2009-10 budget paper no 1 - treasury.tas.gov.au · parliament of tasmania . budget paper no 1 . the...

P A R L I A M E N T O F T A S M A N I A

Budget Paper No 1

The Budget

Presented by the Honourable

Michael Aird MLC, Treasurer, for the information of

Honourable Members, on the occasion of the Budget, 2009-10

Useful 2009-10 Budget and Government Web sites

www.budget.tas.gov.au Contains the Budget Papers.

www.treasury.tas.gov.au Provides other Budget and financial publications.

www.media.tas.gov.au Contains the Government's Budget related media releases.

www.tas.gov.au Provides links to the Web sites of a wide range of Tasmanian public and private sector organisations.

www.service.tas.gov.au Provides a comprehensive entry point to Government services in Tasmania.

www.tasmaniatogether.tas.gov.au Provides detailed information on Tasmania Together, including the current status of this important initiative.

CONTENTS

1 The 2009-10 Budget

2 Tasmanian Economy

3 Interim Fiscal Strategy

4 Revenue and Expense Estimates

5 Taxation Revenue

6 Assets and Liabilities

7 Infrastructure Investment

8 Estimated Outcome, 2008-09

9 Commonwealth-State Financial Arrangements

Appendix 1 Uniform Government Reporting

i

INDEX

1 The 2009-10 Budget 1.1

The 2009-10 Budget 1.2

Fiscal Outlook 1.3

Revenue Summary 1.4

Expenditure Summary 1.5

Budget Management Strategies 1.6

Infrastructure Investment 1.8

Nation Building – Economic Stimulus Plan 1.9

Economic Outlook 1.9

2 Tasmanian Economy 2.1

Introduction 2.2

Current Environment – Overview 2.2

Global Conditions 2.2

Australian Conditions 2.3

Economic Outlook 2.4

Summary of 2008-09 Estimates and 2009-10 Forecasts 2.5

Tasmania's Economic Outlook 2.6

Appendix 1 2.21

Economic Reform in Tasmania over the past decade 2.21

3 Interim Fiscal Strategy 3.1

The Interim Fiscal Strategy 3.2

Interim Fiscal Strategy Targets 3.3

Budget Position 3.3

Debt and Liability Reduction 3.5

Competitive Business and Taxation Environment 3.6

Infrastructure Development 3.6

iii

Risk Management 3.7

Efficient Government Services 3.7

Progress on the Interim Fiscal Strategy Targets 3.8

Credit Status of the State Public Sector 3.11

4 Revenue and Expense Estimates 4.1

Introduction 4.2

The Forward Estimates Concept 4.2

Assumptions Underlying the Forward Estimates 4.3

Income Statement 4.5

Key Fiscal Aggregates 4.6

Other Fiscal Aggregates 4.8

Revenue 4.9

Grants 4.9

Taxation 4.15

Sale of Goods and Services 4.18

Fines and Regulatory Fees 4.20

Interest Income 4.21

Dividend, Tax and Rate Equivalent Income 4.21

Other Revenue 4.24

Expenses 4.26

Employee Expenses 4.26

Superannuation 4.26

Depreciation 4.26

Supplies and Consumables 4.27

Nominal Superannuation Interest Expense 4.27

Borrowing Costs 4.27

Grant Expenses 4.27

Other Expenses 4.28

Other Economic Flows – Included in Operating Result 4.28

iv

Gain or Loss on Sale of Non-Financial Assets 4.28

Movement in Investments in GBEs and SOCs 4.28

Movement in Superannuation Liability 4.28

Other Gains or Losses 4.29

Other Economic Flows – Other Movements in Equity 4.29

Revaluations of Non-Financial Assets 4.29

Other Non-Owner Movements in Equity 4.29

Net Acquisition/(Disposal) of Non-Financial Assets 4.29

Purchases of Non-Financial Assets 4.29

Sales of Non-Financial Assets 4.30

Cash Flow Statement 4.31

Cash Surplus/(Deficit) 4.32

Policy and Parameter Statement 4.33

Statement of Risks and Sensitivities 4.43

Revenue Estimates 4.43

Expenditure 4.45

5 Taxation Revenue 5.1

Introduction 5.2

Tax Competitiveness 5.2

Budget Initiatives 5.3

Estimated Taxation Revenue 5.5

Estimated Taxation Revenue for 2009-10 5.7

Financial Transaction Taxes 5.7

Duties 5.8

Gambling Taxes 5.9

Betting Exchange Revenue 5.10

Casino Tax and Licence Fees 5.11

Lottery Tax 5.12

Totalizator Wagering Levy 5.13

v

Guarantee Fees 5.13

Land Tax 5.13

Motor Tax 5.15

Payroll Tax 5.16

State Fire Commission Receipts 5.17

Vehicle Registration Fees 5.18

Major Legislative and Other Changes 5.19

6 Assets and Liabilities 6.1

Introduction 6.2

Balance Sheet 6.2

Key Measures 6.5

Net Worth 6.5

Net Financial Worth 6.6

Net Financial Liabilities 6.7

Net Debt 6.8

Assets 6.9

Cash and Deposits 6.9

Investments 6.10

Equity Investments 6.10

Receivables 6.10

Other Financial Assets 6.11

Non-Financial Assets 6.12

Liabilities 6.14

Borrowings 6.14

Superannuation Liability 6.14

Employee Entitlements 6.16

Payables 6.16

Other Liabilities 6.16

Managing the State's Superannuation and Insurance Liabilities 6.17

vi

Superannuation Liability 6.17

Tasmanian Risk Management Fund 6.19

7 Infrastructure Investment 7.1

Introduction 7.2


Infrastructure Investment Framework 7.6

Funding Sources 7.6

Major Areas of Infrastructure Investment 7.8

Education 7.9

Health 7.10

Housing 7.12

Law and Order 7.12

Roads and Rail 7.12

Tourism, Recreation and Culture 7.13

Infrastructure Investment Project Details By Agency 7.14

Housing Program 7.20

Roads Program 7.22

8 Estimated Outcome, 2008-09 8.1

Introduction 8.2

Net Operating Balance 8.2

Fiscal Balance 8.2

Revenue 8.5

Explanation of Estimated Revenue Variations 8.5

Expenses 8.8

Explanation of Estimated Expense Variations 8.8

Other Economic Flows – Included in Operating Result 8.10

Plus Other Economic Flows – Other Movements in Equity 8.10

Net Acquisition/(Disposal) of Non-Financial Assets 8.11

vii

9 Commonwealth-State Financial Arrangements 9.1

Introduction 9.2

Summary of Revenue Transfers from the Australian Government 9.3

Major Issues in Commonwealth-State Financial Relations 9.7

Reform of Commonwealth-State Financial Relations 9.7

Ministerial Council for Federal Financial Relations 9.8

General Purpose Payments 9.9

Specific Purpose Payments 9.12

National Partnerships 9.15

Total Revenue Transfers from the Australian Government 9.18

Appendix 1 9.19

Why Revenue Transfers from the Australian Government are Essential 9.19

Appendix 2 9.22

The Commonwealth Grants Commission 9.22

Appendix 3 9.25

Commonwealth Grants Commission Assessments and the Treatment of Specific Purpose Payments and National Partnership Payments 9.25

Appendix 4 9.26

Payments for Specific Purposes by Expenditure Category 9.26

Appendix 1 Uniform Government Reporting A1.1

Introduction A1.2

Government Financial Estimates A1.3

Trend in Fiscal Measures A1.35

Fiscal Balance A1.35

Net Debt A1.37

Cash Surplus/(Deficit) A1.38

Loan Council Allocation A1.39

viii

CONVENTIONS

Figures in tables and in the text have been rounded. Discrepancies in tables between totals and sums of component items reflect rounding. Percentage changes in all tables are based on the underlying unrounded amounts.

The notation used in the Budget Papers is as follows:

na not available, or not applicable

…. zero, or rounded to zero

$'000 $thousand

$m $million

ix

1 THE 2009-10 BUDGET Features

• The 2009-10 Budget focuses on prudent financial and economic management, to support jobs and maintain the delivery of essential services in recognition of the current local, national and global economic circumstances.

• The Global Financial Crisis will have an unavoidable significant impact on Tasmania's economic performance. The main effects of the Global Financial Crisis are expected to emerge during 2009-10, with a forecast decline in Tasmania's Gross State Product of ¾ of one per cent, around 5 000 fewer jobs and the unemployment rate rising to 7 per cent.

• The Budget reflects the actions taken by the Government in response to these circumstances and is framed in accordance with the Government's new Interim Fiscal Strategy targets. The progressive achievement of the Government's Interim Fiscal Strategy targets will return the Budget to a sustainable position.

• In 2009-10, a General Government Net Operating Balance deficit of $117.1 million and a Fiscal Balance deficit of $569.5 million are budgeted. With the implementation of the Government's Budget Management Strategies it is anticipated the Net Operating Balance will be a surplus of $73.6 million and the Fiscal Balance will be a surplus of $33.0 million, by 2012-13.

• The Government will implement a range of Budget Management Strategies that will achieve savings and efficiencies of $760.5 million over the 2009-10 Budget and Forward Estimates period.

• The Government has also allocated $2.0 billion over four years for the largest and most ambitious infrastructure program ever undertaken by a Tasmanian government.

