Cash flows

After the delivery of personal tax cuts of $2.4 billion, an underlying cash surplus of $2.2 billion is now expected in 2003-04, compared with the MYEFO estimate of $4.9 billion. The underlying cash surpluses for 2004-05 and 2005-06 have also been revised downwards, while the outlook for 2002-03 has improved.

Table 3 provides a summary of Commonwealth general government cash flows.

Table 3: Summary of Commonwealth general government cash flows^(a)

1. Cash flows are derived from the accrual GFS framework excluding GST.
2. Equivalent to cash receipts from the sale of non-financial assets in the GFS cash flow statement.
3. Equivalent to cash payments for purchases of new and second-hand non-financial assets in the GFS cash flow statement.
4. The acquisition of assets under finance leases reduces the surplus/deficit. The disposal of assets previously held under finance leases improves the surplus/deficit.
5. Under the cash budgeting framework, these cash flows were referred to as 'net advances'.

The downwards revision to the 2003-04 underlying cash balance estimate largely reflects the impact of new policy decisions, including the reduction in personal income tax rates and new spending on priority areas, partly offset by parameter and other variations.

Table 4 provides a reconciliation of the variations in the underlying cash balance estimates.

Table 4: Reconciliation of general government underlying cash balance estimates

1. Excludes the public debt net interest effect of policy measures.

The underlying cash and fiscal balance estimates for 2003-04 have both fallen by around $2.7 billion since MYEFO.

Headline cash balance

A headline cash surplus of $1.5 billion is now forecast for 2003-04, compared with the surplus of $4.0 billion expected at MYEFO. The reduction in the 2003-04 headline cash surplus estimate since MYEFO largely reflects the fall in the estimated underlying cash balance, which principally reflects policy decisions, in particular, personal tax cuts.

In addition to the lower estimated underlying cash surpluses, the headline cash surplus estimates for the forward years also reflect the effect of a further postponement in the expected sale of the Commonwealth's remaining shareholding in Telstra.

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