Questions on the 2004/05 Budget..help plzz :( (1 Viewer)

[ay_caramba]

i have some stupid assessment coming up and am finding this topic a bit confusing..

* can anyone give me a good definition of fiscal balance?? i read that fiscal balance "means deficits during recession years and surplusses during years of high economic growth".. could someone plzz explain this?
* and how has fiscal balance changed in 2004-05??
* what are the major aims of this budget?

would really appreciate any help at all.. thanx

 

[Bambul]

1. As I remember the fiscal balance was the budget balance using accrual rather than cash basis. So if the government ordered 3 million large pizzas at $5.95 each at 11:50PM on 30 June 2004 but didn't pay for them until they were collected at 12:45AM on 1 July 2004 then the cost of buying the pizzas would be recorded in the 2003/04 fiscal budget balance (when the cost is incurred) and in the 2004/05 budget balance (when the cash is paid).

The example you gave is the structural budget balance. It ignores the effects of moving through the business cycle on the budget bottom line. It is difficult to quantify, but as you said it basically means deficits during recessions and surpluses during booms (this would keep a zero structural budget surplus over the cycle).



2. Taking numbers right from the budget papers (which you can get - just stick to the overview if you look at it - at http://www.budget.gov.au/2004-05/overview/html/overview_main-02.htm ), the fiscal balances for 03/04 and 04/05 are:

$3bn (2004/05)
$700m (20004/05)

0.4% of GDP (2003/04)
0.1% of GDP (2004/05)

3. Go to the link I gave above, it has some overviews of the aims of the budget. I'll refrain from commenting on this one because I'll probably start rambling on about politics, so better you get an answer from the people whose job it is to please Peter Costello.

 

[i-color]

i think what you're talking about caramba is fiscal consolidation, which is where the govt's medium term goal is to achieve a fiscal balance over the course of the business cycle.

this just means that in times of hihg eco growth, the govt can budget for surpluses and low eco growth can budget for deficits to counter the business cycle (hence fiscal policy is countercyclical) --> this would mean tha tin the medium term, the budget is balanced, even if one year they budget for a deficit because it balances back out in the long run

 

[Sset561986]

love the pizza analogy - thats exactly wat we need in the study of economics - more pizza! ( or food in general!)

 

[George W. Bush]

that's Ross Gitten's moto

 

[ay_caramba]

um thanx..all