Australian Government, 2006–07 Budget

General government expenses

Reconciliation of expenses since the 2005-06 Budget

Table 2 provides a reconciliation of expense estimates between the 2005-06 Budget, Mid-Year Economic and Fiscal Outlook 2005-06 (MYEFO) and the 2006-07 Budget, showing the effect of policy decisions and economic parameter and other variations.

Table 2: Reconciliation of expense estimates

Table 2: Reconciliation of expense estimates

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

Discussion of the major changes between the 2005-06 MYEFO and the 2006-07 Budget, shown in the above table can be found in Statement 2 (in the section titled Variations in expense estimates). Further information on expense measures can be found in Budget Paper No. 2, Budget Measures 2006‑07.

Expense estimates by function

Table 3 sets out the estimates of Australian Government general government expenses by function for the period 200506 to 200910.

Table 3: Estimates of expenses by function

Table 3: Estimates of expenses by function

  1. There has been some reclassification of expenditure that was previously reported under the natural resources development sub-function (agriculture, forestry and fishing) to other primary functions.

Major movements within the estimates of expenses by function between 200506 and 200607, and across the forward estimates, include increases in the following functions:

  • Social security and welfare due to the continued effect of indexation of payments together with the demographic and social factors that affect demand driven programmes;
  • Health due to a continued growth in the use of medical and pharmaceutical services over the forward estimates period, increasing costs for the provision of medical services, a continuing trend towards newer and more expensive drugs under the Pharmaceutical Benefits Scheme and additional support programmes for mental health services;
  • Defence due to continued funding increases associated with the Government's White Paper Defence 2000 — Our Future Defence Force, the Hardened and Networked Army — Phase 2 and Heavy Air Lift Capability, together with funding for major Australian Defence Force deployments, such as operations in Iraq and Afghanistan; and
  • Education due to increased schools funding over the four year period 2005 to 2008 (calendar year) provided under the Schools Assistance Act 2004 together with increased higher education funding reflecting increases under the Our Universities Backing Australia's Future package and the Commonwealth Grant Scheme.

Estimates presented in Table 3 above are explained in greater detail for each individual function in the following pages.

General public services

Table 4: Summary of expenses

Table 4: Summary of expenses

Nature of expenses and major trends

The general public services function includes expenses relating to the organisation and operation of government. This includes: expenses related to the Parliament, Governor-General and conduct of elections; expenses related to the collection of taxes, and management of public funds and public debt; and assistance to developing countries including assistance initiatives in the Pacific, contributions to international organisations and the operations of the foreign service. It also includes: expenses related to research in areas not otherwise connected with a specific function; expenses related to overall economic and statistical services and government superannuation benefits (excluding nominal interest expenses on unfunded liabilities which are included under the nominal superannuation interest sub-function in the other purposes function).

Expenses within the function tend to fluctuate over the budget and forward estimates period partly due to factors such as the preparation for a federal election expected in 2007-08 and the Asia-Pacific Economic Cooperation conference in 2007 (legislative and executive affairs sub-function) and the 2006 Census (financial and fiscal affairs sub-function).

The increases in expenses in the foreign affairs and economic aid sub-function over the budget and forward estimates reflect the impact of the Government's goal to increase the level of Official Development Assistance to around $4 billion by 2010 and to forgive 80 per cent of Iraq's debt to Australia. Fluctuations in the foreign affairs and economic aid sub-function over the budget and forward years also reflect timing effects in Australia's contributions to multilateral development banks.

The increase in expenses from 2005-06 to 2006-07 in the general services sub-function arises primarily from a revision of Comcare's estimates for workers' compensation premiums and claims expenses taking into account recent actuarial reports and trends in 2005-06.

Defence

Table 5: Summary of expenses

Table 5: Summary of expenses

Nature of expenses and major trends

Expenses in this function are within the Defence portfolio and support operations and delivery of navy, army, air and intelligence capabilities and strategic policy in the defence of Australia and its national interests.

Total annual expenses for the Defence function are estimated to rise by $3.2 billion over the period 200506 to 200910. In real terms, the growth in expenses for this function is 3.2 per cent a year on average.

The growth and pattern of expenditure is due to a number of factors. Firstly, there is the influence of significant funding increases for investments in capability announced by the Government in Defence 2000 — Our Future Defence Force (the Defence 2000 White Paper). Secondly, there are variations in funding levels for major Australian Defence Force deployments, such as the operations in Iraq and Afghanistan.

