Government has developed different measures through the Budget to overcome limitations in the free market economy. Thus, in the 2012-13 Federal budgets, it has in some degree successful to overcome these limitations.
The Australian Federal Budget is an official document that is presented in Parliament to the parliament by the Treasurer. Its main purpose is to reveal the governments planned expenditure and revenue for the next financial year.
Under the free market system, some needs of the community may not be satisfied and this has then lead to limitations within the market. These limitations include the provision of goods and services, income distribution, externalities and fluctuation in the economic activity. Hence, the government has the responsibility to interfere the free market in order to assist in resolving and controlling these situations.
Types of budget
In each financial year the different planning for revenue and expenditure can result to a different budget outcome, they include three possible outcomes: 1. Balanced budget - revenue is equal to expenditure
2. surplus - Revenue is greater than expenditure
3. deficit - Revenue is less than expenditure
These budget outcomes can affect the fluctuation of the economic activity, which is directly influencing the business cycles of booms and recession.
The growth or recession of economy can be indicated by the following activities: income level, unemployment rate, production and GDP. It is a key consideration for government to decide which fiscal policy stance they will imply in Budget. In an expansionary policy, government aim to increase the level of economic activity by reducing revenue or increase expenditure, while in a contractionary fiscal policy aim the decrease economic activities by increasing revenue or increase expenditure In the following financial year, Government focus of fiscal policy has shifted from expansion to...
Please join StudyMode to read the full document