Introduction“Fiscal policy involves changing the Australian Government's expected expenditure and revenue so as to help achieve the Government's economic objectives.” (Bulmer, 2014) One of the main factors influencing fiscal policy in Australia is the budget; which is an estimate of your income and expenses for a specific period of time. A famous economist called John Maynard Keynes discovered a remarkable economic principle called Keynesian Economics. Keynesian economics is a theory of total spending in the economy (called aggregate demand) and its effects on output and inflation. (Binder, 2008) This economic principle is continually used in the Australian economy and helps governments and economists make economic-based decisions. There are two main ways the government can implement its fiscal policy: raise taxes and cut government spending. (Waller, 2010 )Two Variants of Fiscal Policy Fiscal policy consists of two basic variants called expansionary and contractionary fiscal policy. Each is recommended to correct different problems created by business cycle instability. (Miller, 2013) The fiscal policy suggested to solve the problems of a trade cycle recession is an expansionary fiscal policy. This involves more government purchases, a reduction in taxes or an escalation of transfer payments. This substitute for fiscal policy is intended to stimulate the economy by increasing aggregate spending and aggregate demand. Its main purpose is to reduce unemployment, which is beneficial for the economy and the government. Government objectives and strategies A key element of the government's medium-term fiscal strategy is to achieve budget surpluses, on average, over the medium term. This goal is all... middle of paper... out of the economy. This shows that in just 3 years the budget will be almost completely out of deficit. Conclusion In conclusion, as stated earlier, fiscal policy is set by the budget and is therefore controlled by government spending and taxes. Fiscal policy is therefore divided into two parts (expansionary and contractive). The government's objectives for fiscal policy are summarized in the four main ones:1. Inflation2. Unemployment3. External balance4. GDPWith the new 2014-2015 budget now in force, the changes made will dramatically influence the government's future fiscal policy decisions. In reference to the budget, they will have to rethink their spending, they will have to recalculate the taxes necessary to keep inflation stable, lower unemployment levels, keep the external balance solid and keep GDP under control..