Australian Government, 2008‑09 Budget
Budget

Part 1: Australian Government Budget Outcome

Overview

In 2008-09, the Australian Government general government sector recorded an underlying cash deficit of $27.1 billion (2.3 per cent of gross domestic product (GDP)). The fiscal balance was in deficit by $29.7 billion (2.5 per cent of GDP).

Table 1: Australian Government general government sector budget aggregates

Table 1: Australian Government general government sector budget aggregates
  1. Excludes Future Fund earnings.

In cash terms, the outcome was $5.0 billion better than estimated at the time of the 2009-10 Budget, with total cash receipts $2.8 billion higher than expected and total cash payments1 $2.2 billion lower than expected.

At the end of 2008-09, the level of Australian Government net debt was -$16.1 billion (1.3 per cent of GDP) which was $11.5 billion better than expected at the time of the 2009-10 Budget. Australian Government general government sector net financial worth was -$73.8 billion at the end of 2008-09. Net worth was $19.7 billion at the end of 2008-09.

Revenue

Total accrual revenue was $298.9 billion in 2008-09, which is $3.0 billion above the estimate in the 2009-10 Budget. This reflected higher than expected taxation revenue of $2.9 billion and higher non-taxation revenues of $92 million.

Company tax, other individuals income tax and petroleum resource rent tax (PRRT) were the main contributors to the higher than expected taxation revenue outcome, with partial offsets from weaker income tax withholding and GST.

Company taxation revenue was $2.8 billion (4.8 per cent) above the estimate in the 2009-10 Budget. This primarily reflected stronger than expected taxable income from some companies in the mining industry and some financial institutions (where gains on currency swap transactions are likely to have contributed to higher taxable income) and a large one off tax payment made to correct a previous underpayment.

PRRT revenue was $499 million (31.2 per cent) higher than estimated reflecting higher than assumed oil prices and lower than expected tax refund liabilities.

While total individuals and other withholding tax revenue was only $87 million above the 2009-10 Budget estimate, this result incorporated significant offsetting effects. Revenue from other individuals income tax was $1.0 billion (3.4 per cent) higher than estimated but this was almost fully offset by lower income tax withholding of $594 million (0.5 per cent) and higher individuals refunds of $369 million (1.6 per cent).

Higher other individuals income tax reflected stronger than expected collections relating to 2007-08 income year tax assessments (in part owing to stronger than anticipated capital gains outcomes), as well as some significant compliance assessments. Income tax withholding was lower than anticipated because of weaker wage and salary incomes, particularly owing to a reduction in average hours worked. The higher individuals refunds resulted from a greater than expected bring forward in tax return lodgements into 2008-09 (primarily from 2009-10) in response to the introduction of the Tax Bonus Payment.

GST revenue was $504 million (1.2 per cent) lower than estimated in the 2009-10 Budget. This was mainly the result of lower than anticipated revenue from transactions related to previous financial years.

Excise and customs duty taxation revenue was $365 million lower than estimated, largely owing to weakness across a range of import categories and lower than expected petrol excise.

The major upward variations in non-taxation revenue since the 2009-10 Budget estimates include:

  • higher than anticipated dividends of $280 million earned mainly by the Future Fund; and
  • the recovery of $146 million in overpayments of income support benefits.

This was partially offset by lower than expected interest revenue of $193 million from the Future Fund as a result of fluctuations in the funds invested and interest rate movements and earnings.

Table 2: Australian Government general government sector revenue

Table 2: Australian Government general government sector revenue
  1. Other excisable beverages are those not exceeding 10 per cent by volume of alcohol.
  2. Includes Future Fund earnings.

Expenses

Total accrual expenses were $324.6 billion in 2008-09, $126 million higher than the estimate provided in the 2009-10 Budget. The major upward variations from the 2009-10 Budget estimates for 2008-09 include greater than expected:

  • rental expenses of $302 million including leases by the Department of Defence (Defence);
  • superannuation interest expenses of $283 million associated with adjustments for Defence's superannuation provisions; and
  • expenses of $254 million in Family Tax Benefits owing to a higher than expected number of recipients.

The upward variations were partly offset by lower than expected expenses across a number of programs, including lower than expected:

  • expenses of $415 million owing to New South Wales and Victoria choosing not to accept the Commonwealth's offer to cash out the Snowy-Hydro Ltd company tax compensation;
  • expenses of $186 million for remote indigenous housing, owing to implementation plans for the National Partnership Agreement being finalised in May 2009 with milestone payments becoming due in 2009-10;
  • expenses of $171 million by the Department of Environment, Water, Heritage and the Arts primarily owing to lower than projected uptake of infrastructure projects; and
  • expenses of $138 million for the Newstart Allowance, reflecting lower than expected recipient numbers partly offset by higher than estimated average payment rates.

Estimated expenses for 2008-09 in the 2009-10 Budget also included a provision for an underspend in the contingency reserve.

Table 3 provides information on Government Finance Statistics (GFS) general government sector expenses by function.

