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Australian Government Coat of Arms

Budget | 2015-16

Budget 2015-16
Australian Government Coat of Arms, Budget 2015-16

Statement 6 (continued)

Debt Statement

The Debt Statement provides information on current and projected debt on issue and details of climate spending including the extent to which this spending has contributed to debt.

Commonwealth Government Securities issuance

The Government finances its activities either through receipts or by borrowing. When receipts fall short of payments, the Government borrows by issuing Commonwealth Government Securities (CGS) to investors.

In recent years, the Australian Office of Financial Management (AOFM) has taken the opportunity to lengthen the CGS yield curve. This has provided for a lower risk profile of maturing debt and has been achieved during a period when borrowing costs have been low by historical standards. A bias towards longer issuance of new CGS and consideration towards further lengthening the CGS yield curve is expected to continue while market conditions are favourable.

Even when CGS issuance is not required to finance the Government's activities, successive governments have continued to issue CGS, primarily to maintain a liquid sovereign bond market.

The Government remains committed to a well‑functioning and liquid CGS market. In particular, the Government will focus on ensuring a market of sufficient size to maintain liquidity across the longer yield curve and that supports the Treasury Bond futures market.

A well‑functioning and liquid CGS market also supports the development of a corporate bond market by providing a risk‑free benchmark; it also provides a low‑risk investment vehicle.

The AOFM is the agency responsible for issuing CGS and the management of the Government's financing activities. The AOFM currently issues three types of securities:

Treasury Bonds: medium‑term to long‑term securities with a fixed annual rate of interest payable every six months;

Treasury Indexed Bonds (TIBs): medium‑term to long‑term securities for which the capital value of the security is adjusted for movements in the consumer price index (CPI). Interest on TIBs is paid quarterly, at a fixed rate, on the adjusted capital value; and

Treasury Notes: short‑term securities generally maturing within six months of issuance. The volume of Treasury Notes on issue will vary over the course of the year, depending on the size and profile of the within‑year funding flows.

All new CGS issuance is undertaken in Australian dollars. There is a very small amount of foreign currency denominated debt securities on issue remaining from issuance undertaken before 1988. Most of these securities mature in March 2017.

Within these three broad categories of CGS, issuance is undertaken into a limited number of maturities (known as lines). Each of these lines has a fixed maturity date (the date on which the Government repays the principal it has borrowed) and, for Treasury Bonds and TIBs, a coupon rate (the annual fixed interest rate paid on the security).

Concentrating CGS issuance into a limited number of lines (rather than issuing securities with a specific time value, such as 10 years) ensures each line is sufficiently large that it can easily be traded in the secondary market. Strong liquidity in the secondary market is attractive to investors, promotes demand for CGS, and assists in lowering borrowing costs.

Estimates and projections of CGS on issue

Estimates and projections of CGS on issue are published in both face value and market value terms in this statement.

The face value of CGS on issue is the amount that the Government pays back to investors at maturity, independent of fluctuations in market prices.1 The total face value of CGS on issue changes when new securities are issued, or when securities are repurchased or reach maturity.

The market value of CGS represents the value of securities as traded on the secondary market, which changes continuously with movements in market prices. Consistent with external reporting standards the market value of CGS on issue is reported on the Australian Government general government sector balance sheet. Changes in the market price of CGS will have an impact on the value of gross and net debt.

Table 1 contains projections of the face value (end‑of‑year and within‑year peak)2 and the market value (end‑of‑year) of CGS on issue.

The Commonwealth Inscribed Stock Act 1911 (CIS Act) requires the Treasurer to issue a direction to the AOFM stipulating the maximum face value of relevant CGS that may be on issue.3 As required by the Charter of Budget Honesty Act 1998, Table 1 reports projections of CGS on issue subject to the Treasurer's Direction.

When considering these projections, it is important to note that the AOFM publishes an issuance strategy for the budget year only. Projections beyond the budget year are based on a set of technical assumptions and will vary with changes to these assumptions and budget estimates and projections.

