Fiscal Policy and its Response to COVID-19 by Australian Government

The report discusses the fiscal policy response of Australian government to COVID-19 and its short and long term implications. It also covers the budget constraints and government debt. The report highlights the impact of COVID-19 on the economy and healthcare sector.

ESSAY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Essay............................................................................................................................................3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Fiscal policy is generally use of the government taxation and spending mainly to
influence economy conditions mainly macroeconomic conditions. Government particularly use
this policy to promote sustainable and strong growth as well as reduce poverty (Faria-e-Castro,
2021). This includes aggregate demand for services and goods, inflation, employment and
economic growth. Further, the budget constraint has been said to all the combination of goods
and services that is purchased by the consumer on current prices within his or her income. The
report includes a brief about the fiscal policies and its responded to the COVID– 19 health
shocks By the Australian government. Along, with this the report includes short and long run
implication of responses.
MAIN BODY
Essay
Fiscal policy of the Australia 2022 is designed in such a manner that it overpowers the
impact of Covid -19. Government of Australia uses taxation and spending mainly to influence
economy conditions mainly macroeconomic conditions. Australian Government particularly use
this policy to promote sustainable and strong growth as well as reduce poverty (Faria-e-Castro,
2021). This includes aggregate demand for services and goods, inflation, employment and
economic growth. Expansionary fiscal policy of Australia has been focusing lowering tax rates
or even increasing spending generally to increase aggregate demand as well as fuel economic
growth. The contraction of fiscal policy generally raises the rates or even cut spending to reduce
or prevent inflation. Covid 19 has affected life of the people and also slowing down the economy
growth. It can also be seen in the budget of Australian government. This pandemic generally has
affected a thousand of peoples that is either sick or even being killed because of spread of
Coronavirus disease. This virus is mostly spreading exponentially regions wise. By this the
countries are banning the gathering of people to stop or break exponential curve. The covid – 19
give impact on healthcare and economic as well. For healthcare, it creates challenges in
quarantine, diagnosis and treatment of confirm cases. For healthcare, it gives some consequences
such as overloading of the medical shops, disruption of the medical supply chain etc. The Covid
– 19 give impact on economic as it slow the manufacturing essential goods, poor cash flow,
disrupt supply chain of goods, slow down the revenue growth and losses in international as well
as national businesses.

The Australian government also launched Home Builder Program as one of fiscal policies
designed generally to address economic impact of coronavirus on Australian economic. In
response to recession in economy, Australian government generally influenced level of the
aggregate demand in economy through the use of fiscal policy. Here, the main goals of fiscal;
policy is to achieve price stability, full employment, as well as health rates of the economic
growth. The fiscal policy is macroeconomic policy immediately controlled by the government of
Australia. Fiscal policy is key pillars of the macroeconomic policy, that could influence
economic performance by capital expenditure as well as indirectly by effects of taxes, spending
as well as transfers on the private consumption net export and investment (Romer, 2021). Here
monetary policy was determined as effective macroeconomic policy for handling or managing
aggregate demand in short run. Whereas fiscal policy with the long implication was less
favoured in short run that why was considered as longer-term goals.
The outbreak of the pandemic is resulting in health crisis as well as drop in the economic
activity that are mostly without precedent in resent. The fiscal policy package given by the
Australian government aimed to protect immediate impact of drop economic activity on
households, firms and also to preserve countries capacity of production. Government of Australia
make fiscal policy so at the time of covid – 19 in the year 2019. The countries Australia not
spend much on the health budget so at that time they face many problems even all countries face
economic down position. At the time of panoramic that is first wave the government face many
problems. Because they give preference to all the sectors like health, household, employment,
business etc. The condition of the economy is not good. Budget constraint is also known as
budget line. It generally occurs when the customers is limited in the consumption patterns
through certain income. The budget constraint is accounting recognition linking monetary
authorities select money growth or a nominal interest rate as well as fiscal policy selection of
taxation, borrowing and spending at point in time and also across time (Gunasinghe, and et.al.,
2020).
A budget is a document prepared by government to anticipated tax revenues and also
proposed expenditure that is education, roads, healthcare etc. for coming years. So at the year
2019 the panoramic was arises but at that year the government not make budget on the bases on
Covid 19 so countries face many problems (Le, and et.al., 2020). Whereas in the year 2020 the
government also make consideration of Covid 19 and then make their budget in which they make

