Fiscal developments in the States

Most States are expected to record net operating surpluses in 2006-07, with improvements in their balances over the forward years. After allowing for capital investment, most States are expecting general government fiscal and cash deficits in 2006-07. The States are generally forecasting an improvement in their fiscal and cash balances by 2008-09.

Most States are expected to experience a deterioration in their net debt position in 2006-07 but their net debt levels remain low as a percentage of output. As a whole, the States eliminated net debt in 2001‑02 and this strong position is expected to remain in future. This trend is primarily due to States implementing medium-term fiscal strategies.

The fiscal indicators presented below indicate that the fiscal outlook of the States is strong. However, the challenge for the States is to sustain this in the longer term in light of emerging pressures associated with the ageing population and continuing increases in demand for services such as health.

This section provides an overview of fiscal developments in the States to provide context to the discussion of the Australian Loan Council arrangements that follows.