Australian Government, 2013-14 Budget
Budget

Statement 6: Expenses and Net Capital Investment (Continued)

Overview

Australian Government general government sector (GGS) accrual expenses are expected to increase by 2.2 per cent in real terms in 2013‑14, with the growth rate declining to 2015‑16 before increasing in 2016‑17. Total expenses are expected to decline as a percentage of GDP between 2012‑13 and 2013‑14 and over the forward estimates.

Table 1: Estimates of general government sector expenses
  MYEFO Revised Estimate   Projections
  2012‑13 2012‑13 2013‑14 2014‑15   2015‑16 2016‑17
Total expenses ($b) 375.0 381.4 398.3 415.7   431.0 454.7
Real growth on
previous year (%)(a)
-3.1 -1.3 2.2 1.9   1.2 2.9
Per cent of GDP 24.5 25.1 24.9 24.8   24.4 24.4

(a) Real growth is calculated using the Consumer Price Index.

As set out in Statement 3 of Budget Paper No. 1, the Government also reports spending on an underlying cash basis. When expressed in cash terms, Government spending is forecast to grow by an average of 1.3 per cent per annum over the five years to 2016‑17.

Chart 1: Total spending as a percentage of GDP

Chart 1: Total spending as a percentage of GDP

Total expenses as a percentage of GDP are now significantly less than at their peak in 2009‑10 during the global financial crisis, primarily reflecting the temporary nature of the Government's stimulus packages (see Chart 1).

Table 2 provides a reconciliation of expense estimates between the 2012‑13 Budget, the Mid‑Year Economic and Fiscal Outlook 2012‑13 (MYEFO) and the 2013‑14 Budget showing the effect of policy decisions, and economic parameter and other variations.

Table 2: Reconciliation of expense estimates
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2012‑13 Budget expenses 376,273 398,503 416,449   439,044
Changes from 2012‑13 Budget to 2012‑13 MYEFO          
Effect of policy decisions(a) 215 530 596   223
Effect of parameter and other variations -1,439 -1,179 -3,340   -3,456
Total variations -1,224 -649 -2,744   -3,233
2012‑13 MYEFO expenses 375,049 397,854 413,704   435,811
Changes from 2012‑13 MYEFO to 2013‑14 Budget          
Effect of policy decisions(a) 1,978 382 -1,014   -3,054
Effect of economic parameter variations          
Total economic parameter variations -188 -710 770   -587
Unemployment benefits 419 4 1,613   423
Prices and wages -77 14 30   -415
Interest and exchange rates 20 22 6   5
GST payments to the States -550 -750 -880   -600
Public debt interest 192 757 1,475   2,013
Program specific parameter variations 2,672 2,172 2,135   -368
Slippage in 2012‑13 Budget decisions 0 0 0   0
Other variations 1,736 -2,153 -1,408   -2,800
Total variations 6,391 447 1,958   -4,796
2013‑14 Budget expenses 381,439 398,301 415,663   431,015

(a) Excludes secondary impacts on public debt interest of policy decisions and offsets from the Contingency Reserve for decisions taken.

Economic parameter variations are expected to reduce expenses in 2012‑13 and across the forward estimates compared to the 2012‑13 MYEFO. This trend is driven largely by a fall in goods and services tax (GST) payments to the States and Territories, consistent with a reduction in GST revenue collection. An upwards revision to the estimated number of unemployment benefit recipients is expected to increase expenses in 2014‑15 compared to MYEFO. Growth in expenses is then expected to slow in 2015‑16 in accordance with the use of longer term projections for the number of unemployment benefit recipients in that year. Policy decisions also reduce expenses in 2014‑15 and 2015‑16.

Estimated expenses by function

Table 3 sets out the estimates of Australian Government GGS expenses by function for the period 2012‑13 to 2016‑17.

Table 3: Estimates of expenses by function
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
General public services 25,555 23,023 23,237   23,756 25,537
Defence 21,122 22,045 23,345   25,094 25,834
Public order and safety 4,028 4,272 4,132   4,087 4,048
Education 28,411 29,742 30,386   31,790 34,007
Health 62,249 64,636 68,081   71,597 75,493
Social security and welfare 132,388 138,145 144,021   149,911 158,479
Housing and community amenities 6,898 8,775 8,930   6,508 7,594
Recreation and culture 3,641 3,696 3,551   3,433 3,468
Fuel and energy 6,168 7,586 7,557   7,701 7,574
Agriculture, forestry and fishing 2,605 2,654 2,709   3,047 2,702
Mining, manufacturing and construction 2,267 2,431 2,734   2,592 2,328
Transport and communication 5,002 6,453 6,555   6,005 5,401
Other economic affairs 10,365 11,283 10,485   10,354 9,899
Other purposes 70,741 73,560 79,940   85,139 92,385
Total expenses 381,439 398,301 415,663   431,015 454,747

Major expense trends from 2013‑14 over the forward years include movements in the following functions:

  • general public services — the decrease in expenses between 2012‑13 and 2013‑14 reflects revised actuarial estimates of the Government's superannuation liability. Expenses are estimated to increase from 2013‑14 over the forward estimates due to the Government's commitment to increase the level of ODA to 0.5 per cent of Gross National Income which has been deferred by one year to 2017‑18;
  • defence — the increase in expenses from 2013‑14 over the forward estimates reflects growth in Defence funding, including to support the priorities outlined in the 2013 Defence White Paper;
  • education — the increase in expenses is largely due to the Government's Better Schools — A National Plan for School Improvement reforms;
  • health — expenses are expected to increase to reflect indexation of the Commonwealth's contribution to the provision of hospital services as well as higher demand for increasingly expensive health services, and a growing and ageing population;
  • social security and welfare — the increase in expenses is largely due to an ageing population with more people accessing age, disability and carer payments and residential and home care together with implementation of DisabilityCare Australia to support people with a significant and permanent disability;
  • housing and community amenities — expenses are expected to initially increase due to the continued implementation of the Clean Energy Future package and then fall due to the impact of the revised carbon price projections on the Jobs and Competitiveness program and Energy Security Fund;
  • transport and communication — the increase in expenses between 2012‑13 and 2013‑14 reflects increased funding for the road and rail sectors. Expenses are expected to decrease from 2014‑15 due to the completion of a number of major projects; and
  • other purposes — the increase in expenses primarily reflects growing general revenue assistance payments (primarily GST) to be made to the States and Territories and the conservative bias allowance component of the Contingency Reserve.

Government expenses are strongly influenced by underlying trends in spending in the social security and welfare, health and education functions (see Boxes 1 and 2). Together, these functions account for 58.4 per cent of all government expenses in 2013‑14. Health spending is forecast to grow at a faster rate in real terms than education and social security and welfare spending over the forward estimates period and is expected to increase its share of total expenses from around 14.0 per cent in 2000‑01 to 16.6 per cent in 2016‑17. Further details of spending trends against all functions are set out under individual function headings.

Box 1: Where does government spending go in 2013‑14?

Government spending provides a wide range of services to the community. The most significant component of government spending relates to social security and welfare, with around one third of total expenses providing support to the aged, families with children, people with disabilities, veterans, carers and unemployed people.

Another one sixth of government expenses occur in health, including Medicare Benefits Schedule (MBS) and Pharmaceutical Benefits Scheme (PBS) payments. A similar amount is also transferred to the States and Territories in general revenue assistance under the other purposes function.

The Government also provides significant investment under the education function, supporting government and non‑government schools, as well as higher education and vocational education and training. The remainder is spent on defence and a range of other public services.

Chart 2: Expenses by function in 2013‑14

Chart 2: Expenses by function in 2013‑14

The estimates presented in the chart above are explained in greater detail under each individual function in the following pages.

Box 2: Trends in future spending

Social security and welfare expenses are projected to grow strongly over the forward estimates. Key factors driving this include age, disability and carer payments and an increase in expenses associated with home care, home support and residential aged care, with demographic factors resulting in an increase in the number of people receiving these payments. Another driver of growth is the full implementation of DisabilityCare Australia, including a Government commitment of $14.3 billion in additional funding over seven years from 2012‑13. This includes the launch funding of $2.4 billion through to 1 July 2017, and new funding of $1.9 billion for transition to a full scheme through to 1 July 2017, $3.8 billion in 2017‑18 and $6.2 billion in 2018‑19. A number of major health programs will continue to see strong expenditure growth, including the MBS, and payments to the States and Territories under the National Healthcare Agreement and the National Health Reform Agreement. Spending on health is influenced by population growth and to some extent by the ageing of the population together with developments in health technology and the resulting use of new products and services.

Spending growth in the education function is driven largely by increases in assistance to government and non‑government schools as part of the Government's Better Schools — A National Plan for School Improvement reforms (discussed in greater detail in Box 5).

Chart 3: Total real growth by function — 2013‑14 to 2016‑17(a)

Chart 3: Total real growth by function — 2013‑14 to 2016‑17(a)

(a) The other purposes function is not included in this chart as it contains expenses for general revenue assistance to the State and Territory governments (primarily GST), public debt interest, and the conservative bias allowance.

Major savings

As part of the commitment to sustainable funding, the Government has identified savings in this Budget of $18.3 billion over five years from 2012‑13 in expenses and net capital investment. These savings reduce expenses and net capital investment across a range of functions.

The Government will achieve savings in the social security and welfare function, mainly through a range of changes to Family Tax Benefit (FTB) payments and including not proceeding with the 2012‑13 Budget measure Spreading the Benefits of the Boom. This also includes better targeting of the type of financial support available to parents when they have a baby or adopt a child and extension of the pause on the indexation of the upper income tests for family payments and the FTB supplements for a further three years. Changes to family payments are expected to decrease expenses and net capital investment by $877 million in 2013‑14 ($5.4 billion over the five years from 2012‑13 to 2016‑17).

In the education function, funding from a number of National Partnerships (including Literacy and Numeracy, Empowering Local Schools, Rewards for Great Teachers, Reward for School Improvement, and Low Socio‑Economic Status School Communities) will be redirected towards the Better Schools — A National Plan for School Improvement package, as the new reforms will meet the objectives of these National Partnerships. These measures are expected to save $139 million in 2013‑14 and $3.0 billion over the six calendar years of the proposed funding agreement from 2014 to 2019. Further savings will be achieved in education by offering Student Start‑up Scholarships as income contingent loans, rather than as grants, to all new full‑time higher education students in receipt of Youth Allowance, Austudy or ABSTUDY from 1 January 2014. This is expected to save $33 million in 2013‑14 (or $1.2 billion over the four years to 2016‑17). The Government will also apply an efficiency dividend of 2.0 per cent in 2014 and 1.25 per cent in 2015 to most grants provided under the Higher Education Support Act 2003, saving $85 million in 2013‑14 ($903 million over the four years to 2016‑17), although funding is still projected to grow by $1.2 billion over this period. The Government will also remove the discounts applying to up‑front payments and voluntary re‑payments under the Higher Education Loan Program from 1 January 2014, reducing expenses by $30 million in 2013‑14 ($235 million over the four years to 2016‑17).

In the general public services function, the Government will continue to grow Australia's aid budget to 0.5 per cent of Gross National Income but defer the target date by one year, from 2016‑17 to 2017‑18. This will achieve savings of $1.9 billion over the forward estimates while still growing aid spending by 42.4 per cent in nominal terms over this period.