The remaining variation in expenses is largely due to additional funding being provided in this and previous budgets for logistics, Heavy Air Lift Capability and the Hardened and Networked Army — Phase 2 and military personnel costs and initiatives.

Public order and safety

Table 6: Summary of expenses

Table 6: Summary of expenses

Nature of expenses and major trends

Expenses for the public order and safety function support the administration of the federal legal system and the provision of legal services, including legal aid, to the community. Public order and safety expenses also include law enforcement and intelligence activities, as well as the protection of Australian Government property.

Expenses for the courts and legal services sub-function are expected to increase from 200506 to 200910 reflecting the growth in funding for the family law system announced in 2005-06, the refurbishment of the Sydney Law Courts and increased prosecutions relating to federal law.

Expenses for the other public order and safety sub-function are expected to increase by 3.5 per cent annually on average in real terms from 2005-06 to 2009-10 reflecting security and border protection measures. Key areas of growth include aviation security, intelligence capabilities and the response to illegal foreign fishers in Australia's northern waters. A significant component of the growth in intelligence capabilities is the increase in resources to be provided to the Australian Security Intelligence Organisation (ASIO). This follows the review of ASIO resourcing undertaken by Mr Allan Taylor AM in 2005.

Education

Table 7: Summary of expenses

Table 7: Summary of expenses

Nature of expenses and major trends

Education expenses support the delivery of education services through: higher education institutions; vocational education and training providers (including technical and further education institutions); and government (State and Territory) and non-government schools.

Expenses under the student assistance sub-function include the ABSTUDY scheme, Assistance for Isolated Children and income support for students aged twenty-five years and over through AUSTUDY.

Total expenses for this function are estimated to increase by 6.4 per cent in real terms over the three forward years, 2007-08 to 2009-10, or 2.1 per cent annually on average, with expenditure on higher education and schools being the main drivers.

Funding for higher education continues to grow over the forward years, reflecting increases in expenditure under Our Universities — Backing Australia's Future, the Commonwealth Grant Scheme, increases to the number of higher education student places and scholarships, and additional funding for capital projects.

Growth in expenses relating to schools is largely driven by funding provided under the Schools Assistance Act 2004 (the Act). Estimated Australian Government funding of $32 billion under the 2005-08 Quadrennial Schools Funding Agreements will be provided over the four-year period 2005 to 2008 (calendar year) through the Act. The remaining funding under this sub-function is largely made up of the $1 billion Investment In Our School Infrastructure, Australian Technical Colleges and Indigenous Education Strategic Initiatives. The estimated funding for government schools decreases from 2006-07 to 2007-08, mainly due to funding of $186 million for school infrastructure being brought forward from calendar year 2008 to calendar year 2006 to meet stronger than expected demand for funding under the initiative.

Health

Table 8: Summary of expenses

Table 8: Summary of expenses

  1. The financial impact of premium growth on the forward estimates for the Private Health Insurance Rebate has been allocated to the contingency reserve.
Nature of expenses and major trends

The health function includes expenses relating to: medical services funded through Medicare and the Private Health Insurance Rebate (medical services and benefits sub-function); provision of in-hospital services to eligible veterans and their dependants (hospital services sub-function); funding under Australian Health Care Agreements between the Australian Government and the States and Territories (health care agreements subfunction); and the Pharmaceutical Benefits and Repatriation Pharmaceutical Benefits Schemes (pharmaceutical services and benefits sub-function).

The major purpose of health function expenditure is to ensure that all Australians have access to essential health services through a range of providers and without excessive price barriers.

While expenses related to health are likely to be a major, if not the major, contributor to the growth in Australian Government spending in the coming decades, total Government health spending is expected to remain at around 4 per cent of GDP over the budget and forward estimates years.

Total expenses for this function are estimated to increase by 10.0 per cent in real terms over the three forward years, or on average by around 3.2 per cent per annum in real terms.

Medical services and benefits funded through Medicare and the Private Health Insurance Rebate are the main contributors to health function expenses and are estimated to increase by 9.4 per cent in real terms over the three forward years, or on average by around 3.1 per cent per annum in real terms, making up around 42 per cent of total health expenditure in 2006-07 and across the forward estimates.

The hospital services sub-function has average annual growth in real terms of 1.1 per cent due to an ageing and increasingly frail veteran community requiring more hospital services. This average level of growth is increasing at a slower rate compared to last year due to declining client numbers in the veteran community.

