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SustainableEconomicGrowth  Sustainableeconomicgrowthmeansarateofgrowthwhichcanbemaintainedinanattemptto satisfytheneedsofhumanswithoutcreatingothersignificanteconomicproblemsandwillbe abletosustainnaturalresourcesandtheenvironmentforthefuturegenerations.Aneconomy functionsintheecosystem.Wecannotseparatetheeconomyfromit.Infact,aneconomy cannotexistwithoutit.Theecosystemprovidesthefactorsofproductionthatfuelseconomic growth:land,naturalresources,labor,andcapital.Rapidgrowthtodaymayexhaustresources andcreateenvironmentalproblemsforfuturegenerations,includingthedepletionofoilandfish stocks,andglobalwarming.Sustainableeconomicgrowthismanagingtheseresourcesina mannerthattheywillnotbedepletedandwillremainavailableforfuturegenerations. (http://study.com/academy/lesson/whatissustainableeconomicgrowthdefinitionlessonquiz.ht ml)  Futureeconomicdevelopmentandqualityoflifecruciallydependsonthenaturalresourcebase andqualityoftheenvironmenti.e.,thequalityofland,waterandair.Todestroyandoverexploit thenaturalresourcesindiscriminatelyandpollutetheenvironmentwillraisetheshortterm growthrateandlivingstandardsofthepeoplebutitwillalsohaveadverseeffectonthe longtermfuturegrowthandthequalityoflifeofthefuturegenerationsasthelatterwillhave smallernaturalresourcebaseandpoorqualityofenvironment.Thereforeitisnecessarythat whiledecidingaboutgrowth,environmentalissuesshouldbefactoredin.Forinstance,lossor preservationofimportantenvironmentalresourcesshouldbetakenintoaccountwhilepreparing estimatesofgrowthandwellbeingofthepeople. (http://www.yourarticlelibrary.com/economics/importanceofsustainabledevelopmentfortheec onomicgrowthofacountry/38417/)    PoliciestoAchieveGrowth  ● MonetaryPolicy   Monetarypolicyistheprocessbywhichthemonetaryauthorityofacountrycontrolsthesupply ofmoney,oftentargetinganinflationrateorinterestratetoensurepricestabilityandgeneral trustinthecurrency.Theprimaryobjectiveofmonetarypolicyistoreachandmaintainalow andstableinflationrate,butalsotopromotesustainableeconomicgrowth.Monetarypolicyisa waytoachievesustainedgrowthratesthatwillgenerateemploymentandimprovethe population’squalityoflife.ThemaintoolofmonetarypolicyinNewZealandistheOfficialCash Rate(OCR),whichisthewholesaleinterestratesetbyacountry'sCentralBank(RBNZ)for registeredbanksontheirsettlementcashdeposits.ToencourageeconomicgrowthTheCentral BankwouldreduceOCReitherasa‘oneoff’oraspartofasequencedseriesofreductionover time.InNewZealandtheReserveBankwillpayinterestat0.25%lowerthantheOCRto registeredbanksfortheirsettlementcashdepositsandispreparedtolendtoregisteredbanks 

at0.25%abovetheOCRifregisteredbanksneedtoborrowfromtheCentralBank(theReserve BankofNewZealand)tofundtheirsettlementcashdeposits.InthiswaytheOCRwillinfluence thecallrateandinterestrates.ACentralBankwillchangethewholesaleinterestrateto influencetheretailinterestrates.Changesininterestrateswillimpactthelevelofsavings, consumptionspending,investmentandtheexchangerateandthereforeonthelevelofinflation andgrowthintheeconomy.  Loweringinterestrateswillincreaseinvestmentbecauseitwillbecheapertoborrowmoneyso firmswillborrowmoneytoinvestintotheirbusinesstoexpanditcausinginvestment(I)to increaseanditwillincreaseconsumptionspending(C)andreducesavingsasthevalueof moneyisdecreasingsohouseholdwouldprefertospendtheirmoneyratherthansavingit.C andIarebothcomponentsofaggregatedemandthereforewhenitincreasesitwillcontributeto anincreaseintheaggregatedemandcausingADcurvetoshiftoutwardsandincreasethelevel ofrealoutput.Asshowninthegraphbelow,realoutput(Y)willincreasetoY1whenADcurve shiftoutwardsandthissignifiesagrowthintheeconomy.Anincreaseinrealoutputmeans moreresourcesincludinglabourwillbeneededtoproducethegoodsandservicesand unemploymentratewilldecreaseasmoreworkersareneededtohelpincreaseproduction.This willresultinanincreaseinpricelevelwhenpricelevelchangesfromPLtoPL1andinflationwill occur.  