In the health function, realigning indexation of the Medicare Benefits Schedule (MBS) to the financial year will achieve savings of $160 million in 2013‑14 ($664 million over four years to 2016‑17) and a further $225.1 million in savings over four years will be achieved through removing double billing under the MBS and changes to the extended Medicare safety net.

The Government will also achieve savings of up to around $600 million over four years to 2016‑17 from public service efficiency reforms that focus on a range of efficiencies, including property management, paid parking, procurement and management structures of the Australian Public Service.

Further details of Government policy decisions are provided in Budget Paper No. 2, Budget Measures 2013‑14.

Program expenses

Table 3.1 reports the top 20 expense programs in the 2013‑14 financial year. These programs represent approximately two thirds of total expenses in that year. More than half of the top 20 expense programs provide financial assistance or services to seniors, families, people with a disability, students, carers and the unemployed.

Table 3.1: Top 20 programs by expenses in 2013‑14(a)
    Estimates     Projections
Program Function 2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Revenue assistance to the States and Territories Other purposes 48,935 51,234 53,804   56,778 59,647
Income support for seniors SSW 36,546 39,442 42,065   45,038 48,437
Family tax benefit SSW 20,304 20,289 20,561   20,768 21,005
Medicare services Health 18,549 19,092 20,843   22,161 23,662
Disability support pension SSW 14,852 15,549 16,280   17,005 17,860
Assistance to the States for healthcare services Health 13,252 13,941 15,432   17,060 18,849
Pharmaceuticals and pharmaceutical services Health 9,657 10,071 10,570   11,011 11,484
Job seeker income support SSW 8,559 9,550 10,559   9,830 9,859
Non government schools — national support Education 8,095 8,891 9,252   9,945 10,693
Residential and flexible care SSW 8,311 8,811 9,325   9,979 10,573
Higher education support Education 6,995 7,185 7,465   7,870 8,005
Public sector superannuation(b) Other purposes; General public services 7,962 7,059 7,189   7,332 7,459
Income support for carers SSW 6,206 6,878 7,630   8,352 9,213
Fuel tax credits scheme Fuel and energy 5,519 5,871 5,906   6,270 6,360
Management of capability sustainment Defence 5,095 5,640 6,128   6,461 6,712
Private health insurance Health 5,564 5,399 5,578   5,748 5,912
Army capabilities Defence 5,061 5,377 5,746   6,122 6,159
Parents' income support SSW 5,572 5,275 5,320   5,498 5,628
Child care fee assistance SSW 4,661 5,048 5,373   5,673 5,982
Navy Capabilities Defence 4,246 4,396 4,565   4,687 4,719
Sub-total   243,941 254,998 269,591   283,588 298,218
Other programs   137,498 143,303 146,072   147,427 156,529
Total expenses   381,439 398,301 415,663   431,015 454,747

(a) Programs are at the gross expense level and no related entity eliminations have been applied.

(b) This program is a combination of public sector superannuation nominal interest and benefits programs.

General government sector expenses

General public services

The general public services function includes expenses to support the organisation and operation of government such as those related to the Parliament, the Governor‑General and conduct of elections; the collection of taxes and management of public funds and debt; assistance to developing countries to reduce poverty and achieve sustainable development, particularly countries in the Pacific region; contributions to international organisations; and the operations of the foreign service. It also includes expenses related to research in areas not otherwise connected with a specific function, and those associated with overall economic and statistical services as well as government superannuation benefits (excluding nominal interest expenses on unfunded liabilities which are included under the nominal superannuation interest sub‑function in the other purposes function).

Table 4: Summary of expenses — general public services
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Legislative and executive affairs 1,021 1,335 1,222   1,033 1,264
Financial and fiscal affairs 7,749 8,112 8,194   8,335 8,741
Foreign affairs and economic aid 5,896 6,752 7,010   7,650 8,860
General research 2,639 2,663 2,648   2,511 2,414
General services 683 695 704   728 748
Government superannuation benefits 7,567 3,466 3,460   3,499 3,510
Total general public services 25,555 23,023 23,237   23,756 25,537

Total general public services expenses are estimated to decrease by 11.8 per cent in real terms from 2012‑13 to 2013‑14, and increase by 3.2 per cent in real terms over the period 2013‑14 to 2016‑17.

The uneven profile of expenses under the legislative and executive affairs sub‑function partly reflects costs that will be incurred by the Australian Electoral Commission to support the scheduled federal elections in 2013‑14 and 2016‑17.

Expenses in the financial and fiscal affairs sub‑function are expected to increase over the forward estimates, primarily due to an increase in bad and doubtful debts expenses in line with the normal growth in taxation revenue over the forward estimates.

The fall in expenses from 2012‑13 to 2013‑14 in the government superannuation benefits sub‑function reflects the use of different discount rates. The superannuation expenses for 2012‑13 apply a discount rate based on long‑term government bonds at the commencement of the financial year (3.1 per cent) in accordance with accounting standards. Forward years are estimated based on the discount rate applied by the superannuation scheme actuaries in preparing long term cost reports (6 per cent).

Total expenses under the foreign affairs and economic aid sub‑function are expected to grow by 12.1 per cent in real terms from 2012‑13 to 2013‑14 and are forecast to grow by 22.1 per cent in real terms across the forward years from 2013‑14. This increase has been driven by the Government's commitment to increase the level of ODA to 0.5 per cent of Gross National Income (GNI).

The Government has deferred the target year to reach this GNI target by one year, from 2016‑17 to 2017‑18. Under this new profile, ODA spending is forecast to grow by 7.7 per cent in real terms from 2012‑13 to 2013‑14 and 32.4 per cent from 2013‑14 to 2016‑17. Budget Paper No. 2, Budget Measures 2013‑14, contains further details on the Government's revision to the growth profile for ODA.

Table 4.1: Trends in the major components of foreign affairs and economic aid sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Official development assistance(a)(b) 3,863 4,616 4,912   5,538 6,694
Africa, South and Central Asia, Middle East and other 1,002 1,158 1,273   1,560 1,790
East Asia 973 1,139 1289   1397 1543
PNG and Pacific 924 944 1053   1233 1352
Emergency, humanitarian and refugee programs 294 384 446   595 630
UN, Commonwealth and other international organisations 365 396 396   494 544
Multilateral replenishments 126 373 212   0 553
NGO, Volunteer and community programs 179 222 242   259 282
Other(c) 333 374 354   360 365
International deployments 322 298 301   289 332
Passport services 241 250 258   269 267
Payments to international organisations 236 258 258   260 263
International agricultural research and development 118 119 114   120 124
Consular services 73 76 82   82 83
Finance and insurance services for Australian exporters and investors 40 37 35   33 27
Other 670 724 697   699 705
Total 5,896 6,752 7,010   7,650 8,860

(a) The difference between these figures and the Government's ODA target is partly due to the way replenishments are recognised in accrual terms when initial commitments are made. However, ODA targets are measured in cash terms and reflecting the timing of actual cash payments (which, in the case of multilateral replenishments, can be spread over several years).

(b) Some ODA delivered by other government departments is also classified to other programs or functions.

(c) Other includes AusAID's departmental expenses and the provision available for future aid spending in the ODA Contingency Reserve (CR) in the Budget and forward estimates. The ODA CR represents the difference between the amount of ODA already committed by Australia and the Government's target levels of ODA.

The general research sub‑function incorporates expenses incurred by the Commonwealth Scientific and Industrial Research Organisation, the Australian Nuclear Science and Technology Organisation, the Australian Institute of Marine Science and the Australian Research Council.

Total expenses under this sub‑function are forecast to decrease by 1.2 per cent in real terms from 2012‑13 to 2013‑14. The decrease over the forward estimates is mainly due to the completion of a number of one‑off projects funded under the Education Investment Fund in the Science and Research Capacity Program.

The table below sets out the major components of general research sub‑function expenses.

Table 4.2: Trends in the major components of general research sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
National research flagships 575 646 674   697 695
Discovery - research and research training 542 553 549   531 486
Core research and services 500 485 498   509 503
Linkage - cross sector research partnerships 338 334 332   305 304
Science and technology solutions 265 291 289   297 275
Science and research capacity 283 225 179   41 8
Other 136 129 127   131 143
Total 2,639 2,663 2,648   2,511 2,414

Defence

The defence function includes expenses incurred by the Department of Defence (Defence), the Defence Materiel Organisation (DMO) and related agencies. Defence expenses support Australian military operations overseas and the delivery of navy, army, air and intelligence capabilities and strategic policy advice in the defence of Australia and its national interests. The DMO contributes to the preparedness of the Australian defence organisation through the acquisition and through‑life support of military equipment and supplies.

This function records the majority of expenses incurred by the defence portfolio but does not include the expenses incurred by the Department of Veterans' Affairs, superannuation payments to retired military personnel and housing assistance provided through Defence Housing Australia. These expenses are reported in the social security and welfare, other purposes, and housing and community amenities functions, respectively.

Table 5: Summary of expenses — defence
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Defence 21,122 22,045 23,345   25,094 25,834
Total defence 21,122 22,045 23,345   25,094 25,834

Total expenses for the defence function are estimated to increase by 2.2 per cent from 2012‑13 to 2013‑14, and increase by 9.0 per cent in real terms over the period 2013‑14 to 2016‑17, reflecting growth in defence funding to support the priorities outlined in the 2013 Defence White Paper.

The funding growth does not include the full cost of operations beyond 2013‑14 as such funding is considered on a year‑by‑year basis and is subject to future Government decisions. In 2013‑14, funding of $886.2 million is being provided to support Defence operations in the Middle East and the Solomon Islands.

Funding for Timor‑Leste post‑transition remediation activities, Coastal Surveillance activities and security capabilities to support the Group of 20 Leaders' Summit will be met from within Defence's existing resources. See Budget Paper No. 2, Budget Measures 2013‑14 for further details.

The acquisition of defence capital items is reported in the net capital investment section of this Statement and in Box 3 below.

Box 3: Defence funding

Total Defence expenditure is estimated to increase by $5.0 billion (12.3 per cent in real terms) from 2013‑14 over the forward estimates. This includes both expenses and net capital investment. Expenses for the defence function are those incurred in undertaking day‑to‑day activities. Net capital investment represents expenditure to acquire capital items in the form of equipment, buildings and land, less depreciation expenses.

Table 5.1: Trends in the major components of defence function expenses and net capital investment
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Expenses 21,122 22,045 23,345   25,094 25,834
Net capital investment 1,439 1,890 2,620   2,336 3,054
Total defence spending 22,561 23,935 25,965   27,430 28,888

Capital funding in the defence function is applied towards the acquisition of large and complex platforms and military equipment, and the construction of support facilities linked to capability. Fluctuations in capital spending can be due to slippage in expenditure from one year to the next year, foreign exchange rate fluctuations and additional funding decisions of Government.

Further details of capital spending are provided in the net capital investment section of this Statement and in the overview of the 2013 Defence White Paper (see Box 4).

Box 4: The 2013 Defence White Paper and funding

On 3 May 2013, the Government released the 2013 Defence White Paper. This document complements the National Security Strategy released on 23 January 2013, and the Australia in the Asian Century White Paper released on 28 October 2012.

