An underlying cash deficit of $30.1 billion (1.9 per cent of GDP) is estimated for 2013‑14. The fiscal outlook is for a return to budget surplus in 2016‑17.
Table 3 provides a summary of the major budget aggregates.
| Estimates | Projections | ||||
|---|---|---|---|---|---|
| 2013-14 $b |
2014-15 $b |
2015-16 $b |
2016-17 $b |
||
| Receipts | 369.5 | 390.3 | 423.4 | 450.8 | |
| Per cent of GDP | 23.6 | 23.9 | 24.6 | 24.8 | |
| Payments (a) | 396.6 | 411.3 | 424.9 | 443.2 | |
| Per cent of GDP | 25.3 | 25.1 | 24.6 | 24.4 | |
| Net Future Fund earnings | 2.9 | 3.0 | 3.2 | 3.4 | |
| Underlying cash balance (b) | -30.1 | -24.0 | -4.7 | 4.2 | |
| Per cent of GDP | -1.9 | -1.5 | -0.3 | 0.2 | |
| Revenue | 379.9 | 397.7 | 433.3 | 464.6 | |
| Per cent of GDP | 24.2 | 24.3 | 25.1 | 25.6 | |
| Expenses | 401.5 | 416.0 | 430.9 | 454.5 | |
| Per cent of GDP | 25.6 | 25.4 | 25.0 | 25.0 | |
| Net operating balance | -21.5 | -18.2 | 2.4 | 10.1 | |
| Net capital investment | 4.0 | 3.8 | 0.5 | 2.3 | |
| Fiscal balance | -25.5 | -22.1 | 1.8 | 7.8 | |
| Per cent of GDP | -1.6 | -1.3 | 0.1 | 0.4 | |
| Memorandum item: | |||||
| Headline cash balance | -37.2 | -33.6 | -14.0 | -5.9 | |
(a) Equivalent to cash payments for operating activities, purchases of non‑financial assets and net acquisition of assets under finance leases.
(b) Excludes net Future Fund earnings.
Underlying cash balance estimates
Table 4 provides a reconciliation of the underlying cash balance estimates from the 2013‑14 Budget to the 2013 Economic Statement and the 2013 PEFO.
| Estimates | Projections | ||||
|---|---|---|---|---|---|
| 2013-14 $m |
2014-15 $m |
2015-16 $m |
2016-17 $m |
||
| 2013-14 Budget underlying cash balance(a) | -18,043 | -10,888 | 849 | 6,591 | |
| Per cent of GDP | -1.1 | -0.6 | 0.0 | 0.4 | |
| Changes from 2013-14 Budget to 2013 ES | |||||
| Effect of policy decisions(b) | -373 | -1,607 | 3,364 | 6,811 | |
| Effect of parameter and other variations | -11,727 | -11,477 | -8,921 | -9,374 | |
| Total variations | -12,099 | -13,084 | -5,557 | -2,563 | |
| 2013 ES underlying cash balance(a) | -30,142 | -23,972 | -4,708 | 4,027 | |
| Per cent of GDP | -1.9 | -1.5 | -0.3 | 0.2 | |
| Changes from 2013 ES to 2013 PEFO | |||||
| Effect of policy decisions(b)(c) | |||||
| Receipts | 0 | 0 | 0 | 0 | |
| Payments | 1 | 56 | 49 | -104 | |
| Total policy decisions impact on underlying cash balance | -1 | -56 | -49 | 104 | |
| Effect of parameter and other variations(c) | |||||
| Receipts | 87 | 145 | 131 | 66 | |
| Payments | 85 | 98 | 37 | -1 | |
| Total parameter and other variations impact on underlying cash balance | 2 | 47 | 94 | 67 | |
| 2013 PEFO underlying cash balance(a) | -30,142 | -23,981 | -4,662 | 4,199 | |
| Per cent of GDP | -1.9 | -1.5 | -0.3 | 0.2 | |
(a) Excl
udes net Future Fund earnings.
(b) Excludes secondary impacts on public debt interest of policy decisions and offsets from the Contingency Reserve for decisions taken.
