Budget lingo can be hard to understand, especially as we can often feel disconnected to the world of finance and financial management. But listening to the radio, scrolling through social media and reading news articles can still mean we are confronted with phrases that feel way too financial. Below are some ones that you might have heard of before, so that next time you hear it used in passing, you’re able to understand what’s really being said!
In the black refers to a financial structure or company not being in debt. The origin of the phrase comes from bookkeeping lingo used years ago, where financial books where physical and not computerised. A key phrase used then was in the red which referred to the process where bookkeepers would enter a loss in red ink. This term is now used to to refer to institutions making a loss, compared to in the black which refers to financial institutions not being in debt.
Deficit means that spending is higher than the actual revenue coming in. This also means that the government (or institution) will have to borrow to make a loss.
Gearing is where someone borrows money to buy an investment that will generate an additional source of income. The investment can be anything, but is normally shares or a property of some sort.
Inflation refers to rising prices across the board. For the Australian dollar, it would mean less purchasing power when compared to other currencies. The rate of inflation can also reflect the change in cost of living over time.
Interest refers to the cost of borrowing, which compensates the loaner for the risk of the loan. The lower the risk, the lower the interest.
Interest Rate is an annual rate; so the amount of interest paid divided by the total amount of money loaned. So, if the central bank raises or cuts interest rates, it changes the price of borrowing money overnight.
National debt is the total amount owed by a country’s government (also referred to as outstanding borrowing).
Negative Gearing is when the return is less than the repayments on the loan as well as additional out of pocket expenses. For example, out of pocket expenses for an investment property could include cost of council rates, insurance and maintenance. However, under Australian law, investors can claim these out of pocket expenses as an income tax deduction. This means that the investor will have a lower income at tax time.
Rebate refers to the return of money if too much has been paid, or if the purchase or payment has been subsidised.
Surplus means that revenue is greater than spending. A budget in surplus can also mean the government has additional cash to inject back into the economy without going into the red.
Sustainable Growth refers to economic growth that can keep going without impacting upon the availability of nonrenewable resources and the environment. This term also refers to the level of growth indefinitely maintainable for an economy without increasing inflation.