These three documents are a statement of the priority the Government places on Australia's security and prosperity, and on maintaining a strong Australian Defence Force (ADF) to meet Australia's national security challenges.

The Defence White Paper addresses the range of significant international and domestic developments since 2009, which influence Australia's national security and defence settings, including their impact on force posture, future force structure and the defence budget.

The 2013 Defence White Paper reflects the Government's strong commitment to maintaining a highly skilled, capable and adaptable ADF as it transitions from over a decade of demanding and intensive operations. The White Paper also reaffirms the core capability commitments that are critical to Australia's long‑term defence and security.

The White Paper highlights a funding model for Defence based on the four‑year budget and forward estimates cycle, with subsequent six‑year general guidance to assist Defence capability planning.

The 2013‑14 Budget includes funding for major capital acquisitions such as 12 new build EA‑18G Growler aircraft.

Other major planned acquisitions include:

  • a bring forward of the replacement of Australia's Armidale Class Patrol Boats and the supply ships HMAS Success and HMAS Sirius;
  • around 2,700 deployable protected and armoured vehicles with improved firepower, protection and mobility; and
  • the introduction of the fifth‑generation F‑35A Joint Strike Fighter aircraft.

As well, the Government is committed to increasing Defence funding towards a target of 2 per cent of Gross Domestic Product, as and when fiscal circumstances allow. This is a long‑term objective that will be implemented in an economically responsible manner.

Public order and safety

The public order and safety function includes expenses to support the administration of the federal legal system and the provision of legal services, including legal aid, to the community. Public order and safety expenses also include law enforcement and intelligence activities, and the protection of Australian Government property.

Table 6: Summary of expenses — public order and safety
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Courts and legal services 899 1,007 981   980 896
Other public order and safety 3,129 3,264 3,151   3,108 3,152
Total public order and safety 4,028 4,272 4,132   4,087 4,048

Total expenses for the public order and safety function are estimated to increase by 3.8 per cent in real terms from 2012‑13 to 2013‑14, and decrease by 11.9 per cent in real terms over the period 2013‑14 to 2016‑17. The increase from 2012‑13 to 2013‑14 is partly due to additional funding provided in 2013‑14 for the Addressing Gang Violence and Organised Crime package, which affects both sub‑functions. The increase also reflects the additional funding provided within the courts and legal services sub‑function for the Royal Commission into Institutional Responses to Child Sexual Abuse as 2013‑14 will be the first full year of the Commission's operation; and funding provided within the other public order and safety sub‑function to the Australian Customs and Border Protection Service to strengthen its maritime capability. The decline in real terms from 2013‑14 to 2016‑17 is due to the completion of these measures prior to 2016‑17.

Education

The education function includes expenses to support the delivery of education services through higher education institutions; vocational education and training providers (including technical and further education institutions); and government (State and Territory) and non‑government primary and secondary schools.

Table 7: Summary of expenses — education
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Higher education 8,724 8,997 9,321   9,829 10,073
Vocational and other education 1,904 1,954 2,128   2,124 2,305
Schools 12,419 13,778 14,441   15,748 17,231
Non-government schools 8,094 8,916 9,277   9,970 10,718
Government schools 4,326 4,861 5,164   5,778 6,513
Student assistance 3,532 3,599 3,498   3,458 3,573
General administration 268 268 257   250 266
School education - specific funding 1,563 1,147 740   381 560
Total education 28,411 29,742 30,386   31,790 34,007

Total education expenses are expected to increase by 2.5 per cent in real terms between 2012‑13 and 2013‑14 and by 6.4 per cent in real terms from 2013‑14 to 2016‑17.

Expenses under the higher education sub‑function are expected to increase by 1.0 per cent in real terms from 2012‑13 to 2013‑14, and by 4.1 per cent in real terms from 2013‑14 to 2016‑17. The large increases in enrolment growth from the transition to a demand driven funding system are moderating with lower estimated growth than in 2012‑13. The 2013‑14 Budget decision to apply an efficiency dividend for two years to most grants under the Higher Education Support Act 2003, and the 2012‑13 MYEFO measure to cease Facilitation Funding from 1 January 2014 are also impacting the rate of growth from historical highs.

Expenses under the Higher Education Support Program are still expected to increase from $7.0 billion in 2012‑13 to $7.9 billion in 2016‑17. Investment in higher education research programs is also still expected to increase from $1.6 billion in 2012‑13 to $2.0 billion in 2016‑17.

Growth in the vocational and other education sub‑function reflects the funding profile of the Skills Reform National Partnership announced as part of the Building Australia's Future Workforce package in the 2011‑12 Budget. Total expenses under the sub‑function are estimated to increase by 0.5 per cent in real terms between 2012‑13 and 2013‑14 and by 9.7 per cent in real terms from 2013‑14 to 2016‑17.

The major components of the vocational and other education sub‑function are set out in Table 7.1.

Table 7.1: Trends in the major components of vocational and other education sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Assistance to the States for skills and workforce development 1,388 1,409 1,436   1,463 1,490
National Partnership Payments - vocational and other education 278 280 414   377 516
Adult Migrant English Program 238 265 278   284 299
Total 1,904 1,954 2,128   2,124 2,305

Expenses in the schools (non‑government and government) sub‑functions reflect the Government's Better Schools — A National Plan for School Improvement reforms (discussed in greater detail in Box 5). The Government has made an offer to States, Territories and non‑government education authorities to implement a new needs‑based funding model for schools. Under the proposed offer, the Government will provide an additional $9.8 billion over six years from 2014‑15.

Expenses in the schools — non‑government schools sub‑function are expected to increase by 7.9 per cent in real terms between 2012‑13 and 2013‑14 and by 11.8 per cent in real terms from 2013‑14 to 2016‑17, reflecting the Government's funding offer outlined above. A break‑up of National Partnership funding can be found in Budget Paper No. 3, Australia's Federal Relations 2013‑14.

Expenses under the schools — government schools sub‑function include general assistance and National Partnerships which, by their nature, are time limited. Under the proposed new school funding arrangements, the Rewards for Great Teachers and Smarter Schools — Low Socio‑economic Status School Communities National Partnerships will cease from 31 December 2013. In addition, funding provisioned for National Partnerships associated with the Reward for School Improvement program and the next phase of the Empowering Local Schools program will not proceed. Expenses under this sub‑function are expected to increase by 10.0 per cent in real terms between 2012‑13 and 2013‑14 and by 24.6 per cent in real terms from 2013‑14 to 2016‑17. This reflects the Government's funding offer, with lower initial growth primarily driven by the six year transition to the new funding model.

Expenses under the student assistance sub‑function are expected to decrease by 0.2 per cent in real terms from 2012‑13 to 2013‑14, and by 7.7 per cent in real terms from 2013‑14 to 2016‑17. This primarily reflects recent changes in tertiary student assistance.

The Government's decision to replace Student Start‑up Scholarships (SSS) with income contingent loans is expected to progressively reduce expenses under tertiary student assistance from 2013‑14 to 2015‑16, at which point most of the existing students who are covered by transitional arrangements are expected to have exited the system.

While the conversion of the SSS from a payment to an income contingent loan reduces expenses, the amount of funding available to students is unchanged.

Growth in expenses is expected to resume from 2016‑17 as the ongoing growth in projected higher education enrolments again becomes the key driver of expense growth. Expenses under the Higher Education Loan Program (HELP) reflect the estimated cost to the Government of providing concessional loans. The reduction in expenses between 2013‑14 and 2014‑15 is because 2013 is the last year that the HECS‑HELP discount will be paid. The growth thereafter reflects ongoing enrolment growth under the demand driven system.

The major components of the student assistance sub‑function are set out in Table 7.2.

Table 7.2: Trends in the major components of student assistance sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Tertiary student assistance 3,029 3,082 2,977   2,914 3,002
School student assistance 288 293 302   305 310
Higher Education Loan Program 199 208 203   223 244
Other 16 16 16   16 17
Total 3,532 3,599 3,498   3,458 3,573

The major components of the school education — specific funding sub‑function are the National Partnership Agreements on the National Action Plan for Literacy and Numeracy, Digital Education Revolution, Improving Teacher Quality, Trade Training Centres, Low Socio‑economic Status School Communities, Rewards for Great Teachers and Youth Attainment and Transitions, and a number of elements of the Stronger Futures in the Northern Territory initiative. This includes both government and non‑government school expenditure. The variation in expenses between years can largely be attributed to the terms of these National Partnerships. In particular, the estimated reduction in expenses from 2012‑13 to 2014‑15 is due to the winding up of a number of National Partnerships and the transition to the new schools funding model. If the reforms are agreed by all states and territories, the only National Partnerships that will continue are Trade Training Centres, and a number of elements of the Stronger Futures in the Northern Territory initiative.

Box 5: National Plan for School Improvement

The Review of Funding for Schooling Final Report, released on 20 February 2012, made a number of recommendations for school funding reform in Australia, most notably the introduction of a schooling resource standard, which would provide the basis for all recurrent funding distributed to government and non‑government schools. The Schooling Resource Standard (SRS) would have two elements: a base amount per student, plus additional funding to target forms of disadvantage.

The National Plan for School Improvement and the National Education Reform Agreement are the Government's response to the Review of Funding for Schooling.

As part of the National Plan for School Improvement, the Government is seeking to move all schools funding to a needs based funding mechanism from 1 January 2014. This will include:

  • a base amount per student in 2014 of $9,271 for each primary student and $12,193 for each high school student;
  • loadings to provide additional support for students and schools with factors that may result in disadvantage (based on a percentage of the base amount per student):
    • a set loading of up to $150,000 per school to support small primary schools and a set loading of up to $240,000 per school to support small secondary schools;
    • a loading range of 10 per cent to 80 per cent of the base SRS amount per student to support schools based on location;
    • a loading range of 15 to 50 per cent of the base SRS amount per student where student families are in the lowest income quartile;
    • a loading range of 7.5 to 37.5 per cent of the base SRS amount per student where student families are in the second lowest income quartile;
    • for Aboriginal and Torres Strait Islanders a loading range of 20 to 120 per cent of the base SRS amount per student; and
    • a flat loading of 10 per cent of the base SRS amount per student for students who lack English language proficiency.
  • Loadings can be cumulative, so a single student or school can attract all loadings simultaneously.

A loading for students with a disability is currently being developed for introduction in 2015. A loading based on current resourcing levels will be available in 2014 and, pending agreement with other jurisdictions, the Government will continue the More Support for Students with Disabilities National Partnership for one year.

The Government has made an offer to States, Territories and non‑government education authorities to implement the new needs‑based funding model for schools. Under the proposed offer, current Commonwealth base funding would be indexed by 4.7 per cent per annum, while States and Territories would be required to increase their existing base funding by 3 per cent per annum. The total SRS would initially be indexed by 3.6 per cent per annum. After allowing for these parameters, the Commonwealth will provide an additional $9.8 billion over six years from 2014‑15 to schools to transition to the SRS.

As at 10 May 2013, New South Wales has agreed to these reforms. The Government is in ongoing negotiations with the remaining States and Territories and non‑government education authorities, and the offer will remain open until 30 June 2013. National Partnership funding will continue until current agreements cease.