(c) A positive number for receipts indicates an increase in the underlying cash balance, while a positive number for payments indicates a decrease in the underlying cash balance.
Between the 2013‑14 Budget and the 2013 Economic Statement, the change in parameter and other variations resulted in a negative impact on the underlying cash balance of $41.5 billion over the four years to 2016‑17, including $11.7 billion in 2013‑14. This was largely as a result of write‑downs in tax receipts.
Between the 2013‑14 Budget and the 2013 Economic Statement, tax receipts were revised down due to lower nominal GDP expectations, including lower forecasts of commodity prices, wages and unincorporated business income. Estimated tax receipts were revised down by $7.8 billion in 2013‑14 and $8.7 billion in 2014‑15. Projected tax receipts in 2015‑16 and 2016‑17 were revised down by $8.5 billion and $8.3 billion, respectively.
Since the 2013 Economic Statement, parameter and other variations have resulted in an increase to the underlying cash balance of $2 million in 2013‑14 and of $210 million over the four years to 2016‑17.
Changes to the underlying cash balance as a result of parameter and other variations since the 2013 Economic Statement primarily reflect updated assumptions of a slightly lower exchange rate, which has an impact on both payments and receipts; a higher European carbon price, which has resulted in minor revisions to tax receipts; and revised dividend estimates for government business enterprises based on updated corporate plans, which have resulted in minor adjustments to non‑tax receipts.
The exchange rate revision affects payments (primarily related to defence procurement), as well as receipts relating to resource rent taxes, company tax and excise and customs duty. Both the exchange rate and European carbon price revisions affect receipts from the carbon pricing mechanism. In total, tax receipts have been revised up by $70 million in 2013‑14, $155 million in 2014‑15, $190 million in 2015‑16 and $175 million in 2016‑17.
Policy decisions taken after the 2013‑14 Budget and up to the 2013 Economic Statement had a negative impact of $373 million on the underlying cash balance in 2013‑14, but a positive impact of $8.2 billion over the four years to 2016‑17.
Further information on variations and decisions taken after the 2013‑14 Budget and up to the 2013 Economic Statement can be found in the 2013 Economic Statement.
Policy decisions taken since the 2013 Economic Statement have decreased the underlying cash balance by around $1 million in 2013‑14 and are broadly offset over the forward estimates.
Changes to the underlying cash balance as a result of policy decisions since the 2013 Economic Statement include funding for Priority Health Initiatives ($266 million over the four years to 2016‑17) and a contribution to the redevelopment of the Royal Victorian Eye and Ear Hospital ($50 million in each of 2014‑15 and 2015‑16). These policy decisions have been offset over the four years to 2016‑17, primarily reflecting the reversal of a number of decisions previously taken but not yet announced ($331 million over the four years to 2016‑17), and the lower than estimated costs of finalising negotiations on the Better Schools Plan ($156 million over the four years to 2016‑17).
Detail of all policy decisions not previously published up to the commencement of the caretaker period on 5 August 2013 is provided at Appendix B.
In line with normal practice, the forward estimates in the PEFO do not incorporate funding beyond 2013‑14 for some items that are considered on a year‑by‑year basis, including defence operations overseas and any potential listings of new drugs recommended by the Pharmaceutical Benefits Advisory Committee. Payments to partly reimburse States and Territories for any future natural disasters under the Natural Disaster Relief and Recovery Arrangements are also not included in the forward estimates until any such disasters occur.
Table 5 shows cash receipts by type of revenue.
