How Does Government Expenditure & Revenue Affect the Role of the Share Market in the Economy

Topics: Stock market, Stock, Stock exchange Pages: 3 (865 words) Published: November 28, 2010
The share market is an important aspect in order to operate the economy that provides a way for individuals and businesses to interact . The share market also provides opportunities for companies or businesses to raise funds needed for their growth and gives returns to individuals for their surplus funds. The share market in Australia plays two key roles; it allows companies to sell shares to new investors and also shareholders to sell all of their security to a new owner. The Australian Stock Exchange (ASX) is the largest stock market in Australia whereby most transactions of shares and trade occur through here. Only listed companies are allowed to trade on the ASX, therefore allowing ASX to regulate the share market. This essay discusses how government expenditure and revenue affect the role of the share market from three different perspectives; shareholders, companies & the economy as a whole.

Australia has an extraordinary level of share ownership as it has more shareholders per head of population compared to any other country, with shares owned by half of the adult population in the country, making the share market a very important aspect of the lives of Australians. Statistics from the Australian Survey of Social Attitudes 2003 show that 4.9% Australians own shares in more that 10 companies listed in the stock exchange. Government expenditure and revenue can impact shareholders in many ways; positive and negative. As owners, shareholders are entitled dividends, which are profit gained from their companies. The government gains revenue mainly from taxation whether income, goods and services tax or customs duty and most shareholders buy shares with their income surplus. If the government decides to decrease the percentage of tax that individuals have to pay, it can provide and opportunity for individuals to expand their ownership by buying more shares with the extra surplus they receive.

Most of the trades that occur on the Australian share...
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