Government

Economics essay: The government plays an important role in the Australian Economy. Australia has a federal system of government with a central government, six states and two territories which are self governing and over 650 local governments. The powers of each level of government are determined by the Australian constitution. The structure consists of the Constitution which sets powers and responsibilities of government The High Court which interprets and adjudicates on constitution matters The Federal Government which consists of the House of Representatives and House of the SenateThe State Government which consist of members of legislation council and member of legislation assembly local government. There are various functions that are inclusive in the three levels of government. These are known as : * FEDERAL government which contains exclusive powers to make laws affecting the nation and concurrent powers shared with the state. The federal government provides income through personal selling and company taxes, sales tax, excise duties, customs duties and GST. Expenditure occurs through social welfare, education. Health, defence, economic services, public services and public debt services. * STATE government which has concurrent and residual powers to make laws affecting the state. Income is provided by grants from commonwealth, payroll tax, car registration and stamp duty. Expenditure deals with education, health, transport and communications, housing, public order, roads and highways and recreation. * LOCAL government which acquires residual powers, delegated by states to make lows over local responsibilities. Income is provided by grants from Commonwealth and states and rates. Expenditure occurs from housing, local roads, recreation and culture, health and sanitation, town planning and community amenities. The economic function of the federal government consist of reallocation of resources and redistribution of income through taxation and government expenditure, the stabilisation of economic activity through the tax use of monetary and fiscal policy, provision of goods and services though public trading enterprises and use of other economic policies such as competition and environment policies to allocate efficiency in specific markets. Market failure is determined by when exists when the production or use of goods and services by the market is not efficient therefore creating unfavorable outcomes. The federal government uses many methods to manage its functions and address the issue of market failure. These include * Reallocation of Resources in which Government revenue comes mainly through taxation which is paid with no goods or services in return and represents a call on part of the private sector resources into public sector to finance government spending. Any change in the tax receipts will affect resources allocation when spending is on collective goods and welfare. In addition changes in tax on some goods and services will impact demand and therefore influence resource allocation in private sector. Governments can also offer selective assistance or incentives to specific industries which discourage or encourage certain types of production and hence influence resource allocation. * Being responsible for collective and merit goods by supplying particular goods such as roads which is a necessity for everyone. If voluntary provision of public goods will not work, then the obvious solution is making their provision involuntary. This saves each of us from our own tendency to be a free rider, while also assuring us that no one else will be allowed to free ride. One frequently proposed solution to the problem is for governments or states to impose taxation to fund the production of public goods. This does not actually solve the theoretical problem because good government is itself a public good. Thus it is difficult to ensure the government has an incentive to provide the optimum amount even if it were possible for the government to determine precisely what amount would be optimum. * Redistribution of income which is achieved either by income taxes and provision of social welfare benefits. The extent of redistribution of income through income taxes will depend on the nature of tax. Progressive tax rate is where marginal tax increases with the level of income and more people earn the larger proportion of their income paid. A proportional tax is one where income is taxed at a constant rate regardless of cincome. The government also makes social welfare payments which involce direct payments to low- income households such as disability or sickness benefits. * Conducting monetary and fiscal policies which are used to both ensure long term stability of the economy. Fiscal plolicy is implemented through the budgetary process and monetary policy is implemetned through market operations, affecting interest rates.The government uses a mix of those to even out severe fluctuations in the economic cycle. The fiscal policies can have one of three outcomes incluing contradionary( budget surplus), Neutral( budget balacned) and expansionary(budget deficit) * Operating public trading enterprises which is associated with economic infrastructure. This contributes to the government revenue as dividends from their operations. More emphasis on the PTE’S operating effciently becomes more market orientated and provides higher commerical return. There fore