...through means of selling government owned assets, implementing trade agreements between other countries which enable trade liberalization, and a decrease of government intervention in the domestic Australian market. Although there are many positive impacts such as increased international trade, increased competition and an overall increase in economic growth, this has been coupled with issues such as increased domestic unemployment, a heavier reliance on other countries for domestic growth and an increase in economic inequality. To deal with these economic issues the government employs countercyclical strategies that are designed to resolve or minimize these issues. Such examples of current strategies that the government has employed are: a contractionary fiscal policy which attempts to decrease government spending in inefficient sectors in order to increase long term economic growth, investment in infrastructure, attempting to increase the incentive for employment of those over the age of 50 through subsidies, and reducing the incentive for welfare payments. Unemployment is an on going and current issue as the short and long term prospects seem uncertain in the globalized economy. Possible reasons as to why in recent months the unemployment rate was at its highest since the global financial crisis are: a shift in production patterns, a decrease in demand for labour and consistent long term unemployment. In dealing with these issues the government has implemented policies...
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...whole-hearted gratitude to all those who have helped with the report or have been associated with the report in any way and made it a worth-while experience. We are greatly indebted to our batch mates and our seniors for having shared their invaluable thoughts and opinions that went a long way in helping us gather information and analyse issues for the report. And, a special mention of Professor Latha Ravindran, whom we cannot thank enough for having given us the opportunity and her total support for working on this project and completing our report. Thank you. INtroduction For the last several years the GDP of India has been growing rapidly. The real GDP growth of India averaged 8.5% in the five years ending March 2010. But at the same time food price inflation and consumer price inflation too have been on the increasing curve. The relationship between fiscal deficit and inflation which is measured by WPI in India is an important issue in macroeconomics study. The main purpose of the study is to analyze the relationship between budget deficit and Whole Sale Price Index. The fiscal deficit influences demand and thereby inflation management of any country. So any increase in fiscal deficit will impact the management of inflation and WPI. Fiscal deficit It is government's total expenditures minus the total revenue that it generates (excluding money from borrowings). Deficit is different from debt, which is an accumulation of yearly deficits. The total borrowing requirement...
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...Negative Impact of Economic Recession By Tejvan Pettinger on September 11, 2012 in economics A recession means a fall in GDP / national output. A recession will typically be characterised by high unemployment, falling average incomes, increased inequality and higher government borrowing. The impact of a recession depends on how long it lasts and the depth of the fall in output. The great recession of 2008-12 has shown many of the negative impacts of recession. Unemployment Not everyone is affected equally by a recession. A fall in GDP will cause a rise in unemployment. This is because: • Some firms will go bankrupt meaning all workers lose their jobs. • In an effort to reduce costs, firms will cut back on hiring new workers. Therefore, unemployment often affects young people the most. In this recession, unemployment in the UK has risen to over 2.6 million, though given the depth of the recession, you might have expected it to be even more (e.g. in 1980s, unemployment rose to over 3 million). However, in Europe, many countries in recession have seen a catastrophic rise in unemployment. With rates of over 20% in countries such as Greece, Spain and Portugal. [pic] Rise in Spanish Unemployment. Source ECB Lower wages Firms will also try to reduce costs by keeping wages low. Some workers (especially temporary workers without contracts may see wage cuts) This has been a key feature of the 2008-12 recession, also aggravated by rising costs of living. With...
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...To what extent, is the success of Australia's Fiscal policy, based on the changes of the current federal budget, viable for a stronger economy? This essay aims to illustrate, the success of Australia’s fiscal policy implemented by the current federal budget and its effects for the long-run. In relation, do these strategies provide sufficient evidence that ensures Australia’s “position of strength in the world economy” and if they are considerably better, in comparison to other international economic environments? I will focus primarily on the government’s expenditure on investment to boost the economy and the resulting effect it has towards the productivity, innovation and competition for Australia. The 2013-14 Budget, which illustrates a reduction in taxes of about $ 17 billion and an increase in expenditures of $ 24 billion, is strongly coherent, increasing aggregate demand by about 3 per cent. This process of fiscal expansion has been possible given the low Australian government debt that allows restoring an even budget by 2015 – 2016. There are several fiscal challenges directed to the 2013 Federal Budget. One particular Domestic challenge involves the importance on maintaining fiscal and monetary policy alignment. The previous federal budget 2012-13 fails to preserve alignment between fiscal and monetary policy. As a contractive fiscal policy lead to a decreasing aggregate demand by about 2%, the Reserve bank was cutting interest rates to stimulate demand. Thus, it is...
