Statement 8:
Statement of Risks
(Continued)
The forward estimates of revenue and expenses in the 2010‑11 Budget incorporate assumptions and judgments based on the best information available at the time of publication. A range of factors may influence the actual budget outcome in future years. The disclosure of these factors in this statement increases the transparency of the fiscal projections.
Events that could affect fiscal outcomes include:
- changes in economic and other parameters;
- matters not included in the fiscal forecasts because of uncertainty about their timing, magnitude or likelihood; and
- the realisation of contingent liabilities or assets.
Risks to the Budget — overview
The revenue and expense estimates and projections published in the 2010‑11 Budget Papers are based on a range of economic and other parameters. If the economic outlook were to differ from that presented in the Budget, the revenue and expense estimates and projections would also change. The sensitivity of Budget estimates to changes in economic assumptions is discussed in Appendix A of Statement 3.
It is important to note that the Budget revenue forecasts have been prepared following a period of heightened financial and economic volatility. Although the economy has improved over the last year or so, an associated increase in revenues is not expected, for the most part, until 2010‑11 and the latter years of the forward estimates, as the effects of the earlier economic downturn continue to weigh on tax collections.
To the extent that unanticipated changes in economic circumstances occur, their impact will flow through to revenue forecasts. The current uncertainty in global financial markets means that the risks to the fiscal outlook remain elevated.
Specifically, it should be noted that revenue forecasting relies heavily on the historical relationships between the economy, tax bases and tax revenues. Such relationships may continue to shift in the current climate, requiring a greater degree of caution in their use in predicting future revenues. For example, any losses incurred during the downturn can be carried forward to offset gains or profits as the economy recovers, such that tax revenue improves with some lag.
As in previous years, the fiscal outlook is also subject to a number of contingent liabilities. A large number of these contingent liabilities reflect indemnities, including those relating to the Department of Defence, the Defence Materiel Organisation, Air Services Officers, the Future Fund Board of Guardians and the Reserve Bank. The Government has also issued a number of guarantees, such as those relating to guarantee schemes for the banking and financial sector, payments by the Export Finance and Insurance Corporation and the superannuation liabilities of the Commonwealth Bank prior to its sale to the private sector.
Other significant contingent liabilities relate to uncalled capital subscriptions and credit facilities to international financial institutions and legal cases concerning the Australian Government. The Government continues to have strategies in place to reduce its potential exposure to these contingent liabilities.
There have been several changes to both the quantifiable and unquantifiable risks since the Mid‑Year Economic and Fiscal Outlook 2009‑10 (MYEFO). These include an increase in Australia's uncalled capital in the International Bank for Reconstruction and Development, the Asian Development Bank and the European Bank for Reconstruction and Development. The remote risks around the Government Guarantee Schemes for Large Deposits and Wholesale Funding and state and territory borrowing have been reduced by the closure of these schemes. None of these international financial institutions have ever drawn on Australia's uncalled capital subscriptions.
Several new items have also been included since MYEFO, such as the Government's indemnities relating to the Maralinga Rehabilitation Project (1995‑2000). Australia's bids for the Federation Internationale de Football Association (FIFA) World Cup in 2018 or 2022 and the 2015 Asian Football Confederation (AFC) Cup have also been included as the Australian Government has made commitments that would need to be met in the event that these bids were successful.
Since MYEFO, several risks have been removed. These largely reflect the conclusion of a number of legal cases involving the Commonwealth, such as Medicare Australia's case against Thelma Pty Ltd and Sharjade's appeal against the Commonwealth.