Consistent with the Government's commitment, current funding levels will be maintained in order to ensure that schools are no worse off. Where a non‑government school would receive lower funding based on the new funding model than it received from the Commonwealth in 2013, their 2013 funding will be indexed by a further 3 per cent per annum until such time as their funding matches the new funding model.

Box 6: Education spending trends

Over the period 2000‑01 to 2012‑13, education expenses grew at around 5.3 per cent per annum in real terms. This was largely driven by growth in a number of major programs covering higher education and assistance to government and non‑government schools, which together account for around 80 per cent of total spending on education. A large increase in spending from 2008‑09 to 2011‑12 resulted from the introduction of fiscal stimulus measures under the Building the Education Revolution package. In 2010 and 2011, spending on higher education increased significantly, reflecting a rise in Commonwealth supported places as the sector prepared for demand‑driven enrolments in 2012.

Trends in Major Programs

Average real expense growth in assistance to government and non‑government schools has been around 4 per cent and 5 per cent per annum respectively over the period 2000‑01 to 2012‑13, while the Higher Education Support Program has seen growth of around 2.2 per cent per annum in real terms.

The implementation of the school funding reforms is expected to lead to relatively rapid growth in Commonwealth spending on school funding reflecting the importance of investing in our schools. After the six year implementation period, however, growth is likely to slow, rising in line with enrolment growth and agreed indexation rates.

Strong growth in student enrolments and more generous indexation arrangements have led to strong growth in higher education support in recent years. Beyond the forward estimates, student enrolment growth is not expected to continue at these higher levels and average real expense growth for the Higher Education Support Program is expected to stabilise at around 3 per cent per annum.

 

Health

The health function includes expenses relating to medical services funded through Medicare and the Private Health Insurance Rebate; payments to the States and Territories to deliver essential health services, including public hospitals; the Pharmaceutical Benefits and Repatriation Pharmaceutical Benefits Schemes; blood and blood products; population health initiatives; and health education and training services.

Table 8: Summary of expenses — health
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Medical services and benefits 25,307 25,552 27,430   28,918 30,548
Hospital services(a) 2,694 2,762 2,038   1,900 1,905
National Health Reform Payment 13,252 13,941 15,432   17,060 18,849
Pharmaceutical benefits and services 10,689 11,139 11,664   12,087 12,562
Aboriginal and Torres Strait Islander health 752 851 826   854 890
Health services 6,362 7,053 7,418   7,481 7,413
General administration 3,192 3,337 3,273   3,296 3,327
Total health 62,249 64,636 68,081   71,597 75,493

(a) The hospital services sub‑function includes payments from the Commonwealth to the States and Territories for specific hospital improvement initiatives and is in addition to the bulk of hospital funding provided under the National health reform payment sub‑function.

Total expenses for this function are estimated to increase by 1.7 per cent in real terms from 2012‑13 to 2013‑14, and by 8.6 per cent in real terms from 2013‑14 to 2016‑17. This increase is expected to be driven by higher demand for increasingly expensive health services, and a growing and ageing population.

The medical services and benefits sub‑function, which primarily consists of Medicare and Private Health Insurance Rebate (PHIR) expenses, is 39.5 per cent of total estimated health expenses for 2013‑14. Medicare services expenses are the major driver of growth in this sub‑function helping to improve health outcomes for the community, including through access to advanced health services. Expenses are expected to increase by 0.8 per cent in real terms from 2012‑13 and 2013‑14, and are expected to grow by 15.3 per cent in real terms over the period 2013‑14 to 2016‑17, reflecting ongoing growth in the use of medical services and in the use of high value items on the Medicare Benefits Schedule.

The expected reduction in PHIR expenditure between 2012‑13 and 2013‑14 is due to a higher number of policy holders choosing to prepay their 2012‑13 premiums in 2011‑12. The reduction is also due to the estimated downward expenditure impact in 2013‑14 of the 2012‑13 MYEFO measure, Private Health Insurance Rebate — removal of rebate on lifetime health cover loading, which will be implemented on 1 July 2013.

Expenses for PHIR are expected to increase from 2013‑14 to 2016‑17 due to continued take up of private health insurance policies. The proportion of Australians with some form of private health insurance now stands around 55 per cent, providing a high level of access to private health services and taking pressure off the public system.

The major components of the medical services and benefits sub‑function are set out in Table 8.1.

Table 8.1: Trends in the major components of medical services and benefits sub‑function expenses(a)
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Medicare services 18,549 19,092 20,843   22,161 23,662
Private health insurance(a) 5,564 5,399 5,578   5,748 5,912
General medical consultations and services 928 916 912   904 908
Primary care practice incentives 281 208 223   229 234
Other -15 -63 -126   -124 -168
Total 25,307 25,552 27,430   28,918 30,548

(a) Following changes to indexation, announced in the MYEFO, the estimated financial impact of premium growth on the forward estimates for the Private Health Insurance Rebate has been removed from the Contingency Reserve and included in the published estimates.

The Commonwealth's contribution to funding under the National Health Reform Agreement is reported through the National Health Reform Payment sub‑function. The increase in expenses of 25.8 per cent in real terms from 2013‑14 to 2016‑17 reflects indexation of the Commonwealth's contribution to the provision of hospital services, growth in the volume of services, changes in the efficient price for hospital services, and the agreement that the Commonwealth will meet 45 per cent of the growth in the efficient price from 2014‑15. Hospital services covered by the Government's contribution include all admitted services, programs that deliver hospital services in the home, and emergency department services. The Commonwealth will fund 50 per cent of efficient growth in public hospital services from 2017‑18.

The hospital services sub‑function includes payments to the States and Territories through a range of National Partnership Agreements, and support for veterans' hospital services. Expense growth for this sub‑function is expected to fall by 35.9 per cent in real terms from 2013‑14 to 2016‑17. This fall is primarily due to the conclusion of several National Partnership Agreements for Public Hospitals over the forward years negotiated as part of the National Health Reform Agreement. From 2014‑15 onwards public hospital services will receive significant additional funding of $3.8 billion between 2014‑15 and 2016‑17 through the Commonwealth's agreement to fund 45 per cent of the growth in the efficient price, leading to a net increase in funding to the States for hospitals. This funding is accounted for within the National Health Reform Payment sub‑function.

Growth in the pharmaceutical benefits and services sub‑function over the budget and forward estimates is mainly driven by increasing demand for pharmaceutical services. Pharmaceutical Benefits Scheme (PBS) growth between 2012‑13 and 2013‑14 of 2.0 per cent in real terms is lower than historical trends, largely reflecting the ongoing impact of the 2010‑11 Budget measure Pharmaceutical Benefits Scheme — further pricing reform. This measure requires manufacturers to disclose to the Government the actual price at which they sell medicines to wholesalers and pharmacies. Growth of 4.9 per cent from 2013‑14 to 2016‑17 reflects the expectation that increased transparency will help to stabilise growth in the short to medium term.

PBS estimates do not include the potential listing of new drugs following recommendations by the Pharmaceutical Benefits Advisory Committee.

The major components of the pharmaceutical benefits and services sub‑function are set out in Table 8.2.

Table 8.2: Trends in the major components of pharmaceutical benefits and services sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Pharmaceutical benefits (concessional)(a) 5,642 5,801 6,042   6,218 6,399
Pharmaceutical benefits (highly specialised and other drugs dispensed in hospitals)(b) 2,264 2,435 2,581   2,747 2,933
Pharmaceutical benefits (general)(c) 1,530 1,613 1,721   1,817 1,922
Veterans' pharmaceutical benefits 449 415 395   371 370
Payments for wholesalers and pharmacy programs 209 212 216   219 219
Other 595 663 709   715 719
Total 10,689 11,139 11,664   12,087 12,562

(a) Concessional benefits are those provided through community pharmacies for Centrelink concession card holders.

(b) Highly specialised drugs are subsidised by the Commonwealth Government through hospitals.

(c) General benefits are those provided through community pharmacies for people without concession cards.

Expenses in the health services sub‑function include Commonwealth expenses associated with the delivery of population health, mental health, hearing services, blood and blood products, research and other allied health services, e‑Health, and health infrastructure funding through the Health and Hospitals Fund (HHF). From 2012‑13 to 2013‑14 expenses on mental health are expected to increase by 28.9 per cent in real terms, and by 12.3 per cent in real terms from 2013‑14 to 2016‑17, driving strong expenses growth in the health services sub‑function. This reflects the implementation of the Government's National Mental Health Reform package announced in the 2011‑12 Budget. Growth in elements of health services expenses is partially offset by reducing expenses on Health Infrastructure, as projects rolled out under the HHF near completion.

The major components of the health services sub‑function are set out in Table 8.3.

Table 8.3: Trends in the major components of health services sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Health infrastructure 1,345 1,522 1,828   1,559 999
National blood agreement management 1,077 1,127 1,203   1,281 1,370
Blood and organ donation services (Health) 728 772 823   872 931
Mental health 381 502 546   598 606
Other 2,831 3,130 3,018   3,171 3,507
Total 6,362 7,053 7,418   7,481 7,413

The general administration sub‑function includes the Government's investment in health workforce measures and support for rural health initiatives. Expenditure for this sub‑function is expected to fall in real terms by 7.3 per cent from 2013‑14 to 2016‑17. This is a result of the recent measures the Government has undertaken to minimise the growth in program delivery costs.

Expenses in the Aboriginal and Torres Strait Islander health sub‑function will increase by 10.7 per cent in real terms from 2012‑13 to 2013‑14 and fall by 2.7 per cent in real terms from 2013‑14 to 2016‑17, due to the effect of movements of funds and a reduction in payments through National Partnerships over the forward estimates. However, Aboriginal and Torres Strait Islander people across Australia will continue to access mainstream services as well as Indigenous‑specific services. Substantial investments in Indigenous health also occur through other health sub‑functions.

Box 7: Health spending trends

Spending on health grew by 4.9 per cent per annum in real terms from 2000‑01 to 2012‑13. This strong growth reflects advancements in, and rising cost of, medical technology as well as increasing demand for health services due to population growth and ageing.

Trends in Major Programs

A number of major health programs have seen and will continue to see sustained spending growth, including the MBS, the PBS, and payments to the States and Territories under the National Healthcare Agreement and the National Health Reform Agreement. Over the period from 2000‑01 to 2012‑13, average real expense growth for the MBS was around 5.2 per cent per annum, 4.2 per cent per annum for the PBS, while health payments to the States and Territories had real expense growth of around 3.5 per cent per annum. The Private Health Insurance Rebate has also experienced real growth of around 6.3 per cent per annum.

Spending on the MBS and PBS is impacted by population growth and by the ageing population; however, spending is also influenced by developments in health technology and the resulting listing of new products and services. Payments to the States and Territories for health care under the National Health Reform Agreement will grow at around 8 per cent per annum in real terms from 2016‑17. This growth is largely due to continued growth in the use of hospital services and the Commonwealth's commitment to increase its contribution to fund 50 per cent of the growth in the volume and the efficient price of hospital services from 2017‑18.

Social security and welfare

The social security and welfare function includes expenses for pensions and services to the aged; assistance to the unemployed, people with disabilities and families with children; and income support and compensation for veterans and their dependants. It also includes assistance provided to Indigenous Australians which has not been included under other functions.

