SA Household Finances are in Dire Straits The South African Reserve Bank (SARB) yesterday painted a bleak picture of household finances, saying household expenditure had tanked for the first time in three years. In its quarterly bulletin for June, published yesterday, the central bank said consumption expenditure by households had fallen by 0.8% in the first quarter of 2019 following a 3.2% increase in the fourth quarter of 2018 as the economy wanes. The economy is on a downward spiral with gross domestic product contracting by 3.2% in the first quarter of 2019 – the largest contraction since the first quarter of 2009 when it contracted by 6.1%, at the height of the global financial crisis. The SARB said the deterioration in the household consumption was in line with the decline in consumer confidence in the first quarter of 2019, as measured by the First National Bank/Bureau for Economic Research Consumer Confidence Index. The SARB said consumers' finances had been under pressure due to the prolonged period of weak economic activity, rising unemployment, an increased tax burden, and successive fuel price increases. Growth in the real disposable income of households was weighed down by lackluster employment growth and slower wage growth.
4.2.1 The article states that "the economy is on a downward spiral...first quarter of 2019." Explain which phase of the business cycle this represents. (5)
4.2.2 The article further states that "growth in the real disposable income...and slower wage growth." In terms of this statement, discuss the type of fiscal policy that the government can implement to remedy this situation, paying specific attention in your answer to the tool that needs to be targeted. (5)
4.2.3 Discuss a demand-side policy that can be implemented by the government to reduce unemployment mentioned in the article.