Table 3: Australian Government general government sector expenses by function

Table 3: Australian Government general government sector expenses by function
  1. Includes a number of reallocations between functions since 2009-10 Budget.

Net capital investment

Total net capital investment for 2008-09 was $4.1 billion, which is $283 million lower than estimated in the 2009-10 Budget.

Table 4: Australian Government general government sector net capital investment
by function

Table 4: Australian Government general government sector net capital investment by function

Cash flows

The 2008-09 underlying cash deficit was $27.1 billion, $5.0 billion smaller than estimated at the 2009-10 Budget. The smaller than anticipated outcome was the result of higher cash receipts of $2.8 billion and lower cash payments2 of $2.2 billion.

Total cash receipts were $292.6 billion in 2008-09, around $2.8 billion higher than the estimate in the 2009-10 Budget. This reflected higher than estimated taxation receipts of $3.3 billion, partly offset by lower than estimated non-taxation receipts of $434 million.

The higher tax receipts were essentially the result of higher than expected company income tax collections of $3.6 billion, partly offset by lower than expected tax collections from total individuals and other withholding taxes of $549 million.

Tax receipts outcomes for PRRT, GST, excise and the other smaller revenue heads were broadly in line with the estimates in the 2009-10 Budget.

Total taxation receipts were $3.3 billion higher than the estimate in the 2009-10 Budget while total accrual taxation revenue was $2.9 billion higher than the estimate in the 2009-10 Budget. The difference between the cash and accrual results were primarily the result of GST receipts remaining broadly in line with the Budget estimate, compared with a $504 million decrease for its accrual equivalent, as the lower than anticipated revenue from transactions related to previous financial years did not affect cash receipts in 2008-09. This effect was partially offset by the accrual revenue increase in other individuals income owing to higher compliance assessments that have not yet had time to translate into cash receipts.

Total cash payments (including finance leases) were $316.0 billion in 2008-09, $2.2 billion lower than estimated at the 2009-10 Budget.3

The difference between the lower than expected cash payments of $2.2 billion and the lower than expected net outcome for expenses and net capital investment of $157 million primarily reflects increases in expenses that did not impact on cash payments.

The key drivers include:

  • grant payments to State and Territory governments of $523 million that were expensed in 2008-09 but paid in 2009-10, including revenue assistance to the states and territories ($126 million), school education ($85 million) and rural assistance ($34 million);
  • payments to local government of $480 million which were paid and expensed in 2008-09, while only the cash payment was included in the 2009-10 Budget;
  • greater than expected superannuation interest expenses of $283 million associated with adjustments for the Defence's superannuation provisions; and
  • service and interest costs on the University superannuation provision of $213 million.

Table 5: Australian Government general government sector receipts

Table 5: Australian Government general government sector receipts
  1. Other excisable beverages are those not exceeding 10 per cent by volume of alcohol.
  2. Includes Future Fund earnings.

Table 6: Summary of Australian Government general government sector cash flows

Table 6: Summary of Australian Government general government sector cash flows
  1. Equivalent to cash receipts from the sale of non-financial assets in the cash flow statement.
  2. Equivalent to cash payments for purchases of new and second-hand non-financial assets in the cash flow statement.
  3. The acquisition of assets under finance leases decreases the underlying cash balance. The disposal of assets previously held under finance leases increases the underlying cash balance.
  4. Excludes Future Fund earnings.

Net debt, net financial worth and net worth

At the end of 2008-09, the level of Australian Government net debt was -$16.1 billion (1.3 per cent of GDP) which was $11.5 billion better than expected at the time of the 2009-10 Budget. This reflects the larger than expected value of investments held by the Government and the better than anticipated underlying cash outcome resulting in lower than expected issuance of government securities.

Net financial worth decreased from -$17.8 billion in 2007-08 to -$73.8 billion at the end of 2008-09. This decrease was $8.5 billion less than estimated at the 2009-10 Budget. The change since the Budget largely reflects an increase in the value of the Government's investments, including in the Reserve Bank of Australia, which was partially offset by an increase in the superannuation liability owing to a difference in the estimated and actual discount rate at 30 June.

Net worth decreased from $71.2 billion in 2007-08 to $19.7 billion at the end of 2008-09. This decrease was $9.0 billion less than estimated at the 2009-10 Budget. In addition to the changes in net financial worth since Budget outlined above, the change in net worth since Budget also reflects the higher than expected value of the Government's land and buildings.

Table 7: Australian Government general government sector net financial worth,
net worth, net debt and net interest payments

Table 7: Australian Government general government sector net financial worth, net worth, net debt and net interest payments
  1. Net financial worth equals total financial assets minus total liabilities. That is, it excludes non-financial assets.
  2. 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.

1 Payments are equal to payments for operating activities, purchase of non-financial assets and net acquisition of assets under finance leases.

2 Payments are equal to payments for operating activities, purchase of non-financial assets and net acquisition of assets under finance leases.

3 Payments are equal to payments for operating activities, purchase of non-financial assets and net acquisition of assets under finance leases.

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