Fiscal Polcy in Aus 2013-14

Fiscal Policy in Australia

WHAT IS THE FISCAL POLICY?
The fiscal policy involves the use of the Commonwealth Government Budget to help it in achieving its objectives. The budget is the annual statement (released in May) from the government, of its estimated income expenditure for the following financial year, which varies the amount of government spending and revenue which alters economic activity, therefore influencing internal balance, external balance and the rate of economic growth.

THE MAIN GOALS OF THE 2013-14 BUDGET:
1. Fiscal consolidation and return to budget surplus in the medium term:
One of the government’s main goals of the 2013-14 Budget is to return to its planned and delayed budget surplus. However, the planned surplus for 2013-14 has been transformed to an underlying cash deficit of $19.4 billion, with a deficit of $18 billion expected in 2013-14 (mildly contractionary fiscal stance). Planned fiscal tightening from 2013-14 to 2016-17 estimates that net public debt will peak at 11.4% of GDP in 2014-15, before expecting to return to surplus by 2016-17.
The government has planned $43 billion dollars in savings over the next four years in order to return the budget to surplus. They will do this in the form of discretionary spending and increases in taxation. It is also said that GDP growth is forecast to be slightly below average at 2.75% in 2013-14 but is expected to return to 3% by 2014-15.
A gradual return to surplus is most appropriate considering significant downgrades to revenue and the transition underway in the economy towards new sources of growth. Trying to return to surplus in a hurry by making drastic cuts in the near future would resolve in significant costs to jobs and growth.

2. Boost Education, productivity and participation:
The main objective of the 2013-14 Budget is to boost the economy’s long-term productive capacity through education reforms. This is expected to boost workforce skills, productivity and participation...