Net debt and net worth
Net debt was eliminated in 2005-06, falling from a peak of 18.5 per cent of GDP in 1995-96. Since the 2006-07 Budget, the forecast level of net debt has fallen from -$22.1 billion to -$28.1 billion.
The estimates of net debt have changed since the 2006-07 Budget primarily as a result of changes to the technical assumptions regarding the expected financial asset composition of the Future Fund. These assumptions are for estimates purposes only and are not intended as a guide for the Future Fund Board of Guardians in finalising its investment strategy for the Fund. The net debt projections are therefore sensitive to the actual asset composition of the Fund.
As a result of the lower level of net debt, net interest payments will continue to fall in 2006-07 and beyond. Having peaked at $8.4 billion in 1996-97, net interest payments are expected to fall to $0.5 billion in 2006‑07.
Australian Government general government sector net worth is expected to be -$11.9 billion in 2006-07 compared with -$12.0 billion at the 2006-07 Budget. Net worth over the forward estimates is expected to improve and, for the first time, is projected to be positive in 2008-09.
Table 13: Australian Government general government sector net worth, net debt and net interest payments
- Net debt equals the sum of deposits held, advances received, government securities, loans and other borrowing, minus the sum of cash and deposits, advances paid and investments, loans and placements.
- Includes the impact of the partial sale of the Australian Government's holding in Telstra and transfer of the Australian Government's remaining shares to the Future Fund. It is assumed that the Future Fund will increasingly be invested in equities until it reaches a portfolio equity allocation consistent with the benchmark return specified in the Australian Government's investment mandate.