Fiscal Policy in Australia
Table of Contents
1. Introduction 2
2. Fiscal policy 2
2.1. Definition of Fiscal policy 2
2.2. Expansionary Fiscal policy – indication of a budget deficit? 2
2.3. Contractionary Fiscal policy – indication of a budget surplus? 3
3. Expansionary and Contractionary Fiscal policy in Australia 3
4. Failure to predict the budget in 2012 – 2013 of the Labour Party 4
5. Fiscal policy in Australia between 2006 – 2013 5
6. Conclusion 6
References 7
1. Introduction
The economy is relatively influenced by the government intervention. The use of government revenue collection and government expenditure to contribute to the long-term growth and stability of the economy is considered as “Fiscal Policy”, implying contractionary and expansionary Fiscal policy. This report would classify the type of Fiscal policies applied for Australia as well as discuss their judiciousness in the period of 2006 and 2013. Moreover, the effect of contractionary and expansionary Fiscal policy would be clarified. And lastly, the reason for a failure of the Labour party in predicting the budget in 2012-2013 would be examined.
2. Fiscal policy
2.1. Definition of Fiscal policy
In order to achieve a macro-equilibrium, the aggregate demand for goods and services has to be equal to the aggregate supply (Forde, 2013). One of the important factors to control the macro-economy is the government spending policies. Based on the theories of British economist John Maynard Keynes, Fiscal policy is attempted to control inflation, mend unemployment rate, stabilize the economic cycle and influence interest rate by making use of taxation and government spending (Sullivan & Sheffrin, 2003). There are two types of Fiscal policy applying for economies in different situations, known as Expansionary Fiscal policy and Contractionary Fiscal policy.
2.2. Expansionary Fiscal policy – indication of a budget deficit?
Expansionary Fiscal policy is defined as the practice of increased government expenditure and/or decreased
1. Introduction 2
2. Fiscal policy 2
2.1. Definition of Fiscal policy 2
2.2. Expansionary Fiscal policy – indication of a budget deficit? 2
2.3. Contractionary Fiscal policy – indication of a budget surplus? 3
3. Expansionary and Contractionary Fiscal policy in Australia 3
4. Failure to predict the budget in 2012 – 2013 of the Labour Party 4
5. Fiscal policy in Australia between 2006 – 2013 5
6. Conclusion 6
References 7
1. Introduction
The economy is relatively influenced by the government intervention. The use of government revenue collection and government expenditure to contribute to the long-term growth and stability of the economy is considered as “Fiscal Policy”, implying contractionary and expansionary Fiscal policy. This report would classify the type of Fiscal policies applied for Australia as well as discuss their judiciousness in the period of 2006 and 2013. Moreover, the effect of contractionary and expansionary Fiscal policy would be clarified. And lastly, the reason for a failure of the Labour party in predicting the budget in 2012-2013 would be examined.
2. Fiscal policy
2.1. Definition of Fiscal policy
In order to achieve a macro-equilibrium, the aggregate demand for goods and services has to be equal to the aggregate supply (Forde, 2013). One of the important factors to control the macro-economy is the government spending policies. Based on the theories of British economist John Maynard Keynes, Fiscal policy is attempted to control inflation, mend unemployment rate, stabilize the economic cycle and influence interest rate by making use of taxation and government spending (Sullivan & Sheffrin, 2003). There are two types of Fiscal policy applying for economies in different situations, known as Expansionary Fiscal policy and Contractionary Fiscal policy.
2.2. Expansionary Fiscal policy – indication of a budget deficit?
Expansionary Fiscal policy is defined as the practice of increased government expenditure and/or decreased
References: Chad Brooks, 28 November, 2012, “What is Fiscal Policy”, viewed 10 December, 2013 http://www.businessnewsdaily.com/3484-fiscal-policy.html Commonwealth of Australia, 2006 – 2007 Budget Overview, viewed 12 December 2013, http://budget.gov.au/2006-07/ Commonwealth of Australia, 2007 – 2008 Budget Overview, viewed 12 December 2013, http://budget.gov.au/2007-08/ Commonwealth of Australia, 2008 – 2009 Budget Overview, viewed 12 December 2013, http://budget.gov.au/2008-09/ Commonwealth of Australia, 2009 – 2010 Budget Overview, viewed 12 December 2013, http://budget.gov.au/2009-10/ Commonwealth of Australia, 2010 – 2011 Budget Overview, viewed 12 December 2013, http://budget.gov.au/2010-11/ Dodge E.R., 4 March, 2011,”Expansionary and Contractionary Fiscal Policy – Review for AP Economics”, viewed 9 December, 2013, http://www.education.com/study-help/article/expansionary-contractionary-fiscal-policy/ Ergas H Weil D.N., 2002, “Fiscal Policy”, 1st Edition, Library of Economics and Liberty, viewed 9 December 2013, http://www.econlib.org/library/Enc1/FiscalPolicy.html