QUESTION 12 (7 marks)
These measures are extracts from an Australian federal budget scenario.
1. Introduction of a temporary budget repair levy on incomes over $150 000 for three
years.
2. Assistance for low-income single parents with a new allowance of $1000 per annum for each child aged 6 to 12.
3. Continuation of the move by the former government to increase the Age Pension age limit to 69 by 1 July 2023, and further increase the Age Pension age limit to 72 by 1 July 2035.
4. A temporary pause on CPI indexation of payments and programs including eligibility thresholds for Family Tax Benefit and JobSeeker; thresholds for the Medicare Levy Surcharge, Private Health Insurance Rebate and most Medicare Benefits Schedule fees; and Local Government Financial Assistance Grants.
5. A reduction in the growth of federal hospital and education funding to make the states more accountable for spending and delivery of services.
1. Introduction of a temporary budget repair levy on incomes over $150 000 for three
2. Assistance for low-income single parents with a new allowance of $1000 per annum for each child aged 6 to 12. 3. Continuation of the move by the former government to increase the Age Pension age limit to 69 by 1 July 2023, and further increase the Age Pension age limit to 72 by
4. A temporary pause on CPI indexation of payments and programs including eligibility thresholds for Family Tax Benefit and JobSeeker; thresholds for the Medicare Levy Surcharge, Private Health Insurance Rebate and most Medicare Benefits Schedule fees; and Local Government Financial Assistance Grants. 5. A reduction in the growth of federal hospital and education funding to make the states more accountable for spending and delivery of services.
Based on the initiatives presented, explain the fiscal stance in this federal budget.
QCAA guide · typeset solution
QCAA sample response and mark allocation
Q | The response: | Notes |
12 | Fiscal stance (7 marks) | |
• classifies the temporary budget repair levy as ↑ government revenue (contractionary) and classifies the ↑ single parent allowance as ↑ government spending (expansionary) [1 mark] • classifies the age pension ↑ as expansionary as participation rate is higher or contractionary as government expenditure falls [1 mark] • classifies the pausing of indexation of transfer payments as not ↑ in government spending (neutral impact) [1 mark] • classifies the ↓ of federal government expenditure on hospitals and education as contractionary [1 mark] • explicitly identifies a fiscal stance [1 mark] • provides accurate details to support the conclusion [1 mark] • assumes ceteris paribus [1 mark] | ||
Sample response | ||
A temporary increase in taxation on higher income earners via the temporary budget repair levy is contractionary, as it raises government revenue. Other initiatives that reduce government expenditure include raising the pension age and reducing federal funding on hospitals and education. The pausing of indexation of various transfer payments and government programs have a neutral budget impact. There were smaller expansionary measures to assist low-income, single-parent households and to increase the older worker participation rate, however, when combining initiatives, it becomes apparent that the main budget priority is contractionary — to reduce spending to either reduce a budget deficit or stabilise a high rate of economic growth. This assumes the net change in other budget items are nil. | ||
QCAA sample response and marking criteria reproduced from the official guide.
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