fiscal policy

Topics: Economics, Public finance, Keynesian economics Pages: 8 (1144 words) Published: October 17, 2014
Table of Content

Executive Summary …………………………………………………………………..2

Introduction……………………………………………………………………………3

Features of Commonwealth Government’s Budget …………………………………..3

Government Rationale ………………………………………………………………..4

Evaluation ……………………………………………………………………………..5

Suggestion ……………………………………………………………………….........6

Conclusion……………………………………………………………………………..6

Reference………………………………………………………………………………7

Executive summary
This reports outlines the main feature of Commonwealth Budget. The Budget is theoretically reasonable on a national level, where Government has achieved its objective of starting the process of putting Australia back on the path of a sustainable budget. This should give business the confidence it needs to invest and innovate. But the function of fiscal policy is reduced for current Australian economy, because the world economies are more integrated than before, so the government should take another direction to recover the economy of Australian. Such as import and Export.

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Introduction
For more than a decade now, many Western countries are suffered from high rates of unemployment as well as from considerable Federal budget deficits. Comparatively, Australian has managed its economy better during these years, especially in global financial crisis. However, recently years there is a wide spread consensus among economists that fiscal policy is not useful and it just as people disagree about the politics of fiscal policy. This report will outline the main features of Commonwealth Government’s most recent budget and explain the government’s rationale for its approach in these budget, and also give an evaluation for the rationale and therefore of budget itself, providing some additional directions that the government might overlook.

Features of Commonwealth Government’s budgets
“The 2014-15 Budget takes a significant step in transforming the role of government in people’s lives” (Federal Budget Paper NO.1, 2014).The Budget redirects tax revenue from unaffordable consumption today to productive investment for the future while supporting the most vulnerable areas, and beginning the task of ensuring the government can live with in its mean (Federal Budget Paper NO.1, 2014). The budgets has been set in the context of the expectation for unemployment rate remain increase to 6.25% in 2014-15 and growth rate for Australian economy slightly below trend at around 2.5% in 2014-1 15. The budget is on a clear track to surplus, with a small deficit of $2.8 billion in 2017-18 and a surplus of well over 1 per cent of GDP by 2024-25.

The budget support stronger and more sustainable economic growth in this medium term and does not place further pressures on the economy’s transition to broader-based growth in the near term. Government spending is being redirected to more productive uses, such as expanding infrastructure investment, and by redirecting spending to more productive ends. This Budget has enabled significant reforms, such as the Asset Recycling Fund, Higher Education deregulation and the Medical Research Future Fund. Spending growth has been significantly reduced and the net impact of policy decisions has been to reduce the deficit by $36 billion over the forward estimates. And the Government is introducing measures to encourage greater workforce participation. By getting government finances under control and laying out a credible plan for fiscal repair, the government is providing businesses and households with the certainty they need to invest in their future (Federal Budget Paper NO.1, 2014).

The Government’s rationale
In economics and political science, fiscal policy is the use of government revenue collection and expenditures to influence the economy. According to Keynesian economics, when the government changes the levels of taxation and government spending, it influences aggregate demand and the...
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