Table 1: Projections of Commonwealth Government Securities on issue subject to the Treasurer's Direction(a)
2014‑15
$b
2015‑16
$b
2016‑17
$b
2017‑18
$b
2018‑19
$b
Face value ‑ end of year 367 412 474 497 518
Per cent of GDP 22.9 24.9 27.2 27.0 26.7
Face value ‑ within‑year peak(b) 368 431 478 514 539
Per cent of GDP(b) 22.9 26.0 27.4 28.0 27.8
Month of peak(b) Jun‑15 Jun‑16 Jun‑17 Jan‑18 Mar‑19
Market value ‑ end of year(c) 413 460 523 545 565
Per cent of GDP 25.7 27.8 30.0 29.6 29.2

(a) The same stock and securities that was excluded from the previous legislative limit is excluded from the current limit set by the Treasurer's Direction. These exclusions are outlined in subsection 51JA(2A) of the CIS Act.

(b) The precise within‑year timing of cash receipts and payments is not known. Projected peaks of CGS on issue are therefore subject to considerable uncertainty.

(c) The Treasurer's Direction applies only to the face value of CGS on issue. This table shows the equivalent market value of CGS that are subject to the Treasurer's Direction. These figures will differ from the estimates and projections published in Statement 9: Australian Government Budget Financial Statements Table 2: Australian Government general government sector balance sheet that refer to total CGS on issue.

Source: Australian Office of Financial Management.

The amount of CGS on issue subject to the Treasurer's Direction is reported weekly on the AOFM website.

In 2015‑16, the end‑of‑year face value of CGS on issue subject to the Treasurer's Direction is expected to be around $412 billion, compared to $413 billion at the 2014‑15 MYEFO. Over the forward estimates, the end‑of‑year face value of CGS on issue subject to the Treasurer's Direction is expected to reach around $497 billion in 2017‑18, $16 billion higher than estimated at the 2014‑15 MYEFO. It is expected to increase to around $518 billion in 2018‑19.

In 2015‑16, the face value of CGS on issue is expected to reach a within‑year peak of around $431 billion. Over the forward estimates, the face value of CGS on issue is projected to rise to a within‑year peak of around $539 billion in 2018‑19.

Changes in CGS on issue since the 2014‑15 MYEFO

Table 2 shows the change in the projected end‑of‑year face value of CGS on issue between the 2014‑15 MYEFO and the 2015‑16 Budget.

Table 2: Projected CGS on issue subject to the Treasurer's Direction —reconciliation from the 2014‑15 MYEFO to the 2015‑16 Budget
2014‑15
$b
2015‑16
$b
2016‑17
$b
2017‑18
$b
Total face value of CGS on issue subject to the Treasurer's Direction as at 2014‑15 MYEFO 367 413 459 481
Factors affecting the change in face value of CGS on issue from 2014‑15 MYEFO to 2015‑16 Budget(a)        
Cumulative receipts decisions 0.0 0.4 0.0 ‑0.8
Cumulative receipts variations 2.2 7.2 14.3 21.3
Cumulative payment decisions 0.6 4.7 7.7 10.1
Cumulative payment variations ‑2.1 ‑7.5 ‑11.9 ‑17.4
Cumulative change in net investments in financial assets(b) 0.0 ‑3.6 7.2 4.2
Other contributors ‑0.6 ‑1.8 ‑1.7 ‑1.4
Total face value of CGS on issue subject to the Treasurer's Direction as at 2015‑16 Budget 367 412 474 497

(a) Cumulative impact of decisions and variations from 2014‑15 to 2017‑18. Increases to payments are shown as positive, and increases to receipts are shown as negative.

(b) Change in net cash flows from investments in financial assets for policy and liquidity purposes.

Note: End of year data.

The face value of CGS on issue is projected to rise to $573 billion by 2025‑26, reflecting a modestly weaker underlying cash balance, and its associated higher public debt interest expense, accumulating over the medium term. In 2023‑24, the face value of CGS on issue is projected to reach $555 billion, some $112 billion less than the $667 billion projected at the 2013‑14 MYEFO. This improvement would be even greater compared with the 2013‑14 MYEFO, if the original scenario had assumed taxes were capped at 23.9 per cent of GDP (that is, assuming future tax relief).

