The economic policies of Australia are known to be pro-enterprise and pro-business. The country is well known for its excellent economy and is one of the most developed countries in the world today. Australia has kept a consistent record of maintaining an economic growth of more than 3 percent per year. The main drivers behind this good economic performance are; free trade, liberalization, and low taxation. Australia's economic policies are also known to have augmented competitiveness in the global business environment.
One of the best aspects of the economic policies of Australia is the fact that it has been able to maintain low levels of currency depreciation. This has assisted the economy immensely and facilitated its economic growth further. In turn, this has helped the businesses expand and flourish and encouraged investment in new sectors in order to help the economy grow even further.
Economic policies of Australia are aimed at enhancing the competitiveness of the country in the international market. The government encourages foreign direct investment (FDI) in Australia to boost the country's economic growth further. In addition, the policies aim at promoting a level playing field for local companies in the global marketplace. With a liberalized economy, local business owners can engage in international trade without fearing that their companies will suffer from protectionist legislation. Furthermore, the government encourages FDI by offering attractive investment opportunities and encouraging foreign investments in the country.
In terms of monetary policy, the Australian economy is well-situated to achieve sustained economic growth despite the global economic crisis. Australia's key economic policy makers have repeatedly stated that they would use monetary policy to counter adverse effects of the global economic slowdown. In this regard, they have repeatedly said that they would release additional monetary stimulus packages if necessary. These policies have helped the economy gain financial stimulus from the global credit crunch and have helped in keeping inflation at manageable levels.
As far as fiscal policy is concerned, the government has sought to maintain a stable fiscal policy by maintaining budget deficits at around 3% of GDP. The main reason behind this is the need to maintain confidence in the strength of the Australian economy. While this is an effective method of combating inflationary pressures, the low level of deficits has been cited as a drawback by some policy makers. However, the need to maintain fiscal balance has been cited as one of the key reasons for Australia's economic growth. Moreover, the high level of government debt has also been one of the contributing factors to the sluggish economic recovery in the country.
One of the main policy issues tackled by the government is its commitment towards deficit financing. On the one hand, excessive borrowing may lead to a situation where the budget deficit widens, pushing the economy into recession. On the other hand, excessive fiscal policy is considered a failure on the part of the government as it will not be able to revive . . . . . . the flagging economic cycle in Australia. The former's policies of massive borrowings are said to have created an environment of financial instability.
Another area that is closely watching the economic growth policies pursued by the country is the foreign portfolio balances. The current scenario sees numerous global economic policy failures being witnessed in the backdrop of the Australian economy. The current global economic slowdown has resulted in the shrinking of the gross domestic product (GDP), increasing unemployment, and currency turbulence. For the policy makers of Australia, these factors have served as a major hindrance to achieving the growth rates that have been touted by the current government. To counter the deteriorating economic situation, the government is looking to boost economic growth through effective management of the external exposures through trade deals with other countries.
In fact, the government has been successful in implementing some of the growth policies that were introduced earlier by its predecessors. These include the industrial expansion policy, the Aborigines Economic Benefits Policy, and the Schooling Training Grants. This has helped in establishing an environment that is conducive for business houses to start their operations in Australia. Given the current global scenario, the trading partners have also become quite apprehensive about investing in Australia, given the high rates of taxes and high administrative costs that come with them. Therefore, the policy makers are looking to promote business houses to invest in other countries and increase the manufacturing base of the country.