Macro Economic Policy in Australia Essay Example | Topics and Well Written Essays - 1750 words

Macro Economic Policy in Australia - Essay Example As a result of this, it attained the benefit of full employment and lower inflation level. The macro economic policy in Australia is focused on its monetary and fiscal policy and it aims to attain a sustainable developmental growth by mitigating certain problems in the areas of unemployment, inflation and other trade difficulties. "A macroeconomic policy framework conducive to growth can be characterised by five features: a low and predictable inflation rate; an appropriate real interest rate; a stable and sustainable fiscal policy; a competitive and predictable real exchange rate; and a balance of payments that is regarded as viable. Countries with these macroeconomic characteristics tend to grow faster than those without them."(Andersen and Gruen 2007). The term fiscal policy is related with two major concepts like allocation of resources and proper distribution of income. Proper implementation of fiscal policy is essential for maintaining a constant price level, elimination of job redundancy, and thereby the fulfillment of effective economic growth. So, the fiscal policy can be seen as playing a very important role in the accomplishment of economic objective. The approach towards both fiscal and monetary policy is quite different. ... nder circumstances in which annual budgets are strictly balanced, the irregular character of the within-year flow of expenditures and of revenues inevitably means that for some shorter periods within the annual time period, there will be 'deficits', albeit offset by 'surpluses' during other shorter periods, within the annual cycle. To the extent that the annual budget time-frame is ultimately arbitrary, this means that those who are committed to strict annual budget balance, in fact, as much acquiesce in the acceptability of temporary budget deficits, as do those who would argue instead for allowing some annual budget deficits, to be offset at other times by annual budget surpluses." (Approaches to Fiscal Policy. 2007). As far as the present economic situation prevailing in Australia is taken in to consideration, it is very clear that for the overall development of the economy, there should be a better resource allocation and income distribution is crucial. It is very important to make an understanding about the system of fiscal policy and its effectiveness. By taking this concept in the practical point of view, the fiscal policy may be short term, medium term and long term as far as the different situation is taken in to fact. "Fiscal policy is now directed firmly towards maintaining sound public finances over the medium term, based on strict rules. Where possible fiscal policy supports monetary policy over the economic cycle. This approach, together with the new monetary policy framework, provides the platform of stability necessary for achieving the Government's central economic goal of high and sustainable levels of growth and employment." (Fiscal Policy in the UK. 2007). For the effective imple mentation of an economy, the fiscal policy gives emphasis on certain