The Australian Government's fiscal strategy is designed to maintain the on-going economic prosperity and welfare of the people of Australia as mandated by the Charter of Budget Honesty Act 1998 (the Charter). The Treasury will assist the Australian Government's Treasury Ministers to discharge their responsibilities under the Charter.
Australia has a relatively strong fiscal position by international standards. However, there are a number of very significant long-term fiscal challenges facing the Commonwealth that threaten the sustainability of its fiscal position, including an ageing population and the risks associated with an economy transitioning from a mining investment boom to broader-based drivers of growth. The global economy also continues to provide downside risks for domestic growth.
Commonwealth debt, both on a net and gross basis, is at peak levels last seen during the 1970s and 1990s. These debt levels are not of an immediate concern, given historically low interest rates and a growing economy. But, Australia will be more exposed than has previously been the case should Australia experience a significant negative economic shock.
Fiscal reform to ensure a sustainable fiscal position is challenging. Many variables that have a material impact on fiscal outcomes are outside the Government's direct control such as interest rates, commodity prices or global economic growth.
The Treasury will seek to ensure that the Treasurer's obligations under the Charter are discharged by coordinating the preparation of the Commonwealth Government Budget and other documents required under the Charter. Fiscal sustainability will be achieved by identifying effective and efficient government spending arrangements and reducing pressure on the Government's revenue base by improving the structure and integrity of the tax system.
The Treasury will provide informed advice on the Government's fiscal strategy, tax and expenditure policies, with this advice supported by economic, tax and fiscal modelling. Advice will be provided to the Treasurer and other portfolio ministers on the Australian Government's budget position over the forward estimates and the medium term, to inform overall policy settings and to provide context for the Government's decision-making.
The Treasury has responsibility for the Australian taxation and superannuation systems and is charged with providing advice to Government to support a robust, efficient and sustainable tax system. The challenge is to ensure that the revenue base avoids impeding economic growth while remaining adaptive to future challenges and business practices. We focus on the efficiency of the system today and ensuring that the system will continue to deliver a sustainable revenue base for the next generation.
Economic and social reforms will be facilitated by on-going financial support payments to State and Territory governments. The Treasury will make payments to the States and Territories with regard to the arrangements specified in the Intergovernmental Agreement on Federal Financial Relations. Information on the Government's financial relations with State and Territory governments is detailed in the 2016-17 Budget, Budget Paper No. 3, Federal Financial Relations.
The Treasury will work with the Australian Taxation Office to implement the changes to superannuation and retirement income products announced in the 2016-17 Budget. The Treasury will monitor the adequacy and sustainability of Government support for retirement incomes and advise the Government on ways in which this support can be made more effective.
The fiscal estimates contained in the Budget are based on economic forecasts and projections as well as estimates of the impact of Government spending and revenue measures. Changes to the economic forecasts and projections underlying the estimates — for example, inflation, profits, wages growth, population and unemployment — will affect forecasts for receipts and payments. Assessing whether fiscal policy was based on sound fiscal management will be subjective and dependent on the best information available at the time.
Advice provided by the Treasury will be based on an objective and thorough understanding of the issue(s) and from a whole-of-government perspective. The degree of Ministerial satisfaction with the quality and timeliness of the advice provided is assessed through formal and informal feedback.
The performance of the Treasury in meeting the requirements of the Charter will be measured by the timely production of regular fiscal reports including the Budget, Mid Year Economic and Fiscal Outlook and the Final Budget Outcome.
The Treasury will ensure that financial assistance to State and Territory governments is made in accordance with written agreements that clearly articulate measurable policy objectives. The Treasury will ensure that payments of financial assistance to State and Territory governments are, in all cases, timely and accurate having regard to the terms of relevant agreements.
The Treasury's role in the broader tax system includes provision of advice to Government on tax and superannuation policies as well as the delivery of an extensive legislative program consistent with the Government's policy objectives.
Our delivery of the Government's legislative program will be measured against relevant legislative requirements and guidance, including timeframes.