Statement 6:
Expenses and Net Capital Investment
(Continued)
Appendix B: The Contingency Reserve
The Contingency Reserve (other purposes function) is an allowance, included in aggregate expenses, principally to reflect anticipated events that cannot be assigned to individual programs in the preparation of the Australian Government budget estimates. The Reserve is used to ensure that the budget estimates are based on the best information available at the time of the Budget. It is not a general policy reserve.
While the Reserve is designed to ensure that aggregate estimates are as close as possible to expected outcomes, it is not appropriated. Allowances that are included in the Reserve can only be drawn upon once they have been appropriated by Parliament. These allowances are removed from the Reserve and allocated to specific agencies for appropriation and for outcome reporting closer to the time when the associated events eventuate.
The Contingency Reserve makes allowance in 2010‑11 and the forward years for anticipated events, including the following:
- an allowance for the tendency for estimates of expenses for existing Government policy to be revised upwards in the forward years, known as the conservative bias allowance. This allowance has been set at 2.0 per cent of total general government sector expenses (excluding GST payments to the States) in the third year of the forward estimates period (2013‑14), 1.0 per cent in the second year (2012‑13), and 0.5 per cent in the first forward year (2011‑12);
- a provision for underspends in the current financial year reflecting the tendency for budgeted expenses for some agencies or functions not to be met;
- commercial‑in‑confidence and national security‑in‑confidence items that cannot be disclosed separately, and programs that are yet to be renegotiated with State and Territory governments;
- decisions made too late for inclusion against individual agency estimates;
- the effect on the budget and forward estimates of economic parameter revisions received late in the budget process and hence not able to be allocated to individual agencies or functions; and
- a provision for events and pressures that are reasonably expected to affect the budget estimates.
The Contingency Reserve also makes provision for future increases in Australia's Official Development Assistance yet to be allocated to specific aid programs. However, in this budget statement, those expenses are allocated to the general public services function (see page 6‑9 for further information).
The Contingency Reserve also includes provisions for future equity investments in the National Broadband Network. This is subject to the Government's final response to the implementation study and, accordingly, is not disclosed.
At the time of the 2009‑10 MYEFO, estimates of the revenue from, and the expenses of, the Carbon Pollution Reduction Scheme (CPRS) were included in the Contingency Reserve. The Government recently announced it will not move to introduce the CPRS until after the end of the current commitment period of the Kyoto Protocol and only when there is greater clarity on the actions of other major economies including the United States, China and India.
This means that the Government will not move to legislate the CPRS before the end of 2012 and will only do so after this time if there is sufficient international action. The financial impact of a future CPRS will depend on the timing of its commencement. As the timing is uncertain, no financial implications of the scheme have been included in the forward estimates and previous estimates in the Contingency Reserve have been removed.
If www.budget.gov.au responds slowly or you are having trouble downloading a document, try one of the Budget Website Mirrors
Note: Where possible, Budget documents are available in HTML and for downloading in Portable Document Format(PDF). If you require further information on any of the tables or charts on this website, please contact The Treasury.
