APPENDIX B: STATISTICAL NOTES

Measures of the Underlying Deficit

The underlying deficit used throughout this Statement is the headline deficit adjusted for net advances. The latter comprise transactions in financial assets undertaken for policy purposes - ie net policy lending (new policy loans and advances less repayments) and net equity transactions (injections/purchases of equity less equity sales). The underlying deficit is broadly consistent with the net lending concept in the national accounts and thus closely approximates the relevant sector's direct contribution to the national saving/investment imbalance (current account deficit).

To maintain consistency with the net lending concept in the national accounts, the measure of the general government sector underlying deficit used in the Budget Papers is not adjusted for increases in provisions. This is the only source of difference between the measure used here and the ABS general government deficit adjusted for net advances (as published in the GFS and GFE). It mainly affects the data for the Commonwealth, which makes significant provisions for superannuation payments to the PTE sector.

A GFS table for the Commonwealth general government sector, incorporating an adjustment for the increase in provisions, is included at Appendix D.

Own-Purpose Outlays

The adjusted measure of Commonwealth general government own-purpose outlays used in this Statement comprises outlays excluding net advances, adjusted mainly to exclude Commonwealth payments to the States other than specific purpose payments made 'through' the States. This differs from the published ABS measure (Cat. No. 5501.0) which does not remove all net advances and excludes all payments to the States.

More specifically, the ABS measure excludes all payments to other levels of government and PTEs, such as general revenue assistance, specific purpose payments and advances and subsidies, together with interest payments on borrowings undertaken on their behalf. The adjusted measure adds back in to Commonwealth outlays specific purpose payments 'through' the States (other than those for local government purposes) as these payments - for example in the area of higher education - are generally not for State-like purposes. A corresponding adjustment is made to the State/local series. The adjusted measure also removes State fiscal contributions from the data on grants to the States.

The adjusted measures for both the Commonwealth and the State/local levels abstract from all net advances. They are thus consistent with measures of the underlying deficit in, for example, removing the impact of equity asset sales which would otherwise be included as offsets to outlays.

Net debt

The net debt series used in this Statement incorporates: Treasury estimates for the period 1972 to 1987 were first incorporated in last year's Budget Statement 6. As discussed in Appendix B to that Statement, comparable data on net debt have been collected by the ABS only since 1988. The earlier series was constructed by deducting estimated annual net borrowing - defined as the ABS headline deficit less net advances - from the ABS measure of the stock of net debt at end June 1988. Net advances include both equity and policy lending transactions. Ideally, the estimates should only abstract from policy lending transactions, since they represent an asset for the lender government. Total net advances were used because separate data on equity transactions were not available. This data limitation is not considered significant, however, as asset sales were relatively small until the late 1980s and are reflected in the ABS net debt series from end June 1988 and in the Treasury projections.

The derivation of the historical net debt series is discussed in more detail in the Spring 1996 edition of the Commonwealth Treasury's Economic Round-up.