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Economic Outlook and Macroeconomic Policy Challenges (Maximum 3000 words) The key pillars of macroeconomic policy are fiscal policy, monetary policy and exchange rate policy. (1) Examine Australia’s recent economic performance and provide an overview of the current economic outlook. Critically review the governments’ policy approach to meeting the key domestic challenges identified. (2) There is often a tension in setting macroeconomic policies, where some policies can have undesirable consequences. In the context of the governments’ current policy approach, examine the following and discuss how these countervailing forces might constrain desired policy settings and outcomes. a) Providing incentives for work and innovation via a reduction in company and income tax (which are high by international standards), in the context of a large budget deficit b) Lowering interest rates to stimulate economic activity, while moderating housing price growth and improving housing affordability
