AGGREGATE DEMAND POLICY - U4 AOS1

• What is budgetary (fiscal policy) primarily concerned with?

  Estimated changes in government revenues and expenses for the year ahead
• How can cyclical instability be reduced according to budgetary policies?

  By applying aggregate demand policies in a counter-cyclical way
• What is a direct tax?

  A tax levied on those receiving income
• What is personal income tax?

  A direct tax paid by individuals who earn income
• What is the purpose of the Medicare levy?


  To provide medical insurance
• What is capital gains tax levied on?

  Real profits made from the sale of capital assets
• What is the corporate gains tax rate for large companies?

  30% of each dollar of profit
• What is the fringe benefits tax (FBT)?

  Tax paid by firms on the value of perks provided to employees
• What is the petroleum resource rent tax (PRRT) rate?

  40% of the profits made from offshore petroleum operations
• What is the superannuation fund tax rate?

  15% on most premiums
• What is an indirect tax?

  A tax added onto the price of some goods at the point of sale
• What is excise duty?

  A tax imposed on selected, locally produced goods
• What is the goods and services tax (GST) rate?

  10%
• What is a progressive tax?

  A tax that narrows income inequality, such as PAYG tax
• What is a regressive tax?

  A tax that widens income inequality, such as GST or excise duties
• What is a proportional tax?

  A tax with a neutral impact on income distribution, with a constant rate
• What are the main sources of non-tax revenue?

  Profits from government enterprises and receipts from asset sales
• How does the government use the revenues it collects?

  To provide households and businesses with goods, services, and incomes
• What are the types of government expenses classified by function?

  • Social security or welfare
  • Health
  • Defence
  • Education
  • Mining, manufacturing, and construction
  • Transport and communications
  • Housing and community amenities
  • General public services
  • Net payments to other governments
• What are the types of government expenses classified by economic nature?

  • Government current spending (G1)
  • Government capital spending (G2)
  • Government transfer payments
• What does the budget outcome reflect?

  The total value of receipts minus the total value of outlays for the year
• What is a balanced budget?

  When total annual receipts equal total annual outlays
• What is a budget deficit?

  When total annual receipts are less than total annual outlays
• What are ways to finance a budget deficit?

  Borrowing from overseas or within Australia
• What can a budget surplus be used for?

  To reduce debt and build up savings balances
• What is the headline cash outcome?

  The annual difference between total cash receipts and total cash outlays
• What is the underlying cash outcome?

  Derived from the headline balance but excludes volatile one-off items
• Why are budget receipts and outlays expressed as a percentage of GDP?

  To better assess their impact on aggregate demand and economic activity
• What factors affect the budget outcome?

  GDP growth rate, unemployment rate, overseas growth rates, and commodity prices
• What does the budget stance relate to?

  Whether the change in the budget outcome is intended to impact aggregate demand positively or negatively
• What is the effect of an increased surplus on budget stance?

  It becomes more contractionary
• What is the general view of budget deficits?

  They are typically expansionary because government spending exceeds tax revenue
• What is the effect of a budget surplus on aggregate demand?

  It typically slows aggregate demand and economic activity
• What are the expected effects of the 2023-24 budgetary stance?

  Responsible cost of living relief, taxation measures, and improved access to education
• What is the expected inflation impact of the budgetary measures?

  Higher spending could increase inflation
• What is the forecasted unemployment rate for 2023-24?

  1. 25%
• What role do stabilisers play in influencing aggregate demand?

  They apply expansionary policies during slowdowns and contractionary policies during upturns
• What are automatic stabilisers?

  Policies that automatically stabilize the economy through the business cycle without government intervention
• What are discretionary stabilisers?

  Government uses its discretion to change the structure of the budget to achieve aims
• What is bracket creep?

  When inflation pushes income into higher tax brackets, increasing the tax burden