• The Australian Government's Nation Building - Economic Stimulus Plan will provide support for infrastructure investment in Tasmania of $307.9 million in 2009-10. This is part of a total investment by the Australian Government of $530.7 million over the four year period 2008-09 to 2011-12.


THE 2009-10 BUDGET The 2009-10 Budget has been developed in the context of a turbulent world economic environment that has already impacted the national economic performance appreciably. The State's current financial and economic position has been dramatically impacted by the Global Financial Crisis (GFC) and the downturn in the economies of its major trading partners. This has led to an unanticipated decline in Budget revenues that is both severe and unprecedented. The consequence is a significant deterioration in the State's Budget position.

It is anticipated the main effects of the GFC will emerge in the 2009-10 financial year, with a forecast decline in Tasmania's Gross State Product of ¾ of one per cent, around 5 000 fewer jobs and the unemployment rate rising to 7 per cent.

As a result of the GFC, the Government could not achieve its previous Fiscal Strategy targets over the 2009-10 Budget and Forward Estimates without breaching the Government's commitment to maintain frontline services, minimise the impact on public sector jobs and invest in infrastructure. Accordingly, the Government has developed an Interim Fiscal Strategy (IFS) that establishes a set of targets, the progressive achievement of which will return the Budget to a sustainable position. The IFS has been developed in accordance with the principles of sound fiscal management as specified in the Charter of Budget Responsibility Act 2007.

The Government will also implement a number of Budget Management Strategies that ensure the State's Budget position is managed sustainably. Without implementation of the Budget Management Strategies, the State's financial position would have been substantially weaker.

The Government will continue to provide significant funding for the development of the State's key infrastructure. With the support of the Australian Government's Nation Building – Economic Stimulus Plan, the Government will invest $2.0 billion over the next four years in infrastructure including hospitals, schools, roads, transport infrastructure and telecommunications development.

In these unprecedented times, the 2009-10 Budget will focus on sustaining the Tasmanian economy through strong financial and economic management, to support jobs and maintain the delivery of essential services.

1.2 Tasmanian Economy

FISCAL OUTLOOK A General Government Net Operating Balance deficit of $117.1 million and a Fiscal Balance deficit of $569.5 million are budgeted for 2009-10. This follows an estimated outcome for 2008-09 of a Net Operating Balance deficit of $102.2 million and a Fiscal Balance deficit of $119.8 million.

As a result of the GFC, the Government could not achieve its previous Fiscal Strategy targets over the 2009-10 Budget and Forward Estimates without breaching the Government's commitment to maintain frontline services, minimise the impact on public sector jobs and invest in infrastructure.

The Government has developed an Interim Fiscal Strategy (IFS) which establishes a set of targets, the progressive achievement of which will return the Budget to a sustainable position. The Government will set aside the current Fiscal Strategy until normal economic conditions resume. Whilst the timing of a return to normal economic conditions remains uncertain, it is intended that the IFS initially be adopted for the period 2009-10 to 2014-15. Details of the IFS are provided in Chapter 3 of this Budget Paper.

Table 1.1 lists the Key Budget and Forward Estimate aggregates.

Table 1.1: Key Budget and Forward Estimate Aggregates 2008-09 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Budget) Outcome) Budget) Estimate) Estimate) Estimate)

$m) $m) $m) $m) $m) $m) GENERAL GOVERNMENT

Revenue 4 131.3) 4 139.6) 4 215.8) 4 179.4) 4 279.7) 4 409.4)

Expenses 4 025.6) 4 241.8) 4 332.9) 4 266.7) 4 303.8) 4 335.8)

Net Operating Surplus/(Deficit) 105.7) (102.2) (117.1) (87.3) (24.1) 73.6) Fiscal Surplus/(Deficit) 30.2) (119.8) (569.5) (491.6) (167.6) 33.0) Net Debt at 30 June (1 122.8) (947.5) (486.5) (112.9) (71.8) (231.4) Infrastructure Investment 370.0) 304.8) 745.7) 642.3) 376.1) 230.0)


Revenue Summary In 2009-10, General Government Sector operating revenue is estimated to be $4 215.8 million, an increase of $84.5 million or 2.0 per cent on 2008-09 budgeted revenue of $4 131.3 million.

Chart 1.1 shows the estimated total revenue in 2009-10 and a percentage breakdown of the revenue categories.

Chart 1.1: Total Revenue, 2009-10

Other Revenue$73.8m (1.8%)

Dividend, Tax and Rate Equivalent

Income$100.0m (2.4%)

Sales of Goods and Services

$375.0m (8.9%)

Fines and Regulatory Fees$64.1m (1.5%)

Taxation Revenue$810.0m (19.2%)

Interest Income$33.8m (0.8%)

Grants$2 759.1m

(65.4%)

The single most significant source of revenue for the State is Grants. Grants consist of transfers from the Australian Government, through a range of General and Specific Purpose Payments; and National Partnership Payments. Grants will account for 65.4 per cent of the State's revenue in 2009-10. The remainder of the State's revenue comes from own sources, including Taxation Revenue (19.2 per cent), Sales of Goods and Services (8.9 per cent), Dividend, Tax and Rate Equivalent Income (2.4 per cent), Interest Income (0.8 per cent), Fines and Regulatory Fees (1.5 per cent) and Other Revenue (1.8 per cent).

The Global Financial Crisis has had a significant impact on the State's major revenue items. These impacts include:

• a decrease in Tasmania's GST revenue, due to a substantial reduction in the GST pool, together with a decline in Tasmania's assessed GST relativity and its share of the national population;

• a decrease in Duties revenue, reflecting a significant reduction in conveyance duty arising from a reduction in sales activity in the residential property market;

• a decrease in Dividends, Tax and Rate Equivalent receipts from Government businesses due to a weakening in financial performance;

• a decrease in interest income due to lower interest rates and lower cash levels held in the Public Account; and

• a fall in mineral royalties reflecting a fall in world commodity prices for mineral resources.


Chapter 4 of this Budget Paper provides a detailed explanation of the major revenue items in 2009-10 and over the Forward Estimates.

Expenditure Summary In 2009-10, General Government Sector total expenses are anticipated to be $4 332.9 million, an increase of $307.3 million or 7.6 per cent above the 2008-09 budgeted expenses of $4 025.6 million.

Chart 1.2 shows the estimated total expenses in 2009-10 and a percentage breakdown of the expense categories.

Chart 1.2: Total Expenses, 2009-10

Depreciation $228.3m (5.3%)

Employee Expenses $2 088.6m

(48.2%)

Nominal Superannuation Interest Expense $202.6m (4.7%)

Supplies and Consumables

$937.9m (21.6%)

Borrowing Costs $17.5m (0.4%)

Grant Expenses$814.4m (18.8%)

Other Expenses $43.6m (1.0%)

The growth in total expenses is due to:

• an increase in Employee Expenses reflecting the Government's commitments to current wage agreements, although this growth is partly offset by the impact of the Budget Management Strategies;

• an increase in Grant Expenses reflecting the: increased Australian Government funding to Non-Government Schools for the Nation Building - Economic Stimulus Plan, Digital Education Revolution, and Education Specific Purpose Payment; and a new grant to the Tasmanian Racing Board; and

• an increase in the Nominal Superannuation Interest Expense reflecting the current actuarial assessment of the Government's superannuation liability and the lower than anticipated value of the superannuation assets at 30 June 2008.

Chart 1.3 shows the estimated total expenses in 2009-10 and a percentage breakdown of the expenses by purpose.


Chart 1.3: Total Expenses by Purpose, 2009-10

Other Purposes$648.5m (15.0%)

Agriculture, Forestry and

Fishing $90.3m (2.1%)

Housing and Community Amenities

$223.6m (5.2%)

Health and Welfare

$1 475.1m (34.0%)

Transport and Communications$209.7m (4.8%)

Public Order and Safety

$377.9m (8.7%)

Recreation and Culture

$156.5m (3.6%)

Education $1 151.3m

(26.6%)

Chapter 4 of this Budget Paper provides a detailed explanation of the major expense items in 2009-10 and over the Forward Estimates.

Budget Management Strategies The Government has required agencies to implement a range of Budget Management Strategies in response to the Global Financial Crisis to ensure the State's Budget is managed on a sustainable basis. These strategies impact the 2009-10 Budget and Forward Estimates and will achieve savings of $760.5 million over this period. Without the implementation of the Budget Management Strategies, the State's financial position would have been substantially weaker.

The Budget Management Strategies include:

• agency cost reduction requirements, including a reduction in the number of Senior Executive Service officers and a review of middle management;

• amalgamation efficiencies;

• boards and committees saving;

• efficiency dividends;

• savings from non-salary indexation;

• Public Sector wage restraint; and

• specific whole-of-government non-salary savings targets.

Details of the Budget Management Strategies are provided in Chapter 1 of Budget Paper No 2 Government Services.


Chart 1.4 illustrates the impact of the Budget Management Strategies on the General Government Sector Net Operating Balance.

