Under Loan Council arrangements, every year the Australian Government and each State and Territory government nominate a Loan Council Allocation. A jurisdiction’s Loan Council Allocation incorporates:
- the estimated non-financial public sector cash deficit/surplus (made up from the general government and public non-financial corporations sector balances);
- net cash flows from investments in financial assets for policy purposes; and
- memorandum items, which involve transactions that are not formally borrowings but nevertheless have many of the characteristics of borrowings.
Loan Council Allocation nominations are considered by the Loan Council, having regard to each jurisdiction’s fiscal position and reasonable infrastructure requirements, as well as the macroeconomic implications of the aggregate figure.
As set out in Table 13, the Australian Government’s 2007-08 Loan Council Allocation budget update is a $17,905 million surplus. This compares with its Loan Council Allocation nomination of a $17,163 million surplus endorsed by Loan Council on 30 March 2007.
Table 13: Australian Government’s Loan Council Allocation budget update for 2007-08
- Such transactions involve the transfer or exchange of a financial asset and are not included within the cash deficit/surplus. However, the cash flow from investments in financial assets for policy purposes has implications for a government’s call on financial markets.
- For the Australian Government, memorandum items include the change in net present value (NPV) of operating leases (with NPV greater than $5 million) and over-funding of superannuation.