Course: Government Process Re-engineering Day 3 Session 4: Government Process Analysis.
The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its...
-
Upload
imogene-simmons -
Category
Documents
-
view
218 -
download
2
Transcript of The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its...
![Page 1: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/1.jpg)
Fiscal PolicyThe Government in the Economy
![Page 2: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/2.jpg)
What is Fiscal Policy?
Fiscal Policy is….. How the Government of the day spends
its revenue? What the Government of the day does
with our taxes? How much money the government earns
in relation to how much it spends…… How Government Revenue and
Expenditure is manipulated to achieve an aim – growth, low inflation etc
![Page 3: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/3.jpg)
Step 1: Revenue
Identify the sources of revenue for the
Government. Text pp. 312-315TaxationDirect : E.g. PAYE, RWT, Company, Gift
&EstateIndirect: E.g. GST, Excise, Tariffs,
DutiesFees/Fines:Court Fines, Motor Vehicle
Registration, etcInvestment:Cullen Fund , Dividends from S.O.Es,
etc
![Page 4: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/4.jpg)
Step 2: Expenditure
Identify the areas for GovernmentExpenditure. Text pp. 315-319Current:Education, Health, Other Departments, SalariesetcCapital:New Hospitals, Roads, Schools, DefenceEquipment, Supreme Court…National Library Transfers: Welfare Payments, DBP, Sickness,
UE
![Page 5: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/5.jpg)
Beau0cracy!
How many government departments can you name?
Agriculture, Forestry, Fisheries, Health,Education, Defence, Judiciary, Police,
LocalGovernment, Conservation, Internal
Affairs,Foreign Affairs, Social Development,
Labour,Transport, Housing, Cultural Affairs (?),
Trade,Enterprise, Maori/Pacific Affairs, IRD,
…..and on and on and on…….
![Page 6: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/6.jpg)
NZ Fiscal Policy
So how much compared to other countries does the NZ Government spend?
![Page 7: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/7.jpg)
Fiscal Policy is….
Check out pp. 320-321 and your own prior
Knowledge.Make notes which describe 1)what Fiscal Policy is 2) Define: The Government Budget,
Surplus, Deficit, Balanced, Operating Balance
3) Outline and describe the details of the Public Finance Act 2004
![Page 8: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/8.jpg)
Fiscal policy defined
Is the government’s policy on its income and spending to influence economic activity.
It does this by issuing a plan of expenditure and revenue raising for 12 months. The Budget!
Economic Activity…? Economic Growth, Employment,
Inflation, Exchange Rate, BOP – Favourable Trade position, Social Equity/Concerns
![Page 9: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/9.jpg)
The Budget can be in …..
Deficit…Government spending exceeds government revenue…
Balanced…Spend what they earn… Surplus…..Spend less than they earn… What is the effect of a deficit, surplus etc on..
Circular Flow Aggregate Demand The Economy Your Tax bill or student loan/allowance/education What is happening tomorrow afternoon that might
impact on the gov’t fiscal policy?
![Page 10: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/10.jpg)
Public Finance Act 2004
Replaces the FRA 1994 Increased transparency with Fiscal Policy Plan for the long term Forecast what effects of intended policy are Independent assessment and reporting of
Fiscal Policy Public, Parliamentary Scrutiny of Fiscal and
other Economic Policy Reduce Public Debt to prudent levels to
guard against future adverse events, surplus until this is achieved
![Page 11: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/11.jpg)
In other words…
Tell us what your doing exactly How it will effect us Give us a chance to evaluate it for
ourselves▪ (by using our reps)
Get the debt down! ▪ We used to have quite a lot!
![Page 12: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/12.jpg)
FYI…
Taxation Accounts for 90% Govt revenue
Fines/Fees accounts for 1%Core Crown Revenue 2007/08
Corporate Tax PAYEOther Income Tax
GST
Other Indirect Tax
Fees, Fines etc
Sales of G & S Other Income Investment
![Page 13: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/13.jpg)
The Nuts and Bolts of Fiscal Policy…
GO TO PP. 320-321LINK THESE WORDS IN A MINDMAP /FLOWCHART.
BudgetDeficitSurplusBalancedRevenueExpenditure ContractionaryExpansionaryAggregate Demand***
![Page 14: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/14.jpg)
Fiscal Policy in action…
The Budge
t
SurplusSpends less than earns.
G ↓, possibly C & I as well.
AD ↓
Contractionary Fiscal Policy
DeficitSpends more than earns
G ↑, maybe C or I as well
AD ↑
Expansionary Fiscal Policy
BalancedSpend =
earn
Has T (Taxes) ↓ or
↑
Has G ↑ or ↓
![Page 15: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/15.jpg)
What happens to AD if the Government:
Increases spending of Infrastructure? gives Tax cuts? Introduces a Capital Gains Tax? Increases GST to 15%? Decreases the unemployment
benefit? Raises the Retirement Age to 68? Builds a new prison? Gives the PPTA a 4% pay rise for 3
years?
![Page 16: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/16.jpg)
Circular Flow…
Government Spending is a ? Taxation is a ?
Deficit….increase or decrease the flows? Surplus increase or decrease the flows?
Why would an increase in in Social Welfare spending not impact on GDP?
![Page 17: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/17.jpg)
DO…..
Workbook Pp. 203 Q4, 5 Pp. 204 Q11 Pp. 205 Q12 – 17 Pp. 206 Q18, 20-22
![Page 18: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/18.jpg)
Financing the deficit..
So the gov’t spends too much and then needs to pay for it. It can do this by running either a:
Monetised Deficit Non Monetised Deficit
![Page 19: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/19.jpg)
Monetised
Borrow from RBNZ
Borrow from
Overseas on fixed
exchange rate
Monetised. Both increase the
money supply which increases
Inflation
![Page 20: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/20.jpg)
Monetised Deficit
↑ G
↑ in bank deposits
↑ in Settlement
Cash Deposits At RBNZ
Secondary Expansion of Money Supply
Gov’t deposits at RBNZ ↓/Go
into Overdraft/↑ if borrow from O/S
Money Supply↑
↑ D for Money
meet by ↑ in S of Money
So interest rates stay
same
Inflationary!
![Page 21: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/21.jpg)
Non Monetised
Borrow from Public
(Selling Gov’t Bonds and Securities)
Borrowing from
Overseas under
floating exchange
rate
Non Monetised (Both ↑ the D
for $ which will ↑ r )
![Page 22: The Government in the Economy. Fiscal Policy is….. How the Government of the day spends its revenue? What the Government of the day does with our.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649de45503460f94adbe2a/html5/thumbnails/22.jpg)
Non Monetised Deficit
↑ G
↑ in bank deposits
↑ in Settlement
Cash Deposits At RBNZ
Secondary Expansion of Money Supply
But Public buys Gov’t
bonds which ↓
Bank Deposits
↑ D for Money
Not meet by ↑ in S of Money
So interest rates ↑
Not as Inflationar
y!
B/C ↑ in AD not as large