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22. Outline different budget outcomes i.e. balanced, surplus and deficit budgets
The Federal Budget is the annual statement from the government of its taxation and expenditure
plans for the next financial year.
This is usually announced on the 2nd Tuesday of May each year.
Budget outcomes give an indication of the overall impact of fiscal policy on the economy.
When T>G, a fiscal surplus occurs
Fiscal balance = net operating balance (revenue less expenses) minus net capital
investment (spending)
Same as underlying cash outcome, however transactions are recorded as they occur
23. Account for differences between planned and actual budget outcomes
The actual budget outcome is never the same as the planned/forecasted outcome due to changes
in economic conditions and fiscal policy. These changes include:
24. Explain the methods of financing a budget deficit and the uses of a budget surplus.
The 3 main ways a budget deficit can be financed include:
25. Distinguish between automatic fiscal stabilisers and discretional fiscal policy
Automatic stabilisers are fiscal changes to the economy that will occur automatically to stabilise
the business cycle. Work through:
brackets.
Creates a budget surplus for government (or lower deficit) and stabilises a boom as a
decrease.
Creates a budget surplus for government (or lower deficit)
The effect of automatic stabilisers on the business cycle can be seen below.
When macroeconomic activity is below potential, the government usually runs a budget
deficit (G>T).
When macroeconomic activity is too high, the government will run a budget surplus (T>G)
A budget balance would suggest it was believed economic conditions are stable.