The Global Economy
Define globalisation.
Globalisation is the increasing integration of the world’s economies through trade, investment, finance, technology, labour and information flows.
What is Australia’s largest export?
Iron ore (largest single export).
Define unemployment.
Unemployment occurs when people who are willing and able to work cannot find jobs.
State the current cash rate.
3.60%
Name one past Federal Treasurer of Australia.
Examples: Paul Keating, Peter Costello, Wayne Swan, Josh Frydenberg, Jim Chalmers.
Name one factor contributing to increased global trade.
Advances in technology (e.g. transport and communications), trade liberalisation, and growth of multinational corporations.
State Australia’s current account balance status.
Australia currently runs a current account deficit.
What is the target range for inflation set by the RBA?
The RBA targets inflation of 2–3% on average over the economic cycle.
What is the purpose of fiscal policy?
Fiscal policy uses government spending and taxation to influence aggregate demand, stabilise the economy, and achieve objectives like growth, employment, and equity.
What year was the GFC?
The Global Financial Crisis peaked in 2008.
What is the role of the IMF?
The IMF promotes international financial stability by providing short-term loans to countries facing balance of payments crises, offering policy advice, and monitoring the global economy.
Explain one factor that influences Australia’s terms of trade.
Terms of trade are influenced by commodity prices, exchange rate movements, and global demand for Australia’s exports.
Explain how economic growth can conflict with environmental sustainability.
Economic growth increases output and incomes but often leads to greater environmental degradation, higher carbon emissions, and resource depletion.
Distinguish between microeconomic and macroeconomic policy.
Microeconomic policy: targets specific industries/markets to improve efficiency, productivity, and long-run growth.
Macroeconomic policy: targets economy-wide variables like growth, inflation, unemployment, and external balance.
Give one example of government microeconomic reform.
Examples: Tariff reductions, National Competition Policy, deregulation of financial markets, labour market reforms, privatisation of government enterprises.
Explain how protectionist policies can affect global economic growth.
Protectionist policies (tariffs, quotas, subsidies) restrict trade flows, reduce efficiency, slow global growth, and may provoke retaliatory measures, leading to lower world output.
How does exchange rate appreciation affect exporters?
An appreciating AUD makes exports more expensive for foreign buyers, reducing competitiveness and export revenue, but lowers import costs.
Analyse one structural cause of unemployment in Australia.
Structural causes include mismatch of skills (e.g. technological change), industry decline (e.g. manufacturing), or geographic immobility of labour.
Analyse the effectiveness of monetary policy in managing inflation.
Monetary policy is effective in controlling demand-driven inflation during expansions but less effective in tackling supply-side inflation (e.g. oil shocks) or during downturns when consumer/business confidence is low.
Explain one global factor that influenced Australia’s economy in the past 5 years.
Examples: COVID-19 pandemic, China’s slowdown, US–China trade tensions, global inflation surges, energy price shocks, Russia–Ukraine war.
Analyse the impact of global supply chain disruptions on emerging economies.
Supply chain disruptions (e.g. COVID-19, shipping bottlenecks) disproportionately affect emerging economies reliant on imported inputs and export earnings, increasing inflation, reducing production, and widening global inequality.
Analyse how free trade agreements shape Australia’s trade patterns.
Free trade agreements expand market access, reduce tariffs, and encourage export diversification; however, they also increase import competition, exposing domestic industries.
Discuss how inequality can limit economic growth in the long term.
High inequality reduces access to education, healthcare, and social mobility, which limits human capital development and lowers long-run economic growth potential.
Evaluate the interaction between fiscal and monetary policy in Australia.
Fiscal and monetary policy often work together: e.g. during COVID-19, fiscal stimulus supported incomes while monetary easing lowered borrowing costs. Conflicts can arise if fiscal expansion fuels demand while monetary policy is tightening.
Predict one future challenge for Australia’s economy and justify your answer.
Future challenges could include climate change, ageing population, digital disruption, reliance on China, or global economic fragmentation. Justification would involve explaining potential impacts on growth, trade, and policy.