Introduction Fiscal policy is the means by which a government calibrates its spending and taxation (injections and leakages) in order to balance and steer the nation’s economy towards constant and sustainable growth. It is closely tied with monetary policy, where a central bank influences a nation’s money supply. These two economic policy branches are used in varying combinations and ratios in order to achieve a nation’s economic goals. Contractionary fiscal policy refers to either a reduction in government expenditure, in particular deficit spending, as well as an increase in taxation. It is a macroeconomic tool designed to combat rising inflation and other economic distortions created through government interventions. It is juxtaposed by …show more content…
This is projected to be achieved through substantial increases in taxation such as increases in the Medicare Levy (from 2% to 2.5%), stronger tariffs on foreign imports, the introduction of a new bank levy of 0.06% on Australia’s big four banks and Macquarie as well as increases in taxation on foreign investors (from 10% to 12.5%). These increases in taxation hallmark mild expansionary policy met with overall substantial contractionary policy, in the hopes of combatting the recession by stimulating the economy through investments in small-medium business, an estimated $75 billion to be invested in major infrastructure projects (such as Western Sydney Airport and the Melbourne to Brisbane Inland Railway), as well as some relatively small fiscal measures made to housing and estates. As such, with the overall contractionary nature of the federal budget, the underlying cash balance is set to change from a deficit of -$36 billion in the 2016-17 financial year, to achieving a budgetary surplus of $7.4 billion by 2020-21 (see table …show more content…
Although the reduction of corporate taxation for smaller companies in Australia is a step in the right direction, PWC claims that the biggest economic benefits will be achieved when the government applies lower income tax rates to all businesses. A reduction in corporate taxation tends to attract foreign investment due to the favourable rate, as well as larger Australian businesses choosing to expand further within the market, both of which may promote economic growth and drive increases in real wages; which will in turn increase disposable income in the general population and may result in increased consumer spending and demand in the economy, driving further
In Keynesianism, government uses fiscal policy, which is a list of policies that government spending and taxing can be used to improve the performance of an economy. The government produces stabilization by taxing and spending yearly plans. Taxing can occur when inflation is high, and lowering taxes tends to occur during a high percentage of unemployment. By lowering taxes, it increases disposable income or the amount of income that goes to financial responsibilities. When people have more money, they are able to spend more, which in return goes into jump starting the economy.
Wayne Swan 2009, ‘Budget Speech 2009-10’, Australian Government. Retrieved May 20th, 2010, from - http://www.ato.gov.au/budget/2009-10/content/speech/html/speech.htm
The Australian Budget is an annually published document which details the Federal Government's plans to affect the level of economic activity, resource allocation, and income distribution through the use of fiscal policy. It describes the framework which the government intends to follow during the next financial year which will result in the attainment of their objectives. The budget is a publication of the government's plans regarding the use of fiscal policy, and is published to parliament and the general public on “budget night”, so as to allow open dissemination about the status of public finances and to promote transparency in Australia's fiscal policy.
As a result of the Great Recession of 2007 to 2009, the United States government implemented various fiscal policies in an effort to stimulate the economy. How the government responded as well as how those responses will affect the U.S. economy into the future are the focus of a proposed research study. In order to ensure an appropriate focus for the proposed research study, problems in existing literature must be evaluated.
Business Source Premier. Web. 19 Jan. 2014. Stokey, Nancy L., and Sergio Rebelo. "Growth Effects Of Flat-Rate Taxes." Journal Of Political
Protects the taxpayer during hard times, when income is reduced, the tax rate also become shifts to a lower bracket.
When you think of the “land down under” you don’t really think of the kind of government they have. I chose to write about the Australian government because I really don’t hear much about Australia. It currently has a pretty interesting story to tell when it comes to their government. I became a bit interested in Australian politics when I saw a political animated cartoon on the internet that depicted Kevin Rudd, the last Prime Minister, on a news television show and it was quite humorous. I am going to give a quick history lesson on Australia then go into how the government formed and came to be. Then I will talk about the Australian constitution, the Australian arms of government, their federal system, political parties and Australia’s current Prime Minister.
This economic growth continued to increase through ‘98 and ‘99, partly being attributed to the weakening Australian dollar that allowed for the opening up and increasing market shares held by Australian exports on world markets. This was the case, as the reduction in the Australian dollar’s value, triggered decreases in the prices of our exports for foreign buyers, thereby increasing demand for our products and increasing the amount of money and investments coming into Australia. This therefore resulting in the aforementioned increases economic growth when combined with the high levels of employment and consumer confidence.
Australia has had one of the most outstanding economies of the world in recent years - competitive, open and vibrant. The nation’s high economic performance stems from effective economic management and ongoing structural reform. Australia has a competitive and dynamic private sector and a skilled, flexible workforce. It also has a comprehensive economic policy framework in place. The economy is globally competitive and remains an attractive destination for investment. Australia has a sound, stable and modern institutional structure that provides certainty to businesses. For long time, Australia is a stable democratic country with strong growth, low inflation and low interest rate.(Ning)
Monetary and fiscal policy and their applications to the third world countries with a huge informal sector
The reduction of government role in the economy will affect fiscal policy by decreasing deficit spending a...
Everyone has their own political leaning and that leaning comes from one’s opinion about the Government. Peoples’ opinions are formed by what the parties say they will and will not do, the amounts they want spend and what they want to save. In macroeconomic terms, what the government spends is known as fiscal policy. Fiscal policy is the use of taxation and government spending for the purposes of stimulating or slowing down growth in an economy. Fiscal policy can be used for expansionary reasons, which is aimed at growing the economy and increasing employment, or contractionary which is intended to slow the growth of an economy. Expansionary fiscal policy features increased government spending and decreases in the tax rates as where contractionary policy focuses on lowering government spending and increasing tax rates. It must be understood that fiscal policy is meant to help the economy, although some negative results may arise.
After analyzing the data and the theory, we have provided our conclusion weather tax cut is better for the stimulation of growth or Government spending is? This report explains the big macroeconomic debates of the present times. It seeks to explore the debate within fiscal policy itself between tax cuts and government spending. We have tried to explain the argument through some theories and through some data collected from Indian econ...
Fiscal Policy involves the Government changing the levels of Taxation and Government Spending in order to influence AD (Aggregate Demand) and therefore the level of economic activity.
The government use of taxes plays a crucial role in today’s economy as well as personal finances, it has and will continue to leave its mark on the world we live in.