Australian macroeconomic policy in recent years

Topics: Monetary policy, Inflation, Public finance Pages: 4 (1065 words) Published: October 24, 2013
Year 11 Economics Research Task

Fiscal policy: 2007- 2013

The government during the period from 2007- 2013 developed a strong Fiscal policy stance. In the years Prior to the Global Financial Crisis (GFC), the government decided to take a countercyclical approach to the economy through Fiscal policy as they had seen the unstable increase in levels of spending and the levels of saving. This is shown in diagram 1, government spending was at low point in the previous decade of 31.5 %. In the year of 2008, Australia entered the GFC a severe time of recession in the global economy this marked a period of expansionary policy. This is also shown through diagram 1, which shows the spike in government expenditure to 34.1 % in 2009- 2010. The government started to run budget deficits; this is when expenditure exceeds their intake. In 2010 Australia changed their stance and entered a period of contractionary Fiscal stance to attempt to bring the budget back from deficit to a budget surplus. This change was also brought on by the upcoming federal election, as the labour party had problems with their economic policies in the past. Despite the period of contractionary policy the fiscal stance of the Australian government made little difference on the end result.

During the government’s budgets for 2007 to 2013 there was a recorded $42 billion of expenditure mainly targeted at developing infrastructure, housing, education and infrastructure for the community? The government decided to focus on Infrastructure as the benefits it provides to the economy. The government has also chosen to increase expenditure for both education and disability care sectors.

Diagram 1:

Monetary Policy: 2007 – 2013

Prior to the GFC in 2008, the RBA increased interest rates to up to a level of 7.5% so that they could slow down the economic activity. This was the RBA’s reaction to increasing rates of inflation;...

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