| Estimates | Projections | ||||
|---|---|---|---|---|---|
| 2013-14 $m |
2014-15 $m |
2015-16 $m |
2016-17 $m |
||
| Individuals' and other withholding taxes | |||||
| Gross income tax withholding | 160,600 | 174,000 | 188,300 | 201,100 | |
| Gross other individuals | 33,700 | 37,000 | 41,400 | 45,750 | |
| less: Refunds | 27,500 | 28,300 | 30,100 | 31,400 | |
| Total individuals' and other withholding tax | 166,800 | 182,700 | 199,600 | 215,450 | |
| Fringe benefits tax | 4,160 | 4,580 | 4,840 | 5,120 | |
| Company tax | 69,200 | 70,100 | 75,850 | 80,050 | |
| Superannuation fund taxes | 7,620 | 9,090 | 11,600 | 13,090 | |
| Minerals resource rent tax(a) | 850 | 1,100 | 1,550 | 2,450 | |
| Petroleum resource rent tax | 2,410 | 2,470 | 2,580 | 2,700 | |
| Income taxation receipts | 251,040 | 270,040 | 296,020 | 318,860 | |
| Goods and services tax | 50,633 | 53,559 | 56,739 | 59,909 | |
| Wine equalisation tax | 760 | 810 | 850 | 900 | |
| Luxury car tax | 380 | 350 | 380 | 400 | |
| Excise and customs duty | |||||
| Petrol | 5,850 | 5,750 | 5,850 | 5,950 | |
| Diesel | 8,980 | 9,180 | 9,370 | 9,680 | |
| Other fuel products | 3,800 | 3,620 | 3,690 | 3,750 | |
| Tobacco | 8,320 | 9,110 | 10,050 | 10,930 | |
| Beer | 2,390 | 2,420 | 2,560 | 2,720 | |
| Spirits | 2,030 | 2,160 | 2,300 | 2,420 | |
| Other alcoholic beverages(b) | 1,010 | 1,060 | 1,120 | 1,180 | |
| Other customs duty | |||||
| Textiles, clothing and footwear | 730 | 580 | 420 | 450 | |
| Passenger motor vehicles | 930 | 990 | 1,070 | 1,150 | |
| Other imports | 1,610 | 1,680 | 1,800 | 1,940 | |
| less: Refunds and drawbacks | 260 | 260 | 260 | 260 | |
| Total excise and customs duty receipts | 35,390 | 36,290 | 37,970 | 39,910 | |
| Carbon pricing mechanism | 6,475 | 2,870 | 2,745 | 4,050 | |
| Agricultural levies | 461 | 451 | 458 | 464 | |
| Other taxes | 2,971 | 3,135 | 3,500 | 3,618 | |
| Indirect taxation receipts | 97,070 | 97,466 | 102,641 | 109,251 | |
| Taxation receipts | 348,110 | 367,506 | 398,661 | 428,111 | |
| Sales of goods and services | 8,686 | 8,519 | 8,691 | 8,852 | |
| Interest received | 3,744 | 3,646 | 4,075 | 4,262 | |
| Dividends | 2,748 | 2,463 | 2,679 | 2,695 | |
| Other non-taxation receipts | 6,164 | 8,170 | 9,312 | 6,882 | |
| Non-taxation receipts | 21,342 | 22,799 | 24,758 | 22,691 | |
| Total receipts | 369,452 | 390,305 | 423,419 | 450,802 | |
| Memorandum: | |||||
| Total excise receipts | 26,520 | 27,040 | 28,250 | 29,480 | |
| Total customs duty receipts | 8,870 | 9,250 | 9,720 | 10,430 | |
| Capital gains tax(c) | 7,900 | 10,700 | 13,200 | 15,400 | |
| Medicare and DisabilityCare Australia levy receipts | 9,960 | 10,470 | 14,480 | 15,190 | |
(a) Net receipts from the MRRT are expected to be $0.7 billion in 2013‑14, $0.8 billion in 2014‑15, $1.1 billion in 2015‑16 and $1.8 billion in 2016‑17 which represent the net receipt impact across different revenue heads. These include offsetting reductions in company tax (through deductibility) and interactions with other taxes.
(a) Other alcoholic beverages are those not exceeding 10 per cent by volume of alcohol (excluding beer, brandy and wine).
(b) Capital gains tax is part of other individuals, companies and superannuation fund taxes.
Contingency Reserve
The Contingency Reserve provision in the PEFO is $477 million in 2013‑14, $2.9 billion in 2014‑15, $2.3 billion in 2015‑16 and $8.2 billion in 2016‑17.
