Budget Outcome and Cash Balance

Question 1

Budget Outcome Definition

Answer 1

The budget outcome is the relationship between the money collected by the government in ‘revenue’ (or receipts) and the money to be spent by the government in ‘expenses’ (or payments) over the year under consideration.

We talk about estimated revenues and expenses because we can’t be totally sure about what will happen in the upcoming year.

(The budget is looking at the year to come/the year ahead. So the current 2023-24 budget, is looking at the 12 months of July 1 2023 -> June 30, 2024.)

(June 30 is called the ‘end of financial year,’ many businesses in Australia and around the world also use this date to separate business years and prepare financial statements and reports at this time.)

Question 2

3 Main Elements of The Budget

Answer 2

• Budget Revenue (mainly from taxation)
• Budget Outlays (spending/expenses)
• The overall expected budget outcome (surplus/deficit)

Question 3

The Budget Outcome Calculation

Answer 3

Is measured over the financial year from, July 1st to June 30th.

Calculation:
Total revenue (receipts) minus Total expenses (payments) = Expected/Estimated Budget Outcome

Question 4

Deficit / Surplus of Budget Outcome

Answer 4

Surplus: (revenues > expenses) eg. Budget Outcome = $5b
Deficit: (expenses > revenue) eg. Budget Outcome = -$10b
Balanced: (expenses = revenue) eg. Budget Outcome = $0

The estimated (underlying) outcome of the 2023-24 budget is an underlying cash deficit of $13.9b. (-0.5% of GDP)

Question 5

Headline vs. Underlying Cash Balance

Answer 5

Headline = All revenues and expenses

Underlying = removes both receipts and payments relating to investments in financial assets (these are non-recurring) Eg. investments in the NBN, repayment of a loan

Underlying removes ‘net cash flows from investments in financial assets for policy purposes’. When we look at the budget outcome, we’re referring to the underlying cash balance.

Question 6

Underlying Cash Balance / GDP of the 2023-24 budget

Answer 6

We also measure the size of the deficit as a proportion of GDP

The estimated (underlying) outcome of the 2023-24 Budget is an underlying cash deficit of $13.9B, or -0.5% of GDP.