Table 9: Summary of expenses — social security and welfare
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Assistance to the aged 50,984 54,754 57,620   61,648 66,251
Assistance to veterans and dependants 7,046 7,006 6,880   6,795 6,635
Assistance to people with disabilities 23,873 25,479 27,208   29,156 32,396
Assistance to families with children 35,256 34,945 35,534   36,353 37,158
Assistance to the unemployed and the sick 8,559 9,550 10,559   9,830 9,859
Other welfare programs 1,663 1,637 1,649   1,687 1,763
Assistance for Indigenous Australians nec 1,145 1,043 939   928 1,053
General administration 3,861 3,731 3,631   3,513 3,365
Total social security and welfare 132,388 138,145 144,021   149,911 158,479

Expenses in the social security and welfare function are estimated to increase by 2.2 per cent in real terms from 2012‑13 to 2013‑14 and by 6.7 per cent in real terms from 2013‑14 to 2016‑17. The sub‑functions contributing most to the growth are assistance to the aged, at 20.9 per cent and assistance to people with disabilities at 26.2 per cent in real terms over the period 2012‑13 to 2016‑17.

The principal driver of growth over the forward estimates for the assistance to the aged sub‑function is income support for seniors (Age Pension), which is estimated to grow by 5.7 per cent in real terms from 2012‑13 to 2013‑14 and 12.5 per cent in real terms from 2013‑14 to 2016‑17. The number of eligible Age Pension recipients will grow by 2.9 per cent in 2013‑14 and will increase over the forward estimates to 2016‑17 by 10.6 per cent.

A secondary contributor to growth from 2013‑14 to 2016‑17 is an increase in expenses associated with home care, home support and the residential and flexible aged care programs, largely reflecting demographic factors.

The reduction in National Partnership Payments — Assistance to the Aged from 2013‑14 to 2016‑17 reflects the expiry of National Partnership Agreements with Western Australia and Victoria on 30 June 2014. All other States and Territories transferred funding and policy responsibility for aged care to the Commonwealth from 1 July 2012, with this funding now included in the Home Support Program. Victoria has now also agreed to transfer these responsibilities, with the details to be finalised.

The forecast increase in the cost of veterans' community care and support over the forward estimates is mainly attributable to a growing number of veterans and war widow(ers) accessing residential aged care.

The major components of the assistance to the aged sub‑function are outlined below in Table 9.1.

Table 9.1: Trends in the major components of assistance to the aged sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Income support for seniors 36,546 39,442 42,065   45,038 48,437
Residential and flexible care 8,311 8,811 9,325   9,979 10,573
Veterans' community care and support 1,603 1,695 1,814   1,956 2,078
Home support 1,386 1,485 1,603   1,720 1,863
Home care 1,144 1,205 1,294   1,410 1,736
National partnership payments — assistance to the aged 801 843 304   316 329
Mature age income support 510 439 343   309 266
Allowances, concessions and services for for seniors 235 313 331   349 374
Ageing and service improvement 160 196 206   218 220
Workforce and quality 152 175 176   203 219
Access and information 123 139 137   136 145
Other 13 11 22   14 11
Total 50,984 54,754 57,620   61,648 66,251

The main components of the assistance to families with children sub‑function are family tax benefit payments, child care fee assistance and income support to parents. Growth in expenses under the sub‑function is being driven by the growing number of families accessing Child Care Fee Assistance for child care, indexation of Child Care Benefit expenses, and growth in child care costs resulting in increased payments under the Child Care Rebate. This is estimated to drive growth in Child Care Fee Assistance of 6.0 per cent in real terms from 2012‑13 to 2013‑14 and 10.2 per cent in real terms from 2013‑14 to 2016‑17.

The Government is providing over $314.2 million in child care assistance over five years to support workforce measures for early childhood education. Of this, up to $300 million over two years will be provided to help fund wage increases for Long Day Care educators, through the Early Years Quality Fund measure. This package is aimed at assisting in the retention of the early childhood workforce, and providing better outcomes for families with young children.

Growth in Family Tax Benefit expenses is estimated to remain relatively flat over the forward estimates. This reflects 2013‑14 Budget measures, including not proceeding with the Family Tax Benefit Part A component of the Spreading the Benefits of the Boom and extensions to the current indexation pauses on upper income thresholds and supplements. While average payment rates will continue to increase, this will be offset by further reductions in the customer population base as incomes increase.

Expenses in the parent and baby payment component of the sub‑function will decline across the forward estimates reflecting the changes to the financial support arrangements to families following the birth or adoption of a child, through the replacement of the Baby Bonus from 1 March 2014 with an increase to the rate of Family Tax Benefit Part A.

Expenses under parents' income support are forecast to decrease by 7.3 per cent in real terms from 2012‑13 to 2013‑14, as a result of customers moving from parent income support to Newstart Allowance (with funding reflected in the assistance to the unemployed and the sick sub‑function), with a smaller decrease of about 1 per cent in real terms expected from 2013‑14 to 2016‑17. From 1 January 2013, all parenting payment recipients who were on the payment prior to 1 July 2006 ('grandfathered recipients') will now be assessed under the same eligibility requirements as new parenting payment recipients. As a result of this change, grandfathered recipients with their youngest child aged six years or over (for partnered recipients) or eight years or over (for single recipients) will cease to be eligible for parenting payment and will transition on to Newstart Allowance unless they exceed the income threshold for eligibility.

The major components of the assistance to families with children sub‑function are set out in Table 9.2.

Table 9.2: Trends in the major components of assistance to families with children sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Family tax benefit 20,304 20,289 20,561   20,768 21,005
Parents income support 5,572 5,275 5,320   5,498 5,628
Child care fee assistance 4,661 5,048 5,373   5,673 5,982
Parent and baby payments 2,351 2,080 1,929   2,006 2,094
Child support 1,359 1,372 1,407   1,443 1,480
Support for the child care system 505 427 480   497 508
Family support 233 157 260   266 256
Family relationship services 163 169 174   177 180
National Partnership Payments - child care(a) 78 97 nfp   nfp nfp
Other 30 31 30   25 25
Total 35,256 34,945 35,534   36,353 37,158

(a) Estimates for National Partnership Payments — child care from 2014‑15 are not for publication.

The increase in projected expenses in the assistance to people with disabilities sub‑function from 2012‑13 across the forward estimates is driven primarily by DisabilityCare Australia (the national disability insurance scheme).

Expenses for the Disability Support Pension (DSP) are estimated to grow by 2.5 per cent in real terms from 2012‑13 to 2013‑14 and 6.8 per cent in real terms from 2013‑14 to 2016‑17 largely due to increases in payment rates. Following recent changes to assessment arrangements, the number of DSP recipients are expected to grow at 0.4 per cent per annum on average over the forward estimates, substantially lower than the previous five year period (2007‑08 to 2011‑12) when recipient growth was 3.1 per cent per annum on average.

Expenses for income support for carers are estimated to grow by 8.5 per cent in real terms from 2012‑13 to 2013‑14 and 24.6 per cent in real terms from 2013‑14 to 2016‑17, largely as a result of an increase in payment rates due to recent Government initiatives, such as the Household Assistance Package, and anticipated growth in the number of people receiving the Carer Payment.

DisabilityCare Australia is another major growth component in the sub‑function over the forward estimates, reflecting establishment costs and the anticipated increase in numbers of people with disability accessing the new scheme. The transition to a full national disability care and support system is reported in Box 8 below.

The major components of the assistance to people with disabilities sub‑function are outlined below in Table 9.3.

Table 9.3: Trends in the major components of assistance to people with disabilities sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Disability support pension 14,852 15,549 16,280   17,005 17,860
Income support for carers 6,206 6,878 7,630   8,352 9,213
Assistance to the States for disability services 1,273 1,336 1,408   1,475 1,545
Disability employment services 936 928 978   1,022 1,027
DisabilityCare Australia 68 191 312   604 1,905
Services and support for people with a disability 318 333 317   320 325
Other 220 263 282   378 521
Total 23,873 25,479 27,208   29,156 32,396

Box 8: Transition to a full DisabilityCare Australia

The Australian, State and Territory Governments have committed to DisabilityCare Australia (the national disability insurance scheme), jointly moving forward to establish a national disability support system across Australia for people with significant and permanent disability.

The Government will provide a total of $19.3 billion to DisabilityCare Australia over seven years from 2012‑13, inclusive of the redirection of existing disability funding. This brings the Australian Government's total new investment in DisabilityCare Australia to $14.3 billion over the period.

The launch phase of DisabilityCare Australia will provide eligible participants with reasonable and necessary care and support tailored to their individual circumstances in South Australia (for children aged 0‑14), Tasmania (for young adults aged 15‑24), the Hunter region in New South Wales (NSW) and the Barwon area of Victoria from 1 July 2013; and in the Australian Capital Territory (ACT) and the Barkly region of the Northern Territory (NT) from 1 July 2014.

DisabilityCare Australia will provide full coverage in NSW, South Australia, and the ACT by 1 July 2018 and in Victoria, Queensland, Tasmania and the Northern Territory from 1 July 2019. The Government is committed to ongoing negotiations regarding full implementation of DisabilityCare Australia.

The Government will also assist people with disability who are not eligible for an individual package of care and support, but still experience barriers to social and economic participation. The general assistance to be provided by DisabilityCare Australia will include: local area coordination, information, linkage and referral; community awareness; and capacity building in the disability sector, including support through grants to organisations.

Further information can be found at the DisabilityCare Australia website www.ndis.gov.au, in the joint press release of 1 May 2013 issued by the Prime Minister, Deputy Prime Minister and Treasurer, and the Minister for Families, Community Services and Indigenous Affairs, Minister for Disability Reform and Budget Paper No. 2, Budget Measures 2013‑14.

Expenses for the assistance to the unemployed and the sick sub‑function are forecast to increase by 9.2 per cent in real terms from 2012‑13 to 2013‑14 and to decrease by 4.0 per cent in real terms from 2013‑14 to 2016‑17. The increased expenses in 2013‑14 partly reflect changes to eligibility for parenting payment that commenced on 1 January 2013. Under the new arrangements, previously grandfathered parenting payment recipients are being transitioned on to Newstart Allowance unless they exceed the income threshold for eligibility. The decrease from 2014‑15 reflects a projected decline in the unemployment rate.

Expenses on assistance to veterans and dependants are forecast to fall over the forward estimates, predominantly reflecting an expected natural decline in the number of beneficiaries.

Expenses for the general administration sub‑function are forecast to decrease from 2012‑13 to 2016‑17 due to administrative efficiencies generated within the Human Services portfolio and the structural reforms implemented under the Service Delivery Reform initiative.

Expenses for the assistance for Indigenous Australians not elsewhere classified (nec) sub‑function are estimated to decrease by 10.8 per cent in real terms from 2012‑13 to 2013‑14 and by 6.1 per cent in real terms from 2013‑14 to 2016‑17. The decrease in expenses in this classification is primarily due to the redirection of funds from the Community Development Employment Projects program from 1 July 2013 to the Remote Jobs and Communities program, which is classified under the other economic affairs function and does not indicate a reduction in expenses.

Further, funding from 2012‑13 for the Stronger Futures in the Northern Territory package is partly classified under the assistance for Indigenous Australians nec sub‑function, but most of the expenditure associated with this package is classified under the health, education, public order and safety, and other economic affairs functions.

