growth, to provide benefits
o Increase standards of living
o Improved job prospects for labour force
o Opportunity for increased investment in infrastructure and public services through higher govt tax revenues
• Full employment
o Get economy to reach the Natural Rate of Unemployment
o NAIRU is caused by supply side factors, rather than deficiency in demand – because doesn’t include cyclical UE
o Benefits of Full Employment:
o Maximise economy’s capacity to produce, maximising living standards
o Minimising adverse economic and social problems associated with UE
• Price Stability - Inflation
o Sustain inflation at a level that will cause minimal distortion to economy – NOT eliminate in total
o High inflation may:
o Reduce real value of income and wealth
o Reduce international competitiveness
o Depreciate interest rates
o Create uncertainty about future costs and distort economic decision making
o Distort patterns of resource allocation
• External Stability - CAD
o Achieving external stability involves a country meeting its long term financial obligations to the rest of the world
o Sustainable position on CA – i.e. sustainable CAD
o International confidence in Aust economy – reflected in $A
o Acceptable level of foreign debt
• Distribution of Income and Wealth
o Putting eco growth before inequality
o Recent policies have aimed to reduce – higher tax rates for high income earners
• Environment Management
o Ecologically sustainable development...
13.1 Introduction
• Major objectives of economic management
o Economic growth
o Internal balance – UE and inflation
o External balance – CAD and foreign liabilities and exchange rates
13.2 Objectives of Economic Management
• Economic Growth – measured by GDP
o Increase in Growth, to provide benefits
o Increase standards of living
o Improved job prospects for labour force
o Opportunity for increased investment in infrastructure and public services through higher govt tax revenues
• Full employment
o Get economy to reach the Natural Rate of Unemployment
o NAIRU is caused by supply side factors, rather than deficiency in demand – because doesn’t include cyclical UE
o Benefits of Full Employment:
o Maximise economy’s capacity to produce, maximising living standards
o Minimising adverse economic and social problems associated with UE
• Price Stability - Inflation
o Sustain inflation at a level that will cause minimal distortion to economy – NOT eliminate in total
o High inflation may:
o Reduce real value of income and wealth
o Reduce international competitiveness
o Depreciate interest rates
o Create uncertainty about future costs and distort economic decision making
o Distort patterns of resource allocation
• External Stability - CAD
o Achieving external stability involves a country meeting its long term financial obligations to the rest of the world
o Sustainable position on CA – i.e. sustainable CAD
o International confidence in Aust economy – reflected in $A
o Acceptable level of foreign debt
• Distribution of Income and Wealth
o Putting eco growth before inequality
o Recent policies have aimed to reduce – higher tax rates for high income earners
• Environment Management
o Ecologically sustainable development...