Document Index
Budget Paper 1
Budget Statement 7

• Introduction
• Capital Expenditure
• Capital Appropriations
• A strategic overview of capital expenditure and capital appropriations in the general government sector
• Loans and equity injections
• Overview of specific capital expenditure and capital appropriations
  • Agriculture, Fisheries and Forestry Portfolio
  • Attorney-General’s Portfolio
  • Communications, Information Technology and the Arts Portfolio
  • Defence Portfolio
  • Employment, Workplace Relations and Small Business Portfolio
  • Environment and Heritage Portfolio
  • Family and Community Services Portfolio
  • Finance and Administration Portfolio
  • Foreign Affairs and Trade Portfolio
  • Health and Aged Care Portfolio
  • Industry Science and Resources Portfolio
  • Transport and Regional Services Portfolio
  • Treasury Portfolio

Introduction

This is the first Capital Budget Statement to be prepared for the Commonwealth general government sector.

As owner, the Government is responsible for ensuring that agencies have access to new capital when additional investment is required to deliver outputs efficiently and competitively, having regard to the cost of capital.

Agencies are responsible for ensuring that the value of the Government’s investment is maintained in accordance with Government policies. Normally, this requires each agency to ensure that revenues cover all expenses, including depreciation.

The purpose of this statement is to show the Government’s capital management by detailing agency investment and funding decisions.

Capital Expenditure

Capital expenditure involves the purchase of non-current assets necessary for agencies to produce their outputs and achieve their outcomes. Capital expenditure may be funded by

• internal funds, which can be made up of:
  • cash from operations;
  • capital appropriations made by the Government in preceding years; and
  • sales of agency assets; or
• capital appropriations, which includes equity injections and loans.

Details of capital expenditure by agency by portfolio are shown in Table A.

Capital Appropriations

A capital appropriation is the means by which the Government can provide capital funding to its agencies. There are four types of capital appropriation:

• equity injections;
• loans;
• appropriation of previous years carryovers; or
• administered capital.

Details of capital appropriations by agency by portfolio are shown in Table B.

Tables A and B are aggregations of agency data. That is, they are not consolidated tables as they do not eliminate transactions between general government sector agencies. This presentation improves the visibility of the Commonwealth’s investment in its individual agencies.

Not all capital appropriations shown in Table B will be reflected in Table A as being applied to capital expenditure. Capital appropriations may be used to extinguish liabilities or to fund one-off expenses such as agency internal restructuring. Further, there will be some instances where a capital appropriation in one year is used to finance capital expenditure in another year.

Equity injections are a direct injection of cash into an agency, where the Government earns a return on its investment in the form of a dividend and/or improved performance. In the case of loans the Government provides cash which is repayable with interest by the agency.

In the move to accrual budgeting, there is a transitional difficulty associated with carryovers of 1998-99 running costs appropriations. Under the previous running cost arrangements agencies might have received additional funding for appropriations not expended in the previous year. In order to avoid a distortion of the price of outputs, it was decided that carryovers of running costs from 1998-1999 would be made available to agencies in the form of a specifically identified equity injection. This is a transitional issue for 1999-2000 only.

Administered capital comprises equity injections and carryovers for activities administered by agencies in their fiduciary capacity, on behalf of the Government. In this role agencies do not provide a service for which they earn revenue, rather they implement government policy on the behalf of the Government.

A strategic overview of capital expenditure and capital appropriations in the general government sector

Total capital expenditure for the general government sector is estimated at $5.0 billion in 1999-2000 and $14.9 billion over the period 2000-01 to 2002-03.

Chart 1: Total capital expenditure in general government sector agencies

Chart 1 shows that the Commonwealth is moving towards agencies funding a greater proportion of their capital expenditure from internal sources. This reflects the adoption of the accrual framework, which funds agencies for the full price of their outputs, including the depreciation of their assets.

Although the Government provides a high level of direct capital funding, internally generated funding represents the dominant source of financing for capital expenditure for agencies in the general government sector. This largely reflects agencies’ plans to maintain their capacity to deliver outcomes for the community. Funding for depreciation will enable agencies to replace capital assets as their useful life comes to an end.

Chart 2: Capital appropriations to general government sector agencies

The Government anticipates making an aggregate capital investment in general government sector agencies, of $2,447 million in 1999-2000, and a total of $5,947 million over the period 2000-01 to 2002-03. At the present time, the Government provides capital primarily in the form of direct equity injections to agencies.