Housing and community amenities

The housing and community amenities function includes expenses for the Australian Government's contribution to the National Affordable Housing Specific Purpose Payments and related National Partnerships, other Australian Government housing programs, the expenses of Defence Housing Australia (DHA), and various regional development and environmental protection programs.

Table 10: Summary of expenses — housing and community amenities
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Housing 2,877 3,361 3,183   3,146 3,377
Urban and regional development 560 660 782   596 442
Environment protection 3,460 4,754 4,965   2,766 3,775
Total housing and community amenities 6,898 8,775 8,930   6,508 7,594

Total expenses under the housing and community amenities function are estimated to increase by 24.5 per cent in real terms from 2012‑13 to 2013‑14 and decline by 19.5 per cent in real terms over the period 2013‑14 to 2016‑17.

The housing sub‑function contains initiatives relating to the Australian Government's contribution to the National Affordable Housing Specific Purpose Payments and related National Partnerships, provision of housing for the general public and people with special needs, and the expenses of the DHA.

Expenses for this sub‑function are estimated to grow by 14.4 per cent in real terms from 2012‑13 to 2013‑14 and then decrease by 6.5 per cent in real terms over the period 2013‑14 to 2016‑17. An expected increase in DHA expenses due to market based rent increases on houses provided to DHA is driving estimated growth in 2013‑14. DHA is also undertaking an acquisition and construction program that will guarantee the supply of land for an ongoing construction program, add additional properties, and upgrade and replace existing housing stock. The increase in expenses for 2013‑14 is also supported by increased funding under the National Partnership Agreement on Remote Indigenous Housing.

The urban and regional development sub‑function comprises regional development programs and services to territories, including the Regional Development Australia Fund (RDAF). Expenses are expected to fluctuate over the forward estimates, consistent with the varying nature of the projects being undertaken, and the multiple funding rounds being held. This funding will peak in 2014‑15 coinciding with the fifth RDAF funding round.

The environment protection sub‑function includes expenses for a variety of initiatives including the protection and conservation of the environment, water and waste management, pollution abatement and environmental research. The large increase in expenses from 2012‑13 to 2013‑14 is primarily due to the implementation of various programs under the Clean Energy Future package, including the Jobs and Competitiveness Program, Energy Security Fund and Biodiversity Fund. The significant variations reducing expenses after 2014‑15 are primarily due to the impact of revised carbon price projections on the Jobs and Competitiveness Program and Energy Security Fund.

Recreation and culture

The recreation and culture function includes expenses to support public broadcasting and cultural institutions, funding for the arts and the film industry, assistance to sport and recreation activities, as well as the management and protection of national parks and other world heritage areas. This function also includes expenses relating to the protection and preservation of historic sites and buildings, including war graves.

Table 11: Summary of expenses — recreation and culture
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Broadcasting 1,748 1,761 1,682   1,680 1,656
Arts and cultural heritage 1,118 1,179 1,164   1,095 1,154
Sport and recreation 375 388 363   317 322
National estate and parks 400 368 342   341 336
Total recreation and culture 3,641 3,696 3,551   3,433 3,468

Total expenses under the recreation and culture function are estimated to decrease by 0.6 per cent in real terms from 2012‑13 to 2013‑14 and by 12.7 per cent over the period 2013‑14 to 2016‑17.

Expenses under the broadcasting sub‑function are expected to fall in real terms from 2013‑14 to 2014‑15, reflecting the completion of the roll‑out of the Government's national digital television switchover program. This is offset, to some extent, by an increase in real terms in 2013‑14 of funding to the national broadcasters.

Table 11.1 provides further details of the major components of broadcasting sub‑function expenses.

Table 11.1: Trends in the major components of broadcasting sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
ABC television 627 647 659   674 664
ABC radio 338 349 355   363 358
SBS television 214 250 242   243 233
Broadcasting and digital television 221 168 98   54 45
Access to digital TV services 101 109 114   117 120
SBS digital transmission and distribution 69 81 83   82 81
ABC analog transmission 89 80 76   77 79
Other 89 77 55   70 76
Total 1,748 1,761 1,682   1,680 1,656

Expenses under the arts and cultural heritage sub function are forecast to decrease between 2013‑14 and 2015‑16 due to the anticipated reduction in payments under the Australian Screen Production Incentive. This decrease in expenses is partly offset by the Government's commitment to the arts through its Creative Australia policy announced on 13 March 2013. This includes additional funding to the Australia Council for the Arts, along with six of Australia's national elite arts training organisations, the development of a new national arts curriculum, the development and promotion of innovative Australian stories and content for film, television, games and online productions, and a range of initiatives to recognise the centrality of Aboriginal and Torres Strait Islander cultures in national life. Expenses are also expected to increase in 2016‑17 as a result of the assistance to be provided for the filming in Australia of the Walt Disney Studios feature film 20,000 Leagues Under the Sea: Captain Nemo.

The sport and recreation sub‑function includes programs to improve participation in sport and recreation activities and achieve excellence in high performing athletes. The forecast decrease in expenses from 2014‑15 reflects, in part, completion of preparatory work on the Asian Football Cup.

Fuel and energy

The fuel and energy function includes expenses for the Fuel Tax Credits, Cleaner Fuels, and Product Stewardship Waste (Oil) schemes, all administered by the Australian Taxation Office. It also includes expenses related to improving Australia's energy efficiency, resource related initiatives, and programs to support the production or use of alternative fuels, including ethanol and biodiesel.

Table 12: Summary of expenses — fuel and energy
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Fuel and energy 6,168 7,586 7,557   7,701 7,574
Total fuel and energy 6,168 7,586 7,557   7,701 7,574

Fuel and energy expenses are estimated to increase by 20.4 per cent in real terms from 2012‑13 to 2013‑14, and fall by 7.1 per cent in real terms over the period 2013‑14 to 2016‑17.

The major program within this function is the Fuel Tax Credits Scheme, spending on which is expected to increase by $352 million in 2013‑14, reflecting increased claims by eligible businesses commensurate with higher diesel consumption, particularly in the mining industry. The increase in expenses for the Scheme in 2015‑16 is the result of the forecast reduction in the projected carbon price when that price moves from fixed to floating, reflecting the lower than expected international carbon prices.

Table 12.1 provides further details of the fuel and energy sub‑function.

Table 12.1: Trends in the major components of fuel and energy sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Fuel tax credits scheme 5,519 5,871 5,906   6,270 6,360
Australian Renewable Energy Agency
(ARENA)
129 509 367   260 150
Resources related initiatives and
management
242 340 423   483 311
Other 278 866 861   688 753
Total 6,168 7,586 7,557   7,701 7,574

The fluctuation in expenses under the resources related initiatives and management component from 2012‑13 to 2016‑17 reflects the advancement of projects under the Carbon Capture and Storage Flagships program.

The Australian Renewable Energy Agency (ARENA) administers a range of Government support programs for research and development, demonstration and commercialisation of renewable energy projects. The fluctuation in expenses following ARENA's commencement in 2012‑13 is largely driven by the expected timing of projects and the re‑phasing of funding to beyond the forward estimates which extends funding for ARENA to 2021‑22.

The increase in expenses in 2013‑14 under the Other component partly reflects the timing of the rollout of the Coal Sector Jobs package. The fluctuation in expenses from 2015‑16 is due in part to the reduction in funding for this package in line with revised carbon price assumptions. The package assists the most emissions‑intensive coal mines following the introduction of the carbon price by providing financial assistance to the operators of these mines to assist them in supporting jobs and local communities.

Agriculture, forestry and fishing

The agriculture, forestry and fishing function includes expenses to support assistance to primary producers, forestry, fishing, land and water resources management, quarantine services and contributions to research and development.

Table 13: Summary of expenses — agriculture, forestry and fishing
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Wool industry 54 58 55   57 57
Grains industry 173 182 189   193 176
Dairy industry 53 54 54   56 57
Cattle, sheep and pig industry 173 180 182   182 184
Fishing, horticulture and other agriculture 242 252 250   248 244
General assistance not allocated to
specific industries
28 30 29   29 34
Rural assistance 139 194 179   143 142
Natural resources development 1,052 998 1,083   1,420 1,093
General administration 690 708 688   720 716
Total agriculture, forestry and fishing 2,605 2,654 2,709   3,047 2,702

Total expenses under this function are estimated to decrease by 0.3 per cent in real terms from 2012‑13 to 2013‑14, and by 5.3 per cent in real terms over the period 2013‑14 to 2016‑17.

The real decrease in 2013‑14 is largely due to a reduction in expenses under the natural resources development sub‑function. Table 13.1 provides further details of the natural resources development sub‑function.

Table 13.1: Trends in the major components of natural resources development sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Water reform(a) 703 708 854   1,169 846
Sustainable management - natural resources 42 33 21   12 11
Forestry industry 8 8 7   7 7
Other 299 249 201   232 229
Total 1,052 998 1,083   1,420 1,093

(a) Water Reform includes the programs: National Partnership Payments — Water and Natural Resources; Water Reform and Commonwealth Environment Water.

The majority of expenses under the natural resources development sub‑function are for the Water for the Future package, which comprises urban and rural programs, including funding for water purchasing (included under net capital investment), irrigation modernisation, desalination, recycling and stormwater capture. The increase in expenses under the water reform component after 2013‑14 largely reflects a continued scaling up of projects under the Sustainable Rural Water Use and Infrastructure Program, peaking in 2015‑16. The decrease in expenses from 2012‑13 to 2016‑17 under the Other component reflects the progressive completion of projects under the Murray‑Darling Basin Authority's Environmental Works and Measures program and reductions as a consequence of lower annual contributions from the Basin States under the Murray‑Darling Basin Agreement.

Expenses under the rural assistance sub‑function are estimated to increase by 36.6 per cent in real terms between 2012‑13 and 2013‑14. This is primarily due to the funding profile of the Carbon Farming Futures program announced in the 2011‑12 MYEFO, with expenses peaking in 2013‑14, and the introduction of concessional loans for farmers under the Farm Finance initiative announced in the 2013‑14 Budget. Over the period 2013‑14 to 2016‑17, expenses in the sub‑function are estimated to decrease by 31.9 per cent in real terms. This is due to the funding profile of the Carbon Farming Futures program declining over the forward estimates, the ending of the Transitional Farm Family Payment announced in the 2012‑13 Budget, and a decline in expenses following the provision of concessional loans over two years to 2014‑15 under the Farm Finance initiative. This is partially offset by an increase in expenses under the National Drought Program Reform package announced in the 2013‑14 Budget.

Mining, manufacturing and construction

The mining, manufacturing and construction function includes expenses for programs designed to promote the efficiency and competitiveness of Australian industries. The major components include the research and development tax incentive and programs specific to the automotive, textile, clothing and footwear industries.

Table 14: Summary of expenses — mining, manufacturing and construction
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Mining, manufacturing and construction 2,267 2,431 2,734   2,592 2,328
Total mining, manufacturing
and construction
2,267 2,431 2,734   2,592 2,328

Total expenses under the mining, manufacturing and construction function are expected to increase by 5.0 per cent in real terms from 2012‑13 to 2013‑14. This is due to the introduction of new initiatives under the Industry and Innovation Statement A Plan for Australian Jobs, including opening up opportunities through Australian Industry Participation and the establishment of Industry Innovation Precincts.

