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Part I: Introduction
This statement examines trends in the finances of both the Commonwealth and State/local levels of government, providing a broader context in which to consider developments in the Commonwealth's budget.
The information in this statement is presented in line with the Australian Bureau of Statistics (ABS) Government Finance Statistics (GFS) reporting framework for the public sector. Data are presented both by level of government and institutional sector. Level of government refers to the distinction between the Commonwealth and State/local governments, together referred to as `consolidated government'1. Institutional sector distinguishes between the general government sector and the public non-financial corporations (PNFC) sector within each main level of government.
- The general government sector, through government departments and agencies, provides public services which are mainly non-market in nature, and for the collective consumption of the community, or involve the transfer or redistribution of income. These services are largely financed through taxes and other compulsory levies, although user charging and external funding have increased in recent years.
- The PNFC sector comprises bodies which provide goods and services that are mainly market, non-regulatory and non-financial in nature, financed predominantly through sales to the consumers of these goods and services. In general, PNFCs are legally distinguishable from the governments which own them.
Together the general government sector and the PNFC sector comprise the non-financial public sector, which is the focus of this statement. The GFS coverage of the public sector also includes public financial corporations (PFCs).
From 2000 onwards, the ABS is compiling GFS data on an accrual accounting rather than a cash accounting basis. The new GFS framework reflects the principles contained in the international standards set out in the United Nations' (UN) A System of National Accounts, 1993 (SNA93), and in the International Monetary Fund's (IMF) A Manual on Government Finance Statistics (currently under revision). The first presentation by the ABS of public finance statistics on an accrual accounting basis was in the April 2000 issue of Government Financial Estimates, Australia for 1999-2000 (Cat. No. 5501.0).
The key difference between cash and accrual accounting is one of timing: cash accounting records a transaction when cash is exchanged, whereas accrual accounting records the outcome of the transaction when economic value is exchanged. As a result, GFS accrual recording covers some financial items of significant size which are not included in cash-based statistics because they do not have an associated cash flow. These include increases in a government's unfunded superannuation liability and provisions for the depreciation of its capital assets.
The Accrual Uniform Presentation Framework (UPF), agreed to by the Australian Loan Council in March of this year, outlines the common fiscal information, consistent with the accrual GFS standards, that Commonwealth, State and Territory governments have agreed to include in their budget reports. Under this agreement, jurisdictions have until the 2002-03 budget year to fully implement reporting on an Accrual UPF basis. It is expected that most, but not all, jurisdictions will implement the Accrual UPF with the 2000-01 budget cycle. During this transition process Statement 8 will report both cash and accrual key budget aggregates. Budget Paper No. 3 contains more information on the development of the new UPF.
The Commonwealth revenue, outlays and expenses measures included in Statement 8 (except in Appendix C) differ from ABS GFS measures in treating goods and services tax (GST) collections by the Australian Taxation Office (ATO) as State tax revenue rather than Commonwealth tax revenue paid to the States as grants. This approach reflects the clear policy intent of the Intergovernmental Agreement on Commonwealth-State Financial Relations (the IGA), which is that the GST is a State tax collected by the Commonwealth in an agency capacity. The Commonwealth has no discretion as to the expenditure of GST collections, with all revenue passed to the States. Nevertheless, because the GST is levied by the Commonwealth for constitutional reasons, the ABS, on a technical view, regards it as Commonwealth revenue. The Commonwealth Accrual UPF tables presented in Appendix C are therefore presented on a basis that is consistent with the ABS GFS standards, including the classification of GST revenue.
Part II of this Statement looks at recent trends in Commonwealth and State/local accrual measures, including expenses, revenue and fiscal balance. Part III reviews trends in Commonwealth and State/local cash measures, such as outlays, revenue and cash surplus, on a basis consistent with the cash ABS GFS. Part IV considers public sector liabilities, including net debt and net worth.
Appendix A of this statement outlines the size and structure of the non-financial public sector, including the relative contributions of the Commonwealth and State/local governments. Appendix B provides Commonwealth and State/local historical cash data on revenue, outlays, surpluses, net interest outlays and net debt. Appendix C presents accrual GFS estimates at the Commonwealth level, consistent with the UPF, and Appendix D provides time series data for the Commonwealth general government sector.
1 Consolidated government encompasses the Commonwealth and State/local sectors, and also the multi-jurisdictional sector which comprises universities.