Cash surplus
General government sector
The Australian Government general government sector has been in surplus since 1997-98, with the exception of a small cash deficit of 0.1 per cent of GDP in 2001-02.
Panels A and C of Chart 2 show the large contribution of past Australian Government general government cash deficits to the consolidated NFPS cash deficit. Panel A of Chart 2 also illustrates the improvement in the Australian Government general government sector balance, culminating in the strong surplus outcomes of recent years.
Panel A of Chart 2 also shows the sustained improvement in state/local general government balances over the period 1991‑92 to 1996-97, from a deficit of 1 per cent of GDP to a surplus of 0.6 per cent of GDP. Since then, the state/local sector has maintained surpluses (with the exception of 1998-99). It is estimated that the state/local general government cash surplus will reduce to 0.2 per cent of GDP in 2004‑05, compared to 0.8 per cent of GDP in 2003-04. This partly reflects the state governments’ expectations of a more subdued property market and hence, reduced state government receipts from property taxes such as conveyancing duty.3
Public non-financial corporations sector
The contribution made by the PNFC sector to the cash surplus of the consolidated NFPS has declined from the late 1980s, with the privatisation of government businesses.
As shown in Chart 3, the consolidated PNFC sector maintained a cash surplus position through much of the 1990s. The sector is projected to be in deficit in 2004-05, due to deficits in the PNFC sector of nearly all states.
Chart 2: Cash surplus by sector and level of government
A: General government
B: Public non-financial corporations
C: Non-financial public sector
Non-financial public sector
It is estimated that the consolidated NFPS will achieve a cash surplus of 0.8 per cent of GDP in 2004-05.
Chart 3 illustrates that the consolidated NFPS was generally in a deficit position during the early to mid 1990s. The deficit peaked at 4.4 per cent of GDP in 1992-93 before moving into a surplus position in 1997‑98. This primarily reflects Australian Government general government cash deficits in the early to mid 1990s. Since 1999-2000, the consolidated NFPS has remained in surplus, due to consecutive surpluses in the consolidated general government sector. The deficit in 1998-99 is the result of one-off increases in state funding of superannuation liabilities.
Chart 3: Consolidated non-financial public
sector cash surplus
by sector(a)
- Data for the consolidated PNFCs and NFPS are only available to 2004-05, while general government data are available to 2007-08.
Receipts and payments
Chart 4 shows trends in general government cash receipts and payments at the Australian Government, state/local and consolidated levels. Due to its size, the general government sector is an appropriate focus for an assessment of public sector receipts and payments. It is also the sector through which governments primarily affect the level of private sector activity.
Australian Government receipts and payments estimates in Panel A of Chart 4 are net of GST receipts and show a decline in 2000-01 with the introduction of The New Tax System. In addition, the reform of Australian Government and state/local government taxes resulted in total consolidated general government receipts falling from 38.9 per cent of GDP in 1999-2000 to 38.0 per cent of GDP in 2004-05, due to the Australian Government’s tax reforms, which included significant personal income tax cuts and the abolition at the state level of financial institutions duty and stamp duty on quoted marketable securities.
The improvement in state finances from 1991-92 is shown in Panel B of Chart 4. The state/local cash deficit peaked at 1 per cent of GDP in 1991-92. After 1991-92, deficits continued to be reduced until the state/local sector achieved a surplus in 1994-95. Since then, the state/local cash position has been in surplus each year, with the exception of 1998-99. This improvement was initially due to payments restraint, helped by lower debt servicing charges and more recently by the strong growth in revenues related to the property market and GST. In 2004-05, the sector is expected to record a surplus of 0.2 per cent of GDP.
The increases in both receipts and payments in 1998-99 for the state/local sector and in 1999-2000 for the Australian Government sector, shown in Panels B and A of Chart 4 respectively, were predominantly due to the move to an accrual accounting framework and the subsequent ‘grossing’ up of cash receipts and payments, whereas prior to this, some cash receipts were netted off payments.
The PNFC sector is an important provider of economic infrastructure and contributes significant revenue to the general government sector, mainly in the form of dividends. State/local governments account for the majority of total PNFC sector payments, reflecting state responsibility for infrastructure and service provision in areas such as electricity, gas, water and public transport.
PNFC privatisations during the 1990s have occurred in two main sectors — electricity and gas (such as Victorian and South Australian electricity assets) and transport and communications (such as the partial sale of Telstra). Proceeds of asset sales have largely been used to reduce, or contain, the growth of general government net debt, resulting in ongoing savings in public debt interest.
Chart 4: General government receipts and payments by level of government
A: Australian Government
B: state/local
C: Consolidated
3 For example, see NSW’s 2004-05 Half-Yearly Budget Review, pp.10, 17.