Economy

TERM

DEFINITION

Absolute poverty

The situation where someone does not have the level of income required to purchase a basket of goods and services, which is assumed to be necessary for survival.

Accrual Aggregates

The adoption of accrual budgeting in the Budget represents international best practice in public sector financial management and reporting. The main advantage of accrual measures (as opposed to cash) is that they provide a more comprehensive indication of the total activity of government and the long-term effects of current policy.

Anti-competitive conduct

Behaviour that reduces the level of competition in the market.

Australian Competition and Consumer Commission

An independent statutory authority, the Commission administers the Trade Practices Act 1974 and the Prices Surveillance Act 1983 and has additional responsibilities under other legislation. The Commission is the only national agency dealing generally with competition matters and the only agency with responsibility for enforcement of the Trade Practices Act and the associated State/Territory application legislation.

Automatic stabilisers

A mechanism that decreases the size of fluctuations in the level of spending in the economy. For example when the economy expands, government spending on welfare is reduced and tax revenue will increase. Import expenditure and savings also follow this pattern as automatic stabilisers.

Average rate of tax

Total tax paid divided by the total of the income received.

Budget outcome

The budget result. The difference between revenue and expenses. It is also known as the fiscal balance.

Capital gains tax

A tax levied on increases in value of a capital asset, such as shares or real estate.

Corporatisation

A government business enterprise that remains in government ownership, but its management structure is altered so that it operates like a privately owned enterprise.

Cyclical component of the budget

The changes in the budget outcome as a result of changes in the level of economic activity.

Deficit budget

Estimates of expenses are greater than estimates of revenue. It involves a reduction of the National Debt.

Direct benefits

Direct benefits are government cash benefits and allowances such as the age pension, sole parent pension and unemployment allowances.

Fiscal balance

The fiscal balance is the accrual equivalent of the underlying cash balance. A fiscal surplus indicates that the Government is saving more than enough to finance all of its investment spending.

Fringe benefits tax

A tax on businesses for payments, usually in kind, made to employees over and above wages and salaries. Fringe benefits such as a company car, or an expense account, or payment of superannuation premiums are provided in order to attract and hold staff, and for motivation purpose.

Goods and services tax

A tax on goods and services.

Government budget

The plan of expected expenses and revenue of the government, usually for the next fiscal year.

Government business enterprises

Businesses owned by the government.

Headline cash balance

This is the actual change in the size of government expenses and revenue, including changes in assets and liabilities. A larger headline surplus allows debt repayment or future savings.

Impact of a tax

The impact of a tax refers to the point at which it is imposed initially. In the case of an excise duty, the impact of the tax is on the manufacturer; the incidence of the tax, however, may be on the final consumer.

Incidence of a tax

The final resting place of a tax is called the incident of the tax.

Income tax

The tax on income or the part of income liable to tax. It is determined by deducting from accessible income (gross income) all allowable deductions.

Indirect benefits

Indirect benefits are government non cash benefits received by households from health, education, housing and other social security and welfare services, such as child care assistance.

Indirect tax

These are taxes paid on goods and services that have been purchased. The tax is included in the purchase price.

Marginal tax rate

The extra tax paid as a proportion of the change in income received. It is calculated by dividing the change in tax by the change in income.

National Debt

The national or public debt is the net liabilities of Australian governments.

Pressure group

A group who sets out to influence a government policy, such as the media, business councils, the ACTU, environmentalists.

Privatisation

The process of selling a public corporation to private shareholders.

Progressive tax

A tax whose rate (marginal tax rate) increases as the amount of taxable income increases, eg. personal income tax.

Proportional tax

A tax whose rate (marginal tax rate) remains the same regardless of the amount of taxable income.

Public sector

That sector of the economy, which is owned and directly controlled by the government. It includes both government and semi-government bodies.

Regressive tax

A tax, which takes a smaller proportion of income as taxable income increases.

Relative poverty

This is calculated as a proportion of average earnings. People living below this level are said to be in relative poverty, in comparison to the other people in that nation. They lack the basic necessities in relation to the general standard of living in a country.

Social cost

Costs which do not appear in the account of a firm; eg. the cost to the community and individual of noise, air pollution and traffic congestion.

Structural component of the budget

The budget outcome if the economy was at full employment. This relates to the effects of changes in policy on the budget outcome, as distinct from changes in the level of GDP (cyclical component).

Surplus budget

An excess of government revenue over government expenses. T is greater than G.

Tax efficiency

The taxation system should not cause inefficient resource allocation.

Tax equity

The two basic principles of tax equity are horizontal equity and vertical equity. Horizontal equity means that persons in similar positions should be treated equally and vertical equity means that people should pay taxes in accordance with their ability to pay.

Tax threshold

The starting point where the tax is charged. This is generally the income level that is first subject to the tax.

Trade Practices Act

The objective of the trade practices act, as set out in the legislation, is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection. The Act covers anti-competitive and unfair market practices, mergers or acquisitions of companies, product safety/liability, and third party access to facilities of national significance.

Underlying cash balance

This the most accurate measure of the government's budget funding requirements in a particular year. Over the long term it will equal the fiscal balance.