Microeconomic Issues and Their Impacts and Responses

Summary The retail sector has a major role in the growth of the Australian economy and is the barometer of the economic health of Australia s future growth prospects. When the economy is thriving so does the retail industry within an economy – thus, the level of demand within the retail industry has a significant impact on other industries as the money within the retail industry goes in a circle complementing the growth of the other industries. The performance of the retail industry is a strong indication for the government as to what monetary policies to implement in order to determine the amount of money floating around within the economy. It has been observed before that strong performance from the retail industry is translated into†¦show more content†¦Rising interest rate Interest rate movements affect all businesses in several ways. When interest rates go up, consumers tend to save more money and as a result will have less disposable cash available and tend to tighten their purse strings as mortgage payments increase. Depending on the levels of business debt, rising interest rates also increase retailers’ interest costs, thereby placing further pressure on retailer owners which force them to put up high mark-ups on their products which deter potential consumers. Additionally, rising interest rates increase the criteria for private equity and decrease the amount of cash available for investing. Even though Australia’s interest rate affects all businesses, the current interest rate is considerably below what it was in the early 1990s (16.5 per cent), and businesses were able to survive then. Strong Australian dollar The global financial crisis left the economies of the developed countries in ruins with high unemployment rates and record low interest rates, while the Australian economy was unscathed with a rising interest rates(Refer chart 3 from appendix). This has led to Australia being an attractive investment option thus increasing the demand for the Australian dollar. The strong Australian dollar has provided cost savings for business owners,Show MoreRelatedCorruption At The Firm s Level And The Global Level Essay1190 Words   |  5 Pagesdecades, there were many studies that carefully examined the issue of corruption in the institutional framework as well as its significance in politics and economics. Jakob Svensson (2005) has published a paper in which he defines corruption and compares it to taxation and lobbying. 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