The Defence portfolio accounts for around three quarters of total equity injections over the Budget and forward years. The Defence capital budget is financed from within an overall global budget for Defence funding. This global budget covers both recurrent and capital requirements and reflects the Government's commitment to no real change in Defence spending over the period 1999-2000 to 2000-01.

The large increase in Administered Capital in 2000-01 relates to the Commonwealth's commitment that the States and Territories will be no worse off under the implementation of A New Tax System. The States and Territories will be advanced $1.1 billion in 2000-01, which will be repayable without interest.

Loans and equity injections

The Commonwealth uses the two basic forms of capital injection – loans and equity injections – to meet different requirements.

Equity forms part of the capital base of an agency and is increased or decreased depending on whether the agency runs an operating surplus or a deficit. An equity injection is most appropriate to provide an agency with start-up capital, or to enable it to purchase assets that have useful lives of five years or more. If an agency creates surpluses over time, it may be required to return a dividend to the Commonwealth.

Loans are another form of investment and may be appropriate where an agency has a short-term need to pay for increased expenses, or to buy assets that are consumed over a 1 to 5 year period. Under the accrual framework, all requests for loans of more than 6 per cent of an agency’s revenue must be supported by rigorous investment proposals.

Overview of specific capital expenditure and capital appropriations

This section sets out the major areas of capital expenditure across the general government sector, by portfolio.

In this Budget, the Government is announcing a number of new capital measures involving several portfolios. These measures are separately described in Budget Paper No. 2, Budget Measures.

Agriculture, Fisheries and Forestry Portfolio

Department of Agriculture, Fisheries and Forestry

The Government is providing an administered capital appropriation of $22.6 million to the Department of Agriculture, Fisheries and Forestry for the unspent cash portion of grants expensed in 1998-99 but not paid until 1999-2000.

Attorney-General’s Portfolio

Attorney-General’s Department

The Government is providing an administered capital appropriation of $56.7 million to the Attorney-General’s Department for the rescheduling of discretionary grants from the 1998-99 financial year which were not included in the 1998-99 Appropriation Bills.

Australian Federal Police

Capital expenditure by the Australian Federal Police (AFP) will amount to $29.9 million over the period 1999-2000 to 2002-03 to provide equipment upgrades for forensic and technical analysis, deployable operational and intelligence support and information technology and the construction of forensic facilities at the Weston complex. These purchases will be funded from internal sources using funds provided by the Government as part of the AFP reform programme.

Australian Customs Service

Capital expenditure by the Australian Customs Service (ACS) is expected to peak at some $54.6 million in 1999-2000, falling to $21.1 million in 2000-01, $12.1 million in 2001-02 and $13.2 million in 2002-03. The 1999-2000 estimate includes investment in new search capacity and x-ray technology as part of the Government's Tough on Drugs initiative, completion of a major refurbishment and investment in software development.

The Government will provide ACS with an equity injection of $26.6 million in 1999-2000, including some $7 million to implement the Tough on Drugs strategy for which a further $2.3 million will be provided in 2000-01.

Communications, Information Technology and the Arts Portfolio

Department of Communications, Information Technology and the Arts

The Government will provide an equity injection of $1.9 million in 1999-2000, $1.7 million in 2000-01, and $1.1 million in 2001-02 to the National Science and Technology Centre to fund essential building repairs and maintenance.

The Government will provide an equity injection of $1 million in 1999-2000 to the Australian National Maritime Museum to fund essential building repairs.

The new building for the National Museum of Australia will move to the main construction phase in 1999-2000 with expected expenditure of $94.2 million and a further $33.5 million in 2000-01. The Department will fund the construction from capital previously provided by the Government from the Federation Fund.

Australian Broadcasting Corporation

The ABC is to conduct asset maintenance, replacement of plant and equipment and will invest in digital conversion for studio and broadcasting equipment. Funds will be internally sourced and amount to $73.6 million in 1999-2000; $80.7 million in 2000-01; $99.2 million in 2001-02 and $75.3 million in 2002-03.

Special Broadcasting Service Corporation

Capital expenditure by the SBS will amount to $30.4 million over the budget and forward years. The Government is providing SBS with an equity injection of $5.4 million for the relocation of its transmission service from Gore Hill to Artarmon. SBS is also receiving an equity injection of $14.5 million for the purchase of digital equipment.

