Expenses

Estimated accrual expenses in 2005-06 have increased by $957 million since the 2005-06 Budget. This increase reflects new policy measures of $1.5 billion in 2005-06, partially offset by a net decrease of $568 million due to parameter and other variations.

Table 8: Reconciliation of general government sector expense estimates

1. Excludes the public debt net interest effect of policy measures.
2. The contingency reserve includes an allowance for the established tendency of existing government policy (particularly demand driven programmes) to be higher than estimated in the forward years. This allowance, known as the conservative bias allowance, is progressively reduced so that the budget year conservative bias is zero by the budget. As is standard practice, the conservative bias has been reduced at this MYEFO in the forward years from 2006-07 onwards.

Policy decisions announced since the 2005-06 Budget increase estimated expenses by $1.5 billion in 2005‑06 and include:

• $534 million in 2005-06 ($633 million over two years) for additional drought relief funding to support primary producers in regions that have been declared eligible for Exceptional Circumstances assistance;
• $154 million in 2005-06 ($1.1 billion over four years) for the Connect Australia package. This will improve access to broadband, mobile coverage and communications infrastructure for regional, rural and remote Australia;
• $111 million in 2005-06 ($206 million over four years) for the Commonwealth Fisheries Structural Adjustment package which will provide assistance to fishing and related businesses to help secure Australian fish stocks;
• $99 million in 2005-06 ($403 million over four years) for the development and implementation of workplace relations reforms, including the introduction of a national workplace relations system, simplification of workplace agreement making processes and better balancing of unfair dismissal laws;
• $56 million in 2005-06 ($137 million over four years) as part of the Government’s election commitment A Sustainable Future for Tasmania; and
• $50 million in 2005-06 to extend the Higher Bandwidth Incentive Scheme (HiBIS), which will enable the Government to meet strong increases in demand and provide certainty to HiBIS providers.

A full list of expense measures since the 2005-06 Budget is provided at Appendix A.

Since the 2005-06 Budget, parameter and other variations have reduced forecast expenses by $568 million in 2005-06. This includes:

• a $283 million reduction in expenses for the Pharmaceutical Benefits Scheme due to revised expectations of growth, driven predominantly by reduced consumption across certain drug groups;
• a $197 million reduction in Disability Support Pension and Parenting Payment expenses primarily due to lower than forecast recipient numbers;
• a $194 million reduction in general budget assistance provided to the States and Territories (which, in 2005-06, includes residual adjustment amounts),² largely reflecting the difference in 2004‑05 GST entitlements and actual GST cash receipts for 2004-05, which is reconciled and accounted for in 2005‑06;
• a $176 million reduction in the Energy Grants Credit Scheme expenses due to a reduction in forecast applications; and
• a reduction in expense estimates following the inclusion of the provision for underspends in 2005-06. A provision is included each year at the MYEFO to provide for the established tendency of departments and agencies to underspend their budgets in the current financial year.

The above reduction in expenses has been partly offset by:

• a $259 million increase in expenses reflecting the reprofiling of grants from 2004-05 under the Schools Infrastructure Programme and Indigenous Education Agreements;
• a $182 million increase in projected Medicare benefits payments reflecting revised expectations of the use of Medicare services based on observed trends in spending; and
• $136 million increase in the Age Pension expenses largely due to an upwards revision to the forecast for wages growth, reflecting the Government’s ongoing commitment to maintain selected pensions at 25 per cent of Male Total Average Weekly Earnings.

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² See the Final Budget Outcome 2004-05, page 85, for further information on general budget assistance.