Australian Government, 2012‑13 Budget
Budget

Part 3: Fiscal strategy and outlook (Continued)

Fiscal outlook

The Australian Government's underlying cash surplus for 2012‑13 is estimated to be $1.1 billion (0.1 per cent of GDP). In accrual terms, a fiscal surplus of $1.2 billion (0.1 per cent of GDP) is estimated for 2012‑13.

Table 3.4: Australian Government general government sector budget aggregates
  Estimates
  2012-13   2013-14
  Budget
$b
MYEFO
$b
  Budget
$b
MYEFO
$b
Receipts(a) 368.8 367.0   392.5 392.6
Per cent of GDP 23.8 24.0   24.0 24.3
Payments(b) 364.2 363.2   387.3 387.8
Per cent of GDP 23.5 23.8   23.7 24.0
Future Fund earnings(c) 3.0 2.7   3.2 2.7
Underlying cash balance(d) 1.5 1.1   2.0 2.2
Per cent of GDP 0.1 0.1   0.1 0.1
Revenue(a) 376.1 373.7   402.2 403.2
Per cent of GDP 24.2 24.4   24.6 25.0
Expenses 376.3 375.0   398.5 397.9
Per cent of GDP 24.3 24.5   24.4 24.7
Net operating balance -0.2 -1.3   3.7 5.3
Net capital investment -2.7 -2.5   1.0 1.0
Fiscal balance 2.5 1.2   2.6 4.3
Per cent of GDP 0.2 0.1   0.2 0.3
Memorandum item:
Headline cash balance
-8.7 -7.3   -6.8 -7.9
  Projections
  2014-15   2015-16
  Budget
$b
MYEFO
$b
  Budget
$b
MYEFO
$b
Receipts(a) 413.6 410.0   438.4 434.6
Per cent of GDP 24.0 24.1   24.2 24.3
Payments(b) 404.9 403.9   427.3 425.2
Per cent of GDP 23.5 23.8   23.6 23.7
Future Fund earnings(c) 3.4 2.8   3.7 3.0
Underlying cash balance(d) 5.3 3.3   7.5 6.4
Per cent of GDP 0.3 0.2   0.4 0.4
Revenue(a) 424.8 421.9   449.6 446.4
Per cent of GDP 24.7 24.8   24.8 24.9
Expenses 416.4 413.7   439.0 435.8
Per cent of GDP 24.2 24.3   24.2 24.3
Net operating balance 8.4 8.2   10.5 10.6
Net capital investment 1.4 1.2   1.1 0.9
Fiscal balance 7.0 6.9   9.5 9.8
Per cent of GDP 0.4 0.4   0.5 0.5
Memorandum item:
Headline cash balance
-0.1 -5.5   2.0 -0.7

(a) Includes expected Future Fund earnings.

(b) Equivalent to cash payments for operating activities, purchase of non‑financial assets and net acquisition of assets under finance leases.

(c) MYEFO figures report net Future Fund earnings, whereas Budget figures report gross Future Fund earnings. This is further explained in Appendix B.

(d) Excludes expected Future Fund earnings.

Underlying cash balance estimates

The 2012‑13 underlying cash surplus is expected to be $0.5 billion lower than expected in the 2012‑13 Budget.