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  Wheninterestratesdecreases,foreigninvestorswillbemorereluctantinputtingtheirmoneyin NewZealandthereforedemandforNewZealandDollarwilldecreaseandexchangerateswill depreciates. 

  Depreciationofthe$NZDwillleadtoincreaseinexportreceiptasitwillbemorecompetitive pricewiseinforeignmarketsodemandforgoodsandserviceswillincrease.Importpayment willdecreaseasimportedgoodsandserviceswillbemoreexpensiveandlesscompetitiveprice wiseinthedomesticmarket.Anincreasein(XM)willaffecttheADcurvecausingittoshift outwardsasaggregatedemandforgoodsandservicesincreases.Depreciationof$NZDwill alsoaffecttheAScurveasitwillbemoreexpensivetoimportrawmaterialsfromoversea causingcostofproductiontoincrease.ThiswillresultinAScurveshiftinginwards.

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 WhenAScurveshiftinwardsrealoutputwillbeatY2whichmeansthereiseconomicgrowth butatthesametimepricelevelwillincreasetoP2andinflationwilloccur.  Monetarypolicycertainlycanstimulategrowthintheeconomybutitalsohavesomelimitation. Monetarypolicyneedsalongperiodoftimefortheeffectofthispolicytobeseen,evenif implementedquickly,themacroeffectsofmonetarypolicygenerallyoccuraftersometimehas passed.Theeffectsonaneconomymaytakemonthsorevenyearstomaterialize.Some economistsbelievethatmoneyis'merelyaveil'andwhileservingtostimulateaneconomyin theshortrunhasnolongtermeffectsexceptforraisingthegenerallevelofpriceswithout boostingrealeconomicoutput.Besidesthis,monetarytoolsaregeneralandaffectanentire county.Monetarypolicytoolssuchasinterestratelevelshaveaneconomywideimpactanddo notaccountforthefactthatsomeareasinthecountrymightnotneedthestimulus,whilestates withhighunemploymentmightneedthestimulusmore.Itisalsogeneralinthesensethat monetarytoolscan'tbedirectedtosolveaspecificproblemorboostaspecificindustryor region. (http://www.investopedia.com/articles/investing/050615/fiscalvsmonetarypolicyproscons.asp #ixzz4O3POrKtE)  ● FiscalPolicy  Fiscalpolicyisthemeansbywhichagovernmentadjustsitsspendinglevelsandtaxratesto monitorandinfluenceanation'seconomy.Generally,theprimaryobjectiveoffiscalpolicyisto increaseemploymentrateandensurepriceandeconomicstabilityandencourageeconomic growth.Fiscalpolicyinfluencesdemandpressurethroughbothdirectspendingbythe governmentandchangestothelevelofcompositionoftaxation.Intheseways,fiscalpolicy affectsdemandandinflationpressure.Thelevelofgovernmentactivitywilldependonthestate oftheeconomy.Inexpansionaryfiscalpolicythegovernmentdecreasetaxes,increase 

governmentexpendituresorbothtoincreaseconsumptionspendingandgovernmentspending sothataggregatedemandforgoodsandserviceswillincreaseinordertofightrecessionary pressuresandstimulategrowth.Adecreaseintaxesmeansthathouseholdshavemore disposableincometospend.Higherdisposalincomeincreasesconsumptionwhichincreases aggregatedemandthereforGDPwillalsoincrease.Whereasincontractionaryfiscalpolicythe governmentincreasetaxes,decreasegovernmentexpendituresorbothinordertofight inflationarypressures.Duetoanincreaseintaxes,householdshavelessdisposableincometo spend.Lowerdisposableincomedecreasesconsumptionandlowergovernmentexpenditure decreasesgovernmentspendingandthiswilldampentheeconomicactivities.  Inordertoachievegrowth,thegovernmentwoulduseexpansionaryfiscalpolicyinwhichthey wouldincreasetaxcutstoincreaseconsumptionspending(C)ashouseholdswillbeleftwith moredisposableincometospend.Thegovernmentcouldalsoincreasegovernment expenditure(G)thatwouldincreaseeconomicactivities.Theincreaseinconsumptionspending andgovernmentspendingwillincreaseaggregatedemandforgoodsandservicescausingthe ADcurvetoshiftoutwardsasbothCandGarecomponentsofaggregatedemand.  Asshowninthegraphbelow,theADcurvewillshiftoutwardscausingrealoutputtoincrease fromYtoY1whichmeansthere’seconomicgrowth.Anincreaseinrealoutputmeansmore resourceswillbeneededtoproducethegoodsandservicesandunemploymentratewill decreaseasmoreworkersareneededtohelpincreaseproduction.Thiswillresultinan increaseinpricelevelfromPLtoPL1andinflationwilloccur.   

