Now that you have developed an understanding of the policy tools that are available to address economic challenges, your task is to prepare material that will go towards a Policy Brief analysing Australia’s economic recovery from the COVID pandemic and building an equitable and resilient economy in the future.Imagine you are now employed as a Graduate Economist working for the Australian Treasury. Your team is responsible for putting together a Policy Brief for the department that summarises some key aspects of the government’s policy responses to the COVID-19 recession and provides policy analysis to strengthen Australia’s economy in the future. You have a very important job!Your task is to provide clear answers to the following queries that have been requested from your department manager, using the knowledge and skills that you have gained from your macroeconomics course.This year’s Budget (2023-24) was delivered by the new Australian Treasurer Dr Jim Chalmers in May 2023. This year’s Budget ran a surplus of $4.2 billion for 2022-23. See the excerpts from the Budget Statement below. Also see the major economic parameters and Budget aggregates reported in the tables on the following page.What does the fiscal position (i.e. the Budget surplus) and the state of the economy (i.e. the unemployment rate and inflation rate) tell us about what stage of the business cycle the Australian economy is in at the moment? Explain whether running a Budget surplus is an expansionary or contractionary fiscal policy. (2-3 sentences) Statement 1Budget OverviewThe 2023-24 Budget builds stronger foundations for a better future. It addresses thechallenges Australians are facing today, better shares the opportunities in our society andlays the foundations for a stronger and more secure economy into the future.Australians have shown resilience in the face of heightened global uncertainty, persistentinflation and higher interest rates, which are combining to slow our economy. The bestresponse to these challenges is a responsible budget that strikes the right balance betweenfiscal restraint, easing cost-of-living pressures, securing the essential services people rely onand investing in sustainable drivers of growth.This Budget achieves this while strengthening our fiscal position, with a budget surplusnow forecast in 2022-23, and smaller deficits and lower debt over the forward estimatescompared to October. This much stronger fiscal position would not have been achievedwithout a responsible approach to returning upward revisions of revenue to the budgetand continued budget repair.The Australian economy is not immune from these global economic challenges, but it iswell placed to navigate them. The unemployment rate is holding near 50-year lows of3.5 per cent, wages growth has picked up, and national income is being supported byelevated commodity prices, which are flowing through to higher export revenues. Thesefactors have helped to deliver solid growth in 2022-23.Source: Australian Treasury, Budget 2023-24, Budget Paper Number 1 Table 1.1: Major economic parameters (a)Real GDPEmploymentUnemployment rateConsumer price indexWage price indexNominal GDPOutcome2021-22Underlying cash balancePer cent of GDPTable 1.2: Budget aggregatesActual2021-2Gross debt(b)Per cent of GDPNet debt(c)Per cent of GDP3.73.63.86.12.611.0Source: Australian Treasury, Budget 2023-24, Budget Paper Number 1a) Real GDP and Nominal GDP are percentage change on preceding year. Employment, the consumerprice index and the wage price index are through the year growth to the June quarter. Theunemployment rate is the rate for the June quarter.$b-32.0-1.42022-233 1/42 1/23 1/263 3/410 1/4Source: ABS Australian National Accounts: National Income, Expenditure and Product; Labour ForceSurvey, Australia; Wage Price Index, Australia; Consumer Price Index, Australia; and Treasury.895.338.82023-241 1/214 1/43 1/441 1/4515.622.3Forecasts2024-252 1/414 1/22 3/43 1/42 1/2Estimates2022-23 2023-24 2024-25 2025-26 2026-27548.6574.921.6 22.3 23.5$b$b4.2$b $b $b-13.9 -35.1 -36.6 -28.5-1.0-0.50.2887.0 923.0-1.3 -1.3958.0 1,015.0 1,067.034.9 35.836.3 36.5 36.5620.6 665.224.02025-262 3/41 3/44 1/22 1/23 1/45 1/4Source: Australian Treasury, Budget 2023-24, Budget Paper Number 1702.924.12026-272 3/41 3/44 1/42 1/23 1/25 1/4Total(a)$b-109.9Projection2033-34-0.232.3a) Total is equal to the sum of amounts from 2022-23 to 2026-27.b) Gross debt measures the face value of Australian Government Securities (AGS) on issue.c)Net debt is the sum of interest-bearing liabilities (which includes AGS on issue measured at marketvalue) less the sum of selected financial assets (cash and deposits, advances paid and investments,loans and placements).19.9

A recession refers to a significant decline in economic activity across an entire economy, usually…

Now that you have developed an understanding of the policy tools that are available to address economic challenges, your task is to prepare material that will go towards a Policy Brief analysing Australia’s economic recovery from the COVID pandemic and building an equitable and resilient economy in the future. Imagine you are now employed as a Graduate Economist working for the Australian Treasury. Your team is responsible for putting together a Policy Brief for the department that summarises some key aspects of the government’s policy responses to the COVID-19 recession and provides policy analysis to strengthen Australia’s economy in the future. You have a very important job! Your task is to provide clear answers to the following queries that have been requested from your department manager, using the knowledge and skills that you have gained from your macroeconomics course. This year’s Budget (2023-24) was delivered by the new Australian Treasurer Dr Jim Chalmers in May 2023. This year’s Budget ran a surplus of $4.2 billion for 2022-23. See the excerpts from the Budget Statement below. Also see the major economic parameters and Budget aggregates reported in the tables on the following page. What does the fiscal position (i.e. the Budget surplus) and the state of the economy (i.e. the unemployment rate and inflation rate) tell us about what stage of the business cycle the Australian economy is in at the moment? Explain whether running a Budget surplus is an expansionary or contractionary fiscal policy. (2-3 sentences)

Exploring Economics

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Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

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Now that you have developed an understanding of the policy tools that are available to address economic challenges, your task is to prepare material that will go towards a Policy Brief analysing Australia’s economic recovery from the COVID pandemic and building an equitable and resilient economy in the future.

