Document
Index
Budget Paper 1
Budget Statement 9
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Index |
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This part looks at current and projected accrual data for the Commonwealth non-financial public sector. The concepts contained in this part are consistent with those to be used by the Australian Bureau of Statistics in their Government Finance Statistics publication (Cat. No. 5512.0), planned for release in July of this year.
The key difference between cash and accrual accounting is one of timing: cash
indicators record the transaction when cash is exchanged, whereas accrual indicators
record the outcome of the transaction when economic value is exchanged. As a consequence
accrual measures take into account transactions such as accruing employee entitlements.
The major accrual measure used by the Commonwealth to assess how fiscal policy may affect
the national economy is the fiscal balance. The fiscal balance can be conceptualised as
revenue minus expenses, adjusted for net capital formation and revaluations. The measure
is explained in more detail in Appendix D.
The fiscal balance is effectively a measure of government net lending, the gap between
government savings and investment. It measures the government's net call on other sectors
in the economy, and so corresponds to government's contribution to the current account
deficit. More information on the fiscal balance can be found in Appendix A to
Statement 1, and Appendix D to this Statement, and in the Treasury's information
paper Fiscal Policy Under Accrual Budgeting.
Table 1 shows that the Commonwealth non-financial public sector fiscal balance moved into
surplus in 1997-98. A further improvement, to a surplus of 0.7 per cent of GDP,
is expected in 1999-2000, driven by falls in non-financial public sector expenses.
For the Commonwealth general government sector, expenses are expected to be broadly
unchanged as a per cent of GDP, in 1999-2000. However increased taxation revenue
results in an improvement in the general government fiscal surplus from
0.5 per cent of GDP in 1998-99, to 0.9 per cent in 1999-2000. Further
improvements over the outyears, to a 1.5 per cent fiscal surplus in 2002-03 are
expected to be driven by falls in expenses rather than increased revenue. Revenue is
forecast to fall as a percent of GDP, largely as a result of the Commonwealth's proposed
tax reform measures.
The Commonwealth PTE fiscal balance is expected to deteriorate slightly in 1999-2000, in a
year in which falls in both revenue and expenses are anticipated.
Table 1: Commonwealth Non-financial Public Sector Expenses, Revenue and Fiscal Balance
by Institutional Sector as a Percentage of GDP(a)
| General Government | Public Trading Enterprises | Non-financial Public Sector | ||||||||||||
| Revenue | Expenses | Net Capital Formation | Fiscal Balance | Revenue | Expenses | Net Capital Formation | Fiscal Balance | Revenue | Expenses | Net Capital Formation | Fiscal Balance | |||
| 1996-97 | 26.9 | 27.6 | 0.1 | -0.8 | 5.2 | 4.9 | 0.2 | -0.1 | na | na | na | -0.9 | ||
| 1997-98 | 26.2 | 27.4 | 0.1 | -0.3 | 5.2 | 4.8 | 0.2 | 0.4 | na | na | na | 0.1 | ||
| 1998-99(e) | 25.8 | 25.1 | 0.2 | 0.5 | 4.3 | 4.1 | 0.3 | 0.0 | 29.5 | 28.5 | 0.5 | 0.5 | ||
| 1999-00(e) | 26.2 | 25.1 | 0.2 | 0.9 | 3.9 | 3.9 | 0.2 | -0.1 | 29.4 | 28.2 | 0.5 | 0.7 | ||
| 2000-01(p) | 22.9 | 21.6 | 0.2 | 1.1 | na | na | na | na | na | na | na | na | ||
| 2001-02(p) | 22.0 | 21.1 | 0.2 | 0.7 | na | na | na | na | na | na | na | na | ||
| 2002-03(p) | 22.0 | 20.4 | 0.2 | 1.5 | na | na | na | na | na | na | na | na | ||
This part examines current and projected levels of Commonwealth net debt and net assets. A jurisdiction's levels of net debt and net assets are important indicators of its financial position. High levels of net debt impose a call on future revenue flows to service that debt, and meeting those payments can limit government flexibility to adjust outlays.