The projected face value of CGS on issue is shown in Chart 1.

Chart 1: Face value of CGS on issue projected to 2025‑26

Chart 1: Face value of CGS on issue projected to 2025‑26

Note: A tax‑to‑GDP cap of 23.9 per cent is applied to these projections from 2020‑21, except for the 2013‑14 MYEFO where the tax cap applies from 2019‑20. 2013‑14 MYEFO projections were not originally published with a tax cap.

Source: Australian Office of Financial Management and Treasury projections.

Further details on the changes to the underlying cash balance since the 2014‑15 MYEFO can be found in Statement 3: Fiscal Strategy and Outlook.

Changes in net debt since the 2014‑15 MYEFO

Australian Government general government sector net debt is equal to the sum of deposits held, government securities (at market value), loans and other borrowing, minus the sum of cash and deposits, advances paid and investments, loans and placements.

Table 3: Liabilities and assets included in net debt from 2014‑15 to 2018‑19
  Estimates   Projections
  2014‑15 2015‑16 2016‑17   2017‑18 2018‑19
  $m $m $m   $m $m
Liabilities included in net debt            
Deposits held 211 211 211   211 211
Government securities 418,307 464,298 527,453   550,072 569,504
Loans 10,347 14,148 13,607   13,502 13,400
Other borrowing 1,545 1,428 1,352   1,290 1,242
Total liabilities included in net debt 430,409 480,084 542,624   565,074 584,357
Assets included in net debt            
Cash and deposits 3,144 3,435 4,187   4,988 5,709
Advances paid 45,874 52,901 63,368   73,722 84,896
Investments, loans and placements 131,157 137,947 161,712   162,641 168,306
Total assets included in net debt 180,175 194,282 229,268   241,352 258,911
Net debt 250,234 285,802 313,356   323,723 325,447

Net debt is estimated to increase by $6.2 billion to $285.8 billion in 2015‑16, compared with the 2014‑15 MYEFO. From 2015‑16 to 2017‑18, net debt is higher compared with the 2014‑15 MYEFO. This is primarily driven by higher levels of Commonwealth Government Securities, owing to changes in the financing requirement and a decrease in average yields compared to those at the 2014‑15 MYEFO. Lower yields increase the market value of Commonwealth Government Securities on issue.

Table 4: Net debt — reconciliation from the 2014‑15 MYEFO to the 2015‑16 Budget
2014‑15
$b
2015‑16
$b
2016‑17
$b
2017‑18
$b
Net debt as at 2014‑15 MYEFO ($b) 244.8 279.6 304.4 315.8
Changes in financing requirement ‑2.3 ‑4.2 11.3 10.7
Impact of lower yields on CGS 11.0 11.8 12.0 11.7
Asset and other liability movements ‑3.3 ‑1.3 ‑14.3 ‑14.5
Cash and deposits 0.7 0.7 ‑0.4 ‑0.6
Advances paid 0.3 0.0 ‑1.4 ‑2.9
Investments, loans and placements ‑1.0 ‑3.2 ‑13.2 ‑11.5
Other movements ‑3.4 1.1 0.7 0.6
Total movements in net debt from 2014‑15 MYEFO to 2015‑16 Budget 5.4 6.2 9.0 8.0
Net debt as at 2015‑16 Budget ($b) 250.2 285.8 313.4 323.7

Breakdown of CGS currently on issue

Table 5 provides a breakdown of the CGS on issue by type of security as at 5 May 2015.

Table 5: Breakdown of current Commonwealth Government Securities on issue
  On issue as at 5 May 2015
  Face value
$m
Market value
$m
Treasury Bonds(a) 325,886 359,263
Treasury Indexed Bonds(a) 24,316 33,279
Treasury Notes(a) 5,500 5,481
Total CGS subject to Treasurer's Direction(a)(b) 355,702 398,024
Other stock and securities 2,536 4,930
Total CGS on issue 358,238 402,954

(a) The Treasurer's Direction applies only to the face value of CGS on issue. This table shows the equivalent market value of CGS that are subject to the Treasurer's Direction.