large potion on healthcare and reduce the other one. But the Covid 19 is give bad impact then the
economic is not stable. The government make less budget for the other factors and focus on
health care. Even in monetary policy the central banks of the countries reduce the rates so the
people can get loans easily. So by this government helps people during the Covid 19 pandemic.
Pandemic give negative impact on the people life as well as on economic. The economy of
countries is decreasing because at that time there is no business no physical interaction. Covid 19
give impact on more impact short term. So the government focus is on making the economic
stable. So they make policy according to safeguard the people life as well.
The main objective of the Reserve bank of Australia and government of Australia is to
immediate policy challenges supporting efforts generally to reduce health crisis. The second
challenge is to fix or limit adverse effects of the Covid 19 on business and households (Makin,
and Layton, 2021). Another challenge is to support economic recovery as well as make sure that
recovery from the pandemic. And the last to strengthen the economic as well as health systems.
The long-term implications of this policy of fiscal have been major. As it is seen that Covid 19
was not a one-night thing. It remains with government of Australia and all over the world for two
years. The implications must be long. First of all, country has been in major debt scene and
interest of which has to be paid by the country till the years country does not pay of all the
amount. IMF has also played major role in giving countries debt that were in need at the time of
this situation of Covid which is also one of the long terms long. Despite it is going to take time to
open all the activities that were running before this. The GDP of country has also gone down
which can be seen from last years and it is also going to take time to recover it in coming years.
Budget constraints is an amount of the items that an individual can afford within the current
budget.
IMF also said that short-term impact of the policies is increasing inflation in the country.
Due to Covid the prices of the products are rises so it will give negative impact on the people. As
they are not able to pay bills of the hospital as well as other expenditure (Charlton, 2019). Due to
inflation all item prices are high which also give impact on people life. Many peoples not afford
the food as well at the time of covid. Many countries also focus on their fiscal policy to make
health sector more powerful and because of this they are the government debt increases.
Countries will now need to consider how they make sure sustainable financing of the health
systems. The health financing presently relies strongly or powerful upon health social security

helps, the impact of this is increasing share of older individuals living beyond them at work life
may also require the new approaches to health financing. Therefore, countries may want to
consider the partial shift the capital of health funds away from Social Security Contribution
towards general taxation, in specific because here link between health contributions as well as
health benefits that received is generally weak.
The financing of health sector could be supported by the greater reliance on well-
designed health taxes, which could also play a central role in the tax system to generally help or
strengthen the resilience of the health systems to ageing of their populations. The other country
has also focus on this they are more focuses on the health care sector. Because the pandemic
gives negative impact on every country, so they are focuses on this. Government has to plan for
the future surpluses so they pay their debt easily. So now the countries government make fiscal
policy in a way to make economic strong (Chugunov, and Pasichnyi, 2018). Government make
policy in proper manner so it also helps to pay off the debt easily.
CONCLUSION
From the above report it has been concluded that covid 19 has impacted countries badly
on every has laid down some country to the worst recessions as no country was prepared for that
in he year 2019. The above report discussed the fiscal policy that was formulated by the
Australian government as well as its responded to Covid 19 health shocks. The above report also
discussed short and long run implication of these responses. Moreover, the report also illustrated
how the countries make government budget and also discusses government debt.

REFERENCES
Books and Journals
Charlton, A., 2019. Fiscal policy in extraordinary times: A perspective from Australia’s
experience in the global recession. Economic Analysis and Policy. 64. pp.83-90.
Chugunov, I.Y. and Pasichnyi, M.D., 2018. Fiscal policy for economic development. 1(1 (13)).
pp.54-61.
Faria-e-Castro, M., 2021. Fiscal policy during a pandemic. Journal of Economic Dynamics and
Control. 125. p.104088.
Gunasinghe, C., and et.al., 2020. The impact of fiscal shocks on real GDP and income inequality:
What do Australian data say?. Journal of Policy Modeling. 42(2). pp.250-270.
Le, T.T., and et.al., 2020. The COVID-19 vaccine development landscape. Nat Rev Drug
Discov. 19(5). pp.305-306.
Makin, A.J. and Layton, A., 2021. The global fiscal response to COVID-19: Risks and
repercussions. Economic Analysis and Policy. 69. pp.340-349.
Romer, C.D., 2021. The fiscal policy response to the pandemic. Brookings Papers on Economic
Activity. pp.89-110.
(Gunasinghe, and et.al., 2020)