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Unlikemonetarypolicy,fiscalpolicyhaveshortertimelagbutthisdoesn’tmeanfiscalpolicyis betterthanmonetarypolicybecausefiscalpolicyalsohavesomelimitation.Fiscalpolicycan createdeficitsingovernmentbudgetsasitrequiresgovernmentspendingtoincreaseinorderto stimulategrowth,thereforegovernmentwillmorelikelyspendmorethantheirincome.If spendingishighandtaxesarelowormaintainthesamefortoolong,suchadeficitcancontinue towidentodangerouslevels.Besidesthis,taxincentivesandspendingmaybespenton imports.Theeffectoffiscalstimulusismutedwhenthemoneyputintotheeconomythroughtax savingsorgovernmentspendingisspentonimports,sendingthatmoneyabroadinsteadof keepingitinthelocaleconomy. (http://www.investopedia.com/articles/investing/050615/fiscalvsmonetarypolicyproscons.asp)    Readmore:FiscalVs.MonetaryPolicyPros&Cons|Investopedia http://www.investopedia.com/articles/investing/050615/fiscalvsmonetarypolicyproscons. asp#ixzz4O3VOKNz4 Followus:InvestopediaonFacebook     CurrentEconomicSituationandPoliciesRecommendedforGrowth  CurrentlyinNewZealandtheGDPincreaseis2.4%whichisconsideredmoderateandthisis becauseofthelowoilpriceandincreasednetmigrationwhichreducesthecostofproduction andresultedintheAScurveshiftingoutward.Becausethere’sgrowthinNewZealand’s economy,firmsarelookingtoexpandandinvestintheirbusinesssounemploymentrateinNew Zealandisverylowandiscurrentlyat5.2%.TheinflationrateinNewZealandiscurrentlyat 0.4%whichisalsoverylow.Thisismainlybecauseoflowoilpricesandlowdairypayoutso thereisnotmuchinflationinNewZealand.GenerallyNewZealand’seconomyisverystableat currentstage.  Inordertoattainsustainablegrowththegovernmentwillhavetocontinuetoimplementboth FiscalPolicyandMonetary.ByimplementingMonetaryPolicy,thegovernmentcouldreducethe OCRratewhichcurrentlyliesat2%to1.75%.ThiswillcausetheADcurvetoshiftoutwardfrom ADtoAD1andthiswillresultingrowthasGDPincreasesfromYtoY1.Implementingthe expansionaryfiscalpolicy,governmentspendingwillincreaseandtaxlevelwilldecreasein ordertoincreaseeconomicactivitywhichwillstimulategrowthwhenADcurveshiftfurther outwardfromAD1toAD2andGDPwillincreasefromY1toY2.Whenbothpolicyis implemented,growthwillincreasebutpricelevelwillalsoincrease.Inordertoensureinflation ratestaysbetween1%to3%thegovernmentneedtocounteractwithASpolicy.The governmentcouldgiveeducationtoworkersinordertoincreasetheirknowledgeintheircareer 

fieldsothatproductionwillincreaseastheycandotheirworkmoreefficiently.Besidesthis,the governmentcouldalsoimplementtradepolicyandhavefreetradeagreementswithother countrysuchasAustralia,China,etc,sothatitwillbecheaperforfirmstoimportrawmaterial andcostofproductionwilldecrease.Whenproductionincreaseandcostofproduction decrease,AScurvewilloutwardandresultinpriceleveldecreasingfromPL2toPL3.After implementingmonetarypolicyandfiscalpolicyandcounteractingwithASpolicy,therewillbe economicgrowthbutatthemeantimeinflationratewillmaintainbetween1%to3%.Whenthere isgrowthintheeconomy,employmentratewillalsoincreaseasmoreworkerandhuman resourcesareneededtohelpincreaseproduction. 

 Implementingbothpolicieswillresultingrowthbutitisimportantthatitissustainableeconomic growth.Sustainableeconomicgrowthmeansarateofgrowthwhichcanbemaintainedinan attempttosatisfytheneedsofhumanswithoutcreatingothersignificanteconomicproblems andwillbeabletosustainnaturalresourcesandtheenvironmentforthefuturegenerations. ImplementingexpansionarymonetarypolicywillincreaseInvestment(I)andConsumption Spending(C)andimplementingexpansionaryfiscalpolicywillincreaseGovernmentSpending (G)andConsumptionSpending(C).TheincreaseinI,CandGwillnotworsenthe environmentasTheResourceManagementActwillmakesurethatfirmsdonotoverusethe resourcesintheenvironment.Thegovernmentgivingeducationtoworkerstoincreasetheir workrateandimplementingtradepolicywillnothavebadeffecttotheenvironmenttoo,itwill addtothevalueofresources.Thereforeimplementingmonetarypolicyandfiscalpolicywillbe abletoachievesustainableeconomicgrowth. ...