Evaluate the effects of the budget on Australias long-term economic

growth
The 2016/17 budget has had a number of varied effects on the economy
of Australia. Most notably various policies have been proposed that will
greatly affect the long-term economic growth of Australia, specifically, the
changes to Tax Bracket policies, Corporate reforms, Multinationals Tax and
Defence spending. The policies, in affecting the consumption, investment,
and government expenditure in the economy, can be evaluated by their
ability to transition Australias economy away from the mining investment
boom and its function in channelling growth in other more sustainable
sectors of the economy.
The budget is the governments main mechanism to implement fiscal
policy, adjusting projections of tax revenue and government expenditure
in order to monitor and adjust the nations economic activity. Australias
budget has been in deficit for 7 consecutive years, following the effects of
the GFC, currently running a $37.1 billion deficit (or 2.4% of GDP) in 2016.
The governments aims of returning Australias budget to surplus has
been beset by difficulties, with a below average growth rate of 2.3% (0.7%
below the optimal trend rate of 3-4%) and the unemployment rate at
5.7%, consequently leading the Coalition government to adopt a slightly
contractionary fiscal stance. The government is also focusing its efforts on
promoting income equality, with Australias GINI coefficient at 0.307 and
decreasing and our income per capita at $61979 USD.
The budget policy of adjusting the tax bracket for middle-income earners
would positively influence Australias long-term economic growth. The
proposed policy suggests that the second highest tax bracket will be
pushed up from $80,000 to $87,000, so that those affected will now pay a
32.5% marginal tax rate instead of 37%. This will in turn affect 25% of
Australian consumers, with almost 73% of income tax revenue originating
from this tax bracket ($37k - $80k). Through this policy the government in
turn feeds this tax bracket in reducing their tax burden, thus increasing
the level of disposable income that this demographic receives. With the
high MPC of these middle-income earner, this could resultantly increase
the level of consumption in the household sector in the economy and
therefore stimulating aggregate demand. This extends the time for full
time wage-earners to stay in this tax bracket for longer, and this provides
more space in our economy for average full-time wage earners to earn
more without being taxed more according to Treasurer ScoMo, meaning
that this will maintain a higher level of consumption in the long-term,
specifically increasing the income of the affected bracket by $6 per week.