Budgetary/Monetary Policy

[dduongg]

What are Budgetary and Monetary Policy in Australia?

[Cranium002]

The monetary policy is a process controlled by the Reserve Bank of Australia/ central banks, whom determines the size and rates of growth of the money supply. This process affects the increase/decrease of interest rates. The RBA can sell treasuries to securities to increase interest rates or buy them to decrease interest rates. An increase in interest rates results in lesser spending. On the other side, a decrease in interest rates, increases disposable income, more spending and a higher economic growth. Other factors that is caused by the monetary policy includes stimulating economic growth and lowering unemployment rates. The goal of inflation in Australia is between 2-3%.

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