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The following table shows the movements of the cash rate in Australia since 2008. Discuss why the Reserve Bank of Australia (RBA) has moved the cash rate from 7% to an all-time low of 2.5 % in August 2013, and since than it has maintained this rate.
In your discussion, highlight the economic environment which influenced the rate determination, and discuss the type of monetary policies implemented. In your discussion, you are required to explain how the altering of the cash rate will influence key macroeconomic aggregates. Use the AD - AS framework to help illustrate your discussion.
Do you think the cash rate is likely to fall lower in the future, or do you think it is time the rate was lifted? Explain your reason(s).
Change in cash rate
New cash rate target
Change in cash rate
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