For a decade or more, macroeconomic policy in Australia seems to have been directed primarily at controlling inflation in the belief that success in achieving this

target would be associated with macroeconomic stability and growth.
Following the Global Financial Crisis the main emphasis of macroeconomic policy has been on trying to avoid a recession. Contrast these two phases of policy and

explain how macroeconomic policy objectives, targets and instruments have differed.
In order to complete this task you should:
1. Outline the experience of the Australian economy over the last 10-15 years, making use of major macroeconomic aggregates – these may be presented in summary tables

and/or graphs. Stress should be placed on the challenges facing policy makers at present and likely challenges in
2014 (700 words)
2. Discuss the concept of `instruments and targets’ in macroeconomic policy and assess how this concept might be applied to the current policy framework in Australia.

(500 words)
3. Show how the economic theory you have learnt can be used to explain current macroeconomic policy (700 words)
Some references to get you started –
Garnett, A. and Lewis, P., ‘The Economy’, in Aulich, C. and Wettenhall R.
(eds), Howard’s Fourth Term, New South Wales University Press, Sydney.
Otto, G. (2007) `Central Bank Operating Procedures: How the RBA Achieves Its
Target for the Cash Rate’, Australian Economic Review; June, Vol. 40 Issue 2, p216-224.
Gordon, C. and Valentine, T. (2009), Economics in Focus: The Global Financial Crisis, Pearson Education, NSW.

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