Statement 8: Statement of Risks (Continued)
Contingent liabilities — quantifiable
Defence and Defence Materiel Organisation
Indemnities and remote contingencies
Defence carries 312 (up from 129) instances of quantifiable remote contingent liabilities, to the value of $3.6 billion, an increase on the $2.9 billion reported in the MYEFO. The DMO carries 108 contingencies that are quantifiable (up from 78), to the value of $4.7 billion, an increase on the $4.4 billion reported in the MYEFO. While these contingencies are considered remote, they have been reported in aggregate for completeness.
Education, Employment and Workplace Relations
Comcare liability for additional workers' compensation payments
Comcare has a quantifiable contingency in respect of future statutory workers' compensation claims for asbestos related diseases amounting to $45.6 million. This contingency relates to a decision in the Federal Court, Comcare v Etheridge [2006] Federal Court of Australia Full Court decision number 27.
Finance and Deregulation
Litigation
The Department of Finance and Deregulation (Finance) is involved in litigation in which a counter‑claim for damages has been lodged against the Australian Government. The litigation relates to the Davis Samuel case where Finance is engaged in legal action seeking recovery of funds misappropriated during 1998. The counter‑claim, which is being vigorously defended by the Government, seeks damages of $4.3 billion. Hearing of the Government's claim, and the counter‑claim, concluded in the ACT Supreme Court in September 2008. Recent advice suggests judgment is expected to be delivered during 2011.
Sale of Sydney Airports Corporation Limited
An indemnity was provided to the Southern Cross Airports Corporation as the purchaser of the Sydney Airports Corporation Limited in the event of a liability arising under Chapter 3 of the Duties Act 1997 (NSW) by reason of the sale of shares in Sydney Airports Corporation Limited constituting a relevant acquisition in a land‑rich private corporation. The New South Wales Office of State Revenue issued a notice of assessment on 17 November 2006. The Australian Government maintains that there are no grounds for the assessment. Action has been initiated in the NSW Supreme Court to overturn the assessment. The amount disputed is estimated at $556.9 million as at 31 March 2011.
Foreign Affairs and Trade
Export Finance and Insurance Corporation
The Australian Government guarantees the due payment by the Export Finance and Insurance Corporation (EFIC) of money that is, or may at any time become, payable by EFIC to any body other than the Government. The Government also has in place a $200 million callable capital facility available to EFIC on request to cover liabilities, losses and claims. As at 31 March 2011, the Government's total contingent liability was $3.0 billion, up from $2.7 billion in the MYEFO. This comprises EFIC's liabilities to third parties ($2.5 billion) and EFIC's overseas investment insurance, contracts of insurance and guarantees ($0.5 billion). Of the total contingent liability, $2.3 billion is held on EFIC's Commercial Account and $0.7 billion is held on the National Interest Account.
Treasury
Australian Taxation Office — tax disputes
At any point in time, the ATO is involved in litigation relating to tax disputes. The outcome of these disputes is uncertain and will be confirmed at a future date through a court ruling or when an agreement is reached.
As at 30 June 2010, the estimated aggregate value of tax in dispute was $6.2 billion. This estimate will be updated as part of ATO's 2010‑11 financial statement process.
The decisions in relation to the cases may, in some instances, set precedents creating an additional unquantifiable contingent liability.
Guarantees under the Commonwealth Bank Sale Act 1995
Under the terms of the Commonwealth Bank Sale Act 1995, the Australian Government guaranteed various superannuation and other liabilities amounting to $4.5 billion as at 31 December 2010. Of this amount, $0.8 billion is attributable to liabilities of the Commonwealth Bank of Australia and $3.7 billion is attributable to liabilities of the Commonwealth Bank Officers' Superannuation Corporation.
International financial institutions — uncalled capital subscriptions
The Australian Government has had uncalled capital subscriptions in the International Bank for Reconstruction and Development (IBRD) since 1947. The Government will contribute additional resources to the IBRD as part of its general capital increase agreed during 2010. The paid‑in component of the Australian Government's contribution was a measure in the 2010‑11 Budget. As part of this process, the Australian Government will increase its uncalled capital subscription so that it totals US$3.6 billion (an estimated value of A$3.5 billion as at 30 March 2011).
Australia has also had uncalled capital subscriptions in the European Bank for Reconstruction and Development (EBRD) since 1991. The Government increased its uncalled capital subscription (effective 20 April 2011) to the EBRD as part of its 2010 general capital increase so that it totals EUR237.5 million (an estimated value of A$323.1 million as at 20 April 2011). The financial implications of the paid‑in component were reported as a measure in the MYEFO.
The Australian Government also had uncalled capital subscriptions in the Asian Development Bank of SDR5.8 billion (an estimated value of A$8.9 billion), and the Multilateral Investment Guarantee Agency of US$26.5 million (an estimated value of A$25.6 million) as at 30 March 2011.
None of these international financial institutions has ever drawn on Australia's uncalled capital subscriptions.
International Monetary Fund
Australia has made a line of credit available to the International Monetary Fund (IMF) under its New Arrangements to Borrow (NAB) since 1998. In line with G20 Leaders' commitments, Australia has joined with other countries to increase its credit line under an expanded NAB. When the expanded NAB came into effect on 11 March 2011, Australia's NAB credit arrangement increased from SDR801.3 million (an estimated value of A$1.2 billion as at 30 March 2011) to SDR4.4 billion (an estimated value of A$6.7 billion). This is a contingent loan to help ensure that the IMF has the resources available to maintain stability and support recovery in the global economy. The funds will be drawn upon by the IMF as needed to supplement the IMF's usual quota resources and will be repaid in full with interest.
Reserve Bank of Australia — guarantee
This contingent liability relates to the Australian Government's guarantee of the liabilities of the Reserve Bank of Australia. It is measured as the Bank's total liabilities excluding capital, reserves, and Australian Government deposits. The major component of the Bank's liabilities is notes (that is, currency) on issue. Notes on issue amount to $49.7 billion as at 21 March 2011, and the total guarantee is $58.7 billion, up from $58.1 billion at the MYEFO.
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