Budget terms explained — Gen Z edition

Ad-hoc relief

Definition: Ad-hoc relief is when the government might give out a temporary bonus or raise to employees to help them get through financial challenges. It’s not a permanent raise, but just enough to keep you afloat until things get better.

Simplified: Imagine you’re deep into Candy Crush, down to your last life, about to quit the game… and then bam! The game throws you a free boost, just what you need to keep going. That’s exactly what ad-hoc relief feels like for government employees — a sudden, unexpected lifeline when you need it the most.

Subsidy

Definition: A subsidy is a certain amount of money granted — through taxpayers’ money — by the government to help an industry or business reduce the price of a commodity or service.

Simplified: Imagine you’re all set for a beach day with your squad, but the beach hut costs are higher than expected. Suddenly, a friend’s lifesaver parents step in and cover the expenses. That’s a subsidy in action — a government boost making things affordable for everyone, just like that cool parent swooping in with cash.

Fiscal deficit

Definition: A fiscal deficit is a shortfall in the income of a government compared to its expenditure. It’s essentially when the government spends more money than it brings in through taxes.

Simplified: Ever craved that shiny new iPhone but realised your bank account couldn’t handle it? So, you whip out your credit card, bridging the gap between desire and reality? Bingo! That’s the fiscal deficit vibe — when the government spends more than it earns, just like when you spend more than what’s in your wallet.

Divisible pool

Definition: The divisible pool is the total revenue collected by the central government, divided between different levels of government based on an agreed formula. This ensures fair resource sharing across regions.

Simplified: Suppose your group of friends collected all your money in a jar to buy a bunch of pizzas instead of each person buying their own. When the pizzas arrive, everyone gets a fair share based on how much they pitched in. That jar is basically like the divisible pool — pooled resources distributed fairly to ensure everyone gets their piece.

Default

Definition: Default is when the government fails to make required interest or principal repayments on a debt, making it expensive or impossible for it to borrow money in the future.

Simplified: Imagine lending your car to a friend who promises to return it next week. Weeks pass, and not only do they not return it, but they also start leaving your messages on read. So, now you have a friend who has disappeared into thin air, leaving you car-less and with trust issues. That’s your classic default scenario — when someone ghosts on repayments, making you, and everyone you know, rethink your lending policies.

Debt servicing

Definition: Debt servicing is the process by which a government makes regular payments of interest and principal on its loans or debts.

Simplified: Do subscription services ring a bell? Each month, you cough up cash to keep your favourite shows streaming. Debt servicing is similar as you regularly pay back the money you owe, including both interest and principal, to keep things running smoothly.

Remittance

Definition: Remittance is the non-commercial transfer of money from individuals working abroad back to their home countries. These transfers can include earnings from foreign workers, short-term employee income, and personal remittances, boosting the economy of the home country.

Simplified: Suppose you’re at college, and your parents send you cash monthly to help you cover your food, books, and rent. Getting a monthly allowance from your folks to survive college is similar to remittance (of course, on a bigger scale). The money coming from abroad, often from citizens working in other countries, helps boost the economy and support families back home.

Tax net

Definition: In government terms, the tax net refers to the total population or businesses subject to taxation within a particular jurisdiction.

Simplified: You know those apps where you swipe through profiles looking for matches? Well, think of the tax net as a massive swipe where every taxpayer gets caught. Each swipe represents someone who has to pay up to keep things running smoothly. Just like how those apps find your perfect match, the tax net finds everyone who needs to chip in for the government’s services.

Fixed investment

Definition: Fixed investment refers to spending on physical assets like infrastructure, machinery, and equipment that are expected to last for more than one year, like building new parks or upgrading public transportation.

Simplified: Let’s assume you’re into fashion and you decide to splurge on a timeless wardrobe staple, like a classic leather jacket. Sure, it’s a bit pricey upfront, but it’s an investment piece that’ll never go out of style and will last you for years. Similarly, when the government makes fixed investments, they’re putting money into projects that would stand the test of time and benefit communities for generations to come.

Regressive taxes

Definition: In a regressive tax system, individuals with lower incomes end up paying a larger share of their earnings in taxes than those with higher incomes. This is because taxes are calculated based on the value of assets purchased or owned, rather than on the individual’s income level, disproportionately affecting low-income earners.

Simplified: Think of it like buying concert tickets. Say the ticket price is the same for everyone, but for someone earning minimum wage, it might represent a bigger chunk of their paycheck than for someone earning six figures. Even though they’re both paying the same ticket price, it affects the lower earner more. That’s the deal with regressive taxes — they hit harder on those with less to spare, even though the dollar amount may be the same for everyone.

Understanding budget terms can feel like unlocking a new game level, but with these Gen Z analogies, you’re one step closer to mastering the talk of the town!