Budget_Surplus_on_Australian_Economy

Analysis of Budget Surplus Australian Government is working on the budget level now, because Kevin Rudd will make an earlier budget surplus, three years faster than the first forecast where it is 2013. The current budget deficit will be finance by the government revenue from tax in the mining industry. Mining industry and other polluting industry have imposed a higher level of tax that will increase government revenue. Where the budget surplus will affect many factors such as income distribution, current account deficit, and economic activity. Australian Government have used a fiscal policy, where they imposed higher tax and trying to finance the budget deficit. Australian government will repay Australian debt by using the money gained from increasing the tax. The estimation of an increase of 4 billion dollar from BHP Billiton alone, as the largest mining company in the world, and the total of 12 billion dollar. By repaying their debt, Australia will be able to help in improving their current account deficit, because there will be less money have to be paid to overseas. By improving on the CAD, it will also affect the confidence level of Australia where with a high confidence level, the interest rates imposed to Australia will also lower. By increasing government revenue also means the increasing income distribution through welfare and unemployment benefits. The increasing budget means government can afford more welfare for Australians thus decreasing the gap of both financial and social. The budget surplus will also increase the ability of government to spend, which will help in controlling the economy by tightening and contracting fiscal policy. In a tightening fiscal policy, the government will decrease the expenditure and increase tax, thus a slowing down economic activity similar with what Australia currently doing. And contractionary fiscal policy is where government will start increasing the spending and lowering tax that will lead with higher investment, thus increasing economic activity. Increasing tax isn’t the only way to finacing the budget deficit or achieving the budget surplus. Australian government can try by selling first hand bonds, where it will be used in financing the budget deficit, since government will receive money from selling bonds, they only have to pay back or buy back all the bonds in the future. The second method will be monetary financing from the Reserve Bank, where Reserve Bank will; printing more money in order to gain more money. However, the monetary financing will lead to inflation, because there is more money in the market. Budget surplus can be achieved by many ways; however the easiest and fastest way will be fiscal policy. By increasing tax, instantly government will increase their revenue as well where giving the government more power to spend.