BP1ST2 - Outlays

Outlays

Table 5 provides estimates of budget sector outlays for 1996-97 to 2000-01. [15]

Table 5: Summary of Budget Sector Outlays

Over the period 1997-98 to 2000-01, underlying outlays are expected to fall:

in real terms, by around 1½ per cent in 1997-98, and remain broadly unchanged thereafter; and
as a proportion of GDP, from over 26½ per cent in 1996-97 to just over 25 per cent in 1997-98, and continue to decline steadily in the outyears.

Total outlays (ie underlying outlays plus net advances) fall in real terms in 1997-98, but increase significantly in the following two years. This reflects a sharp reduction in asset sale proceeds forecast from 1998-99. A decline in real terms is forecast for 2000-01.

Net outlays measures taken since the 1996-97 Budget contribute to the fiscal consolidation task in 1997-98 and over the forward estimates period.

Table 6 reconciles the outlays estimates between the 1996-97 Budget, the MYEFO and the 1997-98 Budget in terms of policy decisions and parameter and other variations.

Between the 1996-97 Budget and the MYEFO, underlying outlays increased by $1.5 billion in 1996-97 but decreased in 1997-98 and the outyears. This pattern largely reflected a number of policy decisions taken by the Government which impacted primarily in 1996-97 and did not have a major effect in the outyears. Revisions to economic parameters in particular, lower expected inflation and wages growth * reduced outlays in all years, with the expected impact larger in the outyears. Lower interest rates reduced public debt interest outlays in all years. From 1997-98 these positive effects more than outweighed some increase in outlays associated with higher unemployment beneficiary numbers and higher average rates payable on pensions and other benefits.

Table 6: Reconciliation of Changes to Budget Sector Underlying Outlays since the 1996-97 Budget

(a) Includes the public debt interest savings from measures affecting either the underlying or headline balance.

(b) Includes recostings of pre-MYEFO decisions.

(c) Abstracts from Government spending decisions for which an allowance was already set aside in the Contingency Reserve in the 1996-97 Budget.

Revisions to economic parameters in the period since the MYEFO reduce outlays further across all years. Once again, favourable movements in prices and wages and lower public debt interest outlays contribute to the reductions in outlays. Lower forecasts of unemployment beneficiary recipients also reduce outlays.

Downward movements in outlays have been limited by further increases in programme specific parameters, primarily reflecting changes in client numbers and/or higher average rates payable on family payments, family tax payments and disability support pension programmes. As new data have become available, projections of client numbers and average rates payable on a number of payments have been revised. The major revisions have been to pensions, family tax payments and disability support pension programmes. Programme specific parameters are difficult to forecast because of the need to interpret recent trends in an environment in which programmes and eligibility criteria are changing.

Outlays Measures

Policy decisions taken in the period since the MYEFO (up to and including the 1997-98 Budget) reduce underlying outlays in net terms by $87 million in 1997-98 and by around $1 billion in 1998-99. [16]

It should be noted, however, that these estimates include the effect of spending decisions for which provision had already been included in the 1996-97 Budget in the Contingency Reserve.

While the Government's decisions to provide funding for the environment from 1997-98 (through the NHT) and to legislate the commitment to maintain pensions at 25 per cent of MTAWE have been treated in this Budget as new spending decisions, they do not increase underlying outlays because of the allowance in the Contingency Reserve included in the 1996-97 Budget.

Excluding decisions for which an allowance was previously set aside, net outlays policy decisions since the MYEFO provide for a significant reduction in underlying outlays in 1997-98 and across the outyears.

Table 7 provides a summary of the major savings measures affecting underlying outlays, while Table 8 outlines the major spending measures.

In total, net outlays savings measures in the period since the 1996-97 Budget, after providing funding for new spending measures of $1 billion in 1997-98 and $1.6 billion in 1998-99, reduce underlying outlays by $486 million in 1997-98, and $797 million in 1998-99.

The most significant saving measure reflects the Government's decision on the 'LAW' tax cuts (shown as outlays when they were proposed as matching Government superannuation contributions) which will not be paid as outlays but part of which will be redirected to a new savings rebate implemented through the tax system. This measure reduces outlays by $1.1 billion in 1998-99, $2.4 billion in 1999-2000 and $4 billion in 2000-01.

Other key savings decisions include:

enhancements in the delivery of public goods and services, including through outsourcing certain services;
improved administration of social security and health payments; and
reforms to arrangements for rent relief and funding of public housing.

The savings measures contribute significantly to the fiscal consolidation task and also enable the Government to undertake some new outlays measures including:

an increase in the rate of Domiciliary Nursing Care Benefit and the extension of Carer Payment;
the establishment of a Federation Fund to finance projects of national significance to mark the Centenary of Federation; and
the establishment of the pilot 'Work for the Dole' scheme.

A full description of all 1997-98 Budget outlays measures can be found in Part I of Budget Paper No. 2.

Table 7: Major Savings Measures Introduced Since the 1996-97 Budget

(a) Includes public debt interest savings of decisions.

Table 8: Major Spending Measures Introduced Since the 1996-97 Budget

(a) An allowance was included in the Contingency Reserve for these items in the 1996-97 Budget.