The accrual and cash concepts of net debt are equivalent. Net debt comprises the stock
of selected gross financial liabilities less financial assets, and broadly reflects the
cumulative effect of underlying deficits. The Commonwealth has allocated a high priority
to debt reduction in recent years, in order to reduce the share of current outlays
allocated to debt servicing, and hence to increase policy flexibility.
In accrual terms, changes in net debt will not correspond exactly to the fiscal balance
due to equity proceeds and to revaluations of financial assets and liabilities.
Table 2 shows recent and projected levels of Commonwealth non-financial public sector net
debt. Non-financial sector net debt is expected to fall from 13.5 per cent of
GDP at the end of 1998-99 to 9.6 per cent at the end of 1999-2000. This is part
of a continuing reduction in Commonwealth net debt consistent with the government's
programme of fiscal consolidation.
The majority of net debt reduction has occurred within the general government sector, This
trend is set to continue, with negative net debt of 0.3 per cent of GDP
predicted for 2002-03.
PTE net debt is also trending downwards, but from a much lower base.
Although net debt is an important fiscal indicator, it is limited in that it omits
holdings of certain financial assets and liabilities, most notably accrued employee
superannuation liabilities. It also fails to include all of a jurisdiction's non-financial
assets such as land, fixed assets etc, which may be sold and used to repay debt. A much
broader measure, net assets (or net worth) is calculated as total assets -- both
financial and non-financial -- minus total liabilities. The net assets measure
provides a more exhaustive picture of a jurisdiction's overall financial position.
Because net assets incorporates changes in the value of physical assets, it more fully
reflects the economic impact of the sale of assets than does net debt. Net assets also
shows asset acquisition over time, giving an indication of the extent to which borrowings
are used to finance asset purchases, rather than just recurrent expenditure.
The change in net assets is equal to the change in net non-financial assets plus the
change in net financial assets. This is equivalent to net capital formation, plus the
fiscal balance, plus revaluations of financial and non-financial assets.
Table 2 shows recent and projected levels of Commonwealth non-financial public sector net
assets. There is a break in the series between 1997-98 and 1998-99, reflecting changes to
the accounting treatment of certain revenue items, in particular taxation revenue and some
dividends. These revisions had the effect of decreasing measured net assets.
The Commonwealth's non-financial public sector is in a negative net asset position, with
financial liabilities exceeding the value of financial and non-financial assets. However
this position is expected to improve by 2.9 percentage points in 1999-2000, leaving
the non-financial public sector with negative net assets worth 8.9 per cent of
GDP.
The Commonwealth general government sector is also in a negative net asset position.
However, the ongoing reduction of general government financial liabilities is reducing the
gap between liabilities and assets. General government negative net assets of
13.6 per cent of GDP in 1998-99 are expected to fall to 10.3 per cent
in 1999-2000, with further decreases expected in the outyears.
A significant proportion of the Commonwealth's non-financial assets are held within the
PTE sector. However, PTE privatisations have eroded both non-financial and financial
assets held by the Commonwealth in recent years. In 1999-2000, PTE sector net assets are
expected to fall by half a percentage point to 2.8 per cent of GDP.
Table 2: Commonwealth Non-Financial Public Sector Net Debt and Net Assets as a
Percentage of GDP
(as at end of financial year)
| General Government | Public Trading Enterprises | Non-financial Public Sector | ||||||
| Net Debt | Net Assets | Net Debt | Net Assets | Net Debt | Net Assets | |||
| 1996-97 | 18.1 | -14.0 | 1.6 | 3.4 | 19.7 | -10.6 | ||
| 1997-98 | 14.7 | -12.1 | 1.5 | 3.2 | 16.2 | -8.9 | ||
| 1998-99(a)(e) | 12.1 | -13.6 | 1.4 | 3.3 | 13.5 | -11.8 | ||
| 1999-00(e) | 8.2 | -10.3 | 1.4 | 2.8 | 9.6 | -8.9 | ||
| 2000-01(p) | 7.4 | -8.7 | na | na | na | na | ||
| 2001-02(p) | 3.9 | -5.5 | na | na | na | na | ||
| 2002-03(p) | -0.3 | -1.6 | na | na | na | na | ||
