Greenacre
Educational Publications
Economics HSC Course
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Topic 4: Economic Policies & Management |
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This
topic focuses on the aims and operation of economic policies in the Australian
economy and hypothetical situations. The management of an economy is of central
concern, including contemporary Australian policies and alternative approaches.
(Economics Stage 6 Syllabus)
Glossary of Terms
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DEFINITION |
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Accrual Aggregates |
The adoption of accrual budgeting in the 1999-2000 Budget represents international best practice in public sector financial management and reporting. The main advantage of accrual measures (as opposed to cash) is that they provide a more comprehensive indication of the total activity of government and the long-term effects of current policy. |
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Anti-competitive conduct |
Behaviour that reduces the
level of competition in the market. |
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Australian Competition and Consumer Commission |
An independent statutory
authority, the Commission administers the Trade Practices Act 1974 and the
Prices Surveillance Act 1983 and has additional responsibilities under other
legislation. The Commission is the only national agency dealing generally
with competition matters and the only agency with responsibility for
enforcement of the Trade Practices Act and the associated State/Territory
application legislation. |
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Automatic stabilisers |
A mechanism that decreases
the size of fluctuations in the level of spending in the economy. For example
when the economy expands, government spending on welfare is reduced and tax
revenue will increase. Import expenditure and savings also follow this
pattern as automatic stabilisers. |
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Budget outcome |
The budget result. The
difference between revenue and expenses. It is also known as the fiscal
balance. |
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Capital gains tax |
A tax levied on increases in value of a capital asset, such as shares or real estate. |
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Cash rate |
The equilibrium interest
rate in the market for exchange settlement funds,
also referred to as the money market. The cash rate is targeted by the
Reserve Bank through market operations. |
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Commonwealth Government
Security |
A
Commonwealth government security is originally issued as a means to finance a
budget deficit. It is a form of borrowing where by the Australian Government
agrees to pay the holder a fixed some of money over
a period of time and pays the face value of the security on maturity. They
include treasury notes and government bonds. |
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Corporatisation |
A government business
enterprise that remains in government ownership, but its management structure
is altered so that it operates like a privately owned enterprise. |
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Cyclical component of the budget |
The changes in the budget
outcome as a result of changes in the level of economic activity. |
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Deficit budget |
Estimates of expenses are greater than estimates of revenue. |
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Fiscal balance |
The fiscal balance is the
accrual equivalent of the underlying cash balance. A fiscal surplus indicates
that the Government is saving more than enough to finance all of its
investment spending. |
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Fringe benefits tax |
A tax on businesses for
payments, usually in kind, made to employees over and above wages and
salaries. Fringe benefits such as a company car, or an expense account, or
payment of superannuation premiums are provided in order to attract and hold
staff, and for motivation purpose. |
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Goods and services tax |
A tax on goods and
services. It is a regressive tax. |
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Government budget |
The plan of expected
expenses and revenue of the government, usually for the next fiscal year. |
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Government business enterprises |
Businesses owned by the
government. |
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Headline cash balance |
This is the actual change
in the size of government expenses and revenue, including changes in assets
and liabilities. A larger headline surplus allows debt repayment. |
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Impact of a tax |
The impact of a tax refers
to the point at which it is imposed initially. In the case of an excise duty,
the impact of the tax is on the manufacturer; the incidence of the tax,
however, may be on the final consumer. |
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Incidence of a tax |
The final resting place of a tax is called the incident of the tax. |
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Income tax |
The tax on income or the
part of income liable to tax. It is determined by deducting from accessible
income (gross income) all allowable deductions. |
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Indirect tax |
These are taxes paid on
goods and services that have been purchased. The tax is included in the
purchase price. |
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Labour market policies |
Policies that effect the
operation of the labour market. |
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Marginal tax rate |
The extra tax paid as a
proportion of the change in income received. It is calculated by dividing the
change in tax by the change in income. |
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Market operations |
Reserve Bank activity in
the money market, in implementing monetary policy, through targeting the cash
rate. |
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Microeconomic reform |
The attempt to increase
output from given inputs of labour, capital, and materials by increasing
efficiency. |
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Monetary policy |
The
attempt to control inflation and promote economic stability and to moderate
the business cycle by changing the quantity of money in circulation and
adjusting interest rates. |
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National Debt |