The trend in the estimates for the health care agreements sub-function is driven by funding growth determined in the Australian Health Care Agreements, which cover the period 1 July 2003 to 30 June 2008.

While forecast expenses have been reduced over the forward estimates since the 2005-06 Budget, expenses for the pharmaceutical services and benefits sub-function continues to be one of the fastest growing health expenses and is forecast to grow at an average of 5.6 per cent per annum in real terms. This growth is driven by a combination of an ageing population and demand for newer and more expensive drugs.

Box 6.1: Pharmaceutical services and benefits

Table 8.1: Trends in major components of the pharmaceutical services and benefits sub-function

Table 8.1:  Trends in major components of the pharmaceutical services and benefits sub-function

  1. Since the 2005-06 Budget, there were significant variations to estimates for larger drug categories. For a detailed discussion of the Pharmaceutical Benefits Scheme, refer to Outcome 2 of Health and Ageing Portfolio Budget Statements 2006-07.
  2. Veterans' Pharmaceutical Services are covered under Outcome 2 of the Department of Veterans' Affairs (Defence Portfolio) Portfolio Budget Statements 2006-07. Since the 2005-06 Budget, there have been downward revisions to their forward estimates.
  3. Subsumed within Outcomes 1 and 2 of Health and Ageing Portfolio Budget Statements 2006-07. The ongoing increase in 2006-07 is due to the impact of the Community Pharmacy Agreement.
  4. Approximately 20 per cent of Medicare Australia (formerly Health Insurance Commission) departmental expenses and 14 per cent of Health and Ageing departmental expenses are allocated to this sub-function.

Social security and welfare

Table 9: Summary of expenses

Table 9: Summary of expenses

Nature of expenses and major trends

The social security and welfare function includes pensions and services to the aged, services to the unemployed, assistance to people with disabilities, a variety of assistance to families with children, income support and compensation for veterans and their dependants, and advancement programmes for Aboriginal and Torres Strait Islander people.

Social security and welfare function expenses are estimated to total around $91.8 billion in 2006-07 and grow significantly over the forward years. The sub-functions contributing most to the growth over the forward years are the assistance to the aged and assistance to people with disabilities. The main driver of growth in these sub-functions is the indexation of payments, including maintaining the single rate of age and disability pensions at a minimum of 25 per cent of Male Total Average Weekly Earnings. The growth also reflects demographic and social factors such as the ageing of the population.

The assistance to families with children sub-function is expected to grow steadily at 2.6 per cent, in real terms, over the forward estimates. This sub-function includes the Family Tax Benefit, Parenting Payments and the Child Care Benefit as the most significant contributing programmes.

Lower estimates than in previous years for the sub-function for aboriginal advancement, not elsewhere classified, are due largely to a revision of the estimates for the payment to the Indigenous Land Corporation from the Aboriginal and Torres Strait Islander Land Account, which is paid in accordance with the Aboriginal and Torres Strait Islander Act 2005.

The general administration sub-function largely consists of Centrelink's operating costs and is expected to increase from 2005-06 to 2006-07 due to higher staffing numbers in Centrelink, largely due to the implementation of a number of new measures taking effect in 2006-07.

Housing and community amenities

Table 10: Summary of expenses

Table 10: Summary of expenses

  1. There has been some reclassification of expenditure that was previously reported under the natural resources development sub-function (agriculture, forestry and fishing) to other primary functions.
Nature of expenses and major trends

The housing and community amenities function includes the Australian Government's contribution to the Commonwealth-State Housing Agreement, expenses of the Defence Housing Authority and various regional development and environment protection programmes.

Housing sub-function expenses are estimated to grow over the forward years mainly due to demand by Defence for the on-going upgrade and supply of housing stock. Growth in the housing sub-function over 200607 and 2007-08 is mainly due to the increased expenditure relating to Defence housing requirements, primarily in support of the personnel to be assigned to the Headquarters Joint Operation Command to be located in Bungendore, New South Wales.

The decrease in expenses in the urban and regional development sub-function from 2006-07 to 200809 primarily reflects the conclusion of the Sustainable Regions, Natural Disaster Mitigation and Bushfire Mitigation programmes.

There has been an increase in expenses under the environment protection sub-function due to the inclusion of expenditure under the three programmes that make up the Australian Government Water Fund (AGWF). The AGWF was previously reported under the natural resources development sub-function (agriculture, forestry and fishing function). The expenditure under this sub-function varies significantly from yeartoyear due to the timing of the payment of grants, primarily under the largest AGWF programme, Water Smart Australia.