(b) The same stock and securities that was excluded from the previous legislative limit is excluded from the current limit set by the Treasurer's Direction. These exclusions are outlined in subsection 51JA(2A) of the CIS Act.

Source: Australian Office of Financial Management.

Treasury Bonds

Table 6 lists Treasury Bonds currently on issue, as well as the annual interest rate (the coupon) and the timing of coupon payments. As at 5 May 2015, there were 21 Treasury Bond lines on issue, with a weighted average term to maturity of around 6.6 years and the longest maturity extending to April 2037.

Since late 2010‑11, the AOFM has taken advantage of favourable market conditions to lengthen the CGS yield curve and bias issuance into longer maturities, while still lowering the cost of borrowing significantly. This increases the average maturity and duration profile of the AOFM's debt portfolio — thereby lowering variability in future debt servicing costs and reducing refinancing risk.

Table 6: Treasury Bonds on issue
Coupon
Per cent
Maturity On issue as at 5 May 2015
$m
Timing of interest payments(a)
4.75 21‑Oct‑15 13,899 Twice yearly 21 Oct 21 Apr
4.75 15‑Jun‑16 21,900 Twice yearly 15 Jun 15 Dec
6.00 15‑Feb‑17 21,096 Twice yearly 15 Feb 15 Aug
4.25 21‑Jul‑17 18,900 Twice yearly 21 Jul 21 Jan
5.50 21‑Jan‑18 20,500 Twice yearly 21 Jan 21 Jul
3.25 21‑Oct‑18 12,800 Twice yearly 21 Oct 21 Apr
5.25 15‑Mar‑19 21,447 Twice yearly 15 Mar 15 Sep
2.75 21‑Oct‑19 11,000 Twice yearly 21 Oct 21 Apr
4.50 15‑Apr‑20 20,397 Twice yearly 15 Apr 15 Oct
1.75 21‑Nov‑20 2,000 Twice yearly 21 Nov 21 May
5.75 15‑May‑21 21,599 Twice yearly 15 May 15 Nov
5.75 15‑Jul‑22 18,200 Twice yearly 15 Jul 15 Jan
5.50 21‑Apr‑23 21,300 Twice yearly 21 Apr 21 Oct
2.75 21‑Apr‑24 22,200 Twice yearly 21 Apr 21 Oct
3.25 21‑Apr‑25 17,500 Twice yearly 21 Apr 21 Oct
4.25 21‑Apr‑26 15,500 Twice yearly 21 Apr 21 Oct
4.75 21‑Apr‑27 14,400 Twice yearly 21 Apr 21 Oct
3.25 21‑Apr‑29 9,700 Twice yearly 21 Apr 21 Oct
4.50 21‑Apr‑33 9,800 Twice yearly 21 Apr 21 Oct
2.75 21‑Jun‑35 4,250 Twice yearly 21 Jun 21 Dec
3.75 21‑Apr‑37 7,500 Twice yearly 21 Apr 21 Oct

(a) Where the timing of an interest payment falls on a non‑business day, the payment will occur on the following business day.

Source: Australian Office of Financial Management.

Treasury Indexed Bonds

Table 7 lists Treasury Indexed Bonds (TIBs) currently on issue, as well as the annual interest rate (the coupon) and the timing of coupon payments. As at 5 May 2015, there were 7 TIB lines on issue, with a weighted average term to maturity of around 8.6 years and the longest maturity extending to August 2035.

