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Statement 8: Trends in Public Sector Finances

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Contents

Introduction

Fiscal balance

Cash surplus

Net debt and net worth

Net debt
Net worth
Net interest outlays

Appendices

Appendix A: Size and structure of the public sector
Appendix B: Non-financial public sector - supplementary cash tables

Statement 8: Trends in Public Sector Finances

This statement examines trends in finances for the Commonwealth, State/local levels of government and the consolidated public sector and therefore provides a broader context in which to consider developments in the Commonwealth's Budget.

Introduction

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. When combined the Commonwealth, State/local governments and universities are referred to as the `consolidated government'. Figure 1 shows the institutional structure of the public sector.

Figure 1: Institutional structure of the Public Sector

Figure 1: Institutional structure of the Public Sector

The non-financial public sector is comprised of the general government sector and the public non-financial corporations sector.

The general government sector, through government departments and agencies, provides public services that 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 public non-financial corporations (PNFC) sector comprises bodies that 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 that own them.

Public financial corporations (PFCs) are public sector bodies that engage in financial intermediation services or auxiliary financial services. They are able to incur financial liabilities on their own account (such as taking deposits, issuing securities or providing insurance services). This sector includes the Reserve Bank of Australia (RBA) and other central borrowing authorities. Information on PFCs is not included in this statement as PFCs undertake financial intermediation, which is a fundamentally different function from that performed by other public entities. Jurisdictions are only required to report PFC information in their outcome statements.

Commonwealth, State and Territory governments present common fiscal information in their budget reports as required by the Accrual Uniform Presentation Framework (UPF), agreed by the Australian Loan Council in March 2000. The majority of States and Territories now report on an accrual UPF basis, while the remaining jurisdictions have until the 2002-03 budget year to make the transition from cash UPF reporting.

The Commonwealth revenue, outlays and expenses measures included in this Statement 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 Arrangements, 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. However, 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 Statement 9 are presented on a basis that is consistent with the ABS GFS standards, including the classification of GST revenue.

This Statement looks at recent trends in Commonwealth and State/local accrual measures (including revenue, expenses and fiscal balance), cash measures (such as outlays, revenue and cash surplus), and balance sheet measures (such as 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 data on revenue, outlays, cash surplus, net interest outlays and net debt.

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