30/9/2011
The Reserve Bank of Australia is to keep interest rates on hold for another policy meeting and a Reuters poll shows that interest rates may follow a trend of staying steady next year as well.
In Commerce we have learnt that the business cycle is affected by rising and falling interest rates- in booms there is a lot of spending that pushes inflation and interest rates up. There are other features of a boom such as high income and production, high employment levels and high salaries. Meanwhile in a recession there is little spending that pushes interest rates down- there is low income, unemployment is high as there is not enough money to sustain it, and therefore business demands are low.
In this case as Australia is not in either category the Reserve Bank has decided to keep interest rates on hold after it had risen significantly as Australia seemed to be recovering from the Global Financial Crisis.
Australia is a mixed economy which means that consumers and producers in Australia have power to decide what Australia produces, but there is also government involvement, in which the government through the form of the RBA regulates the economy- in this case, keeping interest rates on hold.
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