min read
· Posted on
May 10, 2024

What’s the Federal Budget and why is it important?

Just like us, the Government has to work out where its income is coming from and what expenses it has to pay.

What's the key learning?

  • The Federal Budget outlines the estimated earnings and spendings of the Federal Government for the next financial year
  • When the government earns more than it spends for the year, the budget is in ‘surplus’.
  • When the government spends more than it earns, the budget is in 'deficit'.
  • The government's budget is expected to be in surplus, but expected to be in deficit next year and beyond.

Next Tuesday night, the Labor Government will release the annual Federal Budget. And while that might sound about as exciting as reading the dictionary word-by-word, the Budget is pretty important for all of us.

The Budget is the Australian Government’s spending plan for the year ahead; how much money the government will collect in taxes, and what they’ll prioritise spending it on.

It’s also our opportunity, as individuals, to see what impact the government spending will have on our own personal budget. 

Every budget, whether it be a personal budget, a company’s budget or an entire government’s budget has two sides; money that comes in, and money that goes out.

The government brings money in through taxes on individuals and businesses. It then spends that money on services that improve the state of the economy and the country, like welfare, health and education.

If the government brings in more money than it spends, we are in a budget surplus. And if the government spends more money than it brings in, that’s a budget deficit.

How is the Budget put together?

The Treasurer (currently Jim Chalmers) prepares the budget, and works alongside other ministers to develop the budget for each government department.

The main questions that the Federal Budget answers are:

  • What’s the government’s assessment of the national economy?
  • What’s the government prioritising in the coming year?
  • How much money does the government plan to collect, and from who?
  • How does the government plan to spend this money?

Why do we care?

As Australian residents, who pay tax, the Government is effectively spending our hard-earned money.

The specific decisions that the government makes in the budget such as changing to HECS debts impact our daily lives

The Budget may benefit us financially - in the form of a tax offset or stimulus. But also, the Budget highlights where the government chooses to spend billions of dollars.

What’s the budget sitch right now?

The 2022-23 budget delivered a cash surplus of $22 billion - the first surplus in 15 years.

Prior to this, since 2007-08 (when the Global Financial Crisis happened), the Australian government’s budget was in deficit, with debt close to $1 trillion.

Source: Parliament of Australia Budget Review October 2022-23

Now, that sounds a lot scarier than it is - our debt levels are pretty stable compared to the past and compared to some other countries.

What can we expect on Tuesday?

Despite the history of deficits, the budget is expected to be $13.4 billion in surplus this year. 

In saying that, it's also expected to go into deficit next year and beyond. 

The Labor Government has promised that there will be cost-of-living relief measures in this year's budget. Some of these have already been announced, including:

  • Changes to the stage-three tax cuts
  • Relief for those with HECS debts
  • Funding to combat gender-based violence
  • Support payments for teaching and nursing students during mandatory placements

Other initiatives that are expected to get more funding in the coming year include healthcare, defence, and infrastructure.

The Flux team will be covering the Federal Budget on Tuesday night so keep your eyes peeled in the Flux app for all the juicy updates!

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