Measuring the budget? (1 Viewer)

[d_a_n_z]

Do we need to know the three measures of budget outcomes ie Headline/Underlying cash/fiscal balance?
From the leading edge textbook it says:

"There are two main measures of the BUDGET OUTCOME - which are results of the underlying cash outome and fiscal balance.
The underlying outcome is the differnce between budget outlays and revenues, excluding one-off items such as assets sales.It measures cash items, not those which will occur into the future.
The ficsal outcomes calculates the differnce bbetween budget expenditure and revenues also excluding one offs, but is measured through the ACCURAL ACCOUNTING METHOD, which incldues future payments which have not taken place, and is thus reagrded as the most accurate long term indicator of fiscal policy.
Th headline budget outcome is the third measure - which analyses the budgets cash outcome but includes one-off transactions."

What does this all mean????????????? Thanks so much...

 

[Jexi]

According to my teacher, this stuff was heavy back in the old syllabus and its not worth stressing over. But a run down, I hope I can explain it properly :|

Fiscal Outcome / Acrual Accounting Method
You know how some expenses you have already incurred but not yet paid?

For instance, your health insurance company says you have to pay $300 at the end of 3 months for their services for those 3 months ($100/month). Well at the end of the first month, if you were to tally up all your expenses and stuff (like an economy would really), you wouldn't really include that Health Insurance fee in because you haven't paid it yet right?

So basically, this method of calculation takes into account all the expenses you have incurred (such as the $100 health insurance fee, even though the fee is not paid until the end of the 3rd month). In the case of the government, they have heaps of superannuation of staff members that are not paid now but are incurred. Basically, this method takes into account all these things.

Headline Budget Outcome
This basically shows all the planned transactions of the government including their one off sales eg. if they sell Telstra (or the rest of it), the Headline Budget Outcome would include this in.


Underlying Cash Outcome
Unlike Headline, it doesn't include these one off sales.

Hope I haven't confused you.

 

[d_a_n_z]

No very simple, i like. Just to clarify some things...

Fiscal Outcome / Acrual Accounting Method

So basically, this method of calculation takes into account all the expenses you have incurred (such as the $100 health insurance fee, even though the fee is not paid until the end of the 3rd month). In the case of the government, they have heaps of superannuation of staff members that are not paid now but are incurred. Basically, this method takes into account all these things.
So this means that fiscal/acural measures the things that they will eventually pay and owe per month, but not at this very moment...

Headline Budget Outcome
This basically shows all the planned transactions of the government including their one off sales eg. if they sell Telstra (or the rest of it), the Headline Budget Outcome would include this in.
This is the same as fiscal/accural, only takes into account one-offs...


Underlying Cash Outcome
Unlike Headline, it doesn't include these one off sales.
But then the differnce between this and the first one im not so sure...

Thanks so much for you help!!!!!

 

[Jexi]

Oh only the Fiscal Outcome uses the Accounting Method. Both Underlying Cash Outcome and Headline Budget Outcome only takes into account the expenses when they need to be paid.

I hope that makes sense.