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Australian Budget 2007 Assignment

2675 words - 11 pages

Andrew Ong Year 11 Economics Budget Research Assignment
The Federal Commonwealth 2007-08 budget was announced by Peter Costello for the 07/08 financial year on 8TH May 2007. In a period of economic growth the government will want to sustain the expansion to ensure the security of Australians in the future.A budget is a financial plan where revenue and expenditure are planned and itemized. A budget's purpose is to have a set goal that can be achieve within a set time. Forecasting or predicting expected future events and knowing where the revenue would come from and where the revenue should be spent is important to continue cash flow. There are two main types of budget; personal and ...view middle of the document...

The stance of the fiscal policy can be one of the following; expansionary, contractionary or neutral, the outcome of the budget are determine by the stance of the fiscal policy set by the government as shown below in figure 1.Figure 1(Adapted from Figure 13.4: "Possible Government Budget Outcomes" Year 11 Economics 2007 page 257, Tim Riley)Contractionary fiscal policy happens when the government raises tax or lower spending or a combination of both, in a contractionary budget government spends less than the tax revenue collected which makes the budget a surplus budget. Expansionary fiscal policy involves increase government spending, lower taxes or a combination of both, in an expansionary budget government spend more than collected tax revenue which makes the budget a deficit. Another stance of fiscal policy is neutral where the government spending matches government revenue, this is neither a surplus or deficit budget. The government's 2007-08 budget is an expansionary budget.The key economic indicators are GDP, inflation, unemployment and the current account deficit. The GDP is the measurement of the total value of the goods and services produced. Inflation is the measurement of the rate of price rising of goods and services. Unemployment is the measurement of the total unemployed in the labour force. Current account deficit is the difference between export and import. The treasury estimates that Australians should expect near perfect economic conditions this year with GDP growth averaging 3.75 percent and at this time next year we can expect the economy growing at 4.25 percent. Australians should also expect the jobs growth of 2.5 percent to drop to 1.5 percent and would cause unemployment to hover around 5 percent. The treasury also forecast inflation to fall from 2.75 percent to 2.5 percent. Current account deficit is -65 billion dollars.The strong growth in the GDP in 2007-08 reflects a strong growth in consumption and business investment and modest growth in investment and accelerating export growth, this despite the severe impact of the drought Australia is experiencing. Inflation falling to 2.5 percent is again expected to fall below 2 percent temporarily through the year til June quarter 2007 because of automotive fuel prices stabilizing and fruit prices remain below the highs experienced last year, the pressures on inflation are expected to be moderate as labour cost ease which reflects improved productivity. Unemployment is rising to and hovering around 5 percent because of participation rate that is expected to rise to 65 percent, the treasury forecasts a rise in unemployment and participation rate partly because the new requirements for Disability support pension and Parenting payment recipients which would result in more people entering the labour force. Current account deficit is forecast by the treasury to expand to 6 percent of GDP in 07-08, with growth in import which would outgrowth export, the expected expanding in the...

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