Prepare for the budget? Here are some of the key terms Australian politicians will use to explain how they intend to spend money
- Australia’s federal budget will be released next week on May 11
- To prepare, it is worth knowing a few important definitions and phrases
- These are just some of the terms that politicians use to explain it to everyone
A SEAT GUIDE TO BUDGET TERMINOLOGY
BUDGET: Like a household budget, it estimates government income and expenditure. Income is generated by taxes and investments. Expenses are for things like welfare, schools, roads, health and defense.
BUDGET OR PROJECTED ESTIMATES: The budget covers this fiscal year – the 12 months ending June 30 – and a subsequent four-year period known as estimates. The first two years are forecasts, the last two are forecasts.
GDP (gross domestic product): The value of a country’s output. As the economy grows, the government will receive more revenue from business taxes and income taxes. Things like deficits, income, expenditure and debt are often measured as a percentage of GDP.
UNDERLYING CASH BALANCE: The best guide to the country’s financial health. It estimates the balance of income and expenses and removes one-time events such as asset sales (Telstra and Medibank Private are past examples).
BUDGET IN BALANCE: The government can change tax rates, impose new taxes, get rid of old ones, cut back, introduce new programs and get rid of existing ones. When expenditures exceed income, the government must borrow money to cover the deficit (see GOVERNMENT DEBT).
Federal budget will be handed over to Australians next week on May 11 (photo Scott Morrison)
CYCLICAL DEFICIENCY: In lean economic times, governments can decide to do things like offer short-term tax breaks to businesses or pump money into the economy, with schemes like Labor’s controversial school building program at the GFC. As jobs disappear during an economic downturn, the government has to pay more benefits and benefits. These are known as ‘automatic stabilizers’. That can force the budget into a cyclical or temporary deficit, but it should turn into a surplus again when the economy improves.
STRUCTURAL DEFICIENCY: The gap between income and expenditure that is not the result of changes in the economy. For example, income tax cuts in the 2000s, when the government enjoyed the mining boom’s ‘rivers of gold’, still need to be accounted for when revenues are not so plentiful. It’s like a household taking out a mortgage based on overtime or bonuses flowing at the time. It still has to be paid when that extra money dries up.
GOVERNMENT DEBT: In order to balance the books while the budget is in deficit, a government must raise money through government paper or bonds – a kind of note of debt that pays interest. Gross debt is the number of bonds that a government has in circulation. Net debt is the amount outstanding minus government financial assets.
RESERVE FOR UNFORESEEN EXPENSES: Money set aside for policies that have yet to be announced or negotiated for commercial or security reasons. It can also be decisions taken too late to be included in the current budget or budgeted expenses incurred outside the current fiscal year.
BUDGET DOCUMENTS: Nuts and bolts books things like economic forecasting, financial strategy, spending and income measures, and government debt management. Plenty of tables for the ‘pointed heads’ who like that kind of thing.