While expenses are expected to increase by 1.7 per cent from 2013‑14 to 2015‑16, they are expected to decline by 12.4 per cent in 2016‑17 due to the General Motors Holden — next generation vehicles — contribution measure ending and the winding down of the clean technology investment initiative which ends in 2017‑18.

The estimated increase in expenses from 2013‑14 under the research and development tax incentive program, administered by the Australian Taxation Office, reflects an increase in the number of expected claims across the forward estimates.

Table 14.1 provides further details of the major components of the mining, manufacturing and construction sub‑function.

Table 14.1: Trends in major components of mining, manufacturing and construction sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Research and development tax incentive 1,471 1,410 1,470   1,547 1,628
Industry development and investment 599 826 1,072   868 523
Other 197 195 192   177 177
Total 2,267 2,431 2,734   2,592 2,328

Transport and communication

The transport and communication function includes expenses to support the infrastructure and regulatory framework for Australia's transport and communication sectors.

Table 15: Summary of expenses — transport and communication
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Communication 589 582 561   500 500
Rail transport 1,032 1,425 1,406   1,396 457
Air transport 208 210 209   204 208
Road transport 2,529 3,501 3,190   2,660 2,863
Sea transport 319 342 353   366 381
Other transport and communication 326 393 836   880 992
Total transport and communication 5,002 6,453 6,555   6,005 5,401

Total expenses under this function are estimated to increase by 26 per cent in real terms between 2012‑13 and 2013‑14 primarily reflecting increased funding for the road and rail transport sectors. Expenses are estimated to decrease from 2014‑15 due to the completion of a number of major projects.

The estimated expenses for the communication sub‑function relate to communication activities and support for the digital economy through the Department of Broadband, Communications and the Digital Economy, the Telecommunications Universal Service Management Agency and the Australian Communications and Media Authority. The decline in real terms of estimated expenses from 2012‑13 reflects the completion of several digital productivity measures, the planned completion of activities related to the renewal, replanning and sale of radio frequency spectrum.

Total expenses under the rail transport sub‑function are estimated to increase in 2013‑14 reflecting a higher level of funding for the Regional Rail Link project in Victoria funded from the Building Australia Fund (BAF), which is part of the Nation Building Plan for the Future package (the package) included in the 2009‑10 Budget. The package included projects such as the Regional Rail Link project in Victoria, including a $3.2 billion contribution over six years with expected payments of $858 million in 2013‑14 and $500 million in 2014‑15 and 2015‑16 respectively. The completion of this funding, together with the completion in 2013‑14 and 2014‑15 of other metropolitan rail infrastructure projects funded under the package, and $232 million in 2015‑16 for the Torrens and Goodwood Junctions project in South Australia, results in an expected decrease in expenses by 2016‑17.

The estimated expenses for the air transport and sea transport sub‑functions predominantly relate to the activities of the safety regulators — the Civil Aviation Safety Authority (CASA), the Australian Maritime Safety Authority (AMSA) and the Australian Transport Safety Bureau (ATSB). The 3.4 per cent increase in real terms in estimated expenses from 2013‑14 over the forward estimates for the sea transport sub‑function is due to the expansion of the ATSB's safety investigation responsibilities under the National Transport Reforms.

The estimated 8 per cent decline in expenses in the air transport sub‑function from 2013‑14 over the forward estimates is primarily due to the completion of airstrip improvements under the Regional Aviation Access program by mid‑2015.

The expenses under the road transport sub‑function primarily consist of grants provided under the Nation Building program, but also includes funding provided for projects under the BAF. Expense estimates for this sub‑function fluctuate year on year based on the number and value of projects funded, with payments corresponding to project timelines. The 2013‑14 Budget includes funding for a number of new projects from 2014‑15 onwards, including upgrades of the Bruce Highway in Queensland, the M80 in Victoria, South Road in South Australia, Sydney Motorways in New South Wales and the Perth Urban Transport and Freight Corridor Upgrade — Gateway project. Road transport funding from 2013‑14 remains at historically high levels, reflecting previous commitments to fund the continued duplication of the Pacific Highway, the Legacy Way — Northern Link Tunnel in Brisbane, projects on the Western Highway and Princes Highway in Victoria and the Majura Parkway in the Australian Capital Territory.

The increase in estimated expenses in the other transport and communication sub‑function reflects the increase in the funding of infrastructure projects from the Regional Infrastructure Fund (RIF) announced in the 2010‑11 Budget. Full funding for the RIF is included in this sub‑function, and a number of new projects to be funded are expected to start construction from 2014‑15, including the Great Northern Highway — Muchea to Wubin Stage 2 in Western Australia and Warrego Highway upgrades in Queensland.

Other economic affairs

The other economic affairs function includes expenses on tourism and area promotion, labour market assistance, immigration, industrial relations and other economic affairs not elsewhere classified (nec).

Table 16: Summary of expenses — other economic affairs
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Tourism and area promotion 181 189 187   169 174
Total labour and employment affairs 4,271 4,358 4,319   4,381 4,327
Vocational and industry training 1,658 1,590 1,581   1,545 1,541
Labour market assistance to job seekers and industry 1,803 2,059 2,025   2,120 2,069
Industrial relations 809 708 712   716 717
Immigration 3,575 4,376 3,617   3,461 3,065
Other economic affairs nec 2,337 2,359 2,362   2,342 2,333
Total other economic affairs 10,365 11,283 10,485   10,354 9,899

Total expenses under the other economic affairs function are expected to increase by 6.6 per cent in real terms from 2012‑13 to 2013‑14 and decrease by 18.4 per cent in real terms from 2013‑14 to 2016‑17.

Tourism and area promotion sub‑function expenses are expected to increase from 2012‑13 to 2013‑14 due to increased funding for the Tourism Industry Regional Development Fund, which supports the development of tourism products and services in regional areas, and the Asia Marketing Fund, which supports the promotion of Australia to growing markets in Asia. The subsequent projected decrease in expenses is the result of the winding down of several tourism related initiatives, including the TQUAL Grants program from the end of 2014‑15.

Expenses under the vocational and industry training sub‑function are expected to decrease in real terms by 6.1 per cent from 2012‑13 to 2013‑14 and by 9.9 per cent in real terms from 2013‑14 to 2016‑17.

Expenses under the labour market assistance to job seeker and industry sub‑function are expected to increase by 11.8 per cent in real terms between 2012‑13 and 2013‑14 partly due to the scheduled commencement of the Remote Jobs and Communities program on 1 July 2013. Expenses between 2013‑14 and 2016‑17 are expected to decrease by 6.5 per cent in real terms due to a forecast fall in client numbers associated with the projected decline in the unemployment rate.

The higher estimated expenses in the industrial relations sub‑function in 2012‑13 compared to later years is due to higher demand for assistance under the General Employee Entitlements and Redundancy Scheme (GEERS) and the Fair Entitlements Guarantee scheme (FEG), which replaced GEERS on 5 December 2012. These schemes are to assist employees of bankrupt organisations who are owed certain employee entitlements. The increased demand in 2012‑13 is due to higher than expected numbers of eligible employees involving certain large corporate bankruptcies. The FEG expenses from 2013‑14 are expected to return to levels experienced under GEERS prior to 2012‑13. Over the period 2013‑14 to 2016‑17 expenses are estimated to decrease by 5.8 per cent in real terms.

Table 16.1: Trends in major components of the immigration sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Offshore Asylum Seeker Management 2,106 2,867 1,736   1,463 1,428
Visa and Migration Services 593 603 612   660 675
Settlement Services for Migrants
and Refugees
240 288 258   280 298
Other 636 618 1,011   1,058 664
Total 3,575 4,376 3,617   3,461 3,065

The main components of the immigration sub‑function relate to the management of Irregular Maritime Arrivals and providing visa and migration services.

Expenses associated with Irregular Maritime Arrivals are expected to increase in 2013‑14 due to a forecast increase in arrivals and a corresponding rise in occupancy levels across the immigration processing network. The falling expenses from 2013‑14 to 2016‑17 is in line with the forecasting methodology for Irregular Maritime Arrivals (further detail on the estimation of Irregular Maritime Arrival costs is provided in Box 9: Irregular Maritime Arrival Costs).

Expenses for Visa and Migration Services are expected to increase in line with the estimated growth in visas issued.

Box 9: Irregular Maritime Arrival Costs

Estimates for Irregular Maritime Arrival (IMA) costs are heavily influenced by the occupancy level across the immigration processing network, which is determined by:

  • the number of IMAs already in Australia awaiting resolution of their protection visa application;
  • forecasts and projections of arrivals over the forward estimates;
  • operational decisions as to how IMAs are placed throughout the network (that is onshore detention, community detention, offshore detention or on a bridging visa); and
  • the length of time taken to resolve asylum claims.

The methodology for forecasting the number of IMAs involves:

  1. forecasting arrivals for the current financial year, the Budget year and the first forward year informed by advice from Australia's national security community; and
  2. projections of arrivals for the second and third forward year derived using a technical assumption that is based on a medium‑term (10 year rolling average) arrival rate.

The methodology assumes arrivals phase down from the forecast arrival rate to the projected rate over a 12 month period commencing in the first forward year (2014‑15).

Under the other economic affairs nec sub‑function, total expenses are estimated to decrease by 1.2 per cent in real terms between 2012‑13 and 2013‑14 and by 8.0 per cent in real terms between 2013‑14 and 2016‑17. The decrease in expenses in 2015‑16 and 2016‑17 is primarily due to final payments being made under the Green Car Innovation Fund and the reprofiling of funding in the Clean Technology Innovation program, both of which are within the Innovative Industry program.

Table 16.2: Trends in major components of the other economic affairs nec sub‑function expenses
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Innovative industry 307 295 315   288 264
Trade, education and investment development 189 186 186   186 188
Export market development grants scheme 125 125 125   125 125
Operating costs for:            
Department of Industry, Innovation, Science,
Research and Tertiary Education
464 507 492   491 482
Australian Securities and Investments
Commission
416 409 393   384 376
Bureau of Meteorology 344 353 349   354 368
IP Australia 170 179 183   190 194
Australian Competition and Consumer
Commission
167 122 120   119 120
Other 155 183 199   205 216
Total 2,337 2,359 2,362   2,342 2,333

Other purposes

The other purposes function includes expenses incurred in the servicing of public debt interest, and assistance to state, territory and local governments. This function also includes items classified to natural disaster relief, the Contingency Reserve (see Appendix B for a detailed description), and expenses related to the nominal interest on unfunded liabilities for government superannuation benefits.

Table 17: Summary of expenses — other purposes
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
Public debt interest 12,209 12,456 12,733   12,902 12,891
Interest on Commonwealth Government's behalf 12,209 12,456 12,733   12,902 12,891
Nominal superannuation interest 6,778 8,462 8,773   9,093 9,423
General purpose inter-government
transactions
51,160 52,397 56,171   59,248 62,222
General revenue assistance -
States and Territories
48,935 51,234 53,804   56,778 59,647
Local government assistance 2,225 1,164 2,367   2,470 2,575
Natural disaster relief(a) 1,894 147 97   22 0
Contingency reserve -1,301 98 2,166   3,873 7,850
Total other purposes 70,741 73,560 79,940   85,139 92,385

(a) Amounts for the Natural Disaster Relief and Recovery Arrangements (NDRRA) reflect expenses being recorded in the year in which the disaster occurs rather than when payments are made to State or Territory Governments in relation to Commonwealth financial obligations under the NDRRA.

