<P> The overall government budget balance is determined by the sum of the cyclical deficit or surplus and the structural deficit or surplus (refer to chart). Therefore, for example, a cyclical surplus could mask an underlying structural deficit, as the overall budget may appear to be in surplus if the cyclical surplus is greater than the structural deficit . In this case, as economic conditions deteriorated and the budget went into cyclical deficit, the structural and cyclical deficits would then compound leading to higher deficits and more dire economic conditions . </P> <P> An example of this occurred in Australia during the later years of the Howard Government . From 2009 Treasury attempted to separate cyclical and structural components of the budget balance, and first started publishing estimates of the structural component . Treasury showed that despite a run of large and often unexpected headline surpluses, the Australian economy was in fact in structural deficit from at least 2006--07, and was deteriorating as far back as 2002--03 . At this time they determined that despite a headline surplus of A $17.2 billion in 2006--07, there was an underlying structural deficit of around $3 billion, or 0.3% of GDP . </P> <P> This structural deficit was caused by a mining boom leading to extremely high revenues and large surpluses for several consecutive years, which the Howard Government then used to fuel spending and tax cuts, rather than saving or investing them to cover future cyclical downturns . With the Global Financial Crisis unexpectedly starting in 2007, revenues quickly and significantly declined and the underlying structural deficit was exposed and exacerbated, which then had to be dealt with by later governments . By 2008--09 when the budget had a headline deficit of $32 billion, the structural deficit was out to around $50 billion . In 2013 it was estimated the structural deficit remained at about $40 billion, or 2.5% of GDP . </P> <P> Economist Chris Dillow has questioned the distinction between cyclical and structural deficits, and this has received support from other leading economists . He contends that there are too many variables involved to allow a clear distinction to be made, especially when dealing with current circumstances rather than retrospectively, and suggests that the concept of structural deficits may be used more for political purposes than analytical purposes . </P>

Where does the money for deficit spending come from