South Africa's Economy and Fiscal Objectives
Research Question: How appropriate is the recently announced fiscal policy in terms of the state of the economy since 2007, the outcomes of ASGISA and the economic growth path envisaged by government?
In measuring the appropriateness of the South African fiscal policy stipulated in the general budget for the 2011/2012 period, one must look not only at South Africa’s current economic position but rather the state of the economy over the last five years as well as the context of the ASGISA outcomes and the overall economic path of the government.
Before one can measure their appropriateness in relation to past years and other measures, one must first fully understand what these fiscal policies were. The fiscal policy stipulated in the recent general budget of South Africa for the 2011/2012 period included an increase in government expenditure and a decrease in taxes: “The Budget expanded spending…For the business sector, it expanded investment” [1] (shown in Figure 3.1). “For the small business sector, there were… tax relief measures.” [1] (R8.1 billion in personal income tax relief). This decrease in tax can be seen in Figure 3.2.
Fiscal policy includes two main measures, government expenditure and taxation. One can see that a clear expansionary fiscal policy has been adopted in 2011. This is to counter the monetary restrictive policy that has simultaneously been announced, "Monetary policy, operated by the SA Reserve Bank, will continue to be focused on controlling inflation, and… fiscal policy is countercyclical." [1]
Once one has a clear understanding of the current fiscal policy, one is then enabled to measure it’s appropriateness in terms of the last five years and other measures. One must begin by comparing certain financial indicators over the last five years (2007 – 2011) in order to gain a greater picture of the economy and then a safe deduction in terms of the effectiveness of the fiscal policy can be made. These indicators include the real
In measuring the appropriateness of the South African fiscal policy stipulated in the general budget for the 2011/2012 period, one must look not only at South Africa’s current economic position but rather the state of the economy over the last five years as well as the context of the ASGISA outcomes and the overall economic path of the government.
Before one can measure their appropriateness in relation to past years and other measures, one must first fully understand what these fiscal policies were. The fiscal policy stipulated in the recent general budget of South Africa for the 2011/2012 period included an increase in government expenditure and a decrease in taxes: “The Budget expanded spending…For the business sector, it expanded investment” [1] (shown in Figure 3.1). “For the small business sector, there were… tax relief measures.” [1] (R8.1 billion in personal income tax relief). This decrease in tax can be seen in Figure 3.2.
Fiscal policy includes two main measures, government expenditure and taxation. One can see that a clear expansionary fiscal policy has been adopted in 2011. This is to counter the monetary restrictive policy that has simultaneously been announced, "Monetary policy, operated by the SA Reserve Bank, will continue to be focused on controlling inflation, and… fiscal policy is countercyclical." [1]
Once one has a clear understanding of the current fiscal policy, one is then enabled to measure it’s appropriateness in terms of the last five years and other measures. One must begin by comparing certain financial indicators over the last five years (2007 – 2011) in order to gain a greater picture of the economy and then a safe deduction in terms of the effectiveness of the fiscal policy can be made. These indicators include the real