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The stance of fiscal policy has changed significantly over recent years Fiscal policy involves the use of the Commonwealth Governments Budget in order to achieve the Governments economic objectives The Howard Governments primary fiscal objective has been to maintain budget balance on average over the course of the economic cycle This infers using fiscal policy as a tool of macroeconomic management deficits during recession years and surpluses during years of higher economic growth During its first two terms in office the Howard Government used fiscal policy as part of its macroeconomic agenda However the last two budgets have shifted away from using fiscal policy as a macroeconomic tool of economic management and have reflected what the government considers to be its long term role - playing a minor support role while monetary policy plays the major role in economic management This shift in the role of fiscal policy can be attributed to the fact that monetary policy is a more effective macroeconomic tool the recent reduction in government debt and the increasing use of fiscal policy as a political tool opposed to an economic one YearBudget Result Underlying Balance 199697Actual 53 billion cash deficit 199798Actual 12 billion cash surplus 19989942 billion cash surplus 199900127 billion cash surplus 20000123 billion cash surplus 20010205 billion cash surplus 20020321 billion cash surplus During its first two terms in office the Howard Government used fiscal policy as a tool of macroeconomic management to achieve balanced budgets Fiscal policy was used to reduce public sector debt By reducing the large amount of public sector debt incurred over the late 1980s and early 1990s the Government ensured that future budgets will focus on domestic rather than external needs The Howard Government argued that Australias high Current Account Deficits CAD were the result of excessive government borrowing and low public savings By running large surpluses it reduced Australias net public sector debt from around 30 of GDP in 1996
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