👉 Background: Each year, the government drops its annual budget for Australia’s spending. It’s a bit like your personal budget, except we’re talking billions and billions in annual income: from personal income tax, payroll tax and corporate tax, as well as billions and billions of dollars in government spending across healthcare, infrastructure, education, childcare and a whole lot more.

‍👉 What happened: As part of this budget, the Labor government has really pushed haaard on cost-of-living relief. They announced a number of significant investments to ease financial pressures:

• $17.1 billion worth of tax relief - the modest tax cuts will reduce the tax rate for income between $18,201 - $45,000, which is expected to save workers $536 a year
• An $8.5 billion investment into Medicare to increase the number of bulk-bill doctor consultations
• A 20% of HECS-HELP debts to ease pressures on current students and recent graduates
• A $15 billion investment into childcare subsidies that will help over 66,000 Aussie families
  

👉 What else: With all these big investments, the Labor government has warned that this election will run into a deficit of more than $42 billion - that's after two years of budget surpluses. But despite running a loss in this budget, this doesn’t come as a surprise because Australia runs a “structural deficit”.

What's the key learning?

💡A structural deficit is when the government budget is permanently making a loss — even during good times. That means even when the employment rate is high, consumer spending is high; and the economy is performing well - we’d likely have a deficit.

💡The Australian budget has been "structural deficit" for nearly 20 years which tells us the issue isn’t just short-term spending, but it’s more deeply embedded in how the budget is built. Interestingly, the two previous budgets have been in surplus mainly due to the economy outperforming expectations — meaning higher tax receipts and lower welfare payments.

💡With this election budget, Labor’s going after some big-ticket spending — tax cuts, Medicare, HECS debt relief, and childcare… so we’re back in deficit territory. The US, UK, France and Italy are also in structural deficits too. And unless structural changes are made like cutting spending or boosting long-term revenue — the deficits are likely to stick around.