Chart 1.4: Net Operating Balance and the Impact of the Budget Management Strategies

(300)

(250)

(200)

(150)

(100)

(50)

0

50

100

2009-10 2010-11 2011-12 2012-13

$ m

illio

n

Net Operating BalanceNet Operating Balance excluding the Budget Management Strategies


INFRASTRUCTURE INVESTMENT The planned level of infrastructure investment is $745.7 million in 2009-10. This is an increase of $375.7 million (approximately 100 per cent) on the 2008-09 Budget allocation for infrastructure investment of $370.0 million. Chart 1.5 provides details of infrastructure investment expenditure by classification.

Chart 1.5: Infrastructure Investment Expenditure by Classification, 2009-10

Education$240.8m (32.3%)

Tourism, Recreation and

Culture$13.8m (1.9%)

Housing$130.4m (17.5%)

Other$6.0m (0.8%)

Health$79.3m (10.6%)

Roads and Rail$275.4m (36.9%)

The major infrastructure investment projects include:

• Building the Education Revolution – $275.8 million will be invested ($151.3 million in 2009-10) in Tasmanian Schools as part of the Australian Governments Nation Building – Economic Stimulus Plan, resulting in major modernisation of Tasmanian schools.

• Child and Family Centres (CFCs) – a $76.1 million program ($27.4 million in 2009-10) that will deliver up to 30 CFCs in Tasmania providing a range of easily accessible services that support families with the health, care and education of children aged from birth to four years;

• Royal Hobart Hospital – $100.0 million provided over five years ($11.0 million in 2009-10) from the Hospitals Capital Fund to upgrade the Royal Hobart Hospital's buildings and infrastructure, and to improve and expand key services such as intensive care;

• Housing – providing housing infrastructure expenditure of $130.4 million, including $94.9 million for social housing as part of the Australian Government's Nation Building – Economic Stimulus Plan and $10.0 million from the Housing Fund to increase the supply of public housing;

• Road and Rail – providing road and rail expenditure of $275.4 million ($242.9 for road projects and $32.5 million for rail projects). Major roads infrastructure projects include the construction of the Brighton Transport Hub, the Brighton Bypass and Tarkine Drive; and


• Urban Renewal and Heritage – continuing to support urban renewal and protecting Tasmania's built heritage with the allocation of $6.9 million from the Urban Renewal and Heritage Fund in 2009-10.

Chapter 7 of this Budget Paper provides a detailed explanation of infrastructure investment by the Government.

Nation Building – Economic Stimulus Plan In February 2009, the Australian Government announced the Nation Building - Economic Stimulus Plan to improve nation building and support economic growth and jobs. The Plan has been formally agreed through a National Partnership Agreement between the Australian Government and Tasmania. Commencing in 2008-09, it is anticipated that Tasmania will receive approximately $530.7 million over four years.

The National Partnership Agreement details the infrastructure and other programs for which the Australian Government will provide funding. The programs include:

• Building the Education Revolution;

• Social Housing;

• High Risk Rail Crossings;

• Black Spots; and

• additional Road Maintenance.

Chapter 7 of this Budget Paper provides further details on the Nation Building – Economic Stimulus Plan.

ECONOMIC OUTLOOK Tasmania has entered the current worldwide economic recession with above trend economic growth, strong investment levels and very low unemployment. It therefore faces this period of economic downturn in a stronger position than was the case during previous national recessions.

Tasmania's economic growth is estimated to be 1¾ per cent for the year to June 2009, due to strong growth in the September and December quarters of 2008. The effects of the Global Financial Crisis will have a significant impact on Tasmania's economic performance, mostly through lower business investment and export revenue.

The main effects are expected to emerge in the 2009-10 financial year, with a forecast decline in Tasmania's Gross State Product of ¾ of one per cent, around 5 000 fewer jobs and the unemployment rate rising to 7 per cent.

A range of Australian Government initiatives will provide a significant stimulus to economic activity in 2009-10, boosting employment by around 3 500 in that year and partly offsetting the impact of lower private final demand.

Tasmania is expected to be on the path towards trend growth by 2012-13, but the rate of recovery is expected to be below the rate forecast for Australia by the Australian Treasury in the Australian Government's 2009-10 Budget.

Chapter 2 of this Budget Paper provides a detailed examination of the Tasmanian economy.


2 TASMANIAN ECONOMY Features

• Tasmania has entered the current worldwide economic recession with above trend economic growth, strong investment levels and very low unemployment. It therefore faces this period of economic downturn in a stronger position than during previous national recessions.

• To date, Tasmania has been less affected than most other economies in Australia. In particular, household consumption and investment in dwellings have been sustained in recent quarters. Some data suggest that Tasmania's economy is experiencing the downturn around six months after the national downturn.

• Tasmania's economic growth is estimated to be 1¾ per cent for the year to June 2009, due to strong growth in the September and December quarters of 2008.

• The effects of the Global Financial Crisis will have a significant impact on Tasmania's economic performance, mostly through lower business investment and export revenue and the flow through effects on household consumption.

• The main effects are expected to emerge in the 2009-10 financial year, with a forecast decline in Tasmania's Gross State Product of ¾ of one per cent, around 5 000 fewer jobs and the unemployment rate rising to 7 per cent.

• A range of Australian Government initiatives will provide a significant stimulus to economic activity in 2009-10, boosting employment by around 3 500 in that year and partly offsetting the impact of lower private final demand.

• Tasmania has a relatively lower reliance on industry sectors whose performance can be cyclical, such as mining, construction and manufacturing. This may, however, serve to constrain the rate of economic recovery once global economic conditions improve.

• Tasmania is expected to be on the path towards trend growth by 2012-13, but the rate of recovery is expected to be below the rate forecast for Australia by the Australian Treasury in the Australian Government's 2009-10 Budget.

Tasmanian Economy 2.1

INTRODUCTION The first section of this chapter presents an overview of Tasmania's economic outlook, including forecasts for 2009-10 and a brief discussion of the current environment and context, including international and domestic conditions. The second section of the chapter outlines Tasmania's recent economic performance, the outlook for key components of economic activity and the risks to this outlook. The Appendix to this chapter provides a summary of the key economic reform measures in Tasmania over the past decade.

All data in this chapter are measured in Australian dollars and, unless otherwise indicated, are expressed in chain volume measures with 2006-07 as the reference year.

CURRENT ENVIRONMENT – OVERVIEW Global Conditions Following the Global Financial Crisis in late 2008, the global economy has weakened considerably and there remains a high degree of uncertainty as to the timing and strength of a recovery. Since the third quarter of 2008, there has been a synchronised deterioration in economic conditions across advanced and developing economies, with changes in the economic and financial environment occurring very quickly. The outlook for some of Tasmania's major export markets, such as Japan, Korea and Taiwan, is very weak.

This rapidly changing environment has led to international forecasters downgrading the outlook for growth frequently as new information becomes available and as they assess the responses of governments and central banks around the world to stimulate demand and improve liquidity.

The International Monetary Fund (IMF) is forecasting a very weak outlook in 2009 for the world economy, with economic growth in Europe and the US, in particular, forecast to be negative. In its April 2009 World Economic Outlook, the IMF forecasts negative economic growth, in aggregate, of 3.8 per cent for the advanced economies. The outlook for Asian economies is mixed, though generally very weak, except for China. Importantly, the IMF has more pessimistic forecasts for international trade than for global economic growth.

Housing markets in the US and some European countries, including the UK, have experienced very large price declines. This has sharply reduced household wealth and consumer confidence and led to lower household spending, as well as a fall in dwelling construction. At the same time, global private investment has declined, driven by credit constraints and a much weaker outlook for profitability.

It is not yet clear whether the damage to the balance sheets of the world's finance sector has yet been fully disclosed, given the scale of losses estimated so far against the total potential losses. Ongoing concerns remain over the ability of financial markets to repair themselves, particularly to adjust to these financial sector write-downs.

Some positive signs are emerging. There is some indication that the rate of contraction in the US economy may be beginning to ease. Industrial production and exports in Asia have recently shown some recovery, after very steep falls, and growth in the Chinese economy appears to be increasing. Global equity markets have risen by around 30 per cent since mid-March 2009, and recently the financial performance of a number of financial institutions has been better than expected. There has also been modest improvement in consumer and business confidence in a range of countries from the very low levels of late last year.


However, global conditions remain fragile and it is unlikely that strong signs of a recovery will emerge until confidence returns to the global financial system. If the advanced countries impose tighter regulatory controls on the finance sector, and on credit growth in particular, this will constrain the rate of recovery, especially in private investment.

Australian Conditions Australia has been better placed to weather the global economic recession than most advanced economies. Reasons include the strength of its financial and banking sector, the support to house prices from sustained strong underlying demand for housing and its reliance on some export markets, such as China, that have been performing relatively strongly. A national response to the economic downturn has been assisted by the room for reductions in interest rates created by relatively high rates heading into the crisis and the strength of the Australian Government's financial position. These factors have helped Australia avoid the worst impacts of the crisis experienced in other advanced economies on the one hand, whilst providing the headroom for significant monetary and fiscal policy responses on the other.

However, the impacts of the downturn are now clearly evident, with much lower consumer and business confidence and, more recently, slowing consumption and reduced employment. The demand for, and prices of Australia's exports have weakened, though these impacts have been partly offset by the sharp decline in the value of the Australian dollar in late 2008. Household wealth has fallen due to the rapid decline in equity values and, to a lesser extent, lower property prices.

