Joe Hockey has unveiled the Abbott government's first Budget, one designed to reduce government debt and set us on the path to surplus. Going back to the early '70s, governments have managed debt, deficits and spending blow-outs in different ways.
Budgets have become increasingly politicised in Australia and there has certainly been much debate in the lead-up to this week’s Budget over spending cuts and the size of the deficit. However, the concept of a balanced budget is fairly straightforward, according to David Primo, associate professor of political science and business administration at the University of Rochester and the author of Rules and Restraint: Government Spending and the Design of Institutions.
‘A balanced budget occurs when what the government spends in a year is equal to what it takes in in taxes and other revenues. If it spends less, it's said to be running a surplus. But as is typically the case, when the government spends more than it takes in, that's when we say it's running a deficit. If that's the case, then to pay its bills the government has to take on debt. So a balanced budget is essentially the absence of a surplus or a deficit in government spending.’