Defence Portfolio

Department of Defence

The Defence capital budget is financed from within an overall global budget for Defence funding. This global budget covers both recurrent and capital requirements and reflects the Government's commitment to no real change in Defence spending over the period 1999-2000 to 2000-01. Total capital expenditure by Defence in 1999-2000 is expected to be $3.6 billion and includes initiatives to progress the Government's policy of enhancing capabilities across the priority areas of the knowledge edge, defeating air and maritime threats, and strike and land forces.

Defence Housing Authority

The Defence Housing Authority plans to spend approximately $1.5 billion over four years on the purchase of new properties. These purchases are to be funded internally by the receipts from property sales.

Employment, Workplace Relations and Small Business Portfolio

Department of Employment, Workplace Relations and Small Business

Administered capital injections of $346 million over the budget and forward years will be provided to extinguish outstanding administered liabilities relating to labour market programmes.

The Department is planning capital expenditure of $38.1 million over the budget and forward years. These will be funded through the use of carryovers and internal sources.

Environment and Heritage Portfolio

Department of the Environment and Heritage

The Department of the Environment and Heritage will make capital acquisitions estimated at $39.5 million in 1999-2000. Acquisitions mainly involve the purchase of property, plant and equipment for the Commonwealth Bureau of Meteorology including computing equipment and systems; equipment to support land based surface, upper air, marine and satellite-derived observations; and capital works, property fitout and furniture and fittings.

The Government has agreed that a Sydney Harbour Federation Trust be established to manage surplus Defence lands on the Sydney Harbour foreshore. The Department will receive a loan of $770,000 in 1999-2000 and $45,000 in 2000-01 to facilitate the establishment of the Sydney Harbour Federation Trust. The costs of relocating Defence facilities and remediating other foreshore areas will be met from the Federation Fund.

National Parks and Wildlife Service

Capital expenditure by the National Parks and Wildlife Service is expected to be $13.4 million in 1999-2000. Included in this are repairs to the main access and associated roads to the Norfolk Island National Park, which were damaged by floods in August 1998. These repairs will be funded by a $3.5 million equity injection from the Government.

Family and Community Services Portfolio

Department of Family and Community Services

Capital expenditure of $12.2 million is expected in 1999-2000 for capital works required to support the introduction and implementation of A New Tax System. The Government is providing an equity injection of $0.2 million to cover this expenditure with the remainder being internally funded.

Centrelink

Centrelink is anticipating capital expenditure of $132.2 million in 1999-2000, $125.9 million in 2000-01, $106.5 million in 2001-02 and $117 million in 2002-03. This expenditure is to fund internally developed software, office fitout and IT acquisitions that relate to the development of the new service delivery model. Capital expenditure of $10.7 million in 1999-2000, $14.8 million in 2000-01, $7.6 million in 2001-02 and $7.4 million in 2002-03 will be required to purchase computer and office equipment and software to support the implementation of A New Tax System.

The Government will provide capital by way of an equity injection of $11.2 million in 1999-2000, $15.1 million in 2000-01, $7.8 million in 2001-02 and $7.6 million in 2002-03 and loans of $64.1 million in 1999-2000 and $5.3 million in 2000-01 in addition to loans provided in 1998-99. An equity injection will be provided to fund the purchases supporting the implementation of A New Tax System with the remainder to be funded internally.

Finance and Administration Portfolio

Department of Finance and Administration

The Department of Finance and Administration will receive an equity injection of $37.5 million over four years for the refurbishment of the Treasury Building in Canberra. An amount of $36 million over 4 years will be injected to meet essential remediation works including Year 2000 compliance and occupational health and safety works necessary to maintain and prepare a large number of special purpose, industrial, and public interest properties for commercialisation and possible sale.

The Government has agreed to the construction of a new law court building to house the Federal Court, High Court and Family Court in Adelaide. Equity of $7.2 million will be provided in 1999-2000 for project planning and $66.5 million in 2002-03 for payment on completion. This meets the Government’s objective of ensuring appropriate and accessible Commonwealth court buildings in each state.

Other capital projects within the Department totaling approximately $100 million over four years will also be progressed using a combination of previously approved capital appropriations and existing special account moneys.

Foreign Affairs and Trade Portfolio

Department of Foreign Affairs and Trade

As part of the Government’s decision to open an Australian Consulate-General in Dili, East Timor, the Department will receive an equity injection of $3.5 million to fund office fitout, communications and office equipment, furniture and motor vehicles. At the same time, a policy liaison office is to be established in Lisbon, Portugal.

The Department will receive a further equity injection of $2.1 million over four years to fund the opening of an embassy in Zagreb. This will fund fitout as well as communications and office equipment.