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...ativeBudget Analysis: The present Budget of Bangladesh for the year FY14-15 has been presented at a time when the Bangladeshi economy is heading towards a high growth trajectory, albeit certain challenges such as elevated inflation, high Current Account Deficit (CAD), and moderating growth of industrial production, lack of capital investment, poor level of power & energy, low level of liquidity, etc. At the current juncture, what was required from the Budget was to address the issue of inflation and support growth momentum, while maintaining the focus on fiscal consolidation and continuing ahead on the reform agenda. Increased allocation of planned resources towards infrastructure projects along with the proposals to direct foreign funds and private saving towards infrastructure sector will unlock much of the growth potential of the sector. Although the continued force on infrastructure along with power & energy, agriculture and education sectors is expected to provide significant impetus to economic growth in the medium-term, measures to control inflation in the immediate future were missing in the budget announcements. On the fiscal deficit front, the budgeted fiscal deficit is 5% of GDP for FY14-15. This indicates government will face lot of trouble in near future. This can be reduced through increasing Tax revenue, reduce debt service liability and etc. Budgeted Expenditure for FY14-15 For FY14-15, total expenditure is budgeted to increase by 15.9% to 250,506...
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...Macroeconomic policies refer to policies directed at stabilising the aggregate level of economic activity or output. The fundamental rationale for government macroeconomic intervention is to stabilise fluctuations in the business cycle. Through the conduct of such ‘counter cyclical’ or ‘stabilisation’ policies the government seeks to achieve three major objectives. • Economic growth that is sustainable in delivering rising real incomes whilst minimising inflationary pressures and the current account deficit as a percentage of GDP; • Internal Balance, which is characterised by full employment and price stability; • External Balance, which involves financing import expenditure with export income, stability of the exchange rate, and minimising the levels of net foreign liabilities and net foreign debt as a percentage of GDP. Other objectives include ensuing that the benefits of economic growth are enjoyed by all groups of the population through an equitable distribution of income, as well as ensuring that economic growth and development is ecologically sustainable such that it meets the needs of present generations without compromising the ability of future generations to meet their own needs. Macroeconomic policies operate on the demand side of the economy since changes in the settings or stances of fiscal and monetary policies will impact on the growth of aggregate demand. • If AD exceeds AS at the full employment level of income, an inflationary gap will emerge, where...
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...| 1 | Introduction | 2-3 | 2 | Macro-Economic Analysis | 4-7 | 3 | Factors affecting Israel and their solution | 8-10 | 4 | Bibliography | 11 | TABLE OF CONTENTS TABLE OF CONTENTS Submission by – Group 5 Yashwant Kasturi – 49B Srinivas Gadepalli – 42B Shasank S Jalan – 37B Saurabh Malik – 34B Saurabh Kumar – 35B Submission by – Group 5 Yashwant Kasturi – 49B Srinivas Gadepalli – 42B Shasank S Jalan – 37B Saurabh Malik – 34B Saurabh Kumar – 35B Macro-Economic review of Israel Macro-Economic review of Israel Economic Backdrop In the last decade, Israel has secured * Strong growth—averaging 3.8 percent * Inflation in the 1–3 percent range * Public debt falling below 80 percent of GDP * Budget deficits declining into the 1–3 percent range * Freely floating and competitive Shekel (Israeli Currency) The economy was open and flexible—reflected in * Exports of around 40 percent of GDP * Stable Property markets (capped by earlier supply overhangs) * Highly activist and effective Financial—and especially banking—supervisory structures The Israeli economy is a diverse open market economy. Being a relatively young state in the modern era, Israel is recognized as a developed market by many major indices. It has also became a member of the OECD in 2010. As of 2011, Israel has the largest number of companies listed on the NASDAQ after the United States and Canada. Resilient Economy The Israeli economy showed...
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...the National Development Plan in Ireland allocated funding to the development of childcare with the specific aim of improving the quality, and increasing childcare provision and places through the introduction of a more coordinated approach. As a result thirty three County Childcare Committees, (CCC) were formed in the Republic of Ireland, each with an agreed set of objectives for the various county/areas. They are currently under the Office for the Minister for Children and Youth Affairs (OMCYA) which was set up by the Government in December 2005. On Wednesday, 9th March 2011, the establishment of a new ‘Department of Children’ was announced, together with the appointment of a new minister. This is on the back of a general election in February 2011, where a new coalition government was voted into power. This means that there could be extensive changes as a new program for government is announced and introduced. As this Office will now become a government department in its own right, it reflects the prioritization that childhood development is now taking in modern Ireland. However as the new Department has not been fully established I will use the previous reference OMCYA for the purpose of this assignment. The South Dublin County Childcare Committee (SDCCC) was established in 2002 to coordinate the delivery of quality childcare (childbirth – 14 years) in South Dublin County. The SDCCC is a not for profit company limited by guarantee with charitable status and 10 guarantors...
