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AS90238:Demonstrate an awareness of government policies … AchievementMeritExcellence DescribeExplainFully Explain 2.5.

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Presentation on theme: "AS90238:Demonstrate an awareness of government policies … AchievementMeritExcellence DescribeExplainFully Explain 2.5."— Presentation transcript:

1 AS90238:Demonstrate an awareness of government policies … AchievementMeritExcellence DescribeExplainFully Explain 2.5

2 Government economic policy objectives will be selected from: price stability economic growth balance of payments A basic understanding of the purpose of legislation that affects these policies, in relation to the economic policy objectives, is expected.

3 Growth: 2.5 Fiscal measures:regional development research and development taxation subsidies business development and education – Resource Management Act 1991 Supply-side policies: eg deregulation Impacts: of growth policies on trade and inflation

4 Inflation: 2.5 Monetary Policy – Reserve Bank of New Zealand Act Monetary Policy Tools: Moral Suasion (jawboning): RBNZ informs the money markets on what it would like to see them doing. Monetary Policy Statements and speeches by the Governor set out the desired monetary conditions. Open Market Operations: RBNZ buys and sells government stock to influence the amount of money in circulation Official Cash Rate: is the main tool of the RBNZ. It is used to set the interest rate in wholesale money markets (via banks settlement account balances) and so influence interest rates in the retail (lending) money market. The Actplaces responsibility for price stability on the Governor of the RBNZ, and sets the target band for inflation (currently 1-3%) in the Policy Targets Agreement (PTA) Loose (Expansionary) Monetary Policy allows more money into the economy Tight (Contractionary) Monetary Policy reduces the quantity of money in the economy. Impacts: of inflation policies on trade and growth

5 Trade: 2.5 trade agreements and organisations: (eg Closer Economic Relations, World Trade Organisation, European Community) trade regulations (eg tariffs, quotas) exchange rate policy government policies to promote trade free trade versus protectionism The government has pursued a policy of free trade liberalisation for a number of years. Impacts: of trade policies on growth and inflation


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