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Australian Economy

In: Business and Management

Submitted By icewave5
Words 1563
Pages 7
Economic growth ‘The super profit-style taxes’ on banks will crimp foreign investment as investors seek more profitable investment opportunities overseas which will lower aggregate demand resulting in lower economic growth and employment is the claim from banks. However, the idea that increased government spending from the taxes can be used to increase aggregate demand is missing from the article and the idea that ANZ have made a 27% jump from first quarter profits to an oversized $1.4 billion. The concept of simple multiplier can be applied in that a decrease in aggregate demand causes a greater than proportionate decrease on aggregate supply. The banking sector is facing ‘high funding costs’ which essentially is passed on as higher interest rates which discourages consumption and investment lowering economic growth. ANZ is investing $120 million for its New Zealand business to shift operation onto a single technology platform and overhaul the regional management structure; this will improve efficiency and productivity and thus support higher economic growth. Banking profits and growth are generally positive correlated as the current negative economic outlook and decreased expected demand discourages investment in capital goods (which requires the bank’s savings) as risks associated with expanding increases. This correlation can also be seen regionally where the “recent floods, bushfires and cyclones will see growth soften in the short term” which has resulted in “… up its provisioning by $35 million” which would help cover the losses and economic impacts. Investment is also impeded by market volatility from commodity and asset price inflation (a constraint on economic growth), emerging protectionism and currency imbalances (resulting in lower exports and higher imports).

The media article in essence describes factors that affect inflation.…...

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