Administered funding

Spending that is managed by government agencies but that they do not directly control. Administered funds include programs governed by eligibility rules and conditions that are set out in legislation, such as income and family support payments, and grant programs that are managed by agencies. In contrast, departmental funding is managed and controlled directly by departments and agencies. Typically, these funds are used for the purpose of day‑to‑day operations and program-support activities.

For example, government assistance for the costs of childcare as set out in the A New Tax System (Family Assistance) (Administration) Act 1999 is an administered expense, and the costs associated with making the assistance payments, such as paying Services Australia staff to assess assistance claims, is a departmental expense.

Accrual accounting

Accrual accounting records income when it is earned, and records costs when they are incurred, regardless of when the related cash is received or paid. Under accrual accounting, government income is called ‘revenue’ and costs are generally called ‘expenses’. As an example, under accrual accounting, goods and services tax revenue is recorded in the financial year that the goods and services are purchased, even though the government may not receive the related tax amounts until the following financial year.

Cash accounting

Cash accounting records income when cash is received, and records costs when cash is paid out, regardless of when those amounts are earned or incurred. For example, under cash accounting, goods and services tax receipts are recorded in the financial year they are received, even though those tax amounts may relate to goods and services purchased in the previous financial year. Under cash accounting, government income is called ‘receipts’ and costs are called ‘payments’.

Capped funding

Capped funding is where the government provides a fixed sum of money for a program. This means that the maximum amount of government spending on the program will not change, even if, for example, there are changes in the demand for the program or costs are higher than expected.

Departmental funding

Departmental funding is managed and controlled directly by government agencies, with the head of the agency having responsibility for managing the funding. Typically, departmental funds are used for the purpose of day-to-day operations and to support programs for which the agency has responsibility. Departmental funding is distinguished from administered funding, which is managed by government agencies on behalf of the government as a whole.

For example, the government provides departmental funding to Services Australia, the government agency that provides income support payments such as the age pension. Services Australia uses this departmental funding to pay for the staff and equipment it needs to make income support payments to the public. The income support payments themselves are administered funding, which is governed by eligibility rules set out in legislation rather than being directly controlled by Services Australia.

Election commitment

A policy that a party has publicly announced and intends to seek to have implemented after the election. Election commitments that would have a material effect on the Australian Government budget estimates are included in the Election commitments report.

Expenses

Expense, in the budget context, refers to the cost of providing government services, excluding costs related to revaluations such as the write down of assets. Examples include spending on programs such as the age pension or Medicare, funding provided to the states and territories for public hospitals, or the wages paid to Australian Government employees.

Fiscal balance

The fiscal balance is an accrual accounting measure of the budget balance equal to the government's revenue (for example from taxes) minus its expenses (from providing services such as Medicare and income support such as the age pension), adjusted for government capital investments such as military equipment (known as 'net capital investment in non‑financial assets') when they are acquired or sold.

Forward estimates

The period over which the government presents its budget estimates. It includes the budget year, which commences from 1 July for the upcoming financial year, and the following 3 years. For example, the forward estimates period for the 2022–23 Budget is from 2022–23 through to 2025–26.

Gross domestic product

The total value of all goods and services produced within an economy over a given period of time, usually 3 months or one year. Growth in gross domestic product (GDP) measures the change in the total value produced from one period to the next.

GDP and GDP growth can be reported in nominal or real terms. Nominal GDP growth measures the change in the dollar value of all goods and services produced, which incorporates changes in both the quantity and prices of these goods and services. Real GDP growth, on the other hand, removes the effect of prices changing (known as 'inflation') and only measures the change in the quantity produced. This means that real GDP growth better reflects changes in how much a country is producing from one period to the next.

GDP is used when comparing the government's financial position over time. Budget aggregates such as the fiscal balance, underlying cash balance and net debt are summary indicators that, together, give a picture of the financial situation of the government and how the government's finances are affecting the rest of the economy. Comparing the dollar values of these aggregates over time is complicated by factors such as inflation, population, and productivity growth, so they are often presented as a share of GDP.

Headline cash balance

The headline cash balance is a cash measure of the budget balance equal to the government's receipts (for example from tax collections) minus payments for operations and investment activities (including certain investments in financial assets). If receipts are lower than payments, the headline cash balance is in deficit, meaning the government does not have sufficient cash to cover its activities and instead borrows from financial markets.

Interactions

An interaction arises when 2 or more proposals (or individual components of different proposals) would have different budgetary implications when implemented together, compared to the sum of the budgetary implications of implementing the proposals (or individual components of proposals) in isolation. For example, a policy to increase the age pension payment rate and a policy to lower the income test threshold for eligibility for the age pension would have a different (and larger) impact when implemented together because the second policy would increase the number of pensioners receiving the higher payment.

Interest payments

Interest payments are the cash payments on the government’s debt liabilities which are recorded as a cost to government in the budget. Net interest payments are equal to interest payments minus the cash interest receipts earned by the government on investments in interest-bearing financial assets.

