Questions 3 is based on an article published in the AFR titled "Australia must have a new macroeconomic framework". Please read the article and answer questions 3 (using appropriate diagrams with reference to relevant evidence): 3. Some argues that the pace and scale of the shock caused by COVID19 means that Australia has already changed, and we will never return to our 'previous normal' after the recovery. Do you agree with this argument? Explain your own experience in the context of this argument. Max word limit 800.

Australia must have a new macroeconomic framework - Policy Forum 6/3/21, 11:34 am ASIA & POLICY FORUM Qf ve THE PACIFIC POLICY SOCIETY Browse Topics - Podcasts Events Subscribe Contribute Australia must have a new macroeconomic framework Preparing the Australian economy for a PHOTO: Maxim Hopman on Unsplash post-pandemic world WARWICK MCKIBBIN More Republish ECONO MICS AND FINANCE, GOVERNMENT AND GOVERNANCE I AUSTRALIA 4 FEBRUARY 2031 About the AL The pandemic is an opportunity to rethink how the government co-ordinates monetary, fiscal, and climate policy and prepare Australia for the future, Warwick Mckibbin writes. The outbreak of the COVID-19 pandemic has been a significant shock to the global economy. There will be ongoing significant Warwick Mck structural change and macroeconomic stress in all countries due to the pandemic. In addition to these disruptions, the primary Warwick Mckibbin Director of the Cer greenhouse gas-emitting countries will be undertaking significant global action on climate change. Applied Matroocor in the ANU Crawfo The pandemic was an unexpected shock. Climate change and climate policy are known shocks that can have an even more Public Policy, a nor substantial impact on economic structures and macroeconomic stability. Senior Fellow at th Institution in Wash Director of Policy The new commitments by the group of seven to target greenhouse gas emissions reductions to be net zero by 2050 and the ARC Centre of China's commitment to zero net emissions by 2060 have particular significance for the Australian economy. Population Aging It matters far less to Australia what Canberra and state governments do on climate and energy policy. What is far more important is the impact of climate shocks and global climate policy changes. The macroeconomic adjustments and structural Also by this / changes across all economies will significantly affect the Australian economy over the coming decades. At the macro level, there are now three major policy issues that need a rethink. The original frameworks for monetary policy, Democracy fiscal policy, and climate policy need to be reconsidered urgently - not individually but as a coherent approach, with all three Sausage: Cli the corona policies working together to achieve the best possible macroeconomic outcomes for this country. While there have already been calls for each framework individually to be reassessed, it is crucial to have an overarching WARWICK HOLDIN context to design the macroeconomic frameworks as we advance from the pandemic shock. For example, there needs to be continual fiscal support as the COVID-19 pandemic keeps on affecting the global and Australian The Reserve of Australia economies. Fiscal retrenchment would be a significant mistake under present conditions. stabilising. Australia's success in reducing the economic impacts of COVID-19 is more than offset by the dangerous state of the world WARWICK HONGBIN https://www.policyforum.net/australia-must-have-a-new-macroeconomic-framework/ Page 1 of 3Australia must have a new macroeconomic framework - Policy Forum 6/3/21, 11:34 am economy. Hume on this: See All D The pandemic is far from under control, with many countries still facing the prospect of severe economic crises. Substantial fiscal support will need to continue. You might al The nature of that financial support is critical from an economic perspective. Fiscal policy needs to be Podcast: consistent with the objectives of climate policy and be supported by monetary policy. Wellbeing and reimagining the Podcast: Ar For example, there is a significant body of evidence, summarised by the International Monetary regional pol Australian Fund's October 2020 World Economic Outlook, that substantial gains from government investments in failing worr economy green technologies and green infrastructure are possible. JACQUI TRUE Thus, fiscal policy can stimulate the demand side of the economy in the short run and support the structural changes and growth prospects that will coincide with the restructuring of global energy systems and structural change to deal with climate Rock star change leadership Another example is monetary policy. Monetary frameworks in most countries were designed during a period of high inflation. However, inflation is no longer the main problem facing the world economy. JOHN HEWSON More on this Today's goal should be to ensure that nominal growth in the economy is sufficient to support the debt that has been generated by the pandemic. It is also important not to reduce the substantial private and Trading up public investments needed in a changing world because of climate change and climate change policies. In the Australian context, the Reserve Bank of Australia should as such be targeting nominal The Australian expenditure in the economy at a level sufficient to stabilise government debt. LEN PERRY economy post- COVID-19 It would be counterproductive in the face of climate policy, which may cause a temporary spike in Democracy inflation due to changes in relative prices of energy, for a central bank to increase interest rates to Sausage: Ho tackle inflation. bushfires h The last thing needed when there is excessive government debt in the economy is for a central bank to start to target inflation MARK KENNY at the risk of reducing real output growth. A thoughtful approach to the current state of the economy requires co-ordination of fiscal, monetary, and climate policies. Sport's transnation There is also a vital role in the climate policy framework to support fiscal policy and monetary policy. Mckibbin, Wilcoxen, Morris networks and Panton discuss this at length in the special issue on Rethinking Macro in the Oxford Review of Economic Policy. WHON CHADWICK Climate policy needs to be designed to manage the uncertainty faced with a significant restructuring of the domestic economy and a restructuring of the global economy while moving away from dependence on fossil fuels. Fixing the N A recent study by the Academy of Social Sciences in Australia, Efficient, Effective and Fair Climate Policy, Darling Bas outlines an approach called the climate asset and liability mechanism. Immerse yourself in the official language This climate framework is designed to support the monetary and fiscal adjustment expected over the of Timer-Leste, QUENTIN GRAFTON coming decades, while directly addressing climate change. Nom nalable urmass, Hindi, Hongalan, Now is the time for government and opposition to embrace a fundamental rethink of how to co-ordinate Theian, Tok Pith A the monetary, fiscal and climate frameworks that prepare Australia for the post-COVID-19 world. Vietnamese This piece was first published in the Australian Financial Review. Back to Top Share in f More Republish Join the APP Society https://www.policyforum.net/australia-must-have-a-new-macroeconomic-framework/ page 2 of 3