On Tuesday night, the Federal Government will hand down the Budget.

The Government’s been busy recently spruiking some of the initiatives we can expect from its 2024/25 spending plan. Support for students, low-to-middle-income earners, and women’s safety have all been in the headlines, and are likely to be back in the news on Tuesday.

I’ll be with some of the TDA team in Canberra on Tuesday to dissect the 2024/25 Budget. We’ll bring you our coverage from about 7:30pm, but for today’s newsletter, I thought I’d get in ahead of the fanfare to shed some light on what the Budget actually is, and what it means for Australians.

There’s no more important economic document for the Federal Government than its Budget. It’s handed down once a year, typically on the second Tuesday of May.

In short, the Budget is a pile of documents that lays out two things: where the government wants to allocate its money (spending), and how it's going to pay for it (revenue).

Funds are allocated to a whole range of things, but the most expensive areas of spending are usually social security (welfare, aged care, disability care), health, education, and defence. Money for housing, the environment, and the arts can also make up some of the government’s spending.

Second, the revenue. This is the part of the Budget where the government shows how it can afford all the spending it’s planning on doing.

Tax is what the government generally relies upon to fund the Budget. The biggest sources of tax revenue come from personal income (individuals paying tax), companies, and the goods and services tax (GST). Other times, governments can choose to borrow money to fund more than what they can afford solely through taxes.

Borrowing allows the government to fund projects in the Budget they otherwise couldn’t. However, they have to pay back borrowed money with interest, which puts them in debt.

Government spending and revenue collide on the final balance sheet. This determines whether the Budget is in surplus or deficit. 

A surplus is when the government has collected more money than it is spending. It’s what happens when the government has leftover money after allocating funds to each of its projects.

A deficit is when the government hasn’t collected enough taxes to fund everything it wants to. This means it needs to borrow money, which puts the government in an interest-accruing debt.

You’re likely to hear more about a surplus on Tuesday night. The Albanese Government has been hesitant to reveal much detail, but we do know it’s been quietly expecting a surplus in this year’s Budget.

This would be the second consecutive surplus. Last year, the Government posted a $22 billion surplus – the first of its kind in 15 years.

However, surpluses don’t automatically eradicate debt. The Government is still in almost $1 trillion of debt and is paying billions of dollars in interest every year.

Many of the Government’s biggest funding initiatives have been announced in recent weeks and months, and are expected to get a good run again on Tuesday night. Here’s a quick rundown:

Also included in each Budget is the Government’s economic outlook. This will show what the Government expects to change in both the global and domestic economy in the next few years, including projections about changes to international trade, wage growth, and inflation.

There may be some surprises in the Budget, or some announcements made before Tuesday night. 

As is true with any Budget, the Government will have had to make difficult decisions about what to fund. 

Some sectors will receive a lack of funding or none at all. Others will welcome money on the way, but say it isn’t enough to address the issues at hand. It’s unlikely that anyone will be totally happy with what the Government gives them, and you can expect to hear plenty of ‘winners and losers’ commentary in the days to come.

As I mentioned at the top of the newsletter, I, along with TDA editor Emma and journalist Harry, will be in Canberra on Tuesday night, delivering the biggest stories in the Budget for TDA readers.

We hope to see you on our Instagram when the floodgates open!

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