Table 3.5: Summary of Australian Government general government sector cash flows
  Estimates
  2012-13   2013-14
  Budget
$b
MYEFO
$b
  Budget
$b
MYEFO
$b
Cash receipts          
Operating cash receipts 363.9 362.2   392.1 392.1
Capital cash receipts(a) 4.9 4.9   0.5 0.5
Total cash receipts(b) 368.8 367.0   392.5 392.6
Cash payments          
Operating cash payments 356.3 355.1   379.8 380.2
Capital cash payments(c) 7.5 7.7   7.0 7.0
Total cash payments 363.8 362.8   386.8 387.3
Finance leases and similar arrangements(d) 0.4 0.4   0.5 0.5
GFS cash surplus(+)/deficit(-) 4.6 3.8   5.2 4.8
Per cent of GDP 0.3 0.2   0.3 0.3
less Future Fund earnings (e) 3.0 2.7   3.2 2.7
Underlying cash balance(f) 1.5 1.1   2.0 2.2
Per cent of GDP 0.1 0.1   0.1 0.1
Memorandum items:          
Net cash flows from investments in financial assets for policy purposes -13.3 -11.1   -12.0 -12.7
plus Future Fund earnings(e) 3.0 2.7   3.2 2.7
Headline cash balance -8.7 -7.3   -6.8 -7.9
  Projections
  2014-15   2015-16
  Budget
$b
MYEFO
$b
  Budget
$b
MYEFO
$b
Cash receipts          
Operating cash receipts 413.4 409.8   436.8 433.0
Capital cash receipts(a) 0.2 0.2   1.6 1.6
Total cash receipts(b) 413.6 410.0   438.4 434.6
Cash payments          
Operating cash payments 397.2 396.3   418.6 416.6
Capital cash payments(c) 7.7 7.6   8.7 8.6
Total cash payments 404.9 403.9   427.2 425.2
Finance leases and similar arrangements(d) 0.0 0.0   0.0 0.0
GFS cash surplus(+)/deficit(-) 8.7 6.2   11.1 9.4
Per cent of GDP 0.5 0.4   0.6 0.5
less Future Fund earnings (e) 3.4 2.8   3.7 3.0
Underlying cash balance(f) 5.3 3.3   7.5 6.4
Per cent of GDP 0.3 0.2   0.4 0.4
Memorandum items:          
Net cash flows from investments in financial assets for policy purposes -8.8 -11.6   -9.2 -10.1
plus Future Fund earnings(e) 3.4 2.8   3.7 3.0
Headline cash balance -0.1 -5.5   2.0 -0.7

(a) Equivalent to cash receipts from the sale of non‑financial assets in the cash flow statement.

(b) Includes expected Future Fund earnings.

(c) Equivalent to cash payments for purchases of non‑financial assets in the cash flow statement.

(d) 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.

(e) MYEFO figures report net Future Fund earnings, whereas Budget figures report gross Future Fund earnings. This is further explained in Appendix B.

(f) Excludes expected Future Fund earnings.

Table 3.6 provides a reconciliation of the variations in the underlying cash balance since the 2012‑13 Budget.

Table 3.6: Reconciliation of general government sector underlying cash balance estimates
  Estimates   Projections  
  2012-13
$m
2013-14
$m
  2014-15
$m
2015-16
$m
2012-13 Budget underlying cash balance(a) 1,536 2,044   5,318 7,469
Per cent of GDP 0.1 0.1   0.3 0.4
Changes from 2012-13 Budget to 2012-13 MYEFO          
Effect of policy decisions(b)(c)          
Receipts 1,821 6,176   2,635 2,209
Payments 410 1,055   718 312
Total policy decisions impact on underlying cash balance 1,411 5,121   1,917 1,897
Effect of parameter and other variations(c)          
Receipts -3,242 -5,595   -5,630 -5,325
Payments -1,373 -595   -1,719 -2,367
Total parameter and other variations impact on underlying cash balance -1,869 -5,000   -3,910 -2,958
2012-13 MYEFO underlying cash balance(a) 1,077 2,165   3,325 6,408
Per cent of GDP 0.1 0.1   0.2 0.4

(a) MYEFO figures include net Future Fund earnings, whereas Budget figures include gross Future Fund earnings. This is further explained in Appendix B.

(b) Excludes secondary impacts on public debt interest of policy decisions and offsets from the contingency reserve for decisions taken.

(c) A positive number for receipts indicates an increase in the underlying cash balance, while a positive number for payments indicates a decrease in the underlying cash balance.

Total policy decisions since the 2012‑13 Budget have had a positive impact on the underlying cash position of $1.4 billion in 2012‑13, and improve the budget position over the forward estimates.

Total parameter and other variations since the 2012‑13 Budget have had a negative impact on the underlying cash position of $1.9 billion in 2012‑13.

Further details of the impact of policy decisions and major variations arising from parameter and other variations on the fiscal outlook is provided in the receipt estimates and payment estimates sections below.

Receipt estimates

Since the 2012‑13 Budget, total tax receipts have been revised down by $3.9 billion in 2012‑13 and $11.4 billion over the four years to 2015‑16, leaving the tax‑to‑GDP ratio broadly unchanged.