Significant monetary and fiscal policy responses have been applied to mitigate the worst effects of the crisis in Australia. The RBA has reduced the official cash rate by 425 basis points between September 2008 and April 2009, the most rapid decline in interest rates since 1990-91.

The Australian Government has implemented a set of fiscal stimulus packages from late 2008 to increase public investment, especially in infrastructure, and stimulate dwelling investment and household consumption. According to the Australian Treasury these measures are expected to result in Australia's GDP being around 2.5 per cent higher in 2009-10 and 1.5 per cent higher in 2010-11, relative to the level it would otherwise have reached in those years.

Most state governments have major infrastructure programs for the following three to four years, largely funded by debt, which will also provide a large boost to public investment. At the same time, some state governments are seeking to reduce growth in recurrent expenditure in response to the pressure on their revenues from lower than expected tax receipts.

Even with these monetary and fiscal policy responses, the Australian Treasury forecasts zero GDP growth for 2008-09 and a decline of ½ of one per cent in 2009-10. The national recovery is expected to commence in 2010-11 with GDP growth of 2¼ per cent, with growth then assumed to be 4½ per cent in 2011-12 and in 2012-13. The return to growth is expected to be driven by a recovery in dwelling investment and household consumption as domestic prospects improve, and increased production in the resources sector as global conditions strengthen.

The Australian Government's 2009-10 Budget forecasts the national unemployment rate to reach 8¼ per cent by the June quarter 2010 and 8½ per cent a year later. This represents a significant increase over the rate of 6 per cent expected for the June quarter 2009.


ECONOMIC OUTLOOK Table 2.1 presents Treasury's estimates for key economic indicators for Tasmania for the current financial year, forecasts for 2009-10 and projections to 2012-13.

Table 2.1: Tasmanian Economic Estimates, Forecasts and Projections

MYFR1 Budget 2009-10

2007-08 2008-09 2008-09 2009-10 2010-11 2011-12 2012-13 Actual Estimate Estimate Forecast Projections

Gross State Product2,3,4 …. …. 1¾ -¾ ¾ 2¼ 3

Employment5 2.9 2½ 2¾ -2 -¾ ¾ 1½

Level of Employment6 231.8 237 238 233 231 233 237

Labour Force Participation Rate7 61.1 61¾ 62 61½ 61¼ 61¼ 61¼

Unemployment Rate7 4.9 4½ 4¾ 7 8¼ 8¼ 7½

Consumer Price Index (Hobart)5 3 4 2¾ 2 1¾ 1¾ 2½

Population5 0.8 0.9 0.9 0.8 0.7 0.7 0.7

Sources: Actual data - Australian Bureau of Statistics; Estimates, Forecasts and Projections – Department of Treasury

and Finance. Notes: 1. The 2008-09 Mid-Year Financial Report (Preliminary) was released on 15 December 2008. 2. This GSP estimate is not intended to be benchmarked against the GSP estimates produced by the ABS due to

ongoing concerns over the reliability of the ABS estimates of year on year changes in Tasmania's GSP. 3. Real, percentage change. 4. The 2007-08 Actual is unavailable. See note 2. 5. Year-average, percentage change. 6. Year-average, '000s. 7. Year-average, percentage level.

The methodology of estimating economic activity has changed for the 2009-10 Budget. In previous years, a measure called 'State Economic Activity' was used that forecasted underlying movements in output based on past trends and expected movements in key indicators, especially employment. In the current economic environment, trends in historical data provide little insight into likely short and medium term movements in economic indicators. The Australian Government also adopted a new economic forecasting methodology for the 2009-10 Budget in light of the global economic recession and its impacts on Australia.

The new methodology estimates changes in Gross State Product and is based on how the components of aggregate demand (namely household consumption, private investment, government spending and net exports) can be expected to respond to the impact of external and local factors, and how this impacts on employment and overall economic activity. It therefore seeks to estimate movements in the same measure that the ABS estimates in its Australian National Accounts. However, the Tasmanian Treasury continues to have concerns with the reliability of the ABS estimates of annual changes in Tasmania's GSP and therefore it does not consider that its own GSP estimate should be benchmarked against the estimates produced by the ABS.


Summary of 2008-09 Estimates and 2009-10 Forecasts Tasmania's economy entered the current global downturn from a strong position, with high levels of private investment, household consumption and government expenditure. Population growth has also been gradually increasing over the past three years.

A significant pipeline of private and public investment projects under construction has assisted to delay the impact of the economic downturn in the State. High levels of employment, household income and stable house prices have sustained consumption growth in recent quarters.

However, business and consumer confidence has fallen sharply since late 2008 and trend employment has declined since September 2008. The pipeline of private sector investment projects is expected to diminish in mid-2009, while lower business profitability and confidence, together with tighter credit conditions, present a bleaker outlook for business investment in 2009-10 than at any time over the past decade.

The impact of government activity on Tasmania's economic performance in 2009-10 will be much greater than in previous years. At the State Government level, public investment is estimated to be around 32 per cent higher in real terms than in 2008-09 (excluding expenditure funded under the Australian Government's economic stimulus measures). However, real State Government public consumption is expected to decline by around two per cent in 2009-10 due to the impact of the Government's Budget Management Strategies.

The Australian Government's Nation Building – Economic Stimulus Plan is expected to inject an additional $307.9 million into the Tasmanian economy in 2009-10, mostly in infrastructure investment. These measures are expected to add around 1¾ per cent to GSP in 2009-10 and generate around 3 500 jobs. These measures may lead some businesses to defer some private investment, especially in areas where skills shortages occur such as construction.

Tasmania's overseas exports have been subdued over the past year and are expected to decline in 2009-10, due largely to the weaker economic prospects for Tasmania's major trading partners, notably Japan, Korea and Taiwan. The unwinding of the mining boom, in particular, has significantly reduced contract prices for commodities, which will also lead to lower export income in 2009-10.

Household consumption is expected to be virtually flat in 2009-10 after growth for most of 2008-09. Key drivers are likely to be lower real household income and concerns over unemployment.

The momentum of the Tasmanian economy leading into the economic downturn suggests that the full effects of the Global Financial Crisis are expected to occur from 2009-10 onwards, later than for the national economy as anticipated by the Australian Treasury. This is consistent with the movements in some forward indicators, such as lending finance, where the downturn in Tasmania has been around two quarters later than nationally.

This is reflected in Treasury's estimate of GSP growth for 2008-09 of 1¾ per cent, which compares with the Australian Treasury estimate of zero GDP growth in that year in the Australian Government's 2009-10 Budget. Tasmania's relatively high year average growth rate is due partly to the lower exposure of Tasmanian households to the collapse in equity values and, to a lesser extent, property values, over the past year. As a result, household consumption spending has been stronger than nationally in recent quarters.

For 2009-10, Tasmania's GSP is forecast to decline by ¾ of one per cent, driven largely by lower private investment and a decline in exports.


Employment in Tasmania is estimated to grow by 2¾ in 2008-09, due to the carryover effect of very strong growth in the six months to September 2008. A decline in employment of 2 per cent is forecast for 2009-10 resulting in the unemployment rate increasing to 7 per cent. The participation rate is expected to be relatively stable, despite increasing unemployment.

In previous Budget Papers, Treasury adopted the standard convention of basing its projections for the Forward Estimate years on trend rates of growth of key indicators such as employment and the participation rate. Given the current environment, recent economic performance does not provide a plausible guide to underlying economic conditions. The projections in Table 2.1 for 2010-11 to 2012-13 are based on Tasmania's economic performance following the most recent major recession in 1990-91. Tasmania's recovery was much slower than the national recovery and it took several years for employment, in particular, to recover to pre-recession levels. These projections provide a guide to the economic outlook based on past experience, but are not forecasts.

There remains a very high level of uncertainty in the outlook for Tasmania, as well as for the national and global economy, reflected in the frequent and major revisions to the global economic outlook from the IMF in recent months. It is not possible to make confident predictions over the magnitude of the contraction in 2009-10 and the rate of recovery in the Forward Estimate years. The current circumstances are unique due to the synchronised nature of the current global downturn and the particularly severe impact on global financial markets.

Treasury has therefore assessed the outlook for 2009-10 and beyond under three scenarios: the base case presented in Table 2.1, a pessimistic scenario that could arise if the global economic outlook further deteriorates, and an optimistic scenario that could be realised if there is significant improvement in global economic conditions and more rapid recovery than currently expected. This scenario approach has been adopted to reflect the uncertainty over the outlook and to highlight the range and magnitude of risks that the Tasmanian economy will be facing.

Tasmania's Economic Outlook State Final Demand and Gross State Product Growth in Tasmania's State Final Demand (SFD) has been very strong in recent years, with annual average growth of 4.9 per cent since 2000-01, including growth of 5.3 per cent in the year to March 2009. This growth rate is expected to ease over the final quarter of 2008-09. Over 2009-10, SFD is expected to decline by ¾ of one per cent as the positive impact on final demand of greater public investment is marginally less than the negative impact of reduced private investment and public sector consumption.