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...can be expected in the future is the 2010 pre-budget report. Growth estimated at 1.5% in 2010, reaching 3.5% in 2011 (figures reduced in the March Budget). This level of growth is supported by short term increases in government spending - estimated to rise by £31 billion. However, the government deficit is to be halved by 2013, suggesting potential conflict will arise. Experts, such as the man responsible for managing £618bn in bonds at Primco - Mike Amey, believes that the performance of the sterling will be crucial for the recovery, because of the way it impacts inflation via imported goods prices. Primco also predict a medium-term government deficit reduction - the need for fiscal reform being agreed by all three political parties. One of the main focuses in the 2010 budget was support for small businesses. Clearly the need to help small businesses survive is essential for the future success of the economy. For example business rates are to be cut for one year, consequently 345,000 small firms will pay no business rate. This is likely to yield many positive externalities, investment will increase, actual output will increase closer to potential output and importantly employment should increase as the smaller firms have a greater profit margin from reduced overheads. Supply side policies are also predicted to be important in the immediate and long term future as the economy stabilises and recovers. One way of improving the long term stability of the economy is to increase education...
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...PROJECT MANAGEMENT INTRODUCTION TO RESEARCH TERM PAPER A report on the impact of Economic Stimulus Programme in Western Region Assignment Submitted in Partial Fulfillment of the Requirements for Award of a Master of Science Degree in Project Management (MSc. Project Management) Olympia Muhanga Musonye Admission Number HD317-C004-2419/2013 23rd June 2013. 1.0 BACKGROUND 1.1 backgrounds The history of government implementation of economic stimulus to receive the economy goes back to the mid – 1930s, following the Great Depression, when Franklin D. Roosevelt of the US attempted to alleviate unemployment and national financial and business failures. During this time, many banks collapsed and consumer confidence became low (Lasse B. 2009). The Kenya Economic Stimulus Program (ESP) was initiated by the Government of Kenya to boost economic growth and lead the Kenyan economy out of a recession situation brought about by economic meltdown. The Kenyan ESP was introduced in the 2009/2010 Budget speech in parliament by the finance minister. Its main aim was to jumpstart the Kenyan economy towards long term growth and development, after the 2007/2008 post election violence that affected the Kenyan economy, prolonged drought, a rally in oil and food prices and the effects of the 2008/09 global economic crisis (Gok, 2009). The Kenyan development can only be sustainable if it is pursued based on principles of equity, good governance, environmental sustainability, and the provision...
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...Union Budget 2014-15 10th July, 2014 Union Budget 2014-15 Budget 2014-15 Holistic Plan of Action In comparison to the less than ordinary and unimaginative budgetary proposals of yester years, Modi’s maiden budget comes as a welcome change from the norm. The proposals and reforms suggested in the Union Budget 2014-15 are ground breaking, specific with a good measure of thought & common sense and vastly catered for holistic growth of the economy. The challenging circumstances of a slowing economy, soaring energy prices, inflation, fiscal and current account deficits do not provide adequate leeway to maneuver and hit the path of high growth. Yet the Budget provides a comprehensive plan and directional footprint towards overcoming these hurdles to sustainable growth of 7-8% over the next few years along with providing macro economic stability, lowered inflation, realistic fiscal health targeting and a manageable current account deficit. Country is in no mood to suffer unemployment & apathetic governance 10th July, 2014 Union Budget 2014-15 Budget 2014-15 Holistic Plan of Action The Finance Minister while presenting the budget takes cognizance of the fact that decisive action to fuel growth without populism is the need of the hour. And that resources for developmental expenditure cannot be raised at the cost of burdening the future generations with the legacy of debt. He goes on to emphasize the need to mobilize resources through both tax and non-tax...
