Essay Question What is the Australian Government's fiscal policy stance in the current phase of the business cycle? Explain the rationale for this stance of fiscal policy. What are the implications...

Australian Government's fiscal policy stance
Introduction:
Australia has shown phenomenal economic growth with a recession for last 36 years. The economy has observed two consecutive quarters of negative economic growth last time in 1991. The resource rich economy has managed to smoothly tackle the Asian financial crisis, dot com bubble and even the Global financial crisis. The mining investment boom, exports of its key resources to emerging economies like China and India and appropriate fiscal and monetary policy have largely contributed to unprecedented economic growth for Australia. The economy has gradually adopted diversified drivers of growth after the end of mining investment boom. Fiscal policy and monetary policy definitely play a major role and contributes significantly to its uninterrupted economic success.
Objective of the study:
The key objective of this paper is to gain a deep insight on Australia’s fiscal stance in its current business cycle. The current study also examines the implications of fiscal policy stance on the economy’s growth and output.
Fiscal policy relates with business cycle:
Macroeconomic theory suggests fiscal policy as a major instrument to stabilize the economy. Any recessionary gap or inflationary gap can be eliminated with the help of fiscal policy. When the economy operates below the potential level, the economy is said to be in the recessionary phase of the business cycle. Expansionary fiscal policy is the effective instrument to close the recessionary gap. Increasing the government spending and reducing the tax to boost the consumption and investment are the major tools for expansionary fiscal policy. On the contrary, when the economy operates above the potential level, it is said to be an overheating economy. A contractionary fiscal policy in terms of lower public expenditure and higher tax rate the government can cool down the overheating economy. Thus fiscal policy has major implications though the effectiveness of the fiscal policy depends on several factors. (Tucker, 2010)
Government committed to maintain stronger fiscal discipline:
Australia is in the booming phase of the business cycle with a promising economic outlook. The adjustment of the economy is well underway after the end of investment boom. Government has announced to support the transition with suitable economic policies for jobs and growth. Fiscal policy is one of the integral part of Australia’s public policy architecture and plays an essential role in protecting the economy from any major shock for a longer period of time. The government has maintained a stronger fiscal discipline and provide a stable and favourable macroeconomic environment to promote economic growth. This includes the tax cut to promote business investment, signed up several trade negotiations to open up new markets and opportunities, increase the infrastructure investment to improve the long run productivity and stimulates economic growth. A disciplined fiscal policy helps to crate an attractive macroeconomic environment for the investors to take the favourable decisions with grater confidence. (Australia, 2018)
Australia is suffering from...