Table 7: Treasury Indexed Bonds on issue
Coupon
Per cent
Maturity On issue as at 5 May 2015
$m
Timing of interest payments(a)
4.00 20‑Aug‑15 1,152 Quarterly 20 Aug 20 Nov 20 Feb 20 May
1.00 21‑Nov‑18 4,239 Quarterly 21 Nov 21 Feb 21 May 21 Aug
4.00 20‑Aug‑20 4,964 Quarterly 20 Aug 20 Nov 20 Feb 20 May
1.25 21‑Feb‑22 4,490 Quarterly 21 Feb 21 May 21 Aug 21 Nov
3.00 20‑Sep‑25 5,843 Quarterly 20 Sep 20 Dec 20 Mar 20 Jun
2.50 20‑Sep‑30 3,293 Quarterly 20 Sep 20 Dec 20 Mar 20 Jun
2.00 21‑Aug‑35 2,850 Quarterly 21 Aug 21 Nov 21 Feb 21 May

(a) Where the timing of an interest payment falls on a non‑business day, the payment will occur on the following business day.

Source: Australian Office of Financial Management.

Treasury Notes

The face value of Treasury Notes on issue as at 5 May 2015 was $5.5 billion. Table 8 lists the Treasury Notes currently on issue. Treasury Notes do not pay a coupon, but they are issued at a discount — the face value received at maturity is higher than the price paid at issuance.

Table 8: Treasury Notes on issue
Maturity On issue as at 5 May 2015 ($m) Timing of interest payment
12‑Jun‑15 3,500 At maturity 12 Jun
7‑Aug‑15 2,000 At maturity 7 Aug

Source: Australian Office of Financial Management.

Non‑resident holdings of CGS on issue

The sale of CGS is not restricted to Australian residents. As at the December quarter 2014, 65.9 per cent of total CGS on issue were held by non‑residents of Australia (Chart 2).

The proportion of CGS held by non‑residents has risen significantly since 2009 and remains around historically high levels. This appears to reflect an increased tendency for global foreign reserves to be invested outside of the major currencies (such as the yen, the US dollar and the euro).

The historically high proportion of non‑resident holdings of CGS is also likely to have been driven by a rise in investor confidence in the Australian sovereign debt market, owing to the relative strength of Australia's public finances and the Australian economy more broadly.

CGS yields remain relatively attractive against a backdrop of low government bond yields globally. Along with strong investor confidence in the Australian sovereign debt market, this has contributed to longer‑term CGS yields falling to historically low levels in recent years.

Chart 2: Non‑resident holdings of Commonwealth Government Securities

Note: Data refer to the market value of holdings.

Source: ABS Catalogue Number 5302.0 and Australian Office of Financial Management.

Interest on CGS

The interest costs related to CGS are presented in these statements in both cash and accrual accounting terms. The difference between the cash interest payments and accrual interest expense generally relates to the timing of when the interest cost is recognised.

  • Interest payments are recognised in the period when they are paid during the life of the security.
  • Interest expense is recognised in the period in which an expense is incurred during the life of the security, rather when they are actually paid.

Estimates of the interest payments and expense of CGS on issue include the cost of CGS already on issue and future CGS issuance. The cost of:

  • CGS already on issue uses the actual interest rates incurred at the time of issuance; and
  • the expected future issuance of CGS is based on the prevailing market rates across the yield curve at the time of a budget estimates update.

The assumed market yields at the 2015‑16 Budget result in a weighted average cost of borrowing of around 2.5 per cent for future issuance of Treasury Bonds in the forward estimates period, compared with around 2.9 per cent at the 2014‑15 MYEFO. Chart 3 shows the yield curve assumptions underpinning the 2014‑15 Budget, 2014‑15 MYEFO and 2015‑16 Budget.

Chart 3: Yield curve assumptions from 2014‑15 to 2018‑19

Source: Australian Office of Financial Management.

The Government's interest payments and expense over the forward estimates mostly relate to the cost of servicing the stock of CGS on issue, and are expected to increase over the forward estimates as a result of the projected rise in CGS on issue.

The Government's total interest payments in 2015‑16 are estimated to be $15.0 billion, of which $14.5 billion relates to CGS on issue (Table 9).

