Economics Monetary Policy Essay (Rojina Parchizadeh)

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Evaluate the effectiveness of the RBA’s expansionary monetary policy in achieving economic objectives in the Australian economy. Intro: The Reserve Bank of Australia’s (RBA) use of expansionary monetary policy to countercyclically stimulate growth at a sustainable level has been moderately effective in the past. Monetary policy has successfully achieved the economic objectives of economic growth to a relatively high extent, maintaining low unemployment, inflation and a sustainable rate of economic growth through its Domestic Market Operations (DMOs) which influence the cash rate in the overnight money market. However, it has been unhelpful to the goal of maintaining a fair distribution of wealth and income whilst not being useful for the objective of external stability. In more recent years, as interest rates become increasingly low, expansionary monetary policy has diminished in its effectiveness, raising questions on the policy mix required to achieve economic objectives