Estimated accrual expenses in 2007‑08 have decreased by $180 million since the 2007‑08 Budget. This reflects a net decrease of $3.7 billion due to parameter and other variations, partially offset by new policy measures of $3.5 billion in 2007‑08.
Table 9: Reconciliation of general government sector expense estimates
- Excludes the public debt net interest effect of policy measures.
- 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 2008‑09 onwards. Following a review by Treasury and the Department of Finance and Administration, the allowance in the contingency reserve at this MYEFO is 0.5 per cent in 2008‑09, 1.25 per cent in 2009‑10 and 2 per cent in 2010‑11.
Policy decisions taken since the 2007‑08 Budget (up to and including 9 October 2007) have increased estimated expenses by $3.5 billion in 2007‑08 and include:
- $794 million in 2007‑08 ($1.5 billion over four years from 2006‑07) in funding for drought relief, including income support and interest rate subsidies to assist farmers and small businesses most affected by the drought;
- $499 million in 2007‑08 ($688 million over four years) for the Northern Territory Emergency Response to strengthen child protection services, increase the provision of family and children's services, enhance indigenous employment opportunities and improve educational opportunities for children in remote communities;
- $223 million in 2007‑08 ($1.8 billion over five years to 2011‑12) for the Government's new Disability Assistance Package to address unmet need in the provision of services for people with disabilities, their families and carers;
- $142 million in 2007‑08 ($393 million over five years from 2006‑07) for workplace relations reforms, including the establishment of the Office of the Workplace Ombudsman and the Workplace Authority;
- $112 million in 2007‑08 ($711 million over four years) for the listing of Lucentis® and Visudyne® on the Pharmaceutical Benefits Scheme for the treatment of age‑related macular degeneration;
- $110 million in 2007‑08 ($393 million over four years) to increase the number of Work Skills Vouchers that provide Australians aged 25 years and over who do not have a Year 12 or equivalent qualification with a voucher up to the value of $3,000 to help improve their qualifications; and
- $101 million in 2007‑08 ($336 million over four years) for the Green Vouchers for Schools programme, which encourages improved energy and water efficiency through rebates for the installation of solar hot water systems and/or specified rainwater tanks.
A full list of expense measures announced since the 2007‑08 Budget is provided at Appendix A.
Since the 2007‑08 Budget, parameter and other variations have reduced estimated expenses by $3.7 billion in 2007‑08. This includes:
- a $945 million reduction in estimated Newstart Allowance expenses as a result of lower average rates of payments to recipients due to higher reported incomes, and a larger than previously anticipated fall in the forecast number of unemployment benefit recipients, reflecting improved labour market conditions and the greater than expected impact of the Welfare to Work measures;
- a $554 million reduction in estimated expenses due to a change in accounting that recognises education expenses when grants are due to be paid, rather than at the beginning of the calendar year. This accounting change has no impact on actual cash payments to schools (see Box 2 in Attachment E for further information);
- a $486 million reduction in estimated Family Tax Benefit (FTB) expenses due to lower than expected numbers of customers receiving FTB and decreases in average rates of payments resulting from higher family incomes;
- a $440 million reduction in estimated expenses due to reprogramming into future years of spending on a number of Defence acquisition projects;
- a $268 million reduction in forecast Parenting Payment expenses due to lower than previously anticipated customer numbers resulting from stronger than expected labour market conditions and lower average rates received by recipients due to higher reported incomes;
- a $197 million reduction in estimated expenses for the Age Pension as a result of lower than expected customer numbers and average payment rates;
- a $105 million reduction in estimated expenses arising from a revised implementation timetable for the Access Card;
- an $88 million reduction in estimated expenses for the Pharmaceutical Benefits Scheme, primarily due to a price reduction for the drug Simvastatin and the delisting of Prexige®;
- a $48 million reduction in estimated expenses for the Community Development and Employment Programme due to lower than expected take‑up of programme places; and
- a reduction in expense estimates following the inclusion of a provision for underspends in 2007‑08. A provision is included each year at the MYEFO update to provide for the established tendency of agencies to underspend their budgets in the current financial year.
These reductions in expenses have been partially offset by:
- a $106 million increase in estimated Medicare Services expenses primarily due to a higher than anticipated level of patient access to psychiatrists, psychologists and General Practitioners for mental health care services under the Medicare Benefits Schedule;
- a $50 million increase in estimated Disability Support Pension expenses primarily due to higher than expected customer numbers; and
- a $46 million increase in estimated Community Pharmacy and Pharmacy Awareness expenses as a result of a higher than forecast take‑up by pharmacies of the Pharmaceutical Benefits Scheme Online claiming facility.