Expenses under the environment protection sub-function decrease between 2007-08 and 2008-09 largely due to the termination of funding for the Natural Heritage Trust (NHT) in 2007-08. A provision for the continuation of NHT has been included in the contingency reserve for 2008-09 and 2009-10. The remaining decrease reflects the termination in 2007-08 of some measures announced as part of the Climate Change Strategy and the conclusion of funding for the Water Wise Communities programme.

Recreation and culture

Table 11: Summary of expenses

Table 11: Summary of expenses

Nature of expenses and major trends

Recreation and culture function expenses support public broadcasting; the regulatory framework for Australia's broadcasting sector; cultural institutions; funding for the arts and the film industry; assistance to sport and recreation activities; and the management and protection of national parks and other world heritage areas. This function also includes expenses relating to the protection and preservation of historic sites and buildings, including war graves.

Total expenses for the recreation and culture function decrease slowly over the period from 200506 to 200910 with some fluctuation.

The broadcasting sub-function expenses increase over the forward estimates, in part due to increased resourcing for the Australian Broadcasting Corporation for Australian television content and the regional and local programming initiative, announced in the context of the Australian Broadcasting Corporation triennial funding arrangements.

Higher expenses in the sport and recreation sub-function in 2005-06 primarily reflect a direct payment to the Victorian Government to assist with costs associated with staging the Melbourne 2006 Commonwealth Games. It also reflects additional funding under the programme Building a Healthy, Active Australia — Active Afterschool Communities. This programme concludes in 2007-08, contributing to the declining trend over the forward years for this sub-function.

The national estate and parks sub-function expenses decrease due to completion of several small programmes. The decrease from 2007-08 is largely due to cessation of funding for the Natural Heritage Trust (NHT). A provision for the continuation of NHT has been included in the contingency reserve for 2008-09 and 200910.

Fuel and energy

Table 12: Summary of expenses

Table 12: Summary of expenses

Nature of expenses and major trends

This function includes expenses for the Energy Grants Credits Scheme (EGCS), Cleaner Fuels Grants Scheme and the Fuels Sales Grants Scheme (FGCS), which are administered by the Australian Taxation Office. The Fuel Tax Credits (FTC) will replace the EGCS on 1 July 2006 and the FSGS will terminate at the end of 200506.

This function also includes expenses of the Department of the Environment and Heritage for programmes funded under A New Tax System — Measures for a Better Environment package, the Climate Change Strategy measures and the Securing Australia's Energy Future measures. These expenses increase in 200607 due to higher funding levels for several greenhouse related programmes, including the Low Emissions Technology Demonstration Fund and Solar Cities programme.

Also included within this function are expenses for programmes relating to the production of alternative fuels including ethanol and biodiesel, which are administered by the Department of Industry, Tourism and Resources and the Australian Taxation Office respectively.

Following the replacement of the EGCS with the FTC on 1 July 2006, this function is expected to have significant growth from 2006-07 due to the staged expansion of entitlements. This includes an increase in expenses in 2008-09 due to the extension of eligibility for 'off-road' business users. In addition, expenses increase in the forward estimates period due to the higher fuel tax credit payments flowing from the decision to freeze the road user charge for operators of heavy vehicles. An additional increase in expenses (fully offset by increased revenue) results from moving to a regime where all fuel attracts the full rate of excise or customs duty and a full tax credit is provided for business use other than as fuel (for example use in solvents, paints and the like). This continues to provide an effective excise-free outcome in these circumstances.

Agriculture, forestry and fishing

Table 13: Summary of expenses

Table 13: Summary of expenses

  1. There has been some reclassification of expenditure that was previously reported under natural resources development to primary functions other than agriculture, forestry and fishing.
Nature of expenses and major trends

Agriculture, forestry and fishing function expenses support assistance to primary producers, forestry, fishing, land and water resources management, quarantine services and contributions to research and development.

Expenses within this function are expected to decrease by around 40 per cent between 200607 and 200910, reflecting expected decreases in expenditure on drought-related measures within the rural assistance sub-function. This reflects an assumed return to normal seasonal conditions in Australia and a consequent cessation of drought assistance outlays. The decrease is also attributable to the conclusion of the Tasmanian Community Forest Agreement Package (fishing, horticulture and other agriculture subfunction) and termination of funding in 2007-08 for the Natural Heritage Trust (NHT) and the National Action Plan on Salinity and Water Quality (NAP) (natural resources development sub-function). A provision for the continuation of NHT and NAP has been included in the contingency reserve for 2008-09 and 200910. In addition the decrease between 2008-09 and 2009-10 is partially due to reduced grains research and development (grains industry sub-function).

