We’ve all had that month where birthday presents, holidays and weddings have sent us over our budget. 

And similar to our own budgets, which can run negative (temporarily)… the Federal Budget can too.

What's a budget surplus?

A big selling point for a government in power is to deliver a Budget in surplus. That means the Government’s revenue is greater than its expenses for that period of time. 

It’s good because it allows the Government to start paying down some of its debt.

But sadly, it ain’t often that it happens. In fact, Australia’s last annual surplus was back in 2008… but we had a small surplus of $1.4 billion for the month of March 2021. Ya know, if that counts.

What's a budget deficit?

A budget deficit is when the Government's expenses are greater than its revenue. When the government’s budget is in deficit, it means it needs to borrow more money to make up for the shortfall in money that’s coming in… or do it another way.

That other way could be…

• Cutting funding to government services to curb spending
• Hiking up taxes to increase their income.

There’s also another scenario: having the budget in balance. AKA the government’s total expected expenses = its total expected revenue. Even Stevens style. The last time this happened was just pre-COVID. Ah, TBT.

Why is it not just called profit or loss?

You're probability more familiar with the terms ‘profit’ and ‘loss’. But the government? They don’t roll like that. 

You see, a private company aims to run the company at a profit so that it can distribute those profits to its shareholders.

However, the Federal Government doesn’t make a profit like Coles, BHP or Qantas. 

A government earns revenue from the community (through taxes) in order to fund public activities (think services, infrastructure) and make repayments on debts. 

And if there is additional revenue at the end of a year, it generally repays the national debt faster. So it makes sense that it’s called a surplus - because it’s not distributing the additional funds back to the community.