Tasmania's Gross State Product (GSP) is also expected to decrease by ¾ of one per cent in 2009-10. This decline is slightly larger than forecast nationally and by some other states. One reason is that Tasmania's economic growth, in year average terms, appears to have continued longer into 2008-09 than nationally, with the result that Tasmania will have stronger GSP growth than nationally in 2008-09, but a greater decline in 2009-10 as it faces the full impacts of the global and national slowdown.

Over the past two decades, there has been a decline in Tasmania in the share of industry sectors most exposed to changes in global economic conditions, namely mining, construction and manufacturing (including woodchips and metal products). One reason for this is that the government services sectors such as education and health are proportionately larger in Tasmania. As Chart 2.1 shows, since 2005 the cyclical sectors have accounted for a smaller share of Tasmania's output than national output.


In recent years, these sectors, especially the resource-related industries, made a larger contribution to national economic growth than in Tasmania. When global conditions improve, the national recovery will be driven, in part, by the resource sector, assisted by the major investment in capacity in some mainland states in recent years. This is likely to favour the resource rich states, which does not include Tasmania.

Chart 2.1: Share of Cyclical Industry Sectors1 - Tasmania and Australia

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Source: Australian National Accounts: State Accounts, ABS Cat No 5220.0. Note: 1. Cyclical sectors are mining, manufacturing and construction.

A return to stronger household consumption is also expected to contribute to the national recovery from 2010-11 onwards, according to the Australian Treasury. It is likely that middle and higher income households, who faced the large decline in asset values in the past year, will account for much of this consumption growth. Tasmania has a smaller proportion of these households than nationally. As discussed above, this assisted in sustaining Tasmania's consumption in recent quarters when average household wealth declined, but this same factor is likely to constrain growth in consumption as conditions improve.

For these reasons, it is expected that GSP will return to very modest growth in 2010-11 and that Tasmania's economic recovery will be slower than nationally over the Forward Estimates period.

Labour Market The level of Tasmanian employment peaked in September 2008 at 240 700 persons, following very strong growth in the previous six months. Since then, employment has fallen by 1.7 per cent to 236 600 persons in April 2009. It is estimated that employment will grow by 2¾ per cent in year-average terms in 2008-09. The growth in hours worked will be substantially lower due to the strong shift towards part-time employment, which has grown by 4 per cent since September 2008.


Forward indicators of employment, such as the Skilled Vacancies Index prepared by the Department of Education, Employment and Workplace Relations and the ANZ Job Advertisement series, have shown a significant decline in recent months as employers reassess their hiring intentions, as Chart 2.2 shows.

Chart 2.2: Employment, ANZ Job Advertisements and DEEWR Skilled Vacancy - Tasmania

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Source: Labour Force, Australia, ABS Cat No 6202.0, ANZ, DEEWR.

Employment is forecast to decline by 2 per cent in 2009-10 in year-average original terms. The shift towards part-time work is expected to continue as employers seek to retain some staff, especially their skilled employees, in preparation for a recovery.

The labour market is not expected to show strong growth over the Forward Estimates period. As conditions improve, it is likely that average hours worked will increase, without significant growth in employment levels.

In Tasmania, unskilled workers tend to be more vulnerable to redundancies in periods of job shedding, while skilled workers remain in relatively strong demand. When the labour market improves, employers tend to seek skilled workers, with the result that many unskilled workers remain unemployed or leave the work force. This constrains the recovery in employment in Tasmania as it has a smaller share of skilled workers and can lead to significant increases in long term unemployment.

The Tasmanian participation rate peaked in September 2008 at 62.4 per cent and has declined since to 61.8 per cent by April 2009. It is expected that the Tasmanian participation rate will remain relatively stable over 2009-10 and the Forward Estimates period.

More people around retirement age are choosing to remain in the work force as they seek to build up their superannuation balances following the collapse in asset values over the past year. This trend is expected to continue, which will sustain the participation rate.


The Tasmanian unemployment rate is estimated to be 4¾ per cent in 2008-09, in year average terms, and is forecast to increase in year-average terms to 7 per cent in 2009-10. Over the Forward Estimates period, unemployment rates are expected to remain high compared to recent record low levels.

Private Investment Since 2000, private investment has contributed strongly to growth in Tasmania's GSP, with its contribution to economic activity rising from 12 per cent of GSP in 2000-01 to 20 per cent in 2007-08. Private investment in a small economy such as Tasmania's tends to be volatile and driven by a few large investment projects. Dwelling investment typically makes up around a third of private investment activity, with business investment (principally non-dwelling construction and in plant and equipment) accounting for the remainder.

Dwelling investment has been sustained over the past year, assisted by the reduction in official cash rates of a cumulative 425 basis points since September 2008.

The Australian Government's policy of increasing the first home owner's grant by $7 000 for existing dwellings and $14 000 for new dwellings has led to a surge in house purchases by first home buyers. One reason is that average property prices, including land prices, remain relatively low in Tasmania. Since the scheme was announced in October 2008, the value of housing finance to first home buyers in Tasmania increased by 122 per cent by March 2009, which compares with growth of 92 per cent nationally.

Chart 2.3: Housing Finance to First Home Buyers – Tasmania and Australia

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Source: Housing Finance for Owner Occupation, Australia, ABS Cat No 5609.0

The Australian Government's decision to cease the additional payments after December 2009 is likely to reverse this recent trend and put downward pressure on the demand for new dwellings, and therefore on dwelling construction in Tasmania.

Over the past six years, the Tasmanian economy has recorded very high growth in business investment, at an annual average rate of 12.0 per cent. Forward indicators suggest that business investment will decline


sharply over 2009-10, reflecting the decline in business confidence and reduced investment opportunities. Business-related finance lending, for example, has eased in recent quarters as shown in Box 1. As some existing major construction projects are completed over coming months, the level of private sector building activity is expected to decrease significantly.

Lower profits will constrain the capacity of businesses to invest in the medium term, together with reduced access to finance, especially for major projects. In previous economic downturns, recovery was aided by the availability of credit, but in the current financial crisis this is not occurring. Lenders are exercising more caution in granting new finance and this could prove to be one of the largest obstacles to a rapid economic recovery.

Box 1: Forward Indicators of Business Investment in Tasmania

Lending Finance Approvals to Business

The availability of lending finance is a key forward indicator of the level of business investment in the Tasmanian economy. Chart 2.4 below shows the recent trends in lending finance to businesses in Australia and Tasmania.

Chart 2.4: Business Lending Finance – Australia and Tasmania

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Source: Lending Finance, Australia, ABS Cat No 5671.0, Australian National Accounts: National Income, Expenditure

and Product, ABS Cat No 5206.0

From 2000 to mid-2008 lending finance to Tasmanian businesses expanded over threefold. The trend in business investment was very similar, though more cyclical. Lending finance approvals to businesses reached its peak in July 2008, after which it began to decline sharply. Business investment in Tasmania tends to lag movements in the value of lending finance by between three to six months, indicating lower business investment in the second half of 2008-09.


Box 1: Forward Indicators of Business Investment in Tasmania (continued)

The chart also shows that national lending finance to businesses started to fall in February 2008, five months earlier than in Tasmania. This suggests that the business sector in Tasmania is facing the impacts of the Global Financial Crisis later than the national economy.

Building Work Yet to be Done

The Australian Bureau of Statistics estimates the value of construction work commenced and yet to be completed, on a quarterly basis. This also provides a useful forward indicator of trends in investment in buildings and structures, a component of business investment. Building work yet to be done for Tasmania is shown in Chart 2.5 below. It shows that the strong growth in non-residential building work yet to be completed ended in March 2008 and that the trend is now downwards. This provides further indication that business investment in Tasmania is likely to ease in the year ahead.

Chart 2.5: Building Work Yet to be Done - Tasmania

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Investment in commercial property, in particular, is expected to contract sharply as this sector is reported to be especially affected by the credit crisis. Subdued investment in the export sector is also expected until international trade prospects, and commodity prices in particular, improve. Compared to recent years, the number of new private sector investment projects expected to commence in the year ahead is currently very low. Several major projects, including tourism-related projects, have recently been cancelled. One major project with private sector involvement expected to commence in 2009-10 is the Musselroe Wind Farm development by Roaring 40's.


It is expected that private investment will decline by around 15 per cent over 2009-10 and recover modestly over the Forward Estimates period. This estimate for 2009-10 does not include the proposed pulp mill at Longreach in northern Tasmania as the proponent, Gunns Ltd, is yet to announce that finance has been secured for construction to commence.

Under a pessimistic scenario, the decline in private investment could be much greater in 2009-10 and could be as much as 25 per cent. A further deterioration in global economic conditions would lead to a new cycle of lower commodity prices and equity values, reduced prospects for international trade and renewed threats to the global financial system. In particular, if financial institutions are not able to raise sufficient capital to restore their balance sheets, following the write-downs, this could lead to a global collapse in business confidence and economic activity.

The very strong public investment program in 2009-10 in Tasmania and nationally will result in increased demand for skilled workers in the construction sector. This is likely to put upward pressure on construction costs and could lead to labour shortages in some high skilled areas. For example, the Tasmanian Chamber of Commerce and Industry reports that its members still list a shortage of skilled workers as the principal constraint on business. The construction industry, in particular, has recently expressed concerns over the availability of brick-layers in Tasmania. If a shortage of skilled workers emerges in response to the public investment programs across Australia, this would have a negative impact on private investment in Tasmania.

