Fiscal Deficit On Economic Activity Last 4 Years In Australia

4684 words - 19 pages

Economic Context of Management

Name: Pradeep

“The Australian government has been running with too large a fiscal
deficit during the past 4 years particularly in light of their projections for
the Australian economy which were made when the first stimulus
package was announced in 2008". Discuss this assertion and the
consequences of this fiscal deficit on economic activity during the past 4
years. What are the implications of your analysis for Australia's fiscal
policy during the next 3 years?

Global Financial Crisis (GFC) evolved from its origin in subprime mortgage crisis of United States and affected almost every country in the world. Australia ...view middle of the document...

It shows that major projects like Building Education Revolution (BER) and Home Insulation Program (HIP) were implemented inefficiently and did not add any valuable asset to the nation. As per Keynes any government spending should be used efficiently and wisely in order to have the intended effect on the economy. So it is important for the government to do cost-benefit analysis and to have the plan in place before rolling out the projects of this kind. With the floating exchange rate, which was introduced in 1984, the stimulus package was ineffective for Australian economy. Therefore it was unnecessary. Historical evidence from the Asian crisis case provides us the great example of how the floating exchange rate in Australia provides insulation from overseas crisis.
The improvement in saving by the households and businesses, during GFC, did significantly reduce the Current Account Deficit (CAD), which otherwise would have been enormous. The current appreciation of Australian dollar, despite the fall of commodity prices is due to the reduction in savings. The data from retail sales which shows the increase and the drop in superannuation saving shows that we are not saving as much as we were during 2008-09. Consequently, Australian government need to take saving measures and also encourage households and business to save in order to minimise the current account deficit, there by reduced overseas borrowing and unpleasant appreciation of Australian dollar.
Government should put the revenue from mining tax into some savings fund, which can be used for useful cause in future (like education, medical research and developing work force etc.). This will not only assist Australia to develop alternative industries, when Australia run out of commodities, but also positively affect in pushing down exchange rate. Also, it should not implement the measure like reduction concessional superannuation cap for people, from $50000 to $25000, as this is one of the contributor for increased superannuation saving (KPMG, Superannuation Trends and Implications, November, 2011), which will lead to reduction in saving and that will not be good for the country from economic perspective.
Further, the domestic and economic outlook presented in Mid-Year Economic and Fiscal Outlook 2012-13, points to challenging times ahead, and will have to be dealt with disciplined actions, as the fall in commodity prices, slowdown in China’s growth and Euro zone and US, which will have a direct impact on China and that will put downward pressure on Australia’s terms of trade. In order to reduce the CAD and budget deficit in coming years, government should take measures for government saving by actions like savings fund for mining tax revenue public sector re-organisation, cost cutting in illegal immigration area, look at tax cut to increase tax revenue etc. as well as influencing business and household savings in a way that does not affect economic activities and also avoiding...

Other Papers Like Fiscal Deficit On Economic Activity Last 4 Years In Australia

Nothing To Do Essay

925 words - 4 pages maintain the welfare on the basis of a sustainable fiscal policy. The government increased the deficit blindly in order to please the voters, therefore, the public debt increase dramatically and their repay ability was suspected. 5. International financial power game: Once it occurs economic problems, Huge budget deficit and poor economic conditions may make the countries with weaker overall strength such as Greece become the sniper target of the international financial power.

Fiscal Cliff Essay

2769 words - 12 pages Fiscal Cliff, which is of course not a real cliff and merely an imagery-rich term popularized and exploited by most media, signifies extensive tax hikes and automatic spending cuts that are all scheduled to take place at once in the beginning of 2013. Unless the Obama Administration and the Republicans reach an alternative agreement on deficit reduction, the country will likely face increases equivalent to up to 3-4% of current GDP, which many worry

Fiscal Policy

894 words - 4 pages Topic 4 – Fiscal Policy Refers to the governments choices regarding the overall level of government purchases or taxes * Government spending – on health sector, education, infrastructure, defence. * Taxation policy – income tax, sales tax (VAT), corporate tax, capital gains tax. Fiscal policy and aggregate demand * Government spending – increase in G spending → AD shifting right * e.g. Gov places £10 billion order for

The Lending Agreement

2902 words - 12 pages , Eichengreen and Mody (2012) describe financial crises and the multilateral response in the last 40 years warning that both crises and programs have changed over time. Other studies evaluate the effects of IMF loan programs on economic growth, reforms and other variables: Conway (1994); Garuda (2000); Dicks-Mireaux, Mecagni and Schadler (2000); Hutchison and Noy (2003); Martinez-Vazquez and Mina (2003); Barro and Lee (2005); Dreher and Rupprecht


633 words - 3 pages Tasks: 1. Examine the degree to which Barbados is exposed to external shocks based on the structure of its economy and the monetary policies it has pursued up to this point. 2. Discuss the risk(s) associated with maintaining a fixed exchange rate regime in Barbados. 3. Since 2008 the government has employed expansionary fiscal policy. However, it has led to a deepening fiscal and monetary crisis without creating growth. Discuss the factors that might have led to this dilemma. 4. Examine the adequacy of the economic plan announced by the Barbadian government in the context of the IMF assessment.


