Importance of controlled inflation for the performance of the Australian economy (1 Viewer)

[Karldahemster]

What is the importance of controlled inflation for the performance of the Australian economy?

Thanks!

 

[Frostguard]

Controlled inflation makes it so the Australian economy doesn't experience both deflation (under 2%) or inflation (above 3%), so you'd discuss the impacts of both de/inflation, but probably more so the inflation part (3%+). Chuck in your causes of inflation, then the impacts (eg decrease in Australian purchasing power, encourages spending and investing which in turn causes more inflation, raises the cost of borrowing, reduces unemployment (short-term) and increases growth (short-term) then reduces both employment/growth (long-term) and depends, may strengthen or weaken the economy. Choose the most important effects/impacts then link that back to performance of the australian economy eg reductions in australian purchasing power > reduced consumption for same amount of goods > reduced consumer confidence/willingness to purchase > decreased economic growth. Or raises cost of borrowing > once again decrease willingness to purchase g/s or take out loans. Then you talk about why we need to control it (eg prevent long-term unemployment/economic contractions in growth). Sorry if its bit messy its all I could remember and I hope it kinda helps you!!!

 

[Karldahemster]

Thank you so much!