Imagine you are now employed as a Graduate Economist working for the Australian Treasury. Your team is responsible for putting together a Policy Brief for the department that summarises some key aspects of the government’s policy responses to the COVID-19 recession and provides policy analysis to strengthen Australia’s economy in the future. You have a very important job!

Your task is to provide clear answers to the following queries that have been requested from your department manager, using the knowledge and skills that you have gained from your macroeconomics course.

This year’s Budget (2023-24) was delivered by the new Australian Treasurer Dr Jim Chalmers in May 2023. This year’s Budget ran a surplus of $4.2 billion for 2022-23. See the excerpts from the Budget Statement below. Also see the major economic parameters and Budget aggregates reported in the tables on the following page.

What does the fiscal position (i.e. the Budget surplus) and the state of the economy (i.e. the unemployment rate and inflation rate) tell us about what stage of the business cycle the Australian economy is in at the moment? Explain whether running a Budget surplus is an expansionary or contractionary fiscal policy. (2-3 sentences)

Statement 1
Budget Overview
The 2023-24 Budget builds stronger foundations for a better future. It addresses the
challenges Australians are facing today, better shares the opportunities in our society and
lays the foundations for a stronger and more secure economy into the future.
Australians have shown resilience in the face of heightened global uncertainty, persistent
inflation and higher interest rates, which are combining to slow our economy. The best
response to these challenges is a responsible budget that strikes the right balance between
fiscal restraint, easing cost-of-living pressures, securing the essential services people rely on
and investing in sustainable drivers of growth.
This Budget achieves this while strengthening our fiscal position, with a budget surplus
now forecast in 2022-23, and smaller deficits and lower debt over the forward estimates
compared to October. This much stronger fiscal position would not have been achieved
without a responsible approach to returning upward revisions of revenue to the budget
and continued budget repair.
The Australian economy is not immune from these global economic challenges, but it is
well placed to navigate them. The unemployment rate is holding near 50-year lows of
3.5 per cent, wages growth has picked up, and national income is being supported by
elevated commodity prices, which are flowing through to higher export revenues. These
factors have helped to deliver solid growth in 2022-23.
Source: Australian Treasury, Budget 2023-24, Budget Paper Number 1

Table 1.1: Major economic parameters (a)
Real GDP
Employment
Unemployment rate
Consumer price index
Wage price index
Nominal GDP
Outcome
2021-22
Underlying cash balance
Per cent of GDP
Table 1.2: Budget aggregates
Actual
2021-2
Gross debt(b)
Per cent of GDP
Net debt(c)
Per cent of GDP
3.7
3.6
3.8
6.1
2.6
11.0
Source: Australian Treasury, Budget 2023-24, Budget Paper Number 1
a) Real GDP and Nominal GDP are percentage change on preceding year. Employment, the consumer
price index and the wage price index are through the year growth to the June quarter. The
unemployment rate is the rate for the June quarter.
$b
-32.0
-1.4
2022-23
3 1/4
2 1/2
3 1/2
6
3 3/4
10 1/4
Source: ABS Australian National Accounts: National Income, Expenditure and Product; Labour Force
Survey, Australia; Wage Price Index, Australia; Consumer Price Index, Australia; and Treasury.
895.3
38.8
2023-24
1 1/2
1
4 1/4
3 1/4
4
1 1/4
515.6
22.3
Forecasts
2024-25
2 1/4
1
4 1/2
2 3/4
3 1/4
2 1/2
Estimates
2022-23 2023-24 2024-25 2025-26 2026-27
548.6
574.9
21.6 22.3 23.5
$b
$b
4.2
$b $b $b
-13.9 -35.1 -36.6 -28.5
-1.0
-0.5
0.2
887.0 923.0
-1.3 -1.3
958.0 1,015.0 1,067.0
34.9 35.8
36.3 36.5 36.5
620.6 665.2
24.0
2025-26
2 3/4
1 3/4
4 1/2
2 1/2
3 1/4
5 1/4
Source: Australian Treasury, Budget 2023-24, Budget Paper Number 1
702.9
24.1
2026-27
2 3/4
1 3/4
4 1/4
2 1/2
3 1/2
5 1/4
Total(a)
$b
-109.9
Projection
2033-34
-0.2
32.3
a) Total is equal to the sum of amounts from 2022-23 to 2026-27.
b) Gross debt measures the face value of Australian Government Securities (AGS) on issue.
c)
Net debt is the sum of interest-bearing liabilities (which includes AGS on issue measured at market
value) less the sum of selected financial assets (cash and deposits, advances paid and investments,
loans and placements).
19.9

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