Question

Background Information: Evaluating the International Macroeconomic context of Australia's 2020 economic performance – current policy challenges and likely future directions. Is Australia well positioned to recover in 2021?

Question: In 500 words or less with graphs explain the real exchange rate and internal and external balance- automatic mechanisms of adjustment- Where is Australia currently on the SWAN diagram - possible policy interventions? (noting you can make assumptions about relative elasticities of the IB / EB schedules) (answer in relation to Australia's recovery from covid)

Answer 1

According to the international monetary fund(IMF),australia's GDP will perform better in 2020 than was feared just two months ago.

The IMF's World Economic Outlook(WEO) now forecasts that australia's real GDP will contract by 4.5 per cent this year- after predicting a 6.7 per cent contraction in april .

If the forecast is accurate ,Australia's economy should weather the pandemic comparatively well.The WEO estimates that australia's economic growth will be rebound sharply with 4 per cent growth in 2021 .This would leave the australian economy broadly flat over the 2020-21 period.

Australia's impressive performance is a refelection of the country successfull containment of the covid- 19 spread . this has enabled the reopening of many sectors sooner than expected .