Statement 8: Trends in Public Sector Finances
Part IV: Net debt and net worth
Net debt
Data
In this section, net debt data are sourced from the ABS 1998 Public Sector Financial Assets and Liabilities (ABS Cat. No. 5513.0), the ABS Government Finance Estimates (ABS Cat. No. 5501.0), the ABS 2000-01 Government Finance Statistics (ABS Cat. No. 5512.0) and Commonwealth Final Budget Outcomes. Net debt numbers from 2001-02 are derived from jurisdictions' 2001-02 mid-year reports and Treasury estimates.
Trends
Chart 4 shows non-financial public sector net debt as a percentage of GDP, and the respective contributions of the general government and PNFC sectors since the late 1980s. Data for the consolidated public non-financial corporations and non-financial public sector are only available to 2001-02, while general government data is available to 2005-06 (general government data for 2001-02 to 2005-06 is provided in Table B4 in Appendix B).
Looking at Charts 1 and 4 together indicates the broad relationship between cash deficits and net debt levels. The financing of Commonwealth cash deficits resulted in a substantial increase in general government net debt as a share of GDP over the early 1990s. Chart 4 also shows the decline in PNFC sector net debt as a share of GDP since the late 1980s, reflecting lower levels of capital expenditure, improved efficiency and privatisations. This decline moderated the increase in non-financial public sector net debt as a share of GDP in the first half of the 1990s.
The subsequent improvement in non-financial public sector net debt mainly reflects lower net borrowing requirements for the Commonwealth and the application of privatisation proceeds to debt retirement at both the Commonwealth and State/local levels.
Chart 4: Consolidated
government non-financial public sector
net debt by sector (as at end of financial year)
General government net debt as a share of GDP is expected to decline further over the estimates period. Consolidated non-financial public sector net debt is estimated to be 10.6 per cent of GDP in 2001-02, compared with the most recent peak of 34.9 per cent in 1994-95.
Chart 5 shows trends in net debt by sector and level of government. Most Commonwealth net debt is held by the general government sector whereas almost all State/local net debt is held in the PNFC sector.
As shown in Panel A of Chart 5, Commonwealth general government net debt as a share of GDP grew from low levels in the late 1980s to a peak of 19.1 per cent in 1995-96. Successive cash surpluses and asset sales (most notably the partial sale of Telstra) have reduced Commonwealth general government sector net debt to an expected 5.5 per cent of GDP in 2001-02.
Chart 5: Non-financial public sector net debt
by level of government
and sector (as at end of financial year)
A: Commonwealth
B: State/local
C: Consolidated non-financial public sector(a)
(a) Consolidated government includes Commonwealth and State/local governments and universities.
In contrast, State/local general government net debt grew only modestly in the early 1990s, and has since declined from a peak of 10.3 per cent in 1992-93 to around -0.3 per cent in 2001-02, as shown in Panel B. This improvement within the State/local general government sector reflects both the impact of asset sales, and fiscal consolidation during the second half of the 1990s. However, some individual States continue to face substantial net debt burdens (see Budget Paper No. 3 - Federal Financial Relations for more information).
Net worth
Data
As there are unresolved methodological issues involved in consolidating non-financial public sector data and with some jurisdictions yet to make the transition to accrual accounting, this section presents only consolidated general government net worth data to 2002-03. Table 4 shows general government net worth data by level of government.
Trends
The State/local general government sector has an estimated positive net worth of 57.9 per cent of GDP in 2002-03. The Commonwealth general government sector has historically recorded negative net worth. This difference primarily reflects the significant funding provided by the Commonwealth to the States for capital works, with the resultant assets recorded in the States' balance sheets.
Table 4: General government net worth by level
of government
(as at end of financial year)(a)
(a) Source: ABS Cat. No. 5512.0, State and Territory 2001-02 mid-year reports and Treasury estimates.
(b) Consolidated government includes Commonwealth and State/local governments and universities.
(e) Estimates.
(p) Projections.
na Data not available.
Net interest payments
Trends
Chart 6 shows the trend in general government net interest payments by level of government. Total general government net interest payments peaked in 1995-96 at 2.2 per cent of GDP due to the increased level of Commonwealth general government net debt. Net interest payments have since decreased to an expected 0.7 per cent in 2001-02 due to lower interest rates and reduced Commonwealth and State/local general government net debt.
The contribution of the PNFC sector to non-financial public sector net interest payments has decreased significantly in recent years, as reduced capital payments, improved PNFC performance and privatisations have reduced PNFC sector net debt as a share of GDP.
Chart 6: General government net interest payments(a)
(a) Source: ABS Cat. No. 5512.0 and Treasury estimates.
(b) Consolidated government includes Commonwealth and State/local governments and universities.