While the outlook for the Australian economy is positive, external factors are weighing heavily on parts of the economy and tax receipts. The moderation in world GDP growth has contributed to a greater‑than‑expected easing in global prices of Australia's non‑rural bulk commodities. This has been the primary driver of the substantial write‑down in total tax receipts.

The weak external conditions are expected to affect mainly company profits, largely in the resource sector, resulting in substantial downgrades to company tax receipts. These downgrades have been somewhat offset by the scaling back of some resources investment plans, resulting in lower capital expenses. The falls in commodity prices have also led to significant downgrades to resource rent tax receipts.

Taxes on wages and consumption are expected to be broadly unchanged since the Budget.

Abstracting from policy decisions, tax receipts are expected to be lower by around $4 billion in 2012‑13 and over $20 billion over the four years to 2015‑16 relative to Budget.

Table 3.7: Australian Government general government sector cash receipts — 2012‑13
  Estimates   Change on Budget
  Budget
$m
MYEFO
$m
 
$m

%
Individuals' and other withholding taxes          
Gross income tax withholding 150,600 151,300   700 0.5
Gross other individuals 35,500 35,000   -500 -1.4
less: Refunds 26,240 26,500   260 1.0
Total individuals' and other withholding taxation 159,860 159,800   -60 0.0
Fringe benefits tax 3,830 3,970   140 3.7
Company tax 73,480 71,170   -2,310 -3.1
Superannuation funds 8,050 8,050   0 0.0
Resource rent taxes(a) 7,160 5,400   -1,760 -24.6
Income taxation receipts 252,380 248,390   -3,990 -1.6
Sales taxes          
Goods and services tax 48,341 48,432   91 0.2
Wine equalisation tax 770 710   -60 -7.8
Luxury car tax 450 450   0 0.0
Total sales taxes 49,561 49,592   31 0.1
Excise duty          
Petrol 5,900 6,000   100 1.7
Diesel 8,700 8,700   0 0.0
Beer 2,035 2,070   35 1.7
Tobacco 5,850 5,200   -650 -11.1
Other excisable products 4,400 4,500   100 2.3
Of which: Other excisable beverages(b) 940 930   -10 -1.1
Total excise duty receipts 26,885 26,470   -415 -1.5
Customs duty          
Textiles, clothing and footwear 730 700   -30 -4.1
Passenger motor vehicles 940 920   -20 -2.1
Excise-like goods 4,370 4,850   480 11.0
Other imports 1,500 1,530   30 2.0
less: Refunds and drawbacks 200 200   0 0.0
Total customs duty receipts 7,340 7,800   460 6.3
Carbon pricing mechanism 4,020 4,020   0 0.0
Other indirect taxation          
Agricultural levies 440 440   0 0.0
Other taxes 2,480 2,497   17 0.7
Total other indirect taxation receipts 2,920 2,937   17 0.6
Indirect taxation receipts 90,727 90,819   93 0.1
Taxation receipts 343,107 339,209   -3,897 -1.1
Sales of goods and services 8,289 8,818   529 6.4
Interest received 4,660 4,390   -270 -5.8
Dividends 2,518 3,268   751 29.8
Other non-taxation receipts 10,201 11,356   1,155 11.3
Non-taxation receipts(c) 25,667 27,832   2,165 8.4
Total receipts(c) 368,774 367,041   -1,733 -0.5
Memorandum:          
Capital gains tax 10,200 8,400   -1,800 -17.6
Medicare levy receipts 9,640 9,700   60 0.6

(a) Resource rent taxes include PRRT and gross receipts from the MRRT.

(b) Other excisable beverages are those not exceeding 10 per cent by volume of alcohol (excluding beer, brandy and wine).

(c) Includes expected Future Fund earnings.

