The paper "Recent Fiscal Policy in Australia" is a perfect example of a micro and macroeconomic case study. The changes that have been witnessed in the federal budget which resulted in a surplus of $1.5 billion in the year 2012-13 in comparison to the fiscal deficit of $47.7 billion in the year 2011-12 was primarily due to the policies that the government has adopted. The steps that the government has taken can be considered as a contractionary measure because the government looked towards increasing their taxes by $39 billion and a reduction in expenditure by $7 billion which resulted in a change in a change in aggregate demand by 2 percent (Budget Overview, 2012).
The government has looked towards developing the process of fiscal consolidation which has helped them to control debt and ensure that the fiscal budget will help to control the manner in which the economic crisis is worsening. The fiscal policies that the Australian government has looked towards enacting looks towards ensuring that the public debt doesn’ t rise over a long period of time in relation to GDP.
The government looks towards ensuring that the government might look towards using a strategy where they look towards increasing the debt ratio during periods of recession but has to be brought back to normalcy when the economy recovers. The budget for the year 2012-13 highlights the same as shown below (Budget Overview, 2012) The fiscal policies highlight that since the financial crisis the Australian government had witnessed an increase in fiscal deficit which increased the level of pressure that the government had to deal with. This resulted in a change in 2012-13 where the government increased the tax rate and resulted in an increase in receipts by $39 billion which is around 2.6% of the GDP.
The government also reduced there expenditure slightly by $7 billion which resulted in a fiscal deficit to be turned around in a surplus of $1.5 billion (Budget Overview, 2012). The steps were taken by the government clearly highlights that the strategies were contractionary policies as the government looked towards cutting down expenses instead of increasing their expenditure. This clearly highlights that the Australian government has looked towards adopting contractionary policies so that they are able to reduce their fiscal deficit and will look towards determining the manner in which the government has been able to develop their policies.
Budget Overview, 2012. Budget 2012-13, Australian Government, Canberra: Retrieved on December 2, 2012 from http://www.budget.gov.au/2012-13/content/overview/html/index.htm
Historical Australian Government Data, 2012. Budget 2012-13, Budget Paper No 1, Statement 10, Australian Government, Canberra: Retrieved on December 2, 2012 from http://www.budget.gov.au/2012-13/content/bp1/download/bp1_bst10.pdf
IMF, 2012. International Financial Statistics, International Monetary Fund, Washington.
Leigh, A. 2012. How Much Did the 2009 Australian Fiscal Stimulus Boost Demand? Evidence from Household-Reported Spending Effects, B.E. Journal of Macroeconomics, Volume 12, Issue 1.
Romer, D. 2012. Advanced Macroeconomics, 4th ed., New York: McGraw-Hill