Additionally, the Department is spending $7 million over two years on the purchase of a new financial and human resources management information system.

Australian Agency for International Development (AusAID)

AusAID will extinguish liabilities to the World Bank of $200 million in each year from 1999-2000 to 2002-03. AusAID will receive an equity injection of $0.2 million to fund the establishment of an AusAID office in Dili, East Timor.

Health and Aged Care Portfolio

Department of Health and Aged Care

The Department has planned capital acquisitions for office fitout and IT development of $17.6 million in 1999-2000 and $9 million in each of the three subsequent years. These capital expenditure programmes will be internally funded.

Industry Science and Resources Portfolio

Australian Nuclear Science and Technology Organisation

The Australian Nuclear Science and Technology Organisation (ANSTO) will receive an equity injection of $286.4 million over nine years to fund the construction of a replacement research reactor at Lucas Heights, NSW. Of this total, $10.0 million is to be drawn down in 1999-2000; $33.8 million in 2000-01; $66.9 million in 2001-02; and $84.6 million in 2002-03.

ANSTO is internally funding normal repair, refurbishment and replacement of buildings and infrastructure as well as maintenance and replacement of scientific instrumentation, safety equipment and transport vehicles to the value of $82.9 million over four years.

Commonwealth Scientific and Industrial Research Organisation

CSIRO will spend approximately $48 million per annum on research plant and equipment and $34 million per annum on replacement and refurbishment of land and buildings for each of the next three years.

In addition the Public Works Committee has approved two financial initiatives:

• construction of the national centre for petroleum and minerals resources research in western australia funded by a $37.5 million finance lease over 25 years through the western australian government; and
• stage 2 of the centre for advanced technologies in queensland funded by a $22.5 million finance lease over 19 years through the queensland government.

This capital expenditure will be funded from within the triennium funding arrangements.

Triennium funding provides CSIRO certainty for funds availability during a fixed three year period. The next triennium commences with the 2000-01 year.

Transport and Regional Services Portfolio

Department of Transport and Regional Services

The Department is anticipating capital expenditure of $34.5 million over four years. This includes capital works projects on the Cocos (Keeling) Islands and Christmas Island. This supports the Government's objective of bringing the public infrastructure in the Indian Ocean Territories up to mainland standards.

The Government has provided an equity injection to cover the Christmas Island and Cocos Island expenditure. The Department will fund the Norfolk Island expenditure from capital previously allocated by the Government.

Treasury Portfolio

Treasury

The Government will establish a specialist Australian Office of Financial Management to increase the efficiency of Commonwealth debt management. This will involve a capital expenditure of $2.9 million and $0.5 million in 1999-2000 and 2000-01 respectively.

The Department of the Treasury has an Administered Capital estimate of $1.2 billion for 2000-01, which includes $1.1 billion in advances to the States and Territories relating to the implementation of A New Tax System. Under the terms of the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations, the Government will make transition payments in the form of interest free loans to the States and Territories (as necessary) to ensure that no State or Territory is worse off from the introduction of the Government's tax package.

Australian Taxation Office

The Government’s taxation reform initiatives under A New Tax System will require the establishment of a legislative basis and supporting administrative systems. These systems will involve capital expenditure of $150 million over four years for the establishment of major infrastructure items including a GST collection system and an Australian Business Number register.

The Government’s reform of business taxation will require capital expenditure of $4.5 million to establish a legislative basis and supporting administrative systems.

All Australian Tax Office capital expenditure will be funded by the Government through equity injections.

Australian Bureau of Statistics

The Australian Bureau of Statistics (ABS) anticipates capital expenditure of $23.2 million in 1999-2000; $31.9 million in 2000-2001; $48.9 million in 2001-2002; and $19.8 million in 2002-2003. Included in these are expenditures on central office fitout and the purchase of computer software and general property and equipment.

The ABS’ capital expenditure programmes in the 1999-2000 Budget and forward years are funded internally.

Table A: Capital Expenditure by Portfolio 1999-2000 to 2002-03 ($m) - continued

Table A: Capital Expenditure by Portfolio 1999-2000 to 2002-03 ($m) - continued

Table A: Capital Expenditure by Portfolio 1999-2000 to 2002-03 ($m) - continued

Table A: Capital Expenditure by Portfolio 1999-2000 to 2002-03 ($m) - continued

Table B: Capital Appropriations by Portfolio 1999-2000 to 2002-03 ($m) – continued

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Past Last Updated: Tuesday 11th May, 7:30 pm AEST