Table 3.8: Australian Government general government sector cash receipts — 2013‑14
  Estimates   Change on Budget
  Budget
$m
MYEFO
$m
 
$m

%
Individuals' and other withholding taxes          
Gross income tax withholding 163,900 163,900   0 0.0
Gross other individuals 37,900 37,300   -600 -1.6
less: Refunds 26,430 26,700   270 1.0
Total individuals' and other withholding taxation 175,370 174,500   -870 -0.5
Fringe benefits tax 4,310 4,450   140 3.2
Company tax 76,370 78,680   2,310 3.0
Superannuation funds 9,010 9,050   40 0.4
Resource rent taxes(a) 8,190 6,400   -1,790 -21.9
Income taxation receipts 273,250 273,080   -170 -0.1
Sales taxes          
Goods and services tax 51,049 51,189   140 0.3
Wine equalisation tax 820 720   -100 -12.2
Luxury car tax 460 460   0 0.0
Total sales taxes 52,329 52,369   40 0.1
Excise duty          
Petrol 5,900 5,950   50 0.8
Diesel 9,200 9,300   100 1.1
Beer 2,183 2,180   -3 -0.2
Tobacco 5,190 4,800   -390 -7.5
Other excisable products 4,710 4,750   40 0.8
Of which: Other excisable beverages(b) 1,030 990   -40 -3.9
Total excise duty receipts 27,183 26,980   -203 -0.7
Customs duty          
Textiles, clothing and footwear 785 720   -65 -8.3
Passenger motor vehicles 1,020 960   -60 -5.9
Excise-like goods 5,310 5,850   540 10.2
Other imports 1,625 1,670   45 2.8
less: Refunds and drawbacks 200 200   0 0.0
Total customs duty receipts 8,540 9,000   460 5.4
Carbon pricing mechanism 6,610 6,640   30 0.5
Other indirect taxation          
Agricultural levies 436 436   0 0.0
Other taxes 3,060 2,888   -172 -5.6
Total other indirect taxation receipts 3,496 3,324   -172 -4.9
Indirect taxation receipts 98,159 98,313   154 0.2
Taxation receipts 371,409 371,393   -16 0.0
Sales of goods and services 8,696 8,758   63 0.7
Interest received 4,679 4,486   -193 -4.1
Dividends 1,967 2,004   37 1.9
Other non-taxation receipts 5,793 5,954   160 2.8
Non-taxation receipts(c) 21,135 21,201   67 0.3
Total receipts(c) 392,544 392,595   51 0.0
Memorandum:          
Capital gains tax 12,900 11,000   -1,900 -14.7
Medicare levy receipts 10,250 10,390   140 1.4

(a) Resource rent taxes include PRRT and gross receipts from the MRRT.

(b) Other excisable beverages are those not exceeding 10 per cent by volume of alcohol (excluding beer, brandy and wine).

(c) Includes expected Future Fund earnings.

Policy decisions

Policy decisions since the 2012‑13 Budget have increased receipts by $1.8 billion in 2012‑13 and by $6.2 billion in 2013‑14.

The revenue saving measures include decisions to remove certain inefficient tax expenditures, as well as a package of measures aimed at improving the operation and fairness of the tax system. Major policy decisions that have increased receipts over the budget and forward estimates include:

  • a phased introduction of monthly pay‑as‑you‑go (PAYG) instalments for large companies in Australia. This measure is estimated to raise $8.3 billion on an underlying cash basis over four years;
  • provision of $390 million funding to the Australian Taxation Office (ATO) for further compliance activities to continue to target profit shifting and high wealth individuals and to focus on outstanding income tax lodgements in the micro and small business segments increasing cash receipts by $1.6 billion over four years;
  • changes to the operation of lost superannuation account provisions to help reunite these accounts with their owners and preserve the value of lost accounts. There will be an increased number of lost superannuation accounts transferred to the Australian Taxation Office (ATO) which will be given additional funding to implement this measure and to use their data matching resources to match lost accounts with active accounts. Importantly, this will help keep money in the superannuation system to support individuals' retirement savings. The Government will pay interest on all unclaimed superannuation monies reclaimed from the ATO and these accounts will not be subject to erosion from account fees. The measure will result in increased net receipts of $738 million over four years;
  • removing the concessional fringe benefits tax treatment for in‑house fringe benefits accessed by way of salary sacrifice arrangements. This measure is estimated to raise $445 million over four years;
  • reducing the period of time that banks and other deposit taking and life insurance institutions hold unclaimed moneys from seven to three years increasing receipts by $300 million in 2012‑13; and
  • targeted increases to a number of Visa Application Charges from 1 January 2013 increasing receipts by $52 million in 2012‑13 ($520 million over four years). The changes to visa application charges will apply to skilled graduates, partners, working holiday makers and temporary overseas workers.