Table 9: Interest payments and interest expense
2014‑15
$m
2015‑16
$m
2016‑17
$m
2017‑18
$m
2018‑19
$m
Interest payments on CGS(a) 13,512 14,455 14,980 15,535 16,587
Per cent of GDP 0.8 0.9 0.9 0.8 0.9
Total interest payments(a) 14,037 14,953 15,464 16,028 17,070
Per cent of GDP 0.9 0.9 0.9 0.9 0.9
Interest expense on CGS(b) 14,450 15,560 16,454 16,845 17,363
Per cent of GDP 0.9 0.9 0.9 0.9 0.9
Total interest expense(b) 15,915 17,270 19,040 19,652 20,141
Per cent of GDP 1.0 1.0 1.1 1.1 1.0

(a) Interest payments are a cash measure, with the relevant amount recognised in the period in which the interest payment is made.

(b) Interest expense is an accrual measure, with the relevant amount recognised in the period in which the expense is incurred, but not necessarily paid.

The Government's interest expense in 2015‑16 is estimated to be $17.3 billion, of which $15.6 billion relates to CGS on issue. In the 2014‑15 MYEFO, interest expense in 2015‑16 was estimated to be $17.9 billion, of which $16.0 billion related to CGS on issue. Table 10 shows the Government's estimated interest expense, interest expense on CGS, interest income and net interest expense over the forward estimates.

Table 10: Interest expense, interest income and net interest expense
2014‑15
$m
2015‑16
$m
2016‑17
$m
2017‑18
$m
2018‑19
$m
Interest expense 15,915 17,270 19,040 19,652 20,141
Per cent of GDP 1.0 1.0 1.1 1.1 1.0
Interest income 3,653 4,083 4,680 5,159 6,184
Per cent of GDP 0.2 0.2 0.3 0.3 0.3
Net interest expense 12,262 13,187 14,360 14,493 13,957
Per cent of GDP 0.8 0.8 0.8 0.8 0.7

Climate spending

The Government's climate spending is shown on an aggregated basis in Table 11.

Table 11: Climate spending from 2014‑15 to 2018‑19
2014‑15
$b
2015‑16
$b
2016‑17
$b
2017‑18
$b
2018‑19
$b
Climate spending(a) 1.35 0.70 0.60 0.50 0.55

(a) Spending in this table is on a headline cash balance basis; that is, payments and net cash flows from investments in financial assets for policy purposes, as well as estimated interest receipts associated with Clean Energy Finance Corporation investments.

Over the forward estimates, the key components of climate spending are:

  • the Emissions Reduction Fund, which is providing incentives to support abatement activities across the economy; and
  • funding for the Department of Industry and Science to support Australian Renewable Energy Agency legacy functions.

Estimates of climate spending have been updated to reflect the delay in the passage of legislation to abolish the Clean Energy Finance Corporation and to reflect revised timelines for the delivery of projects administered by the Australian Renewable Energy Agency.

Impact of climate spending on debt

Climate spending may be financed through either receipts or debt. This statement takes the approach of assuming that the proportion of climate spending being financed through new debt (as opposed to receipts) is equivalent to climate spending as a proportion of total spending. This is shown in Table 12.

Table 12: Impact on debt — climate spending as a proportion of total spending
2014‑15 2015‑16 2016‑17 2017‑18 2018‑19
Climate spending ($b)(a) 1.35 0.70 0.60 0.50 0.55
Total spending ($b)(b) 418.3 440.9 466.0 478.0 504.7
Climate spending (per cent of total spending) 0.3 0.2 0.1 0.1 0.1
Change in face value of CGS from previous year ($b)(c) 50.2 45.1 61.9 23.1 20.8
Contribution to change in face value of CGS from climate spending ($b) 0.16 0.07 0.08 0.02 0.02

(a) The calculation of climate spending in this table is on a headline cash balance basis; that is, payments and net cash flows from investments in financial assets for policy purposes, as well as estimated interest receipts associated with the Clean Energy Finance Corporation investments.

(b) The calculation of total spending in this table is on a headline cash balance basis; that is, total payments and net cash flows from investments in financial assets for policy purposes.

