Policy Approach

Recent Fiscal Policy

While the coalition government was in power, budget revenue fell as a percentage of GDP.  In 1996/7 it was 26.7%, and by the time the 2007/08 budget was completed it was only 22.4% of GDP. Similarly, expenses peaked at 27.5% of GDP in 1996/7, and fell to a low of 22.4% of GDP in 2007/08. These figures suggest that the federal government was working to minimise the impact of government intervention in the Australian economy. Since the election of the Rudd government, things have changed.  As you can see on this page, revenue was 22.9% of GDP in 2010/11, but this is forecast to increase to 24.6% in 2013/14.  On the other hand, expenditure has been high due to the global financial crisis, but is predicted to fall back to 24% by 2013/14.  Recent outcomes for the federal budget were as follows:

It is worth remembering that budget statistics are being updated all the time. Due to a complex system of allocation, it is possible that statistics for budgets that were "completed" several years ago will change. As such, while the statistics below are checked on a regular basis, it is possible that some slight changes have been recorded in the time since this page was last updated.

Significant changes that were made during the most recent years were:

1. 2008/09- The figures above show that the 2008/09 budget was a significant deficit, but that is certainly not what was expected when the budget was handed down.  Originally intended as a surplus of $21.7 billion, this budget was ultimately affected by the swift response to the global financial crisis.  Initiatives announced in the budget included the $55 billion working families support package, an increase in the income threshold for the Medicare surcharge levy from $50,000 to $100,000, three new future funds (including one for health and one for education), and $5.9 billion for the "Education Revolution".  (If you are a registered user of this site, you can log in and read all about this budget here.)
   
   
2. 2009/10 - The federal budget for 2009/10 was an even larger deficit than the year before.  Significant spending was maintained to try and ensure that Australia was protected from the worst of the global financial crisis.  The government allocated $22 billion for nation building infrastructure, and a further $1.5 billion for the "Jobs and Training Compact".  This policy was put in place to try and avoid the 8.5% unemployment that was expected during the economic downturn.  Other discretionary changes included cuts to income tax rates (which were promised during the election, but were viewed as irresponsible by many given the size of the expected deficit) and an increase in the pension.  (Once again, registered users can view greater detail here.)
   
   
3. 2010/11 - The budget for 2010/11 was handed down in an election year, and so the government was keen to find a way to ensure that they appeared to be fiscally responsible.  The Liberal Party frequently campaigns on their economic track record, and so the Labor government needed to ensure that they did not spend a lot of money in a blatant attempt to "buy" votes.  The introduction of the 40% "super profits" tax is actually more likely to have cost the government some votes, although other companies should see the tax on their profits fall from 30% to 28% by 2014/15.  A $652 million renewable energy fund was established, and $611 million was allocated for the Skills for Sustainable Growth Strategy.  (Registered users can click here for a more detailed analysis.)

The government has committed to maintaining spending growth at no more than 2% in real terms each year.  The 2010/11 budget achieved this goal, but only because the government was willing to step away from key election promises, including their promise to implement an emissions trading scheme.  Spending for this promise no longer appears anywhere in the forward estimates for the budget.

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