Total expenses under the other purposes function are estimated to increase by 1.8 per cent in real terms from 2012‑13 to 2013‑14, and by 16.1 per cent over the period 2013‑14 to 2016‑17. The increase in expenses over the forward estimates under the other purposes function is primarily driven by general revenue assistance paid to State and Territory governments, nearly all of which comprise payments of GST entitlements provided on an 'untied' basis. Payments to state and territory governments tied to specific purposes are reported under the relevant sections in this statement. Further information on general revenue assistance to the states and territories can be found in Budget Paper No. 3, Australia's Federal Relations 2013‑14. The increase in expenses under the public debt interest sub‑function in 2013‑14 and over the forward years is due to the increased issuance of Commonwealth Government Securities. Expenses under the nominal superannuation interest sub‑function are projected to increase over time, reflecting the growth in the Commonwealth's superannuation liability. The Future Fund was established to assist in meeting the cost of this liability, and further information on the Future Fund can be found in Statement 7 of Budget Paper No. 1.

Expenses in the local government assistance sub‑function predominantly relate to financial assistance grants made to the States and Territories and consist of a general purpose component and an identified local road component, both of which are untied, allowing councils to direct the grants to local priorities. Expenses are higher in 2012‑13 but reduce in 2013‑14 reflecting the decision in the 2013‑14 Budget to pay the first two instalments of the expected 2013‑14 grants in 2012‑13. Expenses are estimated to increase in 2014‑15 as the timing of payments reverts to four quarterly instalments. Further small real increases in funding across the forward estimates are due to forecast population increases and changes in the Consumer Price Index (local government funding assistance provided by the Commonwealth is linked to population and inflation). Further information on Commonwealth government assistance to local governments can be found in Budget Paper No.3, Australia's Federal Relations 2013‑14.

The expenses under the natural disaster relief sub‑function relate mainly to the major natural disasters that occurred in the summer of 2012‑13. The Australian Government provides financial support for affected States and Territories under the Natural Disaster Relief and Recovery Arrangements. The profile over the forward estimates reflects the requirement under accounting standards to recognise the majority of expenses for a disaster in the year in which it occurs. 

The increase in expenses in the contingency reserve sub‑function from 2013‑14 is largely due to the conservative bias allowance (CBA). The CBA is a mechanism used to improve the accuracy of the forward estimates by anticipating the tendency for the estimates of existing policy to be revised upwards through time. The allowance is progressively unwound at each MYEFO and budget until it is completely removed for the budget year. This regular drawing down of the CBA reflects the fact that the tendency for underestimating payments diminishes as the forecast year gets closer. The Contingency Reserve is discussed in more detail at Appendix B.

General government net capital investment

Net capital investment is broadly defined as the sale and acquisition of non‑financial assets less depreciation expenses. It provides a measure of the overall growth in capital assets (including buildings and infrastructure, specialist military equipment, and computer software) after taking into account depreciation and amortisation as previously acquired assets age.

Australian Government general government sector net capital investment is expected to be $2.9 billion in 2013‑14, $4.2 billion higher than in 2012‑13. The negative investment in 2012‑13 is largely due to proceeds from the renewal of the telecommunications carriers' 15 year licences for 800MHz and 1800MHz spectrum, and proceeds from the auction of the 700 MHz and 2.5GHz spectrum. Details of movements are further explained in the following section.

Table 18: Estimates of total net capital investment
  MYEFO Revised Estimates   Projections
  2012‑13 2012‑13 2013‑14 2014‑15   2015‑16 2016‑17
Total net capital
investment ($m)
-2,517 -1,212 2,945 2,204   1,126 3,003
Per cent of GDP -0.2 -0.1 0.2 0.1   0.1 0.2

Reconciliation of net capital investment since the 2012‑13 Budget

A reconciliation of the net capital investment estimates, showing the effect of policy decisions and parameter and other variations since the 2012‑13 Budget, is provided in Table 19.

Table 19: Reconciliation of net capital investment estimates
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2012‑13 Budget net capital investment -2,701 1,048 1,361   1,059
Changes from 2012‑13 Budget to 2012‑13 MYEFO          
Effect of policy decisions(a) 238 104 -120   -149
Effect of parameter and other variations -53 -121 2   -46
Total variations 185 -17 -118   -194
2012‑13 MYEFO net capital investment -2,517 1,032 1,244   865
Changes from 2012‑13 MYEFO to 2013‑14 Budget          
Effect of policy decisions(a) 63 196 356   87
Effect of parameter and other variations 1,242 1,717 605   174
Total variations 1,305 1,913 961   261
2013‑14 Budget net capital investment -1,212 2,945 2,204   1,126

(a) Excludes secondary impacts on public debt interest of policy decisions and offsets from the Contingency Reserve for decisions taken.

Forecast net capital investment for 2013‑14 has increased by $1.9 billion since the 2012‑13 MYEFO. This increase is driven by the effect of parameter and other variations of $1.7 billion, and new policy decisions of $196 million.

The major parameter and other variations largely reflect the deferral of minor capital spending in a number of entities together with the acquisition of military equipment and the construction of Defence support facilities as outlined in the 2013 Defence White Paper.

A discussion of changes between the 2012‑13 MYEFO and the 2013‑14 Budget, shown in the table above, can be found in Statement 3. Further information on the capital measures since MYEFO can be found in Budget Paper No. 2, Budget Measures 2013‑14.

Net capital investment estimates by function

Estimates for Australian Government general government sector net capital investment by function for the period 2012‑13 to 2016‑17 are provided in Table 20.

Table 20: Estimates of net capital investment by function
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
General public services 350 816 543   133 -39
Defence 1,439 1,890 2,620   2,336 3,054
Public order and safety 130 107 59   27 -109
Education 17 8 3   3 -5
Health 45 8 -35   -45 -57
Social security and welfare -33 -27 -29   -33 24
Housing and community amenities 17 -26 -112   -62 -60
Recreation and culture 45 34 61   10 1
Fuel and energy -5 -1 -1   0 -1
Agriculture, forestry and fishing 123 107 177   250 301
Mining, manufacturing and construction 21 11 0   1 0
Transport and communication -3,495 17 -22   -34 -3
Other economic affairs 141 159 -98   -88 -79
Other purposes -6 -158 -962   -1,374 -23
Total net capital investment -1,212 2,945 2,204   1,126 3,003

A significant component of the Government's net capital investment occurs in the defence function, primarily the acquisition of military equipment and the construction of support facilities as announced in the 2013 Defence White Paper. Major factors contributing to changes in net capital investment, expected to occur in the following functions, include:

  • general public services — a number of factors contribute to the pattern of net capital investment in this function, including additional capital funding provided in the 2013‑14 Budget to the Department of Foreign Affairs and Trade to upgrade the International Communications Network and construction of a number of overseas facilities, investment by the ATO in 2013‑14 on computer software to implement various government decisions, and increased investment in 2013‑14 and 2014‑15 associated with the CSIRO Property Strategy;
  • defence — the purchase of 12 new‑build EA‑18G Growler aircraft, the introduction of the fifth‑generation F‑35A Joint Strike Fighter aircraft, and the replacement of Australia's Armidale Class Patrol Boats;
  • public order and safety — the more significant investments include the fit out of office accommodation for the Royal Commission into Institutional Responses to Child Sexual Abuse in 2012‑13 and 2013‑14 and the replacement of Bay Class vessels by the Australian Customs and Border Protection Service over four years from 2012‑13;
  • agriculture, forestry and fishing —the increasing trend from 2013‑14 over the forward estimates is largely due to investment under the Water for the Future package, to address water over‑allocation in the Murray‑Darling Basin;
  • transport and communication — the negative investment in 2012‑13 is due to the renewal of the telecommunications carriers' 15 year licences for 800MHz and 1800MHz spectrum ($1.5 billion) and the proceeds from the auction of the 700MHz and 2.5GHz spectrum by the Australian Communications and Media Authority (ACMA). The auction was conducted by ACMA in April and May 2013 and resulted in revenue of nearly $2 billion. All of the 2.5GHz spectrum available for sale was sold and it is the Government's intention that unsold 700MHz spectrum will be returned to the market for sale at a later date;
  • other economic affairs — capital investment in 2012‑13 and 2013‑14 is largely for facilities to process asylum seekers as part of the Government's response to the Report of the Expert Panel on Asylum Seekers. This activity includes constructing regional processing centres in Nauru and Manus Island, Papua New Guinea and the upgrading of existing onshore immigration detention; and
  • other purposes — the negative investments in this function are largely due to the Government's intention to sell the remaining 700MHz spectrum and the renewal of the telecommunications carrier's 15 year licences for 2.1GHz spectrum.

Table 21 reports the acquisition of non‑financial assets by function before taking into account depreciation or amortisation.

Table 21: Australian Government general government sector purchases of non‑financial assets by function
  Estimates   Projections
  2012‑13
$m
2013‑14
$m
2014‑15
$m
  2015‑16
$m
2016‑17
$m
General public services 445 1,479 786   1,905 746
Defence 4,920 5,160 6,095   6,066 6,952
Public order and safety 439 432 399   390 241
Education 38 27 17   18 9
Health 103 95 69   62 56
Social security and welfare 277 274 272   294 374
Housing and community amenities 160 159 120   110 51
Recreation and culture 326 303 294   454 303
Fuel and energy -4 1 1   1 0
Agriculture, forestry and fishing 150 131 202   275 327
Mining, manufacturing and construction 29 19 8   8 5
Transport and communication 77 82 41   27 58
Other economic affairs 574 598 315   318 314
Other purposes -6 -5 -5   -20 -23
General government purchases
of non-financial assets
7,528 8,755 8,613   9,908 9,411

Trends in Australian Government staffing

Trends in the estimated annual average staffing level (ASL)1 for all agencies in the general government sector are reported in Table 22 below. The data provides a summary of people employed by the Australian Government, including all Defence Force personnel and those employed by Statutory Authorities.

Table 22: Estimates of average staff levels
2006‑07 2007‑08 2008‑09 2009‑10 2010‑11 2011‑12 2012‑13 2013‑14
238,623 248,217 250,566 258,321 261,891 261,637 256,631 257,376

The ASL figures in Table 22 for 2012‑13 and 2013‑14 exclude contractors. In the 2012‑13 Budget, the ASL figures have included contractors for the Department of Defence (Defence) and Defence Materiel Organisation (DMO). The Defence and DMO contractor numbers for 2012‑13 and 2013‑14 are reported in footnote (i) of Appendix C for comparison purposes.

The ASL for 2012‑13 reported in the 2012‑13 Budget papers excluding contractors was 258,027. The current estimate is 256,631 ASL in 2012‑13. The 2013‑14 Budget is expected to result in a small net increase in ASL of 746 in 2013‑14 across the general government sector, or a reduction of 1,262 if the expected growth in military personnel and reserves are excluded.

Appendix C provides details of ASL at the portfolio and agency level.


1 ASL figures reflect the average number of employees receiving salary or wages over the financial year, with adjustments for casual and part-time staff, to show the average full time equivalent (FTE). ASL figures also include military and overseas personnel.

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