Description: argues that fiscal policy in Australia is shifting away from being used as a tool of macroeconomic management towards being used as a political tool.

The stance of fiscal policy has changed significantly over recent years. Fiscal policy involves the use of the Commonwealth Government's Budget in order to achieve the Government's economic objectives. The Howard Government's primary fiscal objective has been 'to maintain budget balance, on average, over the course of the economic cycle'. This infers using fiscal policy as a tool of macroeconomic management: deficits during recession years, and surpluses during years of higher economic growth. During its …

…shifted away from being used as a macroeconomic tool of economic management. Rather, monetary policy now plays the major role in influencing the macro-economy. However, it must be recognised that this change in stance has only been carried out over the last two budgets during times of relative economic prosperity and will be tested when economic conditions are less favourable. As Gittins writes: 'It will be a very different story once the next recessions arrives'.