Suppose the Australian economy is heading for a recession

If governments can discern impending recessions, they can work at a good speed to stop unfortunate eventualities because fiscal policies are effective for long-term objectives. The Australian Reserve Bank is independent in formulating monetary policy. Therefore, let's tackle the fiscal policy.

A key indicator of an oncoming recession is contracting aggregate demand that pulls down commodity prices, ultimately leading to mass layoffs and further contraction. Therefore, the government should encourage businesses and households to spend by cutting tax rates. Therefore, people will have more disposable income to pay, and shrinking businesses experience reduced operational costs.

The government can also reverse the recessionary trend by increasing its public expenditure to flood in investors, create some employment, and expand the aggregate demand.

Suppose it is too late for the government to reverse the curve. In that case, the Federal Bank can expand the supply of money in supply to drive down the cost of credit, encourage expenditure and investment, and discourage savings.