(c) Calculations of the change in the face value of CGS are calculated using total CGS on issue.

Recurrent and capital spending

In the 2013‑14 MYEFO, the Government made a commitment to enhance disclosure on the proportion of the total budget4 allocated to recurrent and capital spending.

The recurrent budget includes pension and income support payments, funding in the areas of health and education (except where funding is allocated to the building of facilities), interest payments on public debt, student loans, and operating costs of the Government including payments to employees.

The capital budget comprises loans and other funding made to fund infrastructure, including transport and communications infrastructure; and purchases of defence and other non‑financial assets.

Chart 4 below presents a detailed breakdown of recurrent and capital spending for the 2015‑16 year.

Chart 4: Recurrent and capital spending as a proportion of the Budget in 2015‑16

(a) Recurrent payments excluding payments to states and territories include pension and income support payments, government loans, payments to government employees, payments for goods and services, and grants and subsidies not made for capital purposes.

(b) Other capital purchases include the purchase of land and buildings, software and other facilities.

(c) State and territory payments include payments for general revenue assistance (including Goods and Services Tax payments) and specific purpose payments.

Chart 4 shows that 91.6 per cent of estimated total budget spending in 2015‑16 is recurrent, and the remaining 8.4 per cent of the budget is capital.

Of the total budget, 72 per cent comprises recurrent payments such as income support payments, grants and subsidies to recipients other than states and territories, interest payments on public debt, operating costs of the Government, and student loans. Payments to states and territories to fund recurrent spending make up 20 per cent of the budget. This amount includes specific purpose payments to states and territories, including in the areas of health and education, and recurrent spending by the states and territories estimated to be funded through general revenue assistance.

Of the $37.7 billion of the capital budget, around $17.8 billion relates to specific purpose payments to the states and territories for capital purposes and the portion of General Revenue Assistance that is estimated to fund capital spending by the states and territories. Equity payments to NBN Co comprise around 21 per cent of the capital budget and purchases of defence capital (for example, defence weapons and aircraft) comprises around 22 per cent. Other capital purchases such as software facilities upgrades make up around 10 per cent of the capital budget.

Funding for the Infrastructure Growth Package is reflected in payments to states and territories for capital spending (for amounts paid to states and territories) and other capital loans, grants and subsidies (for amounts paid to local governments).

Additional Transparency — Medium‑term projections

To improve the transparency of the budget papers, the medium‑term projections have been enhanced to encourage discussion and debate beyond the short term about the benefits of funding important investments such as infrastructure.

Budget Statement 7: Forecasting Performance and Scenario Analysis includes alternative scenarios of the medium‑term outlook for the underlying cash balance and CGS on issue.

Further, the Budget details the Government's commitment to funding productivity‑enhancing infrastructure over the medium term.

The Government is committed to investing over $50 billion in transport infrastructure to 2019‑20 (this includes a $3 billion commitment to East West Link that is recorded as a contingent liability), with spending included in the forward estimates and the medium‑term projections.

The Government is also investing in a new Northern Australia Infrastructure Facility over five years to help promote private sector participation in major projects necessary for economic development in the north.

The medium‑term fiscal projections in this Budget include expenditure on infrastructure by the Commonwealth.

Stronger infrastructure links improve the competitiveness of businesses and increase their ability to provide services to their customers. Businesses will also benefit from the increased investment activity and a more dynamic economy.


1 For TIBs, the final repayment amount paid to investors includes an additional amount owing to inflation accretion over the life of the security. This amount is not included in the calculation of face value.

2 End‑of‑year values are estimates or projections of CGS on issue at 30 June for the particular year. The precise timing of within‑year peaks of CGS on issue is not known. The timing of the within‑year peak is therefore reported to the given month in the particular year.

3 On 11 December 2013, the Treasurer directed that the maximum face value of CGS that can be on issue is $500 billion.

4 Total budget is defined as all cash outflows within the underlying cash balance and headline cash balance (where identifiable). This is equal to total payments plus investments in financial assets for policy purposes (for example, loans and equity payments).