ARCH7048 Construction Management and Technology

Introduction

Fiscal policy is a representation of all of government Spending Policies which have much influence on the macroeconomic conditions ("Subject and Research Guides: Economics: Monetary & Fiscal Policy" 2021). By the means of fiscal policy, the regulators make an attempt to bring in improvisation in the unemployment rates, influence interest rates, check on inflation, bring in stabilization in business cycles and much more. Fiscal policy is majorly dependent upon the concepts of a British economist, John Maynard Keynes ("Subject and Research Guides: Economics: Monetary & Fiscal Policy" 2021). According to him government could bring about changes in economic performance by adjusting the tax rates and government spending. In this paper, various aspects related to fiscal policy will be discussed upon.

Fiscal policy and its development

As already mentioned in the introduction section fiscal policy is a representation of all of government spending policies which have much influence on the macroeconomic conditions ("Subject and Research Guides: Economics: Monetary & Fiscal Policy" 2021). Through the means of taxation, fiscal policy aids in mobilizing considerable amount of the resources for the purpose of financing various projects. It is of much help when it comes to providing stimulus to elevate the rate of savings. Fiscal policy provides adequate incentives to the private sector for expansion of the activities ("The effectiveness of fiscal policy in Australia | Treasury.gov.au" 2021).

Australian fiscal policy is developed on the basis of medium-term framework that is developed to guarantee balance in budget over the cycle. This specific medium-term framework warrants that balance sheet of the government stays in a better position. The strategies related to fiscal policy are developed emphasizing on “over the cycle” logic that in turn permits the use of these fiscal policies as demand management tool ("The effectiveness of fiscal policy in Australia | Treasury.gov.au" 2021). This strategy has scope for use of all of the discretionary fiscal policy that again give rise to question of both desirability as well as effectiveness. Australia being a comparatively small and at the same time open and financially evolved economy makes use of monetary policy as a demand management tool. For instance, this comes up with a prediction that fiscal expansion will be the reason for production of higher interest rates that in turn will bring a reduction in investment expenditure ("The effectiveness of fiscal policy in Australia | Treasury.gov.au" 2021). It also mentions that prompt inflow of the capital to much extent circumvents any modifications that are brought about in the rate of interests. This again produces an indebtedness of the currency along with a lesser contribution of the net exports to growth.

Fiscal policy and its budget work

The bushfires and then the COVID-19 pandemic in the year 2020, had a significant impact on the Government’s fiscal position with the budget anticipated to remain in deficit for around the next decade. It also hinted at the fact that the government debt will rise and this again in the long run will affect the economy to a much extent. The economy has fallen into recession in the year 2019-20 because of COVID-19 pandemic and it is obvious as all of the businesses were shut and state and international borders closed ("Fiscal overview – Parliament of Australia" 2021). Pandemic has also become the reason for reduction in government tax receipts that include personal tax receipts along with company tax receipts. This again has been impacted by lowered rate of employment, reduction in corporate profitability and them average incomes. There is a link between fiscal data and budget and this can be understood by the discussion done below: Underlying cash balance is the means to measure surplus or deficit that again measures the difference present between the receipts of the government and the payment that the government does on cash accounting basis ("Fiscal overview – Parliament of Australia" 2021). The fiscal balance refers to the equivalent measure on basis of accrual. This measures the different between expenses done and the revenues collected.

Effects of fiscal policy on construction industry in Australia

Fiscal policy can be said to have significant effect on the construction industry of Australia. It is said that the increase in fiscal deficit can impact on order flow as well as collection in the sector. The available information suggests that due to the COVID-19 pandemic there will be a tough situation for the construction sector ("Coronavirus - Australian Construction Industry Forum" 2021). Due to the pandemic, there has been a decrease in the number of people working on a construction project. There has been slowdown in business activities and this certainly have affected the constructions sector. In this COVID times, the fiscal policies are a savior. The Australian government has come up with legislation that highly supports its economic response to COVID-19. For instance, the Government has enhanced the Boosting Cash Flow for the employers and is providing up to $100,000 to all of the eligible small and medium scaled construction business ("Coronavirus - Australian Construction Industry Forum" 2021). The government has come up with expansionary fiscal policy to address the unemployment issue then again, these expansionary policies can be used to address inflation as well. It is already mentioned in the section above ("Coronavirus - Australian Construction Industry Forum" 2021). Fiscal policy can help the construction sector to get out of the downturns but on condition that the issue of inflexibility in this context is addressed.

Conclusion

Thus, from the discussion above it is clear how fiscal policy can help at times of recession and inflation. The concept of fiscal policy has been defined well and above all the way Australian Government has supported the construction section in the COVID times with its policies given suggesting that having proper fiscal policies and checking on inflexibility a country can handle tough situations. There is a need to harness the power of fiscal policies by making every attempt to address the drawbacks that it is otherwise laced up with.

References

"Coronavirus - Australian Construction Industry Forum" 2021, viewed May 25 2021,

<https://www.acif.com.au/resources/coronavirus-construction-industry-challenges>.

"Fiscal overview – Parliament of Australia" 2021, viewed May 28 2021,

<https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/

Parliamentary_Library/pubs/rp/BudgetReview202021/FiscalOverview>.

"Subject and Research Guides: Economics: Monetary & Fiscal Policy" 2021, viewed May 25 2021,

The effectiveness of fiscal policy in Australia | Treasury.gov.au" 2021, viewed May 25 2021,

<https://treasury.gov.au/publication/economic-roundup-winter-2002/the-effectiveness-of-fiscal-policy-in-australia>.

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