The impact of these policy decisions on receipts has been partially offset by a number of decisions that have reduced receipts, including signing the Malaysia‑Australia Free Trade Agreement under which both parties agreed to eliminate tariffs on a wide range of goods. This measure has a cost to revenue estimated to be $80 million on an underlying cash basis over four years.

Parameter and other variations

The key economic parameters that influence revenue are shown in Table 3.9. The table shows effects on the Australian Government's main tax bases of the changed circumstances and outlook since the 2012‑13 Budget.

Table 3.9: Key economic parameters(a)
  Outcome   Estimates   Projections
  2011-12
%
  2012-13
%
2013-14
%
  2014-15
%
2015-16
%
Revenue parameters at 2012-13 MYEFO              
Nominal gross domestic product (non-farm) 5.1   4.2 5.5   5 1/4 5 1/4
Change since 2012-13 Budget -0.7   -0.9 0.1   0    0   
Compensation of employees (non-farm)(b) 7.2   5.4 4.9   5 1/2 5 1/2
Change since 2012-13 Budget 0.7   0.4 -0.5   0    0   
Corporate gross operating surplus(c) 2.7   1.3 6.8   4 3/4 5 1/4
Change since 2012-13 Budget -3.4   -2.8 2.1   - 1/2  1/4
Unincorporated business income -2.6   5.7 4.7   5 1/4 5 1/4
Change since 2012-13 Budget -5.5   0.4 -0.6   0    0   
Property income(d) 2.8   3.5 6.5   5 1/2 5 1/2
Change since 2012-13 Budget -1.1   -3.0 -0.2   0    0   
Consumption subject to GST 5.4   5.2 4.6   5 1/2 5 1/2
Change since 2012-13 Budget 0.3   -0.1 -0.1   0    0   

(a) Current prices, per cent change on previous year. Changes since the 2012‑13 Budget are percentage points and may not reconcile due to rounding.

(b) Compensation of employees measures total remuneration earned by employees.

(c) Corporate GOS is an Australian National Accounts measure of company profits, gross of depreciation.

(d) Property income measures income derived from rent, dividends and interest.

Parameter and other variations have decreased tax receipts since the 2012‑13 Budget by $4.0 billion in 2012‑13 and $5.8 billion in 2013‑14.

Income tax withholding receipts have been revised up $790 million in 2012‑13, reflecting the higher than expected outcome in 2011‑12 for both tax receipts and compensation of employees. Receipts in 2013‑14 have been revised down by $90 million, consistent with the slightly weaker outlook for employment growth.

Gross other individuals' taxation has been revised down by $580 million in 2012‑13 and $740 million in 2013‑14, reflecting weaker than expected income from capital gains. Refunds have been revised up by $260 million in both 2012‑13 and 2013‑14 also reflecting weaker capital gains.

Fringe Benefits tax has been revised up by $120 million in 2012‑13 and $140 million in 2013‑14, reflecting higher than expected non‑cash wage income.

Receipts from superannuation funds are largely unchanged since Budget.

Company tax receipts have been revised down by $2.4 billion in 2012‑13 and $3.3 billion in 2013‑14, largely reflecting substantial downgrades to resource sector profitability due to lower global commodity prices. These downgrades have been somewhat offset by the scaling back of some business investment plans, resulting in lower capital expenses, and lower resource rent taxes (that are deductible against company tax).

Resource rent taxes have been revised down by $1.8 billion in both 2012‑13 and 2013‑14, mostly from minerals resource rent tax but also from petroleum resource rent tax. This reflects lower global commodity prices, particularly iron ore prices.

GST receipts remain broadly unchanged since Budget.

Excise duty has been revised down by $400 million in 2012‑13 and $220 million in 2013‑14, while customs duty has been revised up by $470 million in both 2012‑13 and 2013‑14. These revisions partly reflect an increase in the share of tobacco excise cleared through the customs system.

Wine equalisation tax receipts have been revised down by $60 million in 2012‑13 and $100 million 2013‑14, reflecting greater than expected refunds. Luxury car tax receipts remain unchanged from Budget.