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...VIEW Whatever we might think of the reasoning Greenspan used in convincing Clinton that deficit reduction was an essential policy goal, it still remains a fact that deficits were reduced and (briefly) turned into surpluses over the eight years of the Clinton Presidency. In January of 2001, the Council of Economic Advisers made the following argument: The Omnibus Budget and Reconciliation Act of 1993 was the right policy package at the right time … long-term interest rates remained stubbornly high. … Bond yields were being predictably affected by the forces of supply and demand: the Federal Government was set to run a deficit of almost $300 billion … With an oversupply of government bonds and the prospect of even more to come, bond and stock prices were depressed, and yields were correspondingly high… In 1992, the new Administration was elected on a promise to turn the deficits around. After a tough political battle in 1993, the Administration was able to deliver on that promise … The markets responded quickly to this serious effort to address the deficit by lowering expectations of future inflation, and long-term interest rates accordingly fell…. As economic growth and further restraints on spending … turned the huge deficits into surpluses, a new fiscal environment emerged. The 10-year Treasury rate fell below 6 percent in 1998 and 1999… that rate stood at only 5.7 percent in November 2000. … Ultimately, the combination of falling prices for investment goods and reduced...
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...Budget Deficits, National Saving, and Interest Rates William G. Gale and Peter R. Orszag September 2004 Brookings Institution and Tax Policy Center. This paper was prepared for the Brookings Panel on Economic Activity, September 9-10, 2004. We thank Emil Apostolov, Matt Hall, Brennan Kelly, and Melody Keung for outstanding research assistance; Alan Auerbach, William Brainard, Robert Cumby, Bill Dickens, Doug Elmendorf, Eric Engen, Laurence Kotlikoff, Thomas Laubach, Maria Perozek, George Perry, Frank Russek, Matthew Shapiro, and David Wilcox for helpful discussions; and Eric Engen, Jane Gravelle, and Thomas Laubach for sharing data. ABSTRACT This paper provides new evidence that sustained budget deficits reduce national saving and raise interest rates by economically and statistically significant quantities. Using a series of econometric specifications that nest Ricardian and non-Ricardian models, we obtain evidence of strong non-Ricardian behavior in aggregate consumption. Consistent with several recent studies, we find that projected future deficits affect longterm interest rates, but current deficits do not. Our estimates suggest that each percent-ofGDP in current deficits reduces national saving by 0.5 to 0.8 percent of GDP. Each percent-of-GDP in projected future unified deficits raises forward long-term interest rates by 25 to 35 basis points, and each percent-of-GDP in projected future primary deficits raises interest rates by 40 to 70 basis points...
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...Supplemental Unit 5: Fiscal Policy and Budget Deficits Fiscal and monetary policies are the two major tools available to policy makers to alter total demand, output, and employment. This feature will focus on fiscal policy, what it is and its potential and limitations as a tool with which to promote economic stability and strong growth. What is Fiscal Policy? When the supply of money is economic constant, government expenditures must be financed by either taxes or borrowing. Fiscal policy involves the use of the government’s spending, taxing and borrowing policies. The government’s budget deficit is used to evaluate the direction of fiscal policy. When the government increases its spending and/or reduces taxes, this will shift the government budget toward a deficit. If the government runs a deficit, it will have to borrow funds to cover the excess of its spending relative to revenue. Larger budget deficits and increased borrowing are indicative of expansionary fiscal policy. In contrast, if the government reduces its spending and/or increases taxes, this would shift the budget toward a surplus. The budget surplus would reduce the government’s outstanding debt. Shifts toward budget surpluses and less borrowing are indicative of restrictive fiscal policy. It is important to note that a budget deficit is different from the national debt. A deficit occurs when government spending exceeds revenue over a year, quarter or month. A deficit will increase the size of the national...
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...2013 Session 2 Question 1: There are two factors that impact the AD model: the output （y）and the rate of inflation, the name of the curve reflects the fact that short-term equilibrium output is determined by, and equals, total planned spending in the economy. Increase in inflation will reduce planned spending and short-run equilibrium output, so the aggregate demand curve is downward sloping. Question 2: Yes, the fiscal stimulus to have work. Fiscal policy is the use of government spending and revenue to influence activities in the economy; this is conducted through the use of government budget. Public debt is a reflection of the nature of fiscal policy at a point in time. Possible problem: * Direct taxes and transfer payments take time to implement, delaying the impact of fiscal policy * Capital spending also takes a long time to implement; the economy may have recovered by the time its impact is felt. Question 3: Money policy is used to stabilisation of the business cycle, specifically inflation targeting. RBA’s main policy tool is control of interest rates; they use ‘open market operations’ to influence the ‘cash rate’. The element of GDP is likely to be more responsive to money policy. Because it illustrates the nominal cash rate and real cash rate. Table 1: Actual Outcomes for Economic Growth for Fiscal Years 2007-08 to 2012-13 and the Budget-time forecasts of May 2009 – Real terms, % Growth Rates/% Contribution to Growth | | Household...
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