The stance of fiscal policy has changed significantly over recent years. Fiscal policy involves the use of the Commonwealth Government's Budget in order to achieve the Government's economic objectives. The Howard Government's primary fiscal objective has been 'to maintain budget balance, on average, over the course of the economic cycle'. This infers using fiscal policy as a tool of macroeconomic management: deficits during recession years, and surpluses during years of higher economic growth. During its first two terms in office the Howard Government used fiscal policy as part of its macroeconomic agenda. However, the last two budgets have shifted away from using fiscal policy as a macroeconomic tool of economic management and have reflected what the government considers to be its long term role - playing a minor support role while monetary policy plays the major role in economic management. This shift in the role of fiscal policy can be attributed to the fact that monetary policy is a more effective macroeconomic tool, the recent reduction in government debt and the increasing use of fiscal policy as a political tool opposed to an economic one.
The Seat of Government
Government spending
English: Detail from Government. Mural by Elihu Ve...YearBudget Result $ Underlying Balance
1996/97Actual $5.3 billion cash deficit
1997/98Actual $1.2 billion cash surplus
1998/99$4.2 billion cash surplus
1999/00$12.7 billion cash surplus
2000/01$2.3 billion cash surplus
2001/02$0.5 billion cash surplus
2002/03$2.1 billion cash surplus
During its first two terms in office the Howard Government used fiscal policy as a tool of macroeconomic management to achieve balanced budgets. Fiscal policy was used to reduce public sector debt. By reducing the large amount of public sector debt incurred over the late 1980s and early 1990s the Government ensured that future budgets will focus on domestic rather than external needs. The Howard Government argued that Australia's high Current Account Deficits (CAD) were the result of excessive...