Analysis of the sensitivity of the taxation receipts estimates to changes in the economic outlook is provided in Attachment A to this part.

Major parameter and other variations that have increased non‑taxation receipts since the 2012‑13 Budget include dividend receipts received by the Government of $500 million in 2012‑13 from the Reserve Bank of Australia (RBA). In addition the Government will receive a special dividend from Medibank Private of $300 million in 2012‑13 which was already included in the 2012‑13 Budget estimates.

Payment estimates

Since the 2012‑13 Budget, estimated cash payments for 2012‑13 have decreased by $1.0 billion, reflecting increased payments due to new policy decisions of $410 million and decreased payments due to parameter and other variations of $1.4 billion.

Policy decisions

Major policy decisions since the 2012‑13 Budget that have increased cash payments in 2012‑13 and over the four years to 2015‑16 include:

  • funding for the Government's Dental Health Reform package which includes initiatives to: establish a Child Dental Benefits Schedule; support the provision of dental health services to adults who rely on the public dental system; and support dental infrastructure and workforce initiatives and redirect the Medicare Teen Dental Plan to offset the package. These measures, which are expected to increase payments by $1.8 billion over four years, are broadly funded by savings in other health‑related programs;
  • funding of $111 million in 2012‑13 ($497 million over four years) as part of the Government's response to the Report for the Expert Panel on Asylum Seekers, including increases to the Humanitarian Program of an additional 6,250 places per annum from 2012‑13, and increases to the Family Reunion Stream of the Permanent Migration Program by 4,000 places. The estimated costs of establishing regional processing centres in Nauru and Manus Island, Papua New Guinea are included in MYEFO in the Contingency Reserve but cannot be published as the contracts to build these facilities are currently subject to commercial negotiations;
  • funding of $39 million in 2012‑13 ($325 million over four years) for the Tasmanian health system to address challenges caused by Tasmania's ageing population, high rates of chronic disease and constraints in their health system; and
  • funding to the international contribution to the sustainment of the Afghan National Security Forces (ANSF) with an impact of $154 million over two years from 2014‑15. Australia's contribution is part of international efforts to help sustain and support the ANSF beyond the transition of security responsibility in Afghanistan to the Afghan government.

The impact of these policy decisions on payments has been more than offset by a number of decisions that have reduced cash payments, including:

  • a reduction and movement in funding to a number of grant programs across a range of Government portfolios by $157 million in 2012‑13 ($89 million over four years);
  • slowing the rate of funding increases for Sustainable Research Excellence by maintaining funding at the 2012 level for the 2013 calendar year, then increasing funding over the three years to a maximum amount of $300 million in 2016. This will decrease payments by $79 million in 2012‑13 ($499 million over four years). Funding will then be indexed annually from 2017 by the Higher Education Indexation Factor;
  • discontinuing the $1,500 standard commencement incentive, and reducing the standard completion incentive to $1,500, for employers of part‑time and casual apprenticeships in non‑National Skills Needs List occupations, decreasing payments by $19 million in 2012‑13 ($277 million over four years). This will apply immediately for all commencing apprentices. Employers of ongoing apprentices will continue to be eligible for incentives under the previous arrangements until 30 June 2013;
  • changes to the calculation of the Government's contribution to private health insurance, which will now be calculated using commercial premiums as at 1 April 2013 and then indexed annually by the lesser of CPI or the actual increase in commercial premiums. This will be used to determine an individual's private health insurance rebate. This decision will take effect from 1 April 2014 and will decrease payments by around $700 million over three years from 2013‑14;
  • removing the PHI Rebate on the Lifetime Health Cover loading component of PHI premiums decreasing payments from 1 July 2013 and reducing payments by around $390 million over three years;
  • reducing the baby bonus rate from $5,000 to $3,000 for second and subsequent children from 1 July 2013 reducing payments by $461 million over three years;
  • extending the Trade Training Centres in Schools program to 2018‑19, rephasing funding to evenly distribute projects over the life of the program. This rephasing reduces payments by $305 million over four years, with overall funding over the life of the program remaining unchanged; and
  • ceasing Facilitation Funding for universities from 1 January 2014 reducing payments by $270 million over three years from 2013‑14.
Parameter and other variations