The overall decrease is partially offset by the additional funding for the Murray-Darling Basin Commission (natural resources development sub-function) over the period 2006-07 to 2010-11. In addition the increase in 200607 in the fishing, horticulture and other agriculture sub-function is a result of expenditure on the Fisheries Structural Adjustment package.

Other significant expenses on conservation and sustainable use and repair of Australia's natural environment are included in the environment protection sub-function (housing and community amenities function) and the national estate and parks sub-function (recreation and culture function).

Expenditure on the three programmes that make up the Australian Government Water Fund was previously reported under the natural resources development sub-function. They have now been reclassified to the environment protection sub-function (housing and community amenities function).

Mining, manufacturing and construction

Table 14: Summary of expenses

Table 14: Summary of expenses

Nature of expenses and major trends

Expenses under this function relate to the manufacturing and export sectors, and are designed to improve the efficiency and competitiveness of Australian industries. Major expenses include programmes specific to the automotive, textiles, clothing and footwear (TCF) and pharmaceutical industries. Expenses also include Australian Government assistance to exporters through direct financial assistance for the development of export markets, information and promotional assistance, finance and insurance services, trade policy, programmes providing research and development assistance grants, and a programme of strategic investment incentives.

The introduction of a lower level of assistance under the new TCF Strategic Investment Programme (announced in the 2003-04 MYEFO) will be offset, in 2006-07, by higher grant payments under the Commercial Ready Programme, an increase in payments under the Pharmaceuticals Partnerships Programme, an expected increase in assistance under the Automotive Competitiveness and Investment Scheme, expected growth in the Research and Development Tax Concession Scheme and a continuation of funding for projects under the Strategic Investment Coordination process.

In 2007-08, a lower number of projects being funded under the Strategic Investment Coordination process has been partially offset by expected growth in the Pharmaceuticals Partnerships Programme.

In 2008-09, expenses increase due to expected higher grant payments under the Commercial Ready Programme and expected growth in concessions granted under the Research and Development Tax Concession Scheme.

The reduction in expenses from 2008-09 to 2009-10 arises from the conclusion of funding for the Pharmaceuticals Partnerships Programme and a reduction in the expected level of assistance under the Automotive Competitiveness and Investment Scheme, partially offset by expected growth in concessions granted under the Research and Development Tax Concession Scheme.

Transport and communication

Table 15: Summary of expenses

Table 15: Summary of expenses

Nature of expenses and major trends

Transport and communication function expenses support the infrastructure and regulatory framework for Australia's transport and communications sectors.

The increased expense in the communication sub-function between 2005-06 and 2006-07 is due to the telecommunications programmes Connect Australia and Metro Broadband Blackspots, which commenced in 200506. The overall decline in the sub-function from 2006-07 to 2009-10 reflects the conclusion of telecommunications and information technology initiatives, including the Telstra Social Bonus 2, the response to the Telecommunications Service (Besley) Inquiry, and the Building on IT Strengths, Metro Broadband Blackspots and the Connect Australia programmes.

The high level of expense in the rail transport sub-function in 2005-06 is due to the provision of $270 million to the Australian Rail Track Corporation for investment in the interstate rail network to improve the competitiveness of freight rail. The increasing expenses from 2006-07 to 2008-09 are due to rail expenses associated with the AusLink programme. These include the construction and upgrade of passing loops, communications systems and bridge over-passes on the inter-state rail networks, including the NorthSouth rail line between Melbourne and Brisbane.

The high level of expense in the air transport sub-function in 2005-06 and 2006-07 is due to oneoff aviation security initiatives, including grants for air cargo screening equipment, and a $28.5 million grant for the upgrade of the runway at Canberra International Airport.

The higher level of expense in the road transport sub-function from 2005-06 to 2008-09 is due to the AusLink programme. This includes an additional $1.7 billion in funding announced in the 2006-07 Budget for improvements to the national road network and an additional $307.5 million for improvements to local roads infrastructure. Further information can be found in the measures, Investing in the nation's infrastructure — improving the national network and Investing in the nation's infrastructure — improving local roads, under the Transport and Regional Services portfolio in the 2006-07 Budget Paper No. 2.

