The Question on Budgetary Policy

[Peter123742]

There was a very ambiguous question and it asked 'Two policies designed to return the budget to Surplus' could one use two separate taxes?

[MaddehZ]

carbon tax, flood levy

[ZakHi]

yea i had two policies which have been implemented recently (such as the carbon tax) however Mr. Wood claims that you had to take a theoretical approach and come up with your own policies that could get the budget to surplus?? are both approaches correct or..

[tigerfan11]

Could you have just used the Resource Super Profits Tax and a hypothetical increase in the PAYG income tax rate ?

[Peter123742]

That question was really ambiguous

[ZakHi]

That question was really ambiguous

mm it was just worded so bad, there were two completely different approaches one could take..

[bodriagin]

Isn't the carbon tax intended to be revenue neutral though? Therefore it doesn't have an effect on the budget outcome.

Would answering the question using 2 AS budgetary policies - the $558 million investment in delivering tailored, quality training places through the Workforce Development Fund AND the $36 billion investment in roads, rails and ports be correct? I said that these initiatives would increase productive efficiency and help to boost employment therefore the government receives greater income tax revenue and spends less on welfare transfers, having a positive contribution on the budget outcome.

[Peter123742]

my question is how many people answered this in the supposed 'theoretical sense' required

[amir_mvp]

Isn't the carbon tax intended to be revenue neutral though? Therefore it doesn't have an effect on the budget outcome.

Would answering the question using 2 AS budgetary policies - the $558 million investment in delivering tailored, quality training places through the Workforce Development Fund AND the $36 billion investment in roads, rails and ports be correct? I said that these initiatives would increase productive efficiency and help to boost employment therefore the government receives greater income tax revenue and spends less on welfare transfers, having a positive contribution on the budget outcome.

my thoughts exactly. except instead of skills and training i just used to childcare rebates to increase participation rate that is likely to increase employment and thus increase revenue ...

the carbon tax isn't meant to be raise revenue for the goverment, it will be used to invest in cleaner energies/compensation for low income earners etc.

but im not sure if they were asking for a carbon tax in general or the actual carbon tax implemented .... even for the 6 marker for its effect on equity i said it would worsen equity in personal income distribution because it would be a regressive tax ...and just put in brackets (assuming no compensation was given to low-income earners) ....... hoping that would be correct

[Saur11]

What about an increase in the marginal tax rate then a discussion about automatic stabilisers acting to increase government revenue in the current financial year as forecast growth is 4pct. Also, couldn't you argue that reduced expenditure would also help consolidate a fiscal deficit. Especially if decreases in spending is accompanied with higher tax. I ended up using those two policies and referenced the alco-pop tax (alongside increases in PAYG tax) because it is recent and a reduction in defence capital reprogramming spending.

[BigFunt]

When the question asked for two ways,


I thought it meant to two specific policies, as opposed to two broader ways as in

1. reduce outlays

2. increase outlays


It would have been much easier to do it in a theoretical sense, but I talked to a teacher and he said not to worry. I think 90% of people did it in a specific policy way.

[jm123]

It actually said "in the coming years".

Therefore you could mention an expansionary policy such as the national building plan ($36 billion this year that spans over a few years) and an increase of taxes. That is what I did.

[BigFunt]

yep thats what I did.

I did the infrastructure boost (rails, roads ports)

[damo707]

my question is how many people answered this in the supposed 'theoretical sense' required

Required? I don't know where you got this information from lol. IMO actual policies are fine.

I also did increased spending on vocational education and training ($558 million for 130,000 places in the 2011/12 budget) in that it would decrease the unemployment rate and result in greater income tax receipts for the government, whilst decreasing outlays through less people on welfare. Can't remember my other policy... lol but it was along the same lines.