The federal budget is in two days. Now, that may not exactly get your pulse racing, but budgets matter. The annual budget is an update on just about everything the government is doing, and it’s our best chance to scrutinise and evaluate them. With a new government and a cost of living crisis, this budget is as important as ever. So here’s a little preview of what to expect.
First, a bit of budget background. We can think about a budget in two halves: First, you’ve got the spending half, how much is the government spending and what is it spending on? And there are plenty of individual things that we might be interested in in the spending half, from a new medicine, to a new art gallery, all the way up to a new nuclear powered submarine.
Then you have the revenue half or the ‘how are you going to pay for it’ half. And we care about how these two halves interact with one another. If we raise more money than we spend, we say the budget is in surplus. If we spend more, the budget is in deficit, and when there’s a deficit, the government has to take on debt to fill that gap.
That is, it borrows money now and promises to repay it in future with interest. With all that in mind, let’s take a look at the state of the Federal Budget today. In 2022/23, the government is spending $650 billion. The biggest category of spending is called Social Security. It includes welfare, aged care and disability care, and that amounts for about a third of the budget.
Second is health, which makes up about a sixth. Third is education and fourth is defence. At the same time, the government is raising $607 billion, about half of that comes directly from individuals, about a fifth from companies and the rest from other sources. Now, as you may have noticed, 607 is less than 650, which means that the budget is in deficit.
In fact, it’s been that way for 15 years and it’s expected to be that way into the future. That means that we’ve been taking on debt in total about $1,000,000,000,000. Now, that sounds like a lot, but that number doesn’t really tell us much. What we really care about is how much interest we have to pay on that debt.
And the answer to that question is about $14 billion a year, but increasing significantly over time. That’s important context for this year’s budget. For 15 years, Australian governments have been spending more than they collect in tax. We’re taking on more and more debt and that debt is becoming more expensive. At the same time, we face growing pressure to spend even more.
Health and aged care are becoming more expensive as our population lives longer. We’re spending on new things like the NDIS or more child care. A lot of these things are things that we want to do, but we also need to make sure that when we are spending these big amounts of money which grow over time and that we’re getting maximum value for money.
Exactly how far the government wants to go in trying to reduce the deficit, we’ll find out on Tuesday. But in the meantime, there are calls for the government to spend more right now to take pressure off the cost of living crisis. For example, there have been calls to increase the JobSeeker unemployment payment, currently less than $50 a day for a single person with no kids.
The government’s own expert panel recommended a significant increase. The government has said it won’t do that, but it is believed to be considering a smaller increase for older Australians. The Government has also suggested some other cost of living measures will be in the budget, like energy bill relief, cheaper medicines and perhaps some support for renters. But for the details we’ll again have to wait until budget night and The Daily Aus will be here to take you through it all.