Funding for the second five-year plan of the AusLink programme from 2009-10 will be considered by the Government at a later date, so the 2009-10 projection for road transport is subject to change. The Road Safety Black Spot and the Roads to Recovery programmes are due to terminate in 2007-08 and 200809 respectively. The Government also provides untied funding to local governments through Financial Assistance Grants that are identified for roads — see the general purpose inter-government transactions sub-function (other purposes function).

The increased expense in the sea transport sub-function from 2006-07 is mainly due to the introduction of the national maritime towage and salvage arrangements. The arrangements provide for emergency maritime towage and salvage and will be administered by the Australian Maritime Safety Authority.

Other economic affairs

Table 16: Summary of expenses

Table 16: Summary of expenses

Nature of expenses and major trends

The other economic affairs function includes expenses on tourism and area promotion, labour market assistance, immigration, industrial relations and other economic affairs not elsewhere classified.

Estimates for the labour market assistance to job seekers and industry sub-function reflect an overall increase in resourcing from 2006-07 to the Job Network, Work for the Dole and other work assistance programmes. The Government's Welfare to Work reform package announced in the 2005-06 Budget increased the expenditure on labour market assistance to job seekers.

The increase in the industrial relations sub-function in 2006-07 is a result of increased resourcing to the Department of Employment and Workplace Relations, Office of Workplace Services, Office of Employment Advocate, Australian Fair Pay Commission, Federal Court and Federal Magistrates Court to implement the Government's Workplace Relations reform package announced in the 2005-06 MYEFO.

Continuing growth in the vocational and industry training sub-function is due to an expected increase in apprenticeships/traineeships commencements and from a range of new initiatives targeting traditional trades and skill shortages generally, as a result of the Government's 2004 election commitments and the Commonwealth's contribution to the Council of Australian Governments' skills and training reforms.

The decline in 2008-09 in the tourism and area promotion sub-function reflects the conclusion of additional funding arrangements announced in the context of the 2003 White Paper on Tourism.

The variation in the immigration sub-function between 2005-06 and 2006-07 reflects an increase in resources for the Department of Immigration and Multicultural Affairs in response to the Palmer and Comrie Reports.

Other purposes

Table 17: Summary of expenses

Table 17: Summary of expenses

  1. Asset sale related expenses are treated as a component of the contingency reserve.
Nature of expenses and major trends

The other purposes function includes expenses incurred in the servicing of public debt interest, and assistance to the State, Territory and local governments. The function also includes items classified to natural disaster relief, the contingency reserve, and costs of asset sales.

The decline between 2005-06 and 2006-07 in general revenue assistance to the States reflects the cessation of National Competition Policy (NCP) payments and the removal of Budget Balancing Assistance (BBA) from the estimates from 2006-07 due to the expectation that the States and Territories will receive more GST revenue than their Guaranteed Minimum Amount and will not require BBA.

The NCP agreements only provide for payments to 30 June 2006. The Council of Australian Governments (COAG) has decided on a future National Reform Agenda. COAG agreed that, if funding is needed to ensure a fair sharing of the costs and benefits of reform, the Australian Government will provide funding to the States on a case-by-case basis once specific implementation plans have been developed. Payments to the States, and where appropriate, to local government, would be linked to achieving agreed actions or progress measures and demonstrable economic benefits.

There are no expenses in the debt assistance sub-function from 2006-07, reflecting the cessation of the agreed debt redemption arrangement between the Australian Government and the States in 2005-06.

The assistance to other governments sub-function includes payments to Western Australia for offshore petroleum royalties. Expenses in this sub-function fluctuate primarily due to variations in these payments. There is an expected increase in royalty payments to Western Australia in 2006-07. The reductions in expenses in 2008-09 and 2009-10 are due to the decrease in the estimated crude oil production volume from the North West Shelf project.

The natural disaster relief sub-function includes business assistance grants for the victims of Tropical Cyclone Larry, which are expected to conclude in 2005-06.

The increase in expenses in the contingency reserve from 2006-07 over the forward years is largely due to the conservative bias allowance — an allowance that compensates for the trend in expenses on existing Australian Government programmes to be underestimated by agencies in the forward years. There is also an increase in 2006-07 reflecting one-off asset sales expenses. The nature of the contingency reserve is discussed in more detail at Appendix B.

 

Miscellaneous