Document Index Budget Paper 1 Budget Statement 1

Part I: Budget Aggregates

The 1999-2000 Budget demonstrates the Government's commitment to maintain the budget in surplus while Australia's economic growth prospects remain sound. In both accrual and cash terms, the Budget provides for a substantially strengthened surplus in 1999-2000.

Table 1: Summary of Commonwealth General Government Accrual Aggregates^(a)

1. The figures in the table may not add due to rounding.
2. Operating result before abnormal items.
3. Accrual data for 1997-98 are taken from the annual Consolidated Financial Statements (CFS). From 1998-99, the accounting treatment of certain revenue items, in particular taxation revenue and some dividends, has changed. See Statement 4 for further information.
4. Adjustments for capital and revaluations are required to derive fiscal balance from the operating result (revenue less expenses). See footnote 1 (page 1-5) for further information.

Table 2: Summary of Commonwealth General Government Cash Aggregates^(a)

1. Estimated and projected cash balances from 1998-99 onwards are derived estimates using data from the new accrual accounting system.
2. Following recent changes in the Australian National Accounts standards, the underlying and headline cash balance estimates in the table from 1998-99 onwards include payments by the Commonwealth in respect of accumulated public trading enterprise (PTE) superannuation liabilities. This detracts around $1¼ billion from the surplus in 1998-99 and following years.

The 1999-2000 Budget is the first Commonwealth budget to be prepared using an accrual framework. The major accrual budget aggregates for 1997-98 to 2002-03 are shown in Table 1 above. The underlying and headline cash balances are reported in Table 2 and provide a budget result comparable to the cash basis used in previous years.

• In accrual terms, a fiscal surplus of $5.4 billion, or 0.9 per cent of GDP, is expected in 1999-2000. This is an improvement of $2.3 billion on the estimated outcome for 1998-99.
  
• In cash terms, an underlying surplus of $5.2 billion is expected in 1999-2000. This underlying cash surplus has been achieved despite the inclusion in underlying outlays of around $1¼ billion of Public Trading Enterprise (PTE) related superannuation provisions. The inclusion of provisions is consistent with recent revisions in national accounting standards by the Australian Bureau of Statistics. These provisions mainly involve payments to current and former employees of Telstra and Australia Post who are, or have been, members of Commonwealth superannuation schemes. Prior to 1998-99, these payments were treated as financing transactions and did not impact on the underlying cash balance.
  
• In 2000-01, the fiscal surplus is projected to rise to $7.2 billion or 1.1 per cent of GDP, with substantial surpluses also projected in the years beyond. The underlying cash surplus, however, is projected to be $3.1 billion. The principal reason for the difference is the bring-forward of company tax under the Pay-As-You-Go system. Although liability accrues in 2000-01 (and is therefore counted under an accrual system), the tax is paid in instalments over a number of years (and is therefore not counted under cash accounting until actually received).

The large falls in revenue and expenses in 2000-01 result primarily from changes in Commonwealth-State funding as a result of the implementation of the measures contained in A New Tax System, in particular the abolition of Financial Assistance Grants to the States and Wholesale Sales Tax. The Commonwealth will collect revenue from the Goods and Services Tax (GST) on an agency basis for the States and Territories and therefore revenue from this tax is classified as State and Territory rather than Commonwealth revenue.

The Government's key fiscal indicator in the new accrual framework is the `fiscal balance'. The fiscal balance is the accrual equivalent of the underlying cash balance. A fiscal surplus indicates that the Government is saving more than enough to finance all of its investment spending and is, therefore, not directly contributing to the current account deficit. ^[1]

While the fiscal balance is the accrual equivalent of the underlying cash balance, there will be differences between the two measures arising mainly from timing differences in the recording of transactions under accrual and cash accounting. For example, in 2000-01 differences arise in the accrual and cash treatments of company tax changes under the proposed Pay-As-You-Go arrangements announced in A New Tax System. ^[2]

Coinciding with the move to accrual budgeting, the main focus of budget reporting has broadened to encompass the general government sector (previously the budget sector was the main focus). The general government sector includes non-commercial government authorities such as the CSIRO and ABC. The inclusion of these authorities has only a marginal effect on the fiscal balance, adding $115 million in 1999-2000.

The fiscal balance and other accrual measures are discussed in further detail in Appendix A to this Statement.

Footnotes

[1] The fiscal balance can be derived from the accounting standard operating result (the difference between revenue and expenses) by making two adjustments. The first adjustment is for capital. In order to capture government investment, the fiscal balance incorporates net capital expenditure, but not capital use or depreciation. The second adjustment is for revaluations (changes to the value of assets and liabilities). Revaluations are included in the operating result, but they do not affect the fiscal balance. In addition, some further adjustments may be required to capture differences between Government Finance Statistics (GFS) standards defined by the Australian Bureau of Statistics (which are used as the basis for calculating the fiscal balance) and Australian Accounting Standards (which are used as the basis for calculating the operating result). The fiscal balance is also an aggregate in the GFS operating statement (see Statement 9).

[2] Accrual revenue is recognised at the time an assessment for taxation occurs. New company tax payment arrangements commencing in 2000-01 will involve some companies being assessed for tax under both the existing and new payment arrangements, resulting in higher accrued revenue in that year. As announced in A New Tax System, companies will be allowed to defer part of this tax liability to smooth actual tax payments in 2000-01. Compared to accrual revenue, cash receipts are lower in 2000-01 and higher in later years as a result of these changes.