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Australian Federal Budget

Essay by   •  March 24, 2011  •  653 Words (3 Pages)  •  1,344 Views

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A budget is an estimate of the Commonwealth's revenue and expenditure for the forthcoming year. The budget contains information on matters such as economic forecasts, the provision of goods and services, the Government's social and political priorities and how the government intends to attain these priorities.

The budget is a main tool for the government's fiscal policy involving the Commonwealth's changing expenditure and revenue patterns to achieve a range of economic objectives. The role of a budget it to assist the federal government in achieving:

Ð'* Full employment of people over the age of 15 whom are willing to work.

Ð'* Price stability where the government attempts to maintain stable prices by controlling inflation rates.

Ð'* External balance to sustain a low current account deficit.

Ð'* Economic growth increasing real GDP per capita so living standards improve.

Calculating the budget outcomes provides a good indication of the overall impact of the budget on the Australian economy. The three possible budget outcomes include a:

Ð'* Balanced budget which occurs when the government's expenditure equals the government's revenue.

Ð'* Deficit budget occurs when the government's expenditure is more than the government's revenue.

Ð'* Surplus budget occurs when the government's expenditure is less than the government's revenue.

By deliberate or discretionary changes to the structure of the federal government's revenue and expenditure components, it can be used to alter the level of economic growth and activities, inflation, unemployment and external stability in the coming and future years. Through the government's deliberate methods of revenue collection in the budget outcome from one year to the next, it can indicate various changes in the Australia's fiscal policy stance to stabilize the economy. The three possible stances include:

Ð'* An expansionary fiscal policy stance which aims at increasing the level of economic activities by stimulating demand. The policy is associated with budget deficits as injections are greater than leakages with government's choice of either reducing taxation revenue or increasing government expenditure. This may direct a reduction in unemployment as firms must employ extra resources to increase production, although inflation may occur is the economy were too grow too quickly.

Ð'* A contractionary fiscal policy stance which is associated with surplus budgets where injections are less than leakages. Here the government may decide to increase taxation revenue

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