Capital Essay Example | Topics and Well Written Essays - 1500 words - 1

Capital - Essay Example The prices of the Australian goods exports have decreased since May, due to the decrease in the price of crude oil, iron ore, etc. The Australian dollar price has appreciated over three months, despite the deterioration in the global economy and fragile financial condition. This study aims at evaluating the decision of Reserve Bank of Australia (RBA) for not changing the cash rate until December. The implications of cash rate in the economy of Australia, its effect and the effect of probable changes in the cash rate are also important issues that would be discussed in the study. The motive is to forecast the decision of RBA regarding changing the cash rate. Like the central banks in the industrialized countries, the RBA also utilizes interest rate on short-term basis, as an operating instrument in order to implement monetary policy. Under the current policy, the RBA has set a monetary policy by allotting a level of target for cash rate. RBA has been quite successful in achieving the cash rate as per its target level. The payment system of an economy represents the system by which the different agents settle their transactions. In case of Australia the major participants that can be considered in the payment system are the households or the firms, which can also be called the non-bank mass of public, the RBA, private banks and the federal government. The non-bank public use transaction deposits and currency for making payments and eliminating their debts if any. The transaction deposits are the banks accounts that can be used by cheques or through the debit cards. Money or currency is a liability for the RBA. So it can be said that the transaction deposits are also a liability for the banking system. It can be also said that the medium of transaction by a household or firm would also depend on the relative cost. The banks