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Part B: Policy Brief
Briefing for the Prime Minister
Executive summary
Australia’s unemployment rate has remained steady at above 5% till 2018. With falling unemployment rate, it could be contended that labor market is moving towards full employment as more people are participating in the job market (Scutt, 2018). With falling unemployment rate and steady GDP at 3% in 2018, Australian economy is showing stability signs. However, this would push RBA to raise the interest rates causing rise in wages that can ultimately bring inflation in the economy (Jericho, 2019). The RBA must take policy actions while keeping in view that “too much money chasing too few goods” brings inflationary pressure in economy.
Recommendations
Economic rationale
Australia’s economy and labour market have been resilient, with robust output growth rate of 2.83% and falling unemployment rate of 5.387%. The trends show that the Australian economy is performing well and much stronger than expected in 2018. The unemployment rate in recent years have been falling noticeably while reaching as low as 5.39%. Stronger economic growth and better labor market conditions are expected to improve the wages and cater with inflation over coming years.
The long span of positive output growth (measured as GDP %) has continued for Australia while demonstrating the resilience of he economy. The trends of both unemployment rate and GDP rate indicates the absence of negative economic shocks. This designates that the policy rates in Australia might escalate in near future. Apart from the GDP growth rate, the labor market in Australia also depicts resilience with rising employment and tight labor market (OECD, 2018). The GDP per capita has also been showing the upward trend as compared to other OECD countries (see figure 3 below).
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