In 2009, the world experienced a Global Financial Crisis (GFC) which caused recession in most advanced nations around the world. In an effort to combat this, the Australian Government created a Stimulus Package to increase aggregate demand. The treasurer, Wayne Swan proposed that $42 billion would be given to both individuals and businesses to lessen the impact of a recession. The package included a one off $950 payment to low and middle-income families, individuals, famers, students and other groups. The Stimulus Package was also aimed at the construction of new buildings and upgrades, as well as roadworks. The Government also intended to give 9,540 schools around the country, a grant to build a new hall or canteen. Businesses were also offered investment tax breaks to purchase new assets.
The GFC affected Australia’s Economic growth, Unemployment rate and Inflation. These three elements of the economy are all interrelated and affect one another. In 2008 Australia had been experiencing exponential growth for 10 years at an average growth rate of 3.6%. Unemployment was at an all time low of 4.5%. Australia was experiencing this large amount of growth mainly due to the resource boom at the time and the expansion of macro and microeconomic policy which was being run by the Government. Inflation had been maintained at 2-3% after the recession in the 1990’s. The exception to this was in 2000 when the Goods and Services Tax was introduced. Overall, Australia’s economic health was good and had been experiencing a boom.
Economic growth can be defined as the increase in the volume of goods and services that an economy can produce over a period of time. It is meas...
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... invested into the stimulus package by the government.
The Stimulus Package assisted Australia in staying out of a recession. The money given to consumers and businesses stimulated economic activity in the economy, which gave businesses more profit and allowed them to hire more employees and expand, which in turn gave consumers more confidence to spend more money. This injection into the economy lowered the amount of unemployment, while increasing economic growth. Although inflation has remained steady, the increase in consumer expenditure may inadvertanly cause an increase in inflation down the track (this can be seen in Figure 1.4 where aggregate demand has expanded and created an inflationary gap labeled as CD). The Stimulus Package accomplished the Government objective of keeping the country out of recession.
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