2013

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The economics behind the politics of the federal budget

The Federal Budget is fundamentally – perhaps with a bit of accounting incorporated – an economic conception, right? Wrong. While in an ideal world the political implications of fiscal budgetary processes would be disregarded, the reality is that politics ultimately determines the economics of all government budgets – albeit to various extents. Perhaps paradoxically, however, economics still trumps out in the end. How so? Because the use of economics is often the best way to explain the politics behind the economics.

While last year the use of accounting manipulations was the most demonstrable element of the Federal Budget assailable for extensive analysis, this year there are myriad of components. These will now be explored – largely within the context of the economic concept of private interest theory. This theory is essentially that politicians, including Wayne Swan when preparing the budget, will make rational choices based on their own objectives when in a decision-making position. The primary objective pertaining to the budget for Swan, and by extension the Gillard Government, would ostensibly have been to deliver a well-received budget that will maximise their chances of being re-elected (or at least minimise the number of seats they lose) on September 14.

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