A more optimistic scenario for 2009-10 and the medium term beyond would include some major new projects commencing in that year, such as the pulp mill at Longreach or some large tourism and accommodation projects. Even under an optimistic scenario, real private investment is unlikely to increase in 2009-10, given the high levels to date in 2008-09. There is therefore very little prospect of private investment contributing to economic growth in Tasmania in 2009-10.

Government Expenditure The public sector represents a larger share of economic activity in Tasmania than nationally. Tasmanian Government consumption is the largest single component and has grown by 3.2 per cent per year, on average, since 2002-03. This trend will not continue in 2009-10 and over the Forward Estimates period. In 2009-10, Tasmanian Government consumption expenditure is forecast to decline by 2 per cent in real terms, due principally to the impact of the Government's Budget Management Strategies. More details on the Tasmanian Government's revenue and expenditure can be found in Chapter 4 of this Budget Paper.

Australian Government consumption expenditure in Tasmania has trended down in recent years. This trend is likely to continue in 2009-10 as the Australian Government implements its own expenditure savings measures to adjust to lower revenues. Consumption by local government is expected to remain around current levels.

Total public sector consumption in Tasmania is therefore set to decline in 2009-10 and over the Forward Estimates period.

By contrast, public sector investment in Tasmania will increase significantly in 2009-10 and remain high over the medium term. Major projects include the Brighton Bypass and Transport Hub and continued investment in public housing projects, irrigation and rail infrastructure around the State.

There will be a very significant increase in public infrastructure investment funded by the Australian Government, including under the Nation Building - Economic Stimulus Plan and the National Broadband


Network (see Box 2). These measures are expected to increase employment across the State by around 3 500 in 2009-10 and a further 600 in 2010-11. As a result, GSP in 2009-10 is estimated to be 1¾ per cent higher than otherwise and 2 per cent higher in 2010-11; that is, GSP is forecast to decline by 2½ per cent in 2009-10 without these measures.

Total public investment in Tasmania, excluding investment by government businesses, is forecast to increase by 145 per cent in 2009-10. More detailed information on public infrastructure spending by State Government agencies, including the investment funded under the Nation Building - Economic Stimulus Plan, is provided in Chapter 7 of this Budget Paper.

Tasmania's government businesses have some major investment projects, including Transend Network's new transmission line from Waddamana to Lindisfarne. Against this, some major projects will soon be completed, such as the Tamar Valley Power Station.

Overall, public spending in Tasmania is forecast to increase by 3¼ per cent in 2009-10 in real terms and then decline gradually each year over the Forward Estimates period. Part of this decline in the out-years is due to the temporary nature of the large public infrastructure projects, as once they are completed this has the effect of reducing public investment in the following year. It also reflects the short time period in which funding from the Australian Government's Nation Building – Economic Stimulus Plan must be spent.

Box 2: Australian Government Contribution to Infrastructure Investment in Tasmania

The Australian Government is providing infrastructure investment in Tasmania through support for several Tasmanian Government projects and through the Nation Building - Economic Stimulus Plan and the National Broadband Network.

Support for Significant Infrastructure Projects

Support for infrastructure projects in Tasmania by the Australian Government is estimated to exceed $650 million over the period 2009-10 to 2012-13. Projects that will receive significant funding include:

• the Brighton Bypass ($152 million);

• irrigation infrastructure ($140 million);

• the development and maintenance of rail infrastructure ($165 million);

• the Kingston Bypass and North-East freight road ($46 million); and

• the upgrade of the Launceston General Hospital Acute Medical and Surgical Unit announced as part of the Australian Government's 2009-10 Budget ($40 million).

Other projects receiving Australian Government funding include the Launceston Integrated Care Centre, upgrades to the Launceston flood levee system and other road improvements.

The contribution of the Australian Government to these projects is expected to support over 1 000 direct jobs and 850 indirect jobs in 2009-10 and in 2010-11.


Box 2: Australian Government Contribution to Infrastructure Investment in Tasmania (continued)

Nation Building - Economic Stimulus Plan

In February 2009, the Australian Government announced a $42 billion Nation Building - Economic Stimulus Plan to boost investment and support jobs in response to the Global Financial Crisis. The Plan includes significant investment in social infrastructure, in particular in education and public housing.

Under the plan, over the next three years, Tasmania is set to receive:

• approximately $370 million for education infrastructure and capital works;

• $148.9 million for the construction of new social housing and repairs and maintenance to existing public housing stock; and

• $8.9 million for road and rail safety and additional roads maintenance.

Additional funding of $50 million will also be provided to Tasmania's local government to fund community infrastructure projects.

These initiatives are estimated to increase GSP by between 1¼ and 1½ per cent in 2009-10 and 2010-11 and provide a significant boost to investment spending at a time when private sector investment is expected to decline. The investment will support employment in the construction and associated industries, with over 1 500 people likely to be directly employed on these projects in 2009-10 and 2010-11 and a further 1 300 people indirectly employed.

National Broadband Network

In April 2009, the Australian Government announced its intention to build a $43 billion fibre-to-the-premises National Broadband Network. The project is still in the planning stages and details have not been finalised. The network, to be built over seven to eight years, is due to commence in Tasmania with work beginning in early 2009-10.

Household Consumption The growth in household consumption in the first half of 2008-09 is expected to ease through the year. Retail spending, however, has held up well in recent months, increasing by 7.2 per cent in nominal terms in the year to April 2009.

Tasmanian households have been less exposed to the global economic downturn than households in most other states. This is due, in part, to their lower levels of assets, on average, including property and financial assets, and also due to their lower debt levels. In addition, house prices have not declined appreciably in Tasmania. Consequently, Tasmanian households have not had to make the same adjustments to their household balance sheets in response to the asset price declines. At the same time, employment growth in Tasmania has been much stronger than nationally over the past year. These influences are reflected in higher levels of consumer confidence in Tasmania than nationally and a smaller decline in personal finance lending.


As part of the Australian Government's Economic Security Strategy stimulus package that commenced in December 2008, $4.8 billion was provided in one-off payments to pensioners and carers and $3.9 billion in support payments to low and middle income families across Australia. From April 2009, further payments to households totalling $12.2 billion were made under the Australian Government's Nation Building - Economic Stimulus Plan. These payments are estimated to total approximately $590 million for Tasmania, which equates to 2.8 per cent of Tasmania's GSP in 2007-08.

Tasmania has benefited proportionally more than most other jurisdictions, as a higher proportion of households are on lower incomes and receive welfare payments. These payments have contributed to household spending over the second half of 2008-09.

Tasmanian households tend to sustain their consumption levels in periods of economic downturn. This is shown in Chart 2.6, which demonstrates that household consumption, in real terms, has continued to grow in years where employment growth was negative, such as between 1990-91 and 1992-93 and particularly between 1996 and 1998 when Tasmania's population was falling.

Chart 2.6: Tasmanian Household Consumption and Employment

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Source: Australian National Accounts: National Income, Expenditure and Product, ABS Cat No 5206.0; Labour Force, Australia, ABS Cat No 6202.0.

In recent years, Tasmanian households have adjusted their spending on discretionary goods and services, initially in response to higher interest rates and more recently following the Global Financial Crisis. The share of retail spending on discretionary items is currently at its lowest point for several years, as Chart 2.7 below shows. This is likely to constrain the reduction on retail spending as economic conditions worsen.

Real household consumption is expected to increase marginally by a ¼ of one per cent in 2009-10 as households respond to the worsening economic conditions. While continued population growth supports consumption, this is likely to be offset by the impact of lower household income and increased uncertainty over employment prospects.


Over the Forward Estimates period, a gradual recovery in household consumption is expected, in line with improved economic conditions, though below the national rate as forecast in the Australian Government 2009-10 Budget.

Chart 2.7: Essential and Discretionary Retail Expenditure in Tasmania

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The risks to the outlook for consumption are on the downside. If households respond to the worsening economic conditions by significantly increasing their savings and continuing to defer expenditure on high cost items such as motor vehicles, consumption will decline over 2009-10, possibly by one per cent. A greater fall in employment than in the forecasts would also produce a similar effect.

There is also a risk that tourism-related consumption spending in Tasmania may decline in response to the worsening global and national economic conditions. Business-related visitor spending, in particular, will be vulnerable during the economic downturn.

The consumption forecast is based on house prices in Tasmania remaining around current levels. Under a pessimistic scenario house prices could ease as a result of either unemployment increasing or first home owners no longer receiving the additional grants from the Australian Government. Such a decline in household wealth would put further downward pressure on consumption.

Under an optimistic scenario, household consumption growth would return more quickly to longer term trends. This would require an appreciable improvement in consumer confidence from current levels, especially in the outlook for household income, and almost certainly a smaller increase in unemployment than most commentators are currently forecasting.

Exports The prospects for Tasmania's overseas export sector depend heavily on the capacity of its major trading partners to withstand the effects of the Global Financial Crisis. Most of these countries have suffered from increasingly unfavourable economic conditions.


Tasmania's exports are heavily exposed to Asia, with around 59 per cent of exports going to North Asia and a further 13 per cent to ASEAN countries. According to the IMF, the prospects for Tasmania's major trading partners are less bleak than for the more advanced economies, as Chart 2.8 shows. Economic growth rates will need to increase strongly over several years for global economic conditions to return to those of the first half of this decade.

