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1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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Growth overseas

An increase in economic growth overseas is likely to increase the demand for Australian exports of consumer items, capital items and raw materials needed to fuel the growth in these economies.  Similarly, higher growth rates overseas are likely to cause inflationary pressures in those economies, resulting in Australians demanding a smaller volume of imports and instead purchasing the relatively cheaper domestic alternatives. Overall, the higher overseas growth boost net exports (X-M), lifting AD and boosting economic growth.  As before (e.g. for disposable income and consumer confidence), this higher growth has favourable impacts on full employment and equity in the distribution of income.  With respect to the impact on the achievement of external stability, the higher real GDP in Australia is driven by improvements in (X-M), thereby boosting the Balance on Goods and Services and reducing pressure on the CAD and NFLs (NFD or NFE).  However, the higher AD that is caused by stronger overseas growth is likely to add to demand inflationary pressure and make it more difficult to achieve low inflation.

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