Fiscal Policy Questions (1 Viewer)

[kittystar]

I have a eco assessment due and I'm not sure on a couple of questions relating to the 2013/14 federal budget and fiscal policy. I really want to do well as I'm currently 3rd and wanting to improve this rank so I just want some assurance on some questions.

1. Analyse the likely impact of the fiscal strategy of the 2013/14 Federal Budget on economic activity, in the context of the current internal and external economic conditions
2. Explain the circumstances where financing a budget deficit may create a ‘crowding out’ effect? Discuss whether crowding out is a possibility in the current economic environment.
3. Discuss the impact of the 2013/14 Federal Budget on the government’s objective of achieving higher levels of productivity in Australia in the long term
4. Explain what is meant by fiscal consolidation in the context of the 2013/14 Budget

Thanks heaps and any help would be appreciated greatly

 

[Renegader]

It'd be useful to see what you've written unless you want to point us to what areas of the question you're needing help in

But in short:

1. Likely to have a contractionary effect to AD; as the budget is in a mildly contractionary stance. (they're trying to reduce their deficit). This may result in a slowdown in economic growth, but if this occurs the RBA is likely to step in with expansionary MP.
2. A crowding out effect is created when the budget is in deficit; like at present. This means there's less money in the domestic savings pool as some of it is owed to the government and thus the private sector is "crowded out" so they'll resort to overseas which will increase NFL/NPY etc. It's a possibility in the current environment but the government is trying to decrease the deficit which would decrease this crowding out effect. Although from what I remember something like 60% of government bonds are owned by overseas investors which means currently it has a smaller chance of the crowding out effect occurring. (this is a pretty poor explanation, sorry).
3. Overall this should have a positive impact on the levels of productivity in Australia in the long term; e.g. NDIS (Disability Care Australia) may help make it easier and more efficient for those disabled to work; but the main thing are the Gonski Reforms which will boost the quality of education and in turn have a positive effect on Australia's long term productive capacity (labour will be more efficiently utilised i.e. more productive). Also, the Nation Building Program (the $24bn to Roads, Rails and Ports) is also seen to boost Australia's productive capacity in the long term by alleviating infrastructure bottlenecks).
4. Fiscal consolidation is attempting to reduce the size of the deficit as is seen in the current budget from $19.4bn in 2012-13 to $18bn in 2013-14.


Hope it helped... not the best of answers but meh

 

[kittystar]

Thanks for that, yeah it's those questions I'm having trouble starting but the others I'm okay in - I might post up my full response after I hand it in depending on what mark I get

 

[Bobbo1]

It'd be useful to see what you've written unless you want to point us to what areas of the question you're needing help in

But in short:

1. Likely to have a contractionary effect to AD; as the budget is in a mildly contractionary stance. (they're trying to reduce their deficit). This may result in a slowdown in economic growth, but if this occurs the RBA is likely to step in with expansionary MP.
2. A crowding out effect is created when the budget is in deficit; like at present. This means there's less money in the domestic savings pool as some of it is owed to the government and thus the private sector is "crowded out" so they'll resort to overseas which will increase NFL/NPY etc. It's a possibility in the current environment but the government is trying to decrease the deficit which would decrease this crowding out effect. Although from what I remember something like 60% of government bonds are owned by overseas investors which means currently it has a smaller chance of the crowding out effect occurring. (this is a pretty poor explanation, sorry).
3. Overall this should have a positive impact on the levels of productivity in Australia in the long term; e.g. NDIS (Disability Care Australia) may help make it easier and more efficient for those disabled to work; but the main thing are the Gonski Reforms which will boost the quality of education and in turn have a positive effect on Australia's long term productive capacity (labour will be more efficiently utilised i.e. more productive). Also, the Nation Building Program (the $24bn to Roads, Rails and Ports) is also seen to boost Australia's productive capacity in the long term by alleviating infrastructure bottlenecks).
4. Fiscal consolidation is attempting to reduce the size of the deficit as is seen in the current budget from $19.4bn in 2012-13 to $18bn in 2013-14.


Hope it helped... not the best of answers but meh

+1