The current fiscal policy of the US is also known as government spending policies that influence macroeconomic conditions of the economy. This policy also affects tax rates, interest rates and government spending in order to control the economy.
Introduction This paper describes the evolution of Australian fiscal policy and the fiscal policy framework over the past quarter-century. The focus is primarily on the medium-term influences on fiscal policy, rather than its counter-cyclical role.
The paper explains how the fiscal policy framework has evolved and examines the economic developments that have had the most significant influence on this evolution. The most important of these developments has been the large current account deficits CADs run by the Australian economy over the past two decades, and the paper documents their influence on fiscal policy over this time.
The other important medium-term influences on which the paper focuses are the fiscal implications of the ageing of the population and the projected rising public cost of health services. These issues have risen to public prominence more recently than the CAD, but their influence on fiscal policy has been growing, and is likely to continue to grow over the next generation or so.
The paper begins, in section 2, with a thumbnail sketch of the Australian macroeconomy over the past quarter-century. In common with most industrial countries, Australia experienced serious recessions in the early s and early s.
Since the early s, however, the Australian economy has performed impressively, despite the significant external shocks of the Asian crisis in and the worldwide economic downturn ofas well as a severe extended drought beginning in Section 3 of the paper describes fiscal policy outcomes over the past quarter-century, before turning to the main medium-term influences on fiscal policy.
The large current account deficits run by the Australian economy for the past two decades are discussed, with a particular focus on the continuing debate over the extent to which these deficits should be of public-policy concern. The section then turns to a discussion of the projected fiscal implications of the ageing of the population and rising public health costs.
The final substantive section of the paper, Section 4, discusses the development of a medium-term fiscal framework in Australia. Elements of a medium-term framework first began to emerge in the mid s with a set of medium-term fiscal rules.
It was not until the second half of the s, however, that a fully articulated medium-term fiscal framework was introduced, with the development of the Charter of Budget Honesty. The paper explains the development of the framework, and discusses its gradual evolution as it has matured.
The paper ends with a brief conclusion. Real GDP growth and the output gap Note: The figure shows financial year averages of real GDP growth and a range of output gap estimates derived from three sources: Coming out of the recession, the economy grew strongly for the remainder of the decade.
Unemployment and inflation in Australia and the G7 countries Note: Core inflation is non-food non-energy for the G7 countries, and weighted median for Australia, adjusted for the introduction of a goods and services tax in July This marked the beginning of widespread policy and community concern about the large Australian CAD and the rising stock of net foreign debt and other liabilities, a development that has had an important influence on fiscal policy for the subsequent two decades up to the present.
We take up this topic in detail later in the paper. In response to both the relatively high rate of CPI inflation, but also the large current account deficits, monetary policy was tight for most of the second half of the s. This extremely tight monetary policy, which contributed to the bursting of the commercial property price bubble, combined with a worldwide economic recession, led to an Australian recession in the early s which, although relatively mild in terms of output growth Figure 1was severe in its implications for the labour market.
Thus, in terms of outcomes for both inflation and the real economy, the medium-term flexible inflation targeting regime has achieved what it was designed to achieve. Strong Australian productivity growth in the years since the early s recession has also seen Australian GDP per capita rise more rapidly than the average for the OECD countries Figure 3.
This more-recent performance — a clear contrast to the experience of the previous several decades — has been interpreted by most, though not all, commentators as a dividend from wide-ranging reform, to both the microeconomic structure of the economy as well as the macroeconomic policy frameworks.
Australian GDP per capita Note: Also of considerable note has been the resilience of the Australian macroeconomy over the period, in the face of sizeable shocks, particularly the Asian financial crisis, the worldwide economic downturn in the early s, and an extended drought beginning in At the time of the Asian financial crisis, the countries to which Australia sent half its exports were in recession.
The Australian dollar depreciated significantly in response to this shock, partly cushioning the external sector.
With the inflation-targeting regime having established credibility, the Reserve Bank saw no need to respond with higher policy interest rates to the depreciation and the associated expected pass-through of higher import prices into consumer prices.
As a result, the Australian economy recorded strong growth through this period, despite the significant external shock Figure 1. Somewhat similarly, at the time of the worldwide downturn ina significant depreciation of the Australian dollar, combined with monetary policy easing, cushioned the effects of the external shock, and again real activity in the Australian economy was remarkably unaffected.
The evolution of fiscal policy 3. General government budget balance Note: The figure shows the general government underlying cash budget balance for all levels of government sourced from the Australian Treasury, and an estimate of the structural balance derived using OECD estimates of the cyclical budget contributions.
The general government underlying cash balance to GDP ratio averaged The rest of the s saw significant fiscal consolidation which, as with the earlier loosening, owed more to discretionary fiscal tightening than to the operation of the automatic stabilisers.
The recession in the early s interrupted the fiscal consolidation, and the budget again returned to sizeable deficits. The second half of the s saw a repeat of the experience a decade earlier, with the budget returning to surplus in and the tightening again owing more to deliberate action than to the automatic stabilisers.
In contrast to the s experience, however, the general government sector has remained in surplus for the subsequent eight years to the present.Immigration Roger Daniels Immigration and immigration policy have been an integral part of the American polity since the early years of the American Republic.
The impact of fiscal policy on monetary policy: A conversation with Fed Governor Lael Brainard next year will affect the outlook for the U.S. economy and, thus, the pace at which the Federal Start Date: Jan 17, Download-Theses Mercredi 10 juin Note: ‘Fiscal pressure’ is the change in fiscal balance over the forty years to , and hence differs somewhat from the fiscal gap presented in the IGR.
Results are for the Commission’s ‘base case’. Gmail is email that's intuitive, efficient, and useful. 15 GB of storage, less spam, and mobile access.
A political–economic theory of fiscal policy is presented in which tax policy preferences are derived from a conflict of interest between individuals of different ages.
Policy formation is fully rational in that an individual's beliefs regarding future policies are consistent with state-contingent policy outcomes.