The largest component of this is the 'conservative bias allowance', which makes provision for the tendency for estimates of expenses for existing Government policy to be revised upwards in the forward years. This allowance is unchanged from the 2013‑14 Budget and is set at zero in 2013‑14, ½ of a percentage point of total general government sector expenses (excluding GST payments to the States) in 2014‑15 ($1.8 billion), 1 per cent of expenses in 2015‑16 ($3.7 billion) and 2 per cent of expenses in 2016‑17 ($7.8 billion).
The Contingency Reserve also includes provisions of $2.0 billion over four years to 2016‑17 for a number of items including assumed continuation of some expiring National Partnerships; the effect of economic parameter revisions received late in the process; higher than estimated DisabilityCare Australia costs; negotiations with some State and Territory Governments regarding more efficient funding arrangements for veterans in public hospitals; and possible by‑election and redistribution costs for the Australian Electoral Commission. These items remain in the Contingency Reserve as they remain under negotiation and/or there is some uncertainty as to their final cost and outcome.
The Contingency Reserve also contains a number of items that cannot be disclosed for commercial‑in‑confidence or national security reasons.
Fiscal balance estimates
The fiscal balance deficit is expected to be $25.5 billion (1.6 per cent of GDP) in 2013‑14.
The fiscal balance is projected to return to surplus in 2015‑16, which is a year earlier than the underlying cash balance. This results from the timing difference between when revenues and expenses are recognised on an accrual basis, and when cash receipts and payments are recognised.
Movements in accrual revenue and expenses over the forward estimates are broadly consistent with the movements in cash receipts and payments.
Table 6 provides a reconciliation of the fiscal balance estimates.
| Estimates | Projections | ||||
|---|---|---|---|---|---|
| 2013-14 $m |
2014-15 $m |
2015-16 $m |
2016-17 $m |
||
| 2013-14 Budget fiscal balance | -13,497 | -6,255 | 5,955 | 10,819 | |
| Per cent of GDP | -0.8 | -0.4 | 0.3 | 0.6 | |
| Changes from 2013-14 Budget to 2013 ES | |||||
| Effect of policy decisions(a) | -747 | -3,779 | 4,761 | 6,411 | |
| Effect of parameter and other variations | -11,308 | -12,186 | -8,936 | -9,666 | |
| Total variations | -12,055 | -15,965 | -4,175 | -3,255 | |
| 2013 ES fiscal balance | -25,553 | -22,220 | 1,780 | 7,564 | |
| Per cent of GDP | -1.6 | -1.4 | 0.1 | 0.4 | |
| Changes from 2013 ES to 2013 PEFO | |||||
| Effect of policy decisions(a)(b) | |||||
| Revenue | 0 | 0 | 0 | 0 | |
| Expenses | 4 | 60 | 51 | -102 | |
| Net capital investment | -3 | -4 | -2 | -2 | |
| Total policy decisions impact on fiscal balance | -1 | -56 | -49 | 104 | |
| Effect of parameter and other variations(b) | |||||
| Revenue | 46 | 219 | 171 | 100 | |
| Expenses | -30 | -17 | 22 | -57 | |
| Net capital investment | 30 | 37 | 34 | 34 | |
| Total parameter and other variations impact on fiscal balance | 46 | 198 | 116 | 123 | |
| 2013 PEFO fiscal balance | -25,508 | -22,078 | 1,847 | 7,792 | |
| Per cent of GDP | -1.6 | -1.3 | 0.1 | 0.4 | |
(a) Excludes secondary impacts on public debt interest of policy decisions and offsets from the Contingency Reserve for decisions taken.
(b) A positive number for revenue indicates an increase in the fiscal balance, while a positive number for expenses and net capital investment indicates a decrease in the fiscal balance.
Net debt, net financial worth, net worth and net interest payments
In 2013‑14, net debt for the Australian Government general government sector is estimated to be $184.0 billion (11.7 per cent of GDP). Net financial worth is estimated to be —$295.5 billion, and net worth is estimated to be —$181.9 billion.