Major party

For the purposes of the Election commitments report, a major or ‘designated’ party is one with 5 or more sitting members at the time of the election.

Medium term

The period that includes the current budget year and the following ten years. For example, the medium term for the 2022–23 Budget is the period from 2022–23 to 2032–33. The medium-term period includes the forward estimates and the following 7 years.

Ongoing policies

An ongoing policy is one that does not have a specified end date. Many important government programs are ongoing. Examples include the provision of income support and assistance to families such as the age pension and Child Care Subsidy, and assistance with the cost of higher education through the Higher Education Loan Program (HELP).

An ongoing program will typically continue until there is a government decision to end the program. In many cases, ending the program will also require the approval of Parliament.

For the Election commitments report, policies are assumed to be ongoing unless specified otherwise.

Payments

Payments capture all outgoing cash transactions from the Australian Government to individuals, organisations or other levels of government. In the budget context, payments are those that affect the underlying cash balance and comprise cash transactions for operating activities and the purchase of non-financial assets. Examples include an age pension payment, a Medicare rebate for a doctor's visit, and the wages of a Centrelink employee.

Pre-election Economic and Fiscal Outlook (PEFO)

A report produced under the Charter of Budget Honesty by the Secretary to the Treasury and the Secretary of the Department of Finance within 10 days of the issue of the writs for a general election. The purpose of PEFO is to provide updated information on the economic and fiscal outlook, taking into account, to the fullest extent possible, all government decisions and all other circumstances that may have a material effect on the economic and fiscal outlook that were in existence before the issue of the writs for the election.

PEFO provides the starting point or ‘baseline’ budget estimates and economic parameters that underpin the analysis presented in the Election commitments report.

Public debt interest (PDI)

The borrowing costs of the government, mainly incurred through issuing and servicing government debt, and recorded as a cost to government in the budget. Public debt interest estimates reflect the cost of both the government debt already issued and its expected future borrowings. These are calculated using the contracted interest rates incurred on existing debt and on projected interest rates for future borrowings.

Receipts

Receipts are the government's income, recorded at the time they are received as reported on a cash accounting basis. In the budget context, receipts are those that affect the underlying cash balance, so exclude the repayment of loans and other cash flows relating to the exchange of financial assets. The majority of government receipts are tax receipts, such as company tax, personal income tax, and goods and services tax. The government also receives non-tax receipts, such as interest earned on government loans and dividends from government investments.

Revenue

Revenue is government income, recorded at the time it is earned as reported on an accrual accounting basis. The majority of government income is made up of tax revenue, such as company tax, personal income tax, and goods and services tax. The government also receives non‑tax revenue, such as interest earned on government loans and dividends from government investments.

Tax cap   

A commitment to maintain tax receipts at or below a specified per cent of GDP. In the 2022–23 Budget this cap was 23.9 per cent of GDP.

Unconstrained tax receipts are the level of tax receipts that would be expected to be raised before any tax-to-GDP cap is applied.

Constrained tax receipts are receipts after the application of the tax-to-GDP cap.

Unspecified tax cuts refer to the value of additional unspecified tax adjustments that would be required to prevent taxes rising above the nominated tax-to-GDP cap in each year.

Terminating policies

A terminating policy is one that has a specified end date. An example would be a policy to provide funding over 4 years for a project. Fiscal stimulus measures designed to assist households and businesses in an economic downturn are generally examples of terminating policies. For example, as part of the response to the Global Financial Crisis of 200 ‑ 09, the government made one ‑ off payments to low- and middle-income individuals and households with dependent children.

For the election commitments report, policies are assumed to be ongoing unless specified otherwise.

Uncapped funding

Uncapped funding is where the government does not specify a limit to the sum of money allocated for a program. This means that the maximum amount of government spending on the program may change, for example if there are changes to the demand for the program or any other external factors. Uncapped funding is typically used by governments when delivering welfare and other demand-driven social benefits and programs. Examples are pensions like the age pension and income support payments like the JobSeeker payment. In each case, the total amount of spending depends on factors including the number of eligible recipients.

Underlying cash balance

The underlying cash balance (UCB) is a cash measure of the budget balance equal to the difference between the government's receipts and its payments. It is one of several indicators known as ‘budget aggregates’ that measure the impact of the government's budget on the economy. When the government or the media say the budget is in surplus or deficit, they are generally referring to the underlying cash balance, or sometimes the net operating balance or fiscal balance. More specifically, the underlying cash balance is equal to the government's receipts (for example from tax collections) minus its payments from providing services (such as Medicare) and support (such as the age pension). The types of receipts and payments used in the calculation include those from buying and selling non‑financial assets, such as buildings or equipment. The term 'underlying' is used because it excludes some cash transactions that are captured in the broader, but less commonly used, headline cash balance.