8th May, 2018
Have you ever had the feeling that making it through a Budget speech was a bit like wading in a swamp?
Even though the Federal Budget is fairly important, a lot of people just tune out because they don’t know what the hell’s going on.
Simple concepts are made super complex with language that regular humans just don’t use.
So, here’s a way to decode the jargon so you can follow tonight’s proceedings without a thesaurus!
“We will spend a total of $238.1 million on tea and biscuits over the forward estimates.”
In a nutshell, it’s the next four financial years. The government models out how much it’ll spend on a given policy over four years to have some certainty for forward planning.
Of course, it means they can announce a huge, meaty number on the night.
So the government may say it’s spending $238.1 million on tea and biscuits, but it’s really spending $50-odd million per year.
And doesn’t $238.1 million pack more of a punch than $50 million?
“What are you – some kind of bracket creep, Creep?”
Luckily, bracket creep doesn’t refer to a dude with an unhealthy focus on door hinges.
Income tax is set using different tax rates depending on how much people earn. The more you earn, the more you’re taxed. Simple.
But the tax rates are usually set manually instead of being adjusted for inflation each year.
This means that when people see the money rolling in, their income falls into higher tax ‘brackets’.
If the tax brackets stayed put, the government could simply let wages growth do its thing and bring in a bigger tax take without any announcements on a new tax increase.
Or, as is widely tipped in this budget, it can lift tax brackets to help people right on the border of two brackets stay below the higher rate.
“I bet all these Budget figures will be out of the window come MYEFO time”.
In short, it stands for “Mid-Year Economic Forecast Outlook”.
Each Budget’s assumptions are guided by a mother lode of data – economic activity, employment figures and even commodity prices.
In the middle of each financial year, the government releases an update to these figures – which could throw out the figures each time.
“Ah, yes, the government may well point to the headline GDP figure but the nominal GDP figure is where it’s at”
The GDP is a country’s Gross Domestic Product – or the value of goods and services provided by a country.
It’s usually read as a sign of how productive the economy is.
But others point to ‘nominal GDP’, which adjusts for inflation.
Who cares, you say? If a country produced a GDP of $1.6 trillion in 2000, it would be far more valuable than the same GDP in 2017.
You know how back in the day $1 used to buy you a steak, a shave, and a newspaper but today it would get you an eighth of a pint of cider?
Same principle.
“Geez, another deficit!? Unless we get back into surplus soon the national debt will fly off the charts!”
When you run an individual budget, like any business, there’s a profit or loss at the end of each period. A ‘deficit’ equals a loss, while a ‘surplus’ equals a profit.
However, a business (or government) may have borrowed way up the wahzoo to build things such as roads. So even if one budget is in surplus, there may still be a huge debt to pay off.
To make a dent in that debt, the government has to claw back into surplus as the first step. But the idea isn’t to entirely wipe out the debt – it’s to make it manageable at least.
Don’t forget to tune into our Budget Night coverage on Facebook as we go behind the jargon and tell you how the budget will affect you.
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