Chart 2.8: GDP Growth rates – World, Major Trading Partners and Advanced Economies

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Source: International Monetary Fund; Australian Bureau of Statistics.

The International Monetary Fund's April 2009 World Economic Outlook has predicted that international trade volumes are likely to fall by more than 11 per cent in 2009, significantly below its forecast of a contraction in world GDP growth of 1.3 per cent.

Three of Tasmania's major export markets, Japan, Korea and Taiwan, are expected to contract in 2009 according to the IMF, with little or no recovery in the following year, as Chart 2.9 shows. China alone provides some positive prospects for Tasmania's exports in the year ahead.

The composition of Tasmania's commodity exports continues to be similar to that of the past two decades. Exports continue to be dominated by processed metal and metal products and ores and concentrates, which together represent more than 45 per cent of Tasmania's total exports.


Chart 2.9: IMF Economic Growth Forecasts for Tasmania's Major Trading Partners - 2009 and 2010

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Source: International Monetary Fund; Australian Bureau of Statistics. Notes: 1. Economic growth is real GDP, annual per cent change. 2. ASEAN nations: Brunei, Cambodia, Indonesia, Laos, Malaysia, Burma, Philippines, Singapore, Thailand and

Vietnam.

Global mineral commodity prices have declined sharply. Chart 2.10 below shows the decline since June 2008 and the most recent forecasts by the Australian Bureau of Agricultural and Resource Economics. Tasmania experienced the effect of these price declines in 2008-09, as Tasmania's main mineral exports are heavily weighted to mineral commodities that tend to be traded on spot prices. Nationally, exports are weighted to mineral commodities that are traded on forward contracts, usually negotiated annually. The differing mix of commodities helps explain the difference between the strong national growth in export values, in nominal terms, of 40 per cent to March 2009 and Tasmanian export growth of only 3 per cent over that period.

Global demand for elaborately transformed manufactured goods is expected to decline rapidly in response to the global economic contraction. Tasmania's manufacturing sector is therefore likely to be especially affected, especially for those businesses that produce investment goods or products used by the vehicle production industry.

Woodchip export contracts for export to Japan, which have recently been renegotiated, have generally maintained prices at or around the same level as for contracts throughout 2008-09. However, Tasmanian woodchip export volumes have recently declined, with 2009 volumes reported to be around 30 per cent lower than in 2008.

Overseas export volumes for Tasmania are expected to experience no growth in 2008-09 and are forecast to fall by 5 per cent in 2009-10. There is likely to be a period of recovery in 2010-11, with export growth returning to trend levels by the end of the Forward Estimate period.


Chart 2.10: Selected Mineral Commodity Prices and ABARE Forecasts (June 2008 to June 2010)

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4 000

6 000

8 000

10 000

Jun 08 Dec 08 Jun 09 Dec 09 Jun 10

Uni

t Pric

e (U

S$/t)

0

5 000

10 000

15 000

20 000

25 000

Unit Price (U

S$/t)

Zinc (LHS)

Aluminium (LHS)

Copper (LHS)

Tin (RHS)

Source: Quarterly world indicator prices of selected commodities, the Australian Bureau of Agriculture and Resource

Economics (ABARE).

After remaining relatively stable throughout the 1990s, Tasmania's terms of trade improved significantly since mid-2002 and peaked in 2008 as Chart 2.11 shows. Since then, Tasmania's terms of trade deteriorated and this is expected to continue in 2009-10 as the full impact of lower commodity prices are reflected in export earnings. The result will be lower real income for Tasmanian households and businesses, which is likely to be reflected in lower business and consumer confidence.

The prospects for Tasmania's exports to mainland Australia have also deteriorated. The Australian Treasury expects national total final demand to contract by 1¼ per cent in 2009-10. This provides a guide to the decline that can be expected in Tasmania's exports to mainland Australia. While public final demand is expected by the Australian Treasury to increase by 7¾ per cent in 2009-10, business investment is expected to fall by 18½ per cent. Those Tasmanian businesses that export to mainland Australia to support private investment projects are likely to be especially adversely affected by the national slowdown.

Under a pessimistic scenario, the US economy faces a prolonged downturn, Europe remains in recession and global economic prospects deteriorate further. This would lead to a greater contraction in global economic activity and international trade in particular. The decline in Tasmania's overseas exports under these circumstances could be substantially greater than 5 per cent.

An optimistic scenario would see a more rapid return to long term trends in global growth, and particularly a return to growth in Tasmania's major trading partners. This would trigger a recovery in mining-related exports and halt the decline in manufactured goods. Even under this scenario, Tasmania's exports are still unlikely to increase in 2009-10 above 2008-09 levels.


Chart 2.11: Tasmania's Terms of Trade

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Year Ended 30 June

Tasm

ania

's T

erm

s of

Tra

de

Source: Australian National Accounts: State Accounts, ABS Cat No 5220.0.

Tasmania's Population Tasmania's population has continued to grow at a relatively steady rate over the past three years, although below the rate in all the other states and the territories. This growth has been driven by a return to positive interstate migration and increasing levels of overseas migration.

Through the year to December 2008, Tasmania's population increased by 4 901 persons, or 0.99 per cent, to a level of 500 278 persons.

Tasmania's population is forecast to increase by 0.9 per cent in 2008-09 and by 0.8 per cent in 2009-10. A small further reduction to 0.7 per cent is expected over the Forward Estimates period. Consistent with past trends, a greater decline in Tasmania's population growth rate is likely if employment prospects in mainland Australia are significantly better than those in Tasmania.

Monetary Conditions Inflationary pressures in the Australian economy peaked in late 2008. Prior to this time, the Reserve Bank of Australia had pursued a strategy of increasing the official cash rate to constrain demand and inflation. The Global Financial Crisis and weakening economic outlook have rapidly led to through-the-year inflation (underlying) falling nationally to 4.0 per cent in the March quarter 2009. The RBA now expects underlying inflation to gradually return to the target band of between 2 per cent and 3 per cent.

Tasmania's inflation was 3.3 per cent in the year to March 2009. This rate is expected to decline to 2 per cent in 2009-10 and remain around that level over the Forward Estimates period.

Wage costs in Tasmania, as measured by the Labour Price Index, increased by 4.3 per cent through the year to December 2008. The combination of lower inflation and increasing unemployment is expected to reduce wage pressures over the medium term.


Short-term interest rates are currently at their lowest level since the early 1960s, partly due to the very low official cash rate of 3 per cent since April 2009. These low interest rates are expected to continue until Australia's economy returns to stronger growth.

APPENDIX 1 Economic Reform in Tasmania over the past decade Overview Since 1998, the Tasmanian Government has introduced economic reform in a range of areas, this having dove-tailed well with improvements in the State's economic performance. This reform has assisted Tasmania in securing the benefits from recent strong economic conditions and should leave the State better placed to 'weather' the economic downturn.

The key areas where economic reform has been progressed include energy, competition policy, the water and sewerage sector, superannuation and State Government taxation. A number of other reforms have also had significant benefits for the Tasmanian community, including ports reform, broadband infrastructure development and the divestment of non-core Government businesses.

While these reforms have not been implemented without short to medium-term financial costs, commercial (private sector) impacts, and the need for some labour market re-adjustment, they have overall shown Tasmania to be progressive. They have also brought with them offsetting community benefits in the form of lower prices, better service standards and wider service availability, lower administrative costs to Government, and new job opportunities.

Energy Reform The most significant industry reforms in Tasmania over the past decade have been in the energy sector. In the electricity supply industry ten years ago, there was no competition at the generation or retail level and no practical alternative to electricity as an energy source for many businesses. Since then, Tasmania's energy sector has been transformed, from one of less to more competition, led to very significant private sector investment, and improved Tasmania's energy security.

Key reforms implemented since 1998 include:

• facilitating Basslink, an undersea electricity cable across Bass Strait;

• Tasmania's entry to the National Electricity Market;

• the introduction of retail contestability for electricity consumers;

• the development of the Tasmanian Natural Gas Project; and

• the development of a wind generation industry in Tasmania.


Basslink

The Government facilitated the construction of the undersea Basslink interconnector by the private sector, allowing electricity to be transferred between Tasmania and mainland Australia.

Basslink was commissioned on 29 April 2006 and significantly improves the security of electricity supply in Tasmania by allowing the State to import up to 480 MW of power from Victoria, which is approximately 35 per cent of Tasmania's average load.

Basslink allows Hydro Tasmania to better manage its water storages, which have reached critically low levels in recent years due to extended periods of low rainfall. In providing this flexibility, Basslink has substantially reduced the risk of power rationing for Tasmanian business and households.

Basslink also allows Hydro Tasmania to export up to 600 MW of power to Victoria when Victorian prices are higher than Tasmanian prices and to some extent facilitates competition between Tasmanian generators and their mainland competitors.

Entry to the National Electricity Market

Tasmania joined the National Electricity Market (NEM) on 29 May 2005. The NEM covers New South Wales, Queensland, South Australia, Victoria and Tasmania and allows electricity to be competitively traded across these jurisdictions.