Net interest payments are estimated to be $8.4 billion in 2013‑14 (0.5 per cent of GDP). Interest payments largely relate to the public debt interest on government securities, based on the interest rates on the existing stock of Commonwealth Government Securities (CGS) and the prevailing market interest rates across the yield curve for future issuance of CGS. Assuming prevailing market yields, results in a weighted average yield of around 3.5 per cent for future issuance of Treasury Bonds in the forward estimates period.
Table 7 provides a summary of the Australian Government general government sector net worth, net financial worth, net debt and net interest payments.
| Estimates | Projections | ||||
|---|---|---|---|---|---|
| 2013-14 $b |
2014-15 $b |
2015-16 $b |
2016-17 $b |
||
| Financial assets | 260.8 | 279.2 | 305.1 | 341.1 | |
| Non-financial assets | 113.6 | 116.8 | 119.0 | 120.5 | |
| Total assets | 374.4 | 396.0 | 424.1 | 461.6 | |
| Total liabilities | 556.3 | 596.9 | 622.2 | 652.5 | |
| Net worth | -181.9 | -200.9 | -198.1 | -190.9 | |
| Net financial worth(a) | -295.5 | -317.7 | -317.1 | -311.4 | |
| Per cent of GDP | -18.9 | -19.4 | -18.4 | -17.1 | |
| Net debt(b) | 184.0 | 212.1 | 219.0 | 217.3 | |
| Per cent of GDP | 11.7 | 13.0 | 12.7 | 12.0 | |
| Net interest payments | 8.4 | 9.5 | 11.5 | 10.0 | |
| Per cent of GDP | 0.5 | 0.6 | 0.7 | 0.6 | |
(a) Net financial worth equals total financial assets minus total liabilities.
(b) Net debt equals the sum of deposits held, government securities, loans and other borrowing, minus the sum of cash and deposits, advances paid and investments, loans and placements.
Commonwealth Government Securities
The Australian Government issues debt securities to the public in the form of Treasury Bonds, Treasury Indexed Bonds (TIBs) and Treasury Notes, collectively known as CGS. CGS are reported on the balance sheet in market value terms
, consistent with the relevant accounting standards. The market value of CGS reflects prices in the secondary market, which are constantly changing with market conditions.
The face value of CGS on issue is the amount that the Government owes to investors, and is independent of fluctuations in market prices.4 The face value of CGS on issue fluctuates depending on the issuance of new securities and maturities of securities outstanding. The 'peak' amount of CGS on issue in any given year will depend on the timing of receipts, payments and CGS maturities.
The Commonwealth Inscribed Stock Act 1911 places a limit of $300 billion on the face value of CGS outstanding. Based on current estimates, CGS outstanding is expected to reach the limit within the 2013‑14 financial year (around December 2013) and will remain around that level from December 2013 onwards. CGS on issue is expected to increase over the forward estimates.
Table 8 contains projections of the face value of CGS on issue subject to the legislative limit. It is important to note that there is a debt issuance strategy for the budget year only. Projections beyond the budget year are based on a set of technical assumptions and will vary significantly with changes to budget estimates and projections.
| 2013-14 $b |
2014-15 $b |
2015-16 $b |
2016-17 $b |
|
|---|---|---|---|---|
| End-of-year amount | 290 | 330 | 350 | 370 |
| Within-year peak(c) | 300 | 350 | 370 | Not available |
| Month of peak | Dec-13 | Apr-15 | Apr-16 | Not available |
(a) Data in this table are rounded to the nearest $10 billion.
(b) These figures exclude TIBs issued before July 2008 which are not subject to the legislative limit. $4.6 billion of TIBs are not subject to the legislative limit in 2013‑14 and 2014‑15, and following a maturity in August 2015, $2.5 billion of TIBs will not be subject to the limit in 2015‑16 and 2016‑17.
(c) The precise within‑year timing of cash outlays and receipts are not known. Estimates of projected peaks of CGS on issue are therefore subject to considerable uncertainty.
Source: Australian Office of Financial Management.
4 For TIBs, the final repayment amount paid to investors includes an additional amount owing to inflation accretion over the life of the security.