5378 words - 22 pages review public spending, mobilise resources and gear them towards building the productivity of the economy. Fiscal policy shaped with reference to the recommendations of the Thirteenth Finance Commission, which has recommended a calibrated exit strategy from the expansionary fiscal stance of last two years. It would be for the first time that the Government would target an explicit reduction in its domestic public debt-GDP ratio. ! http

Singapore Exchange Rate Regime

1611 words - 7 pages deflationary pressure. 4. Evaluate the advantages and disadvantages of a fixed vs. floating exchange rate system given the structure of Singaporean economy? Referencing to the Singapore three main necessities and economic objectives. (Appendix 1) Advantages: the floating exchange rates system works as an automatic stabilizer for the value of the currency which helps in freeing the monetary and fiscal authorities to concentrate on internal

Mexico's Balance Of Payments Problem

1873 words - 8 pages deficit of US$4 billion in 1989 to US$29 billion in 1994. In the period between December 1988 and November 1993 the government of Mexico reported that cumulative foreign investments was US$ 34 billion, which was outperformed government’s original target by 40%. In the 7 years from 1986 to 1993 the United States direct investment in Mexico more than doubled to US$23 billion and United State-based multinationals had invested for than 60% of the foreign


9430 words - 38 pages expenditure policy 3. For the administrative authority, the budget is a work program on which each department can base its own operational work program. This function of the budget demands that the structure of objectives, the activity schedule, the resource schedule and the financial schedule is clearly expounded in the budget documents. 4. The budget serves as a source of information for everyone concerned, the information contained in the

Globalization In India

3401 words - 14 pages countries that had significant consequences for India’s trade (14.89). A burgeoning fiscal deficit, a large international debt, a foreign-exchange shortage and the Gulf War were also important factors that contributed to the crisis (14.20). One of the most important contributors was the Gulf War. Merchandise and the invisible trade balances worsened significantly with the skyrocketing of oil prices, sanction on Iraq and decline in the inflow of

Analysis Of National Income Trend Since 1950 And Inflexion Points

829 words - 4 pages , Liberalization and Globalization was able to attract international capital and modern technology. 2 Tracing the inflexion points in National Income trend since 1990-91 National Income Vs. Rate of Growth 60 50 40 30 20 10 0 5.42% 8.10% 4.51% 7.56% 3.99% 4.12% 9.46% 8.05% 9.75% 6.54% 8.78% 12% 10% 8% 6.44% 6% 4% 2% 0% 1.39% National Income at 2004-05 prices Rate of Growth 1991-92: Balance of Payment Crisis –The gross fiscal deficit rose

Related Essays

The Joint Committee On Taxation, “Estimates Of Federal Tax Expenditures For Fiscal Years 2012 2017,” (Jcs 1 13), February 1, 2013, Table 1

1543 words - 7 pages their best interest to purchase a health insurance policy. There have been past taxes implemented to penalize the use of certain items such as cigarettes, alcohol and gambling. Still, the government relies on these taxes and the ultimate purpose for these taxes is still revenue generation. Basically, the government is allowing the taxpayers to continue using these products as long as they pay for the privilege. In terms of the Patient

Do You Agree With The View That Conservative Economic Policy Was A Success In The Years 1979 1983?

933 words - 4 pages into consideration the view that the Conservatives economic policy was a success in the years 1979 to 1983. Source 7 does so by complimenting the success of Thatcherism in the “expanding towns of southern England and East Anglia”. Source 9, comments on the Conservative’s success in decreasing inflation after coming into office. Source 8 directly conflicts with sources 7 and 9 as it shows figures which suggest that unemployment rates and

Economics Assignment

4350 words - 18 pages where the government aims for fiscal balance over the economic cycle. 2.1 The Comparison of Gross Domestic Product between Malaysia and Australia Country / Years | 2005 | 2006 | 2007 | 2008 | 2009 | Malaysia(%) | 5.0 | 5.8 | 6.5 | 4.7 | -1.7 | Australia(%) | 2.8 | 3.1 | 3.8 | 3.7 | 1.3 | Based on the table above, show that the GDP (real growth rate) between Malaysia and Australia from 2005 until 2009. According to the data given

Efesgesges Esf Essay

452 words - 2 pages the following aspects: Week 1: Using economic data as support, outline the past (last 5 years) and current trends in Australia’s GDP Annual Economic Growth and the unemployment rate. Compare the changes in the macroeconomic policy and the achievement of Full Employment over the last 5 years using economic data trends. Introduction What is economic sustainability • briefly outline the main economic objectives of the Australian