World Economic Crisis
- Pages: 5
- Word count: 1172
- Category: Economics
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The recession Australia and many other countries face is a result of the greed that grows from the seeds of capitalism. It affects you and everyone you know, but what are you, your government and your country doing about it? The dire circumstances we are all in have prompted the government to hand out several stimulus packages with a hope that Australian jobs will be saved.
2.0 Main issues
The current global economic crisis or ‘Credit Crunch’ as it has been coined has been believed to have started in mid 2007. Investors from around the world began to lose confidence in the American sales of mortgage loan contracts, triggering a fear in money lenders and banks alike, and an urge to create more returns was brought on. This was only the first step however; due to greed and overleveraged loans banks dealt out, a situation where people who really should not have received loans, did, this was an attempt for higher returns on the investors side (and in turn, more commission for everyone).
In turn this resulted in serious instability in the housing market with people forgoing on their loans due to inability to pay, and an excess of houses on the market led to a decline in value of houses across the whole country, and an enormous deficit for banks who then were in ownership of millions of devalued properties. The tightening of banks lending across the globe then followed for fear of instability and protectionist policies were then adapted, freezing the global economy. Due to this lack of confidence on the part of the banks, investors and the consumers a rapid decrease in spending across the whole economy [Jarvis, 2009].
3.0 Stimulus Packages
As the world enters a new global low-point governments have started to hand out stimulus packages to help relieve the financial situation of lower income families and to consumer confidence throughout the country. Until recently the unemployment rate has been rising slowly and by the end of 2010 is expected to be somewhere around 8.5 percent [Murdoch, 2009]. This, along with other worrying statistics has prompted a $10.4 stimulus from the government [Rodgers, 2009].
This stimulus is directed at lower income, struggling families and is aimed at creating consumer confidence and a group of people with money who have no alternative but to spend it. A publically voiced flaw in this plan was that no incentive was given for those who receive the money to spend it on Australian made goods, essentially making the whole purpose of the stimulus package redundant. The Australian Council of Trade Unions (ACTU) has called immediately for another stimulus to be aimed at saving job cuts for the next year [AAP, 2009].
The Rudd government has responded with another stimulus aimed at jobs in 8 months time. This comes as a logical request as over 200,000 existing jobs are expected to be terminated by the end of 2009 [Murdoch, 2009]. This statistic however, can be refuted with new reports that there is, in fact, positive growth in Australian employment with a boom of 27300 new jobs being filled versus the expected loss of 24400 [Smith, 2009]. With statistics like these it becomes obviously clear that the Australian economy is in good shape in comparison to other industrialized world leaders.
Australian Central Banks interest rates being left at 3.0%, an expected rise in confidence is anticipated to occur [Reporter, 2009] in the near future. This is a positive sign for job growth in the future to come. As there will always be winners and losers when it comes to federal budget handouts, the concept that a stimulus package(s) can solve all economic problems is ludicrous to suggest. However with the evidence collated, an estimation of positive job growth, increased consumer confidence and a mending economy is not too far from reality.
4.0 The Next Step
For the Australian economy to continue on being a stable exemplar to the rest of the world, a strong economical plan for the future will need to be created by the federal government.
To ensure the future of Australia is fair for all parties, the concept of equity has to be incorporated into further monetary spending by the government. To increase the concept of equity throughout the country the Australian government has introduced spending initiatives on Government funded medicines, pension support and new projects. This is all aimed at increasing confidence in the average Australian consumer, who rest assured knowing their future will not be so tough.
For Australia to better its already prominent ‘give everyone a fair chance’ initiative, a newly introduced system to help ‘laid off’ workers should be created. As the aspect of rising unemployment is becoming a worrying aspect for those in harder hit industries the financial strain will be felt for the workers and their families. As a ‘fair go’ nation, this lifeline to struggling workers will inspire confidence in workers, businesses and consumers alike. However equilibrium should be incorporated into the future handouts as not to create an unbalanced situation. Infrastructure upgrades on roads, ports and railways will help create this balance [Swan, 2009].
The concept of efficiency when incorporated into Australian economic future planning is relatively simple. Bob Hawke once put it; “Australia needs to work smarter, not harder”, which sums up efficiency in our circumstances completely. To create a more efficient economy we would have to reflect on our industries we can consider ‘Import Replacing’ and ‘Export Enhancing’. By capitalizing on these industries, not only can companies provide a wider variety of ‘Australian Made’ goods, but will increase the efficiency of the economy itself.
The Australian Auto Manufacturing Industry is a prime example of an industry that could be expanded to better Australian economic efficiency. If the government partially subsidized some of the costs within Australian car-making companies the industry would expand, creating large basis for ‘Australian Made’ sales. The growth of an industry like this would seek to improve economic confidence and increase the workforce within the industry. This could also enhance our exported goods with a possible market for Australian car overseas [Hamilton, 2009].
Environmental policies will be essential to future policy making for Australia with respect to confidence and jobs. The pro-environment policies inspire confidence in consumers through the belief that our budgetary spending can be used to better our own society.
This is a perfect example of a very politically acceptable policy, and one which can be already seen in future development with the carbon emissions trading scheme [Taylor, 2009]. The ability to produce a positive policy that appeals to the public is the goal of political acceptability and one which is a fine balance of public opinions. Future ramifications of an expensive environmental plan could however, be an overwhelming drain on the economy. Once again it is a trade up between the two.
The future remains grey for the world economic powers. While economic forecasters are predicting a recovery by 2010, nobody is really sure what the future holds. However during the present the goal is to preserve the working force of Australia and consolidate on our economic strengths.