Government in Macroeconomy

Course Objectives for Year 11 Economics ATAR

Government Revenue Highest to Lowest

Personal Income Tax, Company Tax, GST, Excise and Customs, Superannuation fund, Other, Non-Taxation

Direct Taxes

Applied to income

Indirect Taxes

Applied to expenditure

Government Expenditure highest to lowest

Social security and welfare, health, general revenue assistance, education, defence, Covid 19 response, public debt interest, transport and communication, other

Social security and Welfare

Just above 30%

Health

15% of total expenditure

General revenue Assistance

11.1% total expenditure (made mostly of GST)

Education

6.9% total expenditure

COVID 19 response

9.5% - 12.3% total expenditure

Taxation purposes

Redistribution of Income, influences resource allocations, regulates economic fluctuations

Impact

Where the tax is levied/collected

Incidence

Where the tax burden falls/who pays the tax

Progressive tax

As income increases, proportion of income tax increases

Example of Progressive Tax

Australian Income Tax

Proportional Tax

As Income increases, proportion of income tax stays the same

Example Proportional Tax

Australian Company Tax

Regressive Tax

As income increases, proportion of income tax decreases

Example Regressive Tax

GST and Excise Tax

Ad Valorem

Percentage of price tax (GST)

Sustainable Economic Growth

Capacity of economy to satisfy material wants, measured by GDP rate of change, better at 3-4%

Price Stability

Low rates of inflation, measured through CPI rate of change, better at 2-3%

Full Employment

Where everyone who is willing and able to work can find a job, measured through unemployment rates, better under 5%

Natural Rate of Unemployment

Frictional + Structural Unemployment, at about 4%

Equitable Distribution of Income + Welfare

achieved when other objectives achieved

How to achieve prosperity

Increasing Productivity and Efficiency