Global Financial Crisis
Impacts of the global financial crisis
The global financial crisis has something that has been brewing for some time now and it really started showing its effects somewhere in the mid 2007 and the early months of 2008. All the global stock exchange markets have been on the decline, large financial companies and institutions have been also collapsed, or have been sold out. Different governments even in some of the richest and economically developed nations like United Kingdom and United States have been coming with the necessary rescue packages which can help bail out all the financial systems in the countries. As that has been happening, many people have been concerned that most of the people responsible for the present financial hardships have been bailed out, while at the same time, a financial global meltdown is projected to affect the life of almost everybody in the currently inter-connected small world.
As experts argue, this is a problem that could have been barred from happening if most of the countries had come up with the necessary ideologues for supporting the present economic models so that they may not remain influential, vocal and inconsiderate of the concerns and viewpoints of the other economies. Basically, the present crisis has been making the Australian nation an impoverished economy. This has resulted in bankruptcy in the entire economy, and the reason it has been the duty of the countrys Federal Reserve to stem in and look for long lasting solutions to these impacts that have resulted from the ongoing global financial crisis. From this crisis, Australia has been unavoidably one of the major countries that have been exposed to this global crisis, and the indications have been a sharp downturn in the countrys economy. The major deficits have been in the current accounts and its transactions with the rest of the world. But though that is the case, most of the factors that have been expreineced in US and some European countries are not present in the country. Its banking system is still in good shape, and not in need of capital boosts from global governments.
Monetary Policy Responses
In order to come up with a long lasting address of the recession, what has happened is that the country has put the necessary monetary policies in place. It has hence been noted that the Monetary Policy has been working in a very effective manner than in any other nation affected by global financial crisis. The Central Bank of the country took conventional monetary action in order to cut down the federal funds. Currently, Australia is one out of the four major developed economies which have effectively come up with official rates of interest above the 1 percent mark. The cuts in interests are a classical conventional policy which has been effective in the country. In order to have these cuts making better progress, what was done was to have the rates of interests not passing on the businesses and households, and that way it became extremely easy to establish an aggressive monetary system. In order to have better performance or responses from the Monetary Policies, the country came up with the unconventional options. These were additional tools in the policy that have been applied to target costs and availability of foreign finance. Therefore, these tools have been effective in creating credit easing, commitments for future interests, and credit easing.
Application of Fiscal Policy
In order to effectively fight global financial recession, different nations have been using both fiscal policy and Monetary Policies in order to ensure that the economy never capsized. Therefore, Australian government came up with similar policies in order to tackle this recession. The country quickly resulted in the implementation of temporary fiscal stimulus which would result in overall economic monitoring. This stimulus provided a considerable boost to the domestic demand from the beginning of the year 2009 and 2010. This strategy was very effective in cushioning the impacts of the ongoing global recession in the world. There were the transfers for households which gave instant impacts on the activities which further helped in pinning the confidence in the people. With this policy, there was increased investment in the public sector which continued to support the activities of the economy. Therefore, it will be concluded that the fiscal policy has been used effectively in reducing the impacts of global financial recession.
Adequacy of the Responses
Looking at all the responses which have been put in place in Australia, it will be noted that they have been in one way or the other effective in bringing about economic development through addressing economic and financial recession. But, it will be also worth noting that these measures alone may not really bring a long lasting solution to this problem. Therefore, there are a number of measures that can be put in place to fight recession. There should be measures which will be undertaken in addressing regulations in the policies in order to ensure that similar recession may never occur. The reserve of the country can also loan extra liquidity into the financial system which will in the end be collateralized by the Treasury Debt incurred by the taxpayers. This strategy will be applicable in covering all the bad loans that may have been made earlier with the banking system credits. This will result in forestalling any kind of bankruptcy in the entire Australian economy.
Formulation of the Exit Strategy
In our case, Australian government has formulated an exit strategy in order to reduce the governments debts and reliance on temporary measures in the financial sector. These are policy differences which are referred to as exit strategies. In order to achieve this, what happens is that the Federal Reserve looks for swift exits when the appropriate time comes. Australia has already been able to apply the strategies by raising most of its interest rates, thereby causing the American dollar to fall, and at the same time the price of gold which is the major mineral export to rise up. This has ensured that the country can attain higher financial income to offset its existing debts. With the application and incorporation of all the above named strategies, the country has been singled to be one of the developed countries which have been able to fight the financial recession in a very intelligent manner. Unlike different nations, Australia has incorporated all the mechanisms of monetary policy, fiscal policy and exit strategies in offsetting some of the burdens which might have dragged the financial recovery. It would therefore be necessary that any other given nation applies the same measures to fight the ongoing economic and financial recessions.