Government in action

What kind of policy is fiscal policy?

It is a macroeconomic policy

Who made the ideas that fiscal policy is based on?

John Maynard Keyes

What did Keyes argue?

that governments could stabilise the business cycle and regulate economic output by adjusting spending and taxation measures

What does fiscal policy use?

Fiscal policy involves the use of taxation and spending to achieve the government’s economic objections

What does altering levels of G and T influence?

sustained economic growth, low inflation, full employment, external stability

What can further changes in G and T lead to?

reallocation of resources and redistribution of income

when is the Budget presented?

Usually in May

What does the budget show?

It shows planned revenue and expenditure for the next financial year

How much does income tax make up of the total revenure?

70%

What is income tax?

taxes earned from both individuals and companies

How much of revenue does company tax make up?

20% of revenue

What percentage of personal income tax is in the total cash reciepts?

48%

What percentage oftotal tax collection is GST?

13%

What percentage of revenue is exercise + customs?

6%

What percentage of revenue is other tax (charges, fees, fines)?

1-2%

What percentage of revenue is non tax (profit form enterprises)?

8%

How is provision of infrastructure linked to the government’s economic objectives?

increases productive capacity of the economy and reduced infrastructure bottlenecks, leading to increased economic growth

How is social security and welfare linked to the government’s economic objectives?

the largest commonwealth government outlay, this represents transfer payments (redistributing income)

How is health linked to the government’s economic objectives?

while the delivery of healthcare services is primarily the responsibility of state and territory governments, the commonwealth fund medicare and the pharmaceutical benefits scheme as well as contributing to the funding of public hosptials

How is education linked to the government’s economic objectives?

the commonwealth provides education funding to the universities vocational education and training providers as well as government and non-government pramry and secondary schools

How is protecting the environment and promoting ecologically sustainable developments linked to the government’s economic objectives?

protecting the environment and promoting ecologically sustainable developments includes clean water, low carbon emission technologies and energy efficiency measures

What is a balanced budget?

planned government revenue + planned government expenditure = zero balance

What is a budget surplus?

planned government revenue > planned government expenditure = positive balance

what is a budget deficit?

planned government revenue < planned government expenditure = negative balance

The budget outcome changes reflects the impact of what two key factors?

changing economic conditions, changes in government policy

what is the economic impact of an expansionary stance?

stimulates economic demand, and may increase inflation

what is the economic impact of a contractionary stance?

dampens economic demand, may increase unemployment

what is the economic impact of a neutral stance?

generally no overall effect on aggregate demand

What are the two parts of the budget to consider?

cyclical components and structural component

What is cyclical component also known as?

non-discretionary, as it is not a government decision

What does cyclical component as a non-discretionary mean?

it is an automatic stabilizer

cyclical component involves changes in G&T which results from changes in what?

changes in the level of economic activity

What is structural component also known as?

discretionary policy decisions, a government made decision

What does structural component represent?

delicate revenue and expenditure charges

What do automatic stabilisers offset?

the extremes of the business cycle

What are the main automatic stabilisers?

unemployment benefits, progressive income tax system

What is the key driver of the fiscal policy stance?

structural component

What are some examples of structural components?

capital gains tax reform, NDIS reform

How do political parties influence government policy in australia?

major policy changes must be authorised by the political party at the time, and each party has different concerns for which they focus policies on

How do business influence government policy in australia?

political parties rely on donations from businesses to fund campaigns, and are sometimes accused of changing policies because of the financial contributions of business groups

How do unions influence government policy in australia?

they are the largest organisation by membership in Australia, and represent the interest of workers,with a focus on industrial relation policy, work health and safety issues, and measures that affect low income earners