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Attachment B

Australian Loan Council Allocation

Under Loan Council arrangements, every year the Australian Government and each State and Territory government nominate a Loan Council Allocation (LCA). A jurisdiction's LCA incorporates:

• the estimated non‑financial public sector GFS cash surplus/deficit (made up from the balances of the general government and public non‑financial corporations sectors and total non‑financial public sector acquisitions under finance leases and similar arrangements);
• 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.

LCA nominations are considered by the Loan Council, having regard to each jurisdiction's fiscal position and infrastructure requirements, as well as the macroeconomic implications of the aggregate figure.

In March 2009, the Australian Government nominated, and the Loan Council endorsed, an LCA deficit of $34,073 million. In the 2009‑10 Budget, the Australian Government estimated an LCA deficit of $60,965 million.

As set out in Table B12, the Australian Government's revised estimate for the 2009‑10 LCA is a $64,496 million deficit.

Table B12: Australian Government Loan Council Allocation

1. May not directly equate to the sum of the GG sector and the PNFC sector cash surplus/deficit due to intersectoral transfers which are netted out.
2. Net cash flows from investments in financial assets for policy purposes are displayed with the same sign as which they are reported in cash flow statements. 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.
3. For the Commonwealth's Loan Council Allocation outcome, memorandum items include the change in net present value (NPV) of operating leases (with NPV greater than $5 million) and the over‑funding of superannuation.

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