FPC001B Economic and Legal Context for Financial Planning

Section A (65 marks) Question 1 Economic impacts on strategy (18 marks | Word limit: 600 words)

LO1: Explore the role of intermediaries in financial markets.
LO2: Explain the impact of current issues and key economic and financial indicators on the Australian and global financial markets.
In November 2020, the Reserve Bank of Australia (RBA) announced a package of monetary measures to “support job creation and the recovery of the Australian economy from the pandemic”.
The key elements of the package are:
• a reduction in the cash rate target to 0.1 per cent
• a reduction in the target for the yield on the 3-year Australian Government bond to around 0.1 per cent
• a reduction in the interest rate on new drawings under the Term Funding Facility to 0.1 per cent
• a reduction in the interest rate on Exchange Settlement balances to zero
• the purchase of $100 billion of government bonds of maturities of around 5 to 10 years over the next six months.
A full transcript of the RBA statement can be found at: <www.rba.gov.au/media-releases/2020/mr-20-28.html>.
(a) Discuss how these measures might impact Jill and Marcus’s goals and objectives. (8 marks)
(b) The RBA statement also states that:
“In the central scenario, GDP growth is expected to be around 6 per cent over the year to June 2021 and 4 per cent in 2022. The unemployment rate is expected to remain high, but to peak at a little below 8 per cent, rather than the 10 per cent expected previously. At the end of 2022, the unemployment rate is forecast to be around 6 per cent.”
For each of the regulatory bodies listed below:
• Briefly discuss its role and function, and
• Explain what role, if any, the regulatory body has to play in maintaining or increasing GDP growth, and keeping the unemployment rate below 10%, as outlined in the RBA’s quote above.
All regulatory bodies must be considered in your answer.
(i) ASIC (2 marks)
(ii) APRA (2 marks)
(iii) ASX (2 marks)
(iv) ACCC (2 marks)
(v) AUSTRAC (2 marks)