Key Economic Issues Facing Australia in 2008

The Rudd Governments 2008/09 Federal Budget will be used to implement a contractionary fiscal policy based on a budget surplus, to achieve its key economic objectives. The government has implemented a budget surplus of $21.7 billion (1.8% of GDP) to address its key economic issues; these being economic growth, unemployment, price stability, the environment, the distribution of income and wealth and external stability. With the correct implementation of government policies, Australia’s economic stance and international competitiveness will flourish as the terms of trade will improve along with the general living standards.

Economic Growth refers to the expansion of a nation’s productive possibilities. The level of increase in economic growth will determine, to a large extent, a person’s living standards in a country. Economic growth is a very serious issue facing the Australian economy in 2008 and the latter part of the financial year. The budgets growth trends will differentiate between the short and long term. The increasing inflationary pressures have led to the government trying to slowdown the economy. The Sydney Morning Herald Article “Swan cuts achieve huge surplus” is evidence of the governments intensions as it highlights that a higher surplus was delivered than expected.

The weaker global growth rates and the effects of monetary policy are slowing the Australian economy, alongside reduced government expenditure and increased taxation. “Eight interest rate rises in three years and the global economic slowdown are expected to see growth in the Australian economy moderate,” the article “Surplus better than expected” shows us the intention of the Australian government to slowdown the economy as it is one of its primary issues.

The RBA’s monetary policy statement, delivered in early May 2008, Treasurer Swan said; “Australia faced countervailing economic forces as it battled high inflation at home and economic turbulence overseas,” once again showing the importance of economic growth as an issue facing the economy, and that increasing inflationary pressures would ease as budget spending cuts work with the government’s move to increase the capacity in the economy. “The tighter fiscal and monetary policies would gradually ease underlying inflation down from a 16 year high of 4.2%.”

With the introduction of the three new nation building funds, (Building Australia Fund, Education Investment Fund & Health and Hospitals Fund) technological advancements will increase, a diverse and skilful workforce will be formed and there will be a better health system. Economic growth will indeed be an important issue faced by the Australian economy in 2008 as we see growth moderating in the short term, whereas the long term effects are yet to be seen.