Major increases in cash payments in 2012‑13, as a result of parameter and other variations since the 2012‑13 Budget, include:

  • a range of immigration related programs which are expected to increase payments by $1.1 billion in 2012‑13. These include an update in the number of irregular maritime arrivals to reflect experience to date in 2012‑13; the forecast impact of Government policies for Offshore Asylum Seeker Management; the consequential impacts of the increase of the Humanitarian Program by 6,250, to 20,000 places; and an increase to the Family Reunion Stream of the Permanent Migration Program;
  • Medicare payments which are expected to increase by $358 million in 2012‑13, primarily resulting from the extension of the Chronic Disease Dental Scheme (CDDS) to 30 November 2012. The closure of the CDDS is an element of the Government's Dental Health Reform package;
  • PHI payments which are expected to increase by $313 million in 2012‑13, reflecting a higher than expected increase in the prepayment of PHI policies in June 2012, with a consequent increase in the PHI rebate paid by government in 2012‑13;
  • Tertiary Student Assistance payments which are expected to increase by $381 million in 2012‑13 ($2.0 billion over four years), largely reflecting an increase in projected enrolments in higher education and a growing take up of income support payments by higher education students;
  • payments related to Family Tax Benefit (FTB) which are expected to increase by $155 million in 2012‑13 ($111 million over four years), largely reflecting a one‑off increase in 2012‑13 for the Schoolkids Bonus. The increase in 2012‑13 largely reflects a shift in recipient preferences to receive FTB payments within the entitlement year (rather than after the end of the year) which is expected to result in a fall in future FTB liabilities and lump sum payments;
  • Child Care Benefit and Child Care Rebate payments which are expected to increase by $133 million in 2012‑13 ($654 million over four years), largely reflecting higher than expected growth in the hours of childcare utilised;
  • employee assistance payments which are expected to increase by $102 million in 2012‑13, reflecting an increase in demand for the General Employee Entitlements and Redundancy Scheme. This scheme provides assistance to employees of bankrupt businesses who are owed certain employee entitlements when their employer is subject to an insolvency event;
  • Natural Disaster Relief and Recovery Arrangements which are expected to decrease by $9 million in 2012‑13 (and increase by $867 million over four years, with the majority of the impact in 2014‑15). This largely reflects updated estimates of Australian Government contributions for Queensland disasters that occurred in 2011‑12; and
  • Residential Care Subsidies, which are expected to increase by $390 million over four years (with no impact in 2012‑13), reflecting revised forecasts for demand based on 2011‑12 data.

Major reductions in expected payments in 2012‑13, as a result of parameter and other variations since the 2012‑13 Budget include:

  • changes in the timing of funding to a number of grant programs across a range of Government portfolios to better reflect the expected timing of payments ($324 million in 2012‑13 ($125 million over four years));
  • Australian Government general recurrent grants funding for schools which is expected to be $317 million lower in 2012‑13 ($1.5 billion over four years) than forecast in the 2012‑13 Budget. This reflects lower than previously forecast cost increases in average recurrent expenditure on educating students at government schools;
  • National Health Reform Funding, which is expected to be $254 million lower in 2012‑13 ($1.5 billion over four years), reflecting downward revisions to the weighted population used to calculate hospital utilisation following the 2011 Census and the Australian Institute of Health and Welfare health price index, which has been driven by a higher Australian dollar leading to lower prices for medical equipment that is sourced from overseas;
  • a delay in consideration of reward payment funding of up to $175 million in 2012‑13 for the Improving Teacher Quality National Partnership as a result of performance milestones for 2012‑13 being renegotiated with the States. This negotiation process is likely to impact on the COAG Reform Council's ability to complete its assessment before May 2013 and subsequently delay the Australian Government making payment until 2013‑14; and
  • payments to Job Services Australia which are expected to decrease by $150 million in 2012‑13 ($376 million over four years) reflecting a reduction in forecast client numbers and a decline in the proportion of jobseekers requiring more intensive employment assistance services.

Consistent with previous budgets, the underlying cash balance has been improved by the regular drawdown of the conservative bias allowance. Details of this drawdown are provided at Attachment C.

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