Table 1: Summary of material changes to Statement of Risks since the 2009‑10 Budget and Mid‑Year Economic and Fiscal Outlook 2009‑10(a)
| Contingent liabilities — quantifiable | |
|---|---|
| Defence and Defence Material Organisation | |
| Indemnities and remote contingencies | Modified |
| Finance and Deregulation | |
| Sale of Sydney Airports Corporation Limited | Modified |
| Foreign Affairs and Trade | |
| Export Finance and Insurance Corporation | Modified |
| Immigration and Citizenship | |
| Immigration detention services | Deleted |
| Treasury | |
| Financial Claims Scheme | New |
| Guarantees under the Commonwealth Bank Sale Act 1995 | Modified |
| International financial institutions | Modified |
| Reserve Bank of Australia — guarantee | Modified |
| Standby loan facility for the Government of Indonesia | Modified |
| Contingent liabilities — unquantifiable | |
| Agriculture, Fisheries and Forestry | |
| Compensation claims arising from equine influenza outbreak | Modified |
| Attorney General's | |
| Native Title costs | Modified |
| Southern Ocean Maritime Patrol and Response Program | Modified |
| Broadband, Communications and the Digital Economy | |
| Extended Zones | New |
| National Broadband Network Request for Proposals process — panel of experts and strategic adviser indemnities | Deleted |
| New company to roll out and operate the National Broadband Network— interim board members' indemnity | Deleted |
| Climate Change and Energy Efficiency | |
| Kyoto Protocol — emissions target | Modified |
| Defence and Defence Materiel Organisation | |
| ASC Pty Ltd — Australian Government indemnities provided to Electric Boat Corporation under the services agreement | Deleted |
| Decontamination of Defence sites | Modified |
| HMAS Melbourne and HMAS Voyager claims | Deleted |
| Litigation cases | Modified |
| Military Superannuation and Benefits Scheme — indemnity | Deleted |
| Environment, Water, Heritage and the Arts | |
| Art Indemnity Australia | Deleted |
| National Aboriginal Islander Skills Dance Association (NAISDA) — construction works | New |
| Risk assignment under the National Water Initiative | Deleted |
| Finance and Deregulation | |
| Comcover — Insurance Claims | New |
| Indemnities relating to other former asset sales, privatisations and IT outsourcing projects | Modified |
| Industrial Waste Commission (IWC) Cleanaway | Deleted |
| Pan Pharmaceuticals | Deleted |
| Sharjade v Darwinia — breach of Heads of Agreement between the parties | Deleted |
| Health and Ageing | |
| Australian Medical Association | New |
| CSL Ltd | Modified |
| Guarantee scheme for aged care accommodation bonds | Modified |
| Indemnities relating to vaccines (b) | New |
| Indemnity relating to H5N1 vaccine | Deleted |
| Indemnity relating to smallpox vaccine | Deleted |
| Whole of Government — Australia's bid for the 2015 Asian Football Confederation (AFC) Cup — Government Guarantees | New |
| Whole of Government — Australia's bids for the Federation Internationale de Football Association (FIFA) World Cup in 2018 or 2022 — Government Guarantees | New |
| Human Services | |
| Medicare Australia | Deleted |
| Immigration and Citizenship | |
| Immigration detention services — liability limit | Modified |
| Systems development — liability limit | Deleted |
| Infrastructure, Transport, Regional Development and Local Government | |
| Assumed residual liabilities of the Australian National Railways Commission | Deleted |
| Innovation, Industry, Science and Research | |
| Liability for damages caused by Kistler space activities | Modified |
| Liability for damages caused by space activities | Modified |
| Resources, Energy and Tourism | |
| British atomic test site Maralinga | New |
| Snowy Hydro Ltd — water releases | Modified |
| Treasury | |
| Car dealer financing — Australian Government guarantee of the OzCar Special Purpose Vehicle | Modified |
| Financial Claims Scheme | Modified |
| Guarantee of deposits in authorised deposit‑taking institutions | Deleted |
| Guarantee of state and territory borrowing | Modified |
| Guarantee of wholesale funding of authorised deposit‑taking institutions | Deleted |
| Guarantee Scheme for Large Deposits and Wholesale Funding(c) | New |
| Contingent assets — unquantifiable | |
| Innovation, Industry, Science and Research | |
| Wireless Local Area Network | Modified |
- Risks appearing in this Statement but not listed in the table above are substantially unchanged since disclosed in Budget Paper No. 1, Budget Strategy and Outlook 2009‑10, Statement 8 or in Mid‑Year Economic and Fiscal Outlook 2009‑10, Appendix C.
- This risk combines two risks that were listed separately in previous reporting periods — the indemnity relating to the H5N1 vaccine, and the indemnity relating to the smallpox vaccine.
- This risk combines the Guarantee of deposits in authorised deposit‑taking institutions and the Guarantee of wholesale funding of authorised deposit‑taking institutions.
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.