The national or public
debt is the net liabilities of Australian governments. |
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Phillips Curve |
Shows the relationship
between the inflation rate and the unemployment rate. |
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Prices and incomes policy |
Policies designed to
influence the level of prices and incomes. The most common ones are wages
policies. |
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Privatisation |
The process of selling a public
corporation to private shareholders. |
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Progressive tax |
A tax whose rate (marginal
tax rate) increases as the amount of taxable income increases, eg personal income tax. |
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Proportional tax |
A tax whose rate (marginal
tax rate) remains the same regardless of the amount of taxable income. |
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Public sector |
That sector of the
economy, which is owned and directly controlled by the government. It
includes both government and semi-government bodies. |
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Regressive tax |
A tax, which takes a
smaller proportion of income as taxable income increases. |
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Relative poverty |
This is calculated as a
proportion of average earnings. People living below this level are said to be
in relative poverty, in comparison to the other people in that nation. They
lack the basic necessities in relation to the general standard of living in a
country. |
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Safety net |
A minimum guaranteed
standard of wages and working conditions. |
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Social cost |
Costs which do not appear
in the account of a firm; eg. the
cost to the community and individual of noise, air pollution and traffic
congestion. The cost is borne by non-producers and non-consumers of the
product. |
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Structural change |
Larger and more lasting adjustments which occur in the structure of production in the economy; for example, changes in the relative sizes and characteristics of industries. |
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Structural component of the budget |
The budget outcome if the
economy was at full employment. This relates to the effects of changes in
policy on the budget outcome, as distinct from changes in the level of GDP
(cyclical component). |
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Surplus budget |
An excess of government
revenue over government expenses. T is greater than G. |
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Tax efficiency |
The taxation system should
not cause inefficient resource allocation. |
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Tax threshold |
The starting point where
the tax is charged. This is generally the income level that is first subject
to the tax. |
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Time lags |
The time it takes for
something to have an effect. |
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Trade policy |
Policies that are designed
to effect trade. They may favour free trade or be protectionist. |
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Trade Practices Act |
The objective of the trade
practices act is to enhance the welfare of Australians through the promotion
of competition and fair trading and provision for consumer protection. The
Act covers anti-competitive and unfair market practices, mergers or
acquisitions of companies, product safety/liability, and third party access
to facilities of national significance. |
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Underlying cash balance |
This the most accurate
measure of the government's budget funding requirements in a particular year.
Over the long term it will equal the fiscal balance. |
The Australian Federal Government site contains information on
the departments as well links to other information related to the government.
Australian Federal Government -- http://www.fed.gov.au/
The Treasury site includes the Federal Budget, economic data and
economic roundup (a regular publication on the state of the economy).
Department of the Treasury -- http://www.treasury.gov.au/
The Reserve Bank of Australia site has many articles,
discussion papers and speeches, that are relevant to
not only monetary policy but all areas of economics.
Reserve Bank of Australia
The Australian Department of Foreign Affairs and Trade site includes
information on the governments trade policy as well as
an Annual Report on Trade and Foreign Affairs.
Australian Department of Foreign Affairs and Trade -- http://www.dfat.gov.au/
The Productivity Commission provides information on
industry and trade policies and policies relating to microeconomic reform.
The Productivity Commission -- http://www.pc.gov.au/
The Department of Education, Employment and Workplace
Relations provides information on labour market programs
and policies. - Department
of Education, Employment and Workplace Relations
Fair Work Australia provides information on wage
determination and industrial relations in Australia - http://www.fwa.gov.au/
The Australian Council of Trade Unions (ACTU) provides a lot of
information about wages, industrial relations and unions. They also have a
special schools section.
Income and Wealth Inequality and the Effect of Economic Policy on these is
explored in the following article:
The Labour Market in Australia is discussed in the
following article:
Industrial Relations Policy in
Australia is discussed in the
following article:
·
Australia’s
Industrial Relations System (2010)
·
The Fair Work Act and
its Implications (2011)
A fantastic HSC Economics exam study guide
can be by Dr Anthony Stokes and Dr Sarah Wright can be purchased from Cambridge
University Press. This
will really help you with your HSC Economics.
Have you considered studying economics at university?
Then you need to have a look HERE.
Useful
resources for this topic and other topics in the HSC course can be found at:
The site contains information about two excellent workbooks that provide
activities for students to do (with the answers), as well as practice multiple choice
questions. These are available now. Students and teachers can purchase these
books from the site.
There are also overhead masters and powerpoint slides available on the HSC topics. These
are an excellent source of information and a great time saver for teachers.
Return
to HSC Economics homepage
Last
modified 14th June 2011
Comments and enquiries to Tony
Stokes