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Reasons for Actual Budget Outcomes

Economics (Year 12) - Fiscal Policy

Christian Bien

In most cases, actual budget outcomes are not the same as budget estimates. This can be contributed to a range of factors such as:

Political Factors

  • Budget measures do not pass through both houses of government or are modified - for example, the 2016/17 budget included estimated revenues from a 32.5% backpacker tax which was compromised to only 15% from political pressure

  • New policies are introduced and passed in both houses in government to which the budget has not been considered.

Economic Factors

  • Economic estimates were wrong - budget estimates are based off predictions in future economic indicators. Actual economic indicators are often different from budget estimates, leading to changes in revenue and expenditure.

External Factors

  • Unforeseen event - a natural disaster may require the government to contribute government spending to assist in affect areas. This expenditure is unplanned and not included in government budget estimates.

  • Changes in the exchange rate

  • Changes in terms of trade

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