Trend Description (1 Viewer)

[wonderboyskorn]

I was wondering if anyone had a detailed trend description for inflation in Australia. Would be greatly appreciated

~wonderboy

 

[Robbeh]

mid-90s general productivity increase combated the Asian financial and slowing US/global market - contractionary (budget surplus) Fiscal policy means lower inflation

2000 - GST introduction means a great spike in inflation. Olympics also meant greater inflation. Real Estate boom. A$ depreciated 20% - inf outside RBA target

2002 - strong economic growth meant inflation outside RBA target

2003 - A$ appreciated... I.R began to come into effect, cyclical factor - drought - eased... US$ confidence shook post 9/11


2005 - petrol prices and rising domestic prices countered by continuing A$ appreciation

2006 - inflation 3%, commodity prices and subsequent X earnings -- borrowings and capacity constraints

 

[Sparcod]

Well put.

 

[wonderboyskorn]

Thanks very much. I have constructed one, but im not to sure if its good. Is their anyone willing to have a look- be greatly appreciated

Cheers

~wonderboy

 

[wonderboyskorn]

Q.
c) Description of the trend performance since 1997.
d) Demonstrate a knowledge of a range of demand and supply factors that have affected the objective since 1997.

NOTE: Criteria C and D can be joined

A.
Criteria C & D
The average inflation rate per annum has been slightly under 2.5%, right in the middle of the RBA’s preferred band of 2-3%.

• In 1997-00 inflation trended strongly from 0.0% steadily upward to 2.4%. One possible supply factor would have been the rise of interest rates from 5.00% to its equal peak during the 10 year period at 6.0%. This rise in interest rates should increase the cost structure of firms. Therefore, businesses are discouraged from expanding their business, hence profitability decreases- leading to cost push inflation.
• In 2000-01there was a sharp increase in the inflation figure- from 2.4% to reach its peak at 6%. Without the spike it can be said that inflation was nevertheless, trending upwards. The one-one inflation spike was largely initiated with the abnormal introduction of GST. This introduction added more cost inflationary pressures. As most businesses operate in debt, when interest rates went up, repayments along with the net cost of running a business increase. Therefore, in an attempt by businesses to maintain profitability, all or most of these pressures can be passed onto consumers in the form of increased prices ie. cost push inflation.
  
  Any good?
  
  

So far for 2001-02 i have:

• As interest rates are a lagging indicator, the lower level of interest rates in 2000 (5%) encouraged inflation to plummet to 2.9% in 2001-02, in the comfort zone of the Reserve Bank.

Bit stuck tho...

~wonderboy

 

[Ozza]

Yeah, that sounds alright.. except for the last point where you've said that lower interest rates made inflation plummet. It's usually when interest rates rise that consumption and investment (and hence, inflation) slow down.

In 2001-02 You've gotta remember the important stuff that happened, like the introduction of the GST and the attacks of September 11 which had a huge impact on consumer confidence. Which meant that people were spending less = businesses get less revenue = less money for employees = even less money being spent... and as a result our inflation dropped remarkably.