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  • Writer's pictureDhanesh Narroo

The Politics of Fiscal Policy

Fiscal policy dictates the fundamentals of the economy and governments are tasked with regulating the economy to achieve desired targets. Unemployment, economic growth, and price stability are three consequential areas of fiscal policy that are crucial to the economy. However, politicians often distort figures and definitions so as to satisfy their specific audience at the cost of rising public debt, unstable inflation, and mistrust in public institutions.


Opposing ideas coupled with distorted economic arguments form a toxic environment for the neutral consumer to develop a reasoned understanding of the current state of affairs. In addition, during political campaigns, the lack of substance in economic arguments is deeply concerning. The opposing party or candidate would portray a completely negative impression about the current officeholders whilst the reply would be based on the same petty politics. Most countries have their official statistics bureau within the public sector - which is under the control of the government. The risk of interference and leniency is therefore present as accurate unemployment figures are always subject to a proper data collection methodology that caters for frictional, cyclical and structural unemployment as well as those workers who have removed themselves from the labour force. A call for better political speeches is urgent - politicians, on both sides of the House, have to understand that they do themselves no good by distorting facts and figures for their own interests but rather impede on a very serious economic debate for the future of their country by confusing their respective audiences.

The impact of lobby groups on government policy is another matter of concern for economic welfare. Fiscal policy involves all decisions that have a national impact and is therefore a federal government prerogative. However, local or state governments have the power to allocate tax rebates, holidays or impose levies on specific products or services. Lobby groups often finance political parties before and/or during their mandate and have thus a special relationship with the governing party. As a result, they are able to get what they want when they want. The anonymous nature of the relationship of politicians and lobby groups is intriguing for the public as they are unaware of what kind of negotiations happen behind the scrutiny of public institutions. For instance, most people read only headlines of annual budgets and care only about price drops of commodities or income tax changes that impact directly on them. However, minor changes to income tax legislation or allocation of permits are often driven by lobby groups’ demands. Some lobby groups are courageous enough to publicly ask for what they want from the government. Such initiatives should be hailed and encouraged.


The loss of clear-sightedness is also a major weakness of the voting population prior to elections. Globalisation has contributed to more hectic schedules, ultra-liberal societal behaviours, and a lack of identity. In economic terms, voters do not exactly know what kind of fiscal policy they would like to see implemented. It is true that they are often supplied with a ‘bad’ and a ‘worse’ choice and left to choose between the lesser of the evils, instead of having the chance to vote for the best. However, I believe that political parties’ economic agenda will only change if the mass of voters shows genuine interest in the wellbeing of the economy at regular intervals throughout the year. Engaging in debates through the media, writing articles, or having drinks with friends over an exchange of thoughts about fiscal policy are all constructive activities to participate in.

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