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Macroeconomic management is the use of government polices to influence the economy with the aims of reducing large fluctuations in the level of economic activity and the achievement of certain objectives. It is comprised of both Monetary and Fiscal policies, which operate with the aim of managing and achieving economic growth, low inflation, full employment, external balance, an equitable distribution of income and wealth and ecologically sustainable growth. Over the past decade, there has been a shift in emphasis from fiscal policy to monetary policy, which has been seen to be more effective in stimulating economic growth and controlling inflationary pressures.

Fiscal policy can influence the overall level of economic growth and have a targeted impact on specific sectors of the economy. It influences resource allocation by varying the amount of government spending and revenue, redistributing income and reducing the fluctuations of the business cycle using automatic stabilisers. Its instruments include government spending and taxation and the budget outcome. In some years, governments can make major policy changes in response to changing economic or political conditions.

The Federal Budget is the annual statement from the government of its income and expenditure plans for the following financial year. The Budget includes all forms of revenue received, such as Personal and company tax, customs and excise duties, goods and service taxes, which are redirected to the states, and other revenue, such as dividends from public trading enterprises. The other side of the budget is government expenditure, the major items of which are social welfare, health, education, defence and public administration.

There are three possible budget outcomes, fiscal surplus, fiscal deficit and fiscal balance, and yet it is the fiscal stance that has the greater effect on the economy. A government can have an expansionary, contractionary or...