Mid September 2008 saw a significant change for the Australian economy, with the collapse of the Lehman Brothers triggering the Global Financial Crisis. The Global Financial Crisis was characterised by a tightening in the availability of money from overseas markets and resulting in governments having to intervene to maintain market stability. The Australian economy and its leaders generated considerable discussion about the prospect of a global recession, while most expected the financial crisis would have a major impact on the Australian economy, a factor that was not considered was the immediacy of its effects. The December quarter of 2008, saw business stocks devalue by $3.4 billion, the largest fall on record. In addition, there was a considerable softening in property prices, resulting in many companies/people having too much debt vs. too little wealth. With this, consumer confidence plummeted which in turn deteriorated consumption. Throughout the month of September and into October, the financial crisis spread from the United States to Europe, and all around the global economy, with economies contracting in growth.
In response to the most challenging global economic conditions since the Great Depression, the 2009-2010 Budget and the Economic Stimulus Plan focused on nation building and was crafted to boost employment, create a solid foundation for future growth and place the Australian economy to capitalise on the global recovery.
Key Initiatives
Stimulus now and investment for the future
A balanced stance on fiscal policy was targeted by the Government in response to the global recession between short and long-term policies. These measures involved bonus payments to low and middle-income Australians to insta...
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...d 2009, ‘Rudd stimulus package protected jobs: OECD’. Retrieved May 23rd, 2010, from -
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(n.d.). Monetary Policy in Australia 2010 (pp. 1-6). West Perth: WACE Revision Centre.
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
Wayne Swan 2010, ‘Budget Speech 2010-11’ Australian Government. Retrieved May 20th, 2010, from - http://www.budget.gov.au/2010-11/content/speech/html/speech.htm
Westpac Institutional Bank May 2010, ‘Westpac Market Insights Australia, New Zealand, G3 & China’. Retrieved June 6th, 2010 from - http://www.westpac.com.au/about-westpac/media/reports/australian-economic-reports/
Austerity: The History of a Dangerous Idea was written by Mark Blyth, and published by the Oxford University Press in 2013. The text conceptualizes the theory of austerity, and provides countless scenarios in which austerity has failed to combat inauspicious economic conditions, for example, the Great Depression of the 1930’s, and the Great Recession of 2007. Austerity is a fiscal policy mechanism used by governments during business cycle contractions to reduce government deficits, usually by increasing taxes, reducing government expenditure or a combination of both tactics.
The financial crisis of 2007–2008 is considered by many economists the worst financial crisis since the Great Depression of the 1930s. This crisis resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. The crisis led to a series of events including: the 2008–2012 global recessions and the European sovereign-debt crisis. The reasons of this financial crisis are argued by economists. The performance of the Federal Reserve becomes a focal point in this argument.
Lazar, Harvey. “The Spending Power and the Harper Government.” HeinOnline. 34 Queen's L.J. 125 2008-2009
One of that main features of the 2011-12 Federal Government Budget is that it will return to surplus in 2012-13, and as such, the budget is implemented as a three year plan. This will be achieved by continuing to invest in Australia's productive capacity, and minor cuts in spending in a variety of areas. Along with this, there has been increased spending to enhance Australia's workforce, increased spending on infrastructure, improving hospitals and healthcare, improving schools, helping families and low income earners, and investment into regional areas.
Reserve Bank of Australia (2010). Minutes of the monetary policy meeting of the board – 3 August 2010. Retrieved August 20, 2010, from http://www.rba.gov.au/monetary-policy/rba-board-minutes/2010/03082010.html.
“The Budget and Economic Outlook : Fiscal Years 2010 to 2020.” Congress of the United States
“Fiscal policy involves varying the intended expenditure and revenue of the Australian government so as to assist in attaining the government’s economic objectives.” (Bulmer, 2014) One of the main influences on the fiscal policy in Australia is the budget; which is an estimate of income and expenditure for a set period of time. A famous economist called John Maynard Keynes discovered a remarkable economic principle called Keynesian Economics. Keynesian economics is a theory of total spending in the economy (called aggregate demand) and its effects on output and inflation. (Binder, 2008) This economic principle is continuously used in Australian economics and helps governments and economics make economically based decisions.
Wildavsky, A., & Caiden, N. (2004). The new politics of the budgetary process (5th ed.). New York, NY: Pearson/Longman.
Canadian Centre for Policy Alternatives, Alternative Federal Budget 2011, Report: Rethink, Rebuild, Renew (pg. 69, 70, 72, 75) Retrieved from: http://www.policyalternatives.ca/AFB2011
The financial crisis occurred in 2008, where the world economy experienced the most dangerous crisis ever since the Great Depression of the 1930s. It started in 2007 when the home prices in the U.S. Dropped significantly, spreading very quickly, initially to the financial sector of the U.S. and subsequently to the financial markets in other countries.
Permatasari, S (2011, 7 August) Australia’s Economy has Strength to meet challenges, Swan Says; Bloomberg, Retrieved from http://www.bloomberg.com/news/2011-08-07/australia-s-economy-has-strength-to-meet-challenges-swan-says.html
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)
The 2008 global financial crisis was widely considered the worst economic financial crisis since the 1930’s and the Great Depression. This crisis was a major problem for nation states across the globe and exposed the interdependence that can easily result in a systemic international banking and credit crisis. While the crisis is six years in the past, we are still plagued by many of the long-term effects of the crisis such as extraordinarily high unemployment, austerity measures that decreased government budgets as a method to ensure government solvency, rapidly increasing poverty, and worsening economic inequality, one ramification of all of this has been the growing social and political discontent across Spain.
Howells, Peter., Bain, Keith 2000, Financial Markets and Institutions, 3rd edn, Henry King Ltd., Great Britain.
Keynes, S. and Tetlow, G. (2014) Survey of Public Spending in the UK. [Online] Available from: http://www.ifs.org.uk/uploads/publications/bns/BN43%20Public%20Spending%202014.pdf [Accessed: 29th February 2016]