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Statement 8: The Public Sector

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Part II: General Government Fiscal Balance

This part looks at recent accrual data for the Commonwealth and State/local non-financial public sectors, including medium term projections for the Commonwealth. The concepts contained in this part are outlined by the ABS in their Accruals-based Government Finance Statistics information paper (Cat. No. 5517.0).

Fiscal Balance

Fiscal balance, or GFS net lending, represents the gap between government savings and investment. It measures a government's net call on other sectors of the economy, and so corresponds to government's contribution to the current account deficit (CAD). Fiscal balance is the major accrual measure used by the Commonwealth to assess the impact of fiscal policy on the national economy. A fiscal surplus indicates that a government is saving more than enough to finance all of its investment spending and is therefore not contributing directly to the CAD.

Fiscal balance includes net capital expenditure, but not the use of capital (depreciation). Because it includes the full amount of investment by a government in a particular period, the fiscal balance is a good measure of the impact of a government's budget on the economy in a given period. For more information on the derivation of fiscal balance refer to the Commonwealth's information paper Fiscal Policy under Accrual Accounting, released April 1999.

With some jurisdictions yet to move to accrual GFS reporting, fiscal balance data for all Australian governments are currently only available on a general government sector basis. Table 1 shows general government revenue, expenses and fiscal balance by level of government.

Commonwealth revenue and expenses estimates in Table 1 are net of GST revenue, and show a decline in 2000-01 with the introduction of The New Tax System. The Commonwealth fiscal balance is expected to fall to 0.8 per cent of GDP in 2000-01, with continuing fiscal surpluses projected across the forecast period.

Preliminary ABS figures suggest that the State/local general government sector may move to a negative fiscal balance in 1999-2000, with revenue declining by more than expenses over the year.

Table 1: General Government Expenses, Revenue and Fiscal Balance by Level of Government (per cent of GDP)(a)

(a) State/local data are sourced from the ABS 1999-2000 Government Financial Estimates publication (ABS Cat. No. 5501.0). Commonwealth and Consolidated data are Treasury estimates, utilising information contained in the ABS Government Financial Estimates (GFE).
(b) Consolidated government includes Commonwealth and State/local governments, and universities.
(c) Commonwealth revenue and expenses estimates are net of GST collections.
(d) Net operating balance equals GFS revenue less GFS expenses.
(f) Fiscal balance equals net operating balance less net acquisition of non-financial assets.
(e) Estimates.
(p) Projections.
na Data not available.

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