Fiscal Policy and the Government Budget

These flashcards cover the definitions, tools, and outcomes of fiscal policy as well as specific Australian government budget forecasts and debt projections.

Fiscal policy

Measures undertaken by governments to influence a nation's aggregate demand by adjusting taxation and government spending.

Balanced Budget

A budget in which revenue ($T$) is equal to expenditure ($G$), expressed as $T = G$.

Surplus Budget

A budget in which revenue ($T$) is greater than expenditure ($G$), expressed as $T > G$.

Deficit Budget

A budget in which revenue ($T$) is less than expenditure ($G$), expressed as $T < G$.

Expansionary Stance

A budget stance where government spending is rising relative to taxation, resulting in a smaller surplus or a bigger deficit.

Contractionary Stance

A budget stance where government taxation is rising relative to spending, resulting in a bigger surplus or a smaller deficit.

Government Spending ($G$)

A fiscal policy tool used to boost Aggregate Demand through infrastructure, education and training, and welfare payments.

Taxation ($T$)

A fiscal policy tool including income tax, company tax, and GST; lower taxes increase disposable income and raise Aggregate Demand.

Total Revenue (2026-27)

The total amount of income the government expects to receive, forecasted to be $\$815$ billion.

Total Expenses (2026-27)

The total amount of spending directed by the government, forecasted to be $\$833$ billion.

Individuals income tax

The largest source of government revenue, projected at $\$390.9$ billion in 2026-27.

Social security and welfare

The largest item of government spending, projected at $\$308.7$ billion in 2026-27.

Underlying Cash Balance (UCB) variations

The main drivers of budget improvement, primarily including higher income tax receipts and variations in spending on the NDIS and GST payments.

Gross debt peak

The point at which gross debt as a share of GDP is projected to reach its highest level of $35.8\%$ in 2028-29.

Gross debt per person (2027-28)

The expected amount of government debt per individual, estimated at around $\$37,000$ when total debt hits $\$1.1$ trillion.