Entry to the NEM introduced Tasmania's electricity market to competition from other Australian jurisdictions and within Tasmania for the first time. For example, Hydro Tasmania is now to an extent open to competition with electricity generators elsewhere on the basis of price. This competition is beginning to encourage new electricity generation in the State.

Retail Contestability in the Electricity Market

As part of joining the NEM, retail contestability has been introduced in Tasmania, providing larger consumers with greater choice in determining their energy supplier and encouraging price competition between retailers.

Retail contestability started with the largest users of electricity in 2006 and is being progressively introduced to tranches of smaller customers over a four year period. By July 2009, contestable customers will account for approximately 70 per cent of the demand for electricity in Tasmania. The Government is yet to determine whether to extend retail contestability to households and very small business customers.

The introduction of retail contestability has already resulted in significant benefits for the Tasmanian economy. In particular, there are currently three licensed electricity retailers competing for Tasmanian electricity consumers with Aurora Energy.

Natural Gas

In 2002, the Government facilitated the introduction of natural gas to Tasmania, with the private sector company Duke Energy constructing a 302 kilometre undersea gas pipeline from Victoria and a 430 kilometre transmission backbone within Tasmania that directly serves a number of major customers. A distribution network has since been established, with natural gas currently available to 38 500 commercial and residential customers across the State. These were major investment projects for the State.


The facilitation of natural gas in Tasmania has provided the opportunity to establish gas-fired generation in Tasmania which is especially important as there are no further opportunities for additional large scale hydro-electric generation schemes. The 380 MW gas-fired Tamar Valley power station is due to be commissioned in September 2009. This new generation plant, owned by Aurora Energy, will significantly increase the level of competition in electricity generation in Tasmania.

Natural gas has introduced a competitive new source of energy for businesses that are suited to natural gas as an energy source. It has also created new development opportunities for industry, particularly those that require direct heat or steam for processing.

All customers can choose their gas retailer as there is full retail contestability in the natural gas market. In addition, the Tasmanian Gas Access Regime allows third parties to negotiate access to natural gas pipeline services in Tasmania should they wish to provide competition in the distribution of natural gas.

Wind Generation

Since 1998, two significant wind farm developments have been constructed, the Woolnorth Wind Farm by Roaring 40's, jointly owned by Hydro Tasmania and the CLP Group, and Hydro Tasmania's King Island Huxley Hill Wind Farm. These two projects have increased wind generation output in Tasmania from 0.66 GWh in 1998 to 350 GWh in 2008.

Wind generation provides a number of benefits for the Tasmanian community. As a renewable source of energy, wind power contributes to reducing the State's greenhouse gas emissions. Similar to Basslink, it also reduces Tasmania's reliance on Hydro Tasmania's water storages and therefore contributes to improved security of electricity supply.

Promoting Competition Since 1998, a range of reform measures has been implemented to abolish existing monopolies, remove unnecessary restrictions on competition and stimulate economic growth.

Many reforms were implemented as part of National Competition Policy (NCP). From 1997 to 2005, Tasmania was assessed by the Australian Government as complying fully with its NCP obligations and was one of only two jurisdictions within Australia to receive all NCP-related payments over this period. This demonstrates the strong track record of economic reform under recent governments.

The key industry reforms implemented over the past decade in Tasmania are discussed below.

Shop Trading Hours

Retail businesses employing more than 250 people in Tasmania were previously required to close at certain times, and were prohibited from opening on Sundays and most public holidays. This was a major restriction on competition in the retail sector. Following two detailed reviews, legislation was introduced in 2002 that removed almost all of these restrictions.

This reform has encouraged retail investment in Tasmania and provided greater choice for consumers. Independent retailers previously protected by the restrictions have responded by improving service standards to remain competitive with larger retailers. The reform has resulted in significant economic benefits for Tasmania, including promoting retail activity on Sundays and public holidays which, for example, has attracted tourists to city centres on those days. From 2002 to 2008, the number of people employed in the Tasmanian retail sector has increased from 23 100 to 28 100.


http://www.hydro.com.au/Documents/Renewables%20Development/5882Roaring40s.pdf

Taxi Industry

In November 2003, the Government amended the Taxi and Luxury Hire Car Industries Act 1995 to require the annual release of new taxi licences in all taxi areas. Prior to this time, the release of taxi licences was at the discretion of the Minister responsible for the Act and very few licences were issued, especially in urban areas where demand for taxi services is strongest.

Under the amended Act, the number of licences to be offered for sale each year is five per cent of the number of licences at the time, or one licence, whichever is the greater, for each taxi area. An additional 5 per cent of licences can be issued within that year under specified circumstances.

Since 2002, the number of taxi licences in Hobart and Launceston has increased from 298 to 380, including 42 wheelchair accessible taxis. There has also been an increase in the number of licences issued in all other taxi areas in the State.

These reforms enable market forces to play a greater role in the taxi industry, while maintaining the appropriate consumer protection measures, such as safety standards and maximum taxi fares. They enable more operators to establish taxi businesses while providing greater availability and choice of taxi services to consumers.

The model that Tasmania has adopted is regarded as the most pro-competitive in Australia, in part because the barriers to entry into the taxi industry are lowest, in terms of cost and access to new licences.

Conveyancing Services

The Legal Profession Act 1993 was amended in 2005 to enable persons other than legal practitioners to operate as licensed conveyancers in Tasmania. These amendments also removed restrictions on the advertising of conveyancing services. The licensing system ensures that the appropriate levels of consumer protection are maintained.

These reforms have enhanced competition in the conveyancing market and have contributed to lower costs of conveyancing services and increased choice for consumers. There are currently six licensed conveyancers in Tasmania that are not legal practitioners.

Liquor Licensing and Tourism Industry Reform

The Government amended the Liquor and Accommodation Act 1990 in 2003 and 2004 to remove a number of restrictions on competition. The most significant reforms were:

• the removal of the requirement to purchase no less than nine litres of liquor from outlets other than hotels;

• the extension of operating hours for off-licences;

• the removal of the licensing requirement for tourism accommodation; and

• the abolition of the accommodation licensing scheme.

The Government's reforms in this area have promoted competition in the liquor and tourism industries and enabled new businesses to be established such as specialist wine shops, placing downward pressure on prices and providing greater choice for consumers.

The reforms have also reduced the administrative obligations and fees imposed on Tasmania's tourist accommodation providers, making them more competitive with their interstate competitors.


Water and Sewerage Reform The long term sustainability of Tasmania's water and sewerage sector is important to the State's future economic growth. In previous years, the sector has been subject to a sustained period of underinvestment, resulting in:

• approximately 5 000 Tasmanians being on a permanent boiled water alert;

• 15 000 properties on the fringes of major towns not being connected to the reticulated sewerage network; and

• around 50 per cent of the wastewater treatment plants in Tasmania not meeting required quality standards.

The Government is currently progressing a range of structural and regulatory reforms that will place the delivery of water and sewerage on a sustainable footing and provide a commercial return on assets to ensure future investment. The reforms will lead to improved environmental, public health and economic outcomes.

The three regional corporations, Southern Water, Ben Lomond Water and Cradle Mountain Water, will be responsible for all water and sewerage services for the southern, northern and north-west regions respectively, replacing the roles of the bulk water authorities and the local government councils.

A fourth business has been established to provide common services to the corporations across a number of areas. All businesses will be owned by councils and therefore all returns from these businesses will flow back to the councils.

New regulatory arrangements for the sector will provide independent price oversight and performance reporting under the Water and Sewerage Economic Regulator. The new arrangements also establish a licensing framework and transparent and accountable customer service standards. The powers of the Ombudsman have also been extended to water and sewerage services.

Superannuation A decade ago, nearly all State public servants belonged to defined benefit superannuation schemes. The unfunded liabilities associated with these schemes became an ever-growing cost to governments, effectively imposing an unsustainable burden on future generations. As a result, the major schemes were closed to new members in 1999 and 2000, including:

• the Retirement Benefits Fund Defined Benefit Scheme;

• the 1973 Parliamentary Superannuation Fund Scheme;

• the 1985 Parliamentary Retiring Benefits Fund Scheme; and

• schemes established in the Judges' Contributory Pensions Act 1968, the Solicitor-General Act 1983 and the Governor of Tasmania Act 1982.

In 1999, a fully funded accumulation scheme was established for new State public sector employees, operated by the Retirement Benefits Fund. For the first time, fund choice was widely available, with employees able to have their employer superannuation contributions paid to a complying superannuation scheme of their choice. In later developments, the State Fire Commission Superannuation Scheme was


closed to new members from 1 July 2005 and the Tasmanian Ambulance Service Superannuation Scheme was closed to new members from 30 June 2006.

These reforms have significantly reduced the Government's unfunded superannuation liability and therefore the burden on future generations of Tasmanians. The majority of State public sector employees are now members of fully funded superannuation schemes.

Government in consultation with the Retirement Benefits Fund (RBF) Board, will undertake the necessary reform process for the RBF to become a fund regulated by the Australian Prudential Regulation Authority.

Bringing the RBF under independent APRA regulation will place the RBF under the same regulatory framework as the majority of its competitors.

Taxation Reform There has been a significant improvement in Tasmania's competitive tax position over the decade, driven by a program of tax relief and abolition. In addition, there have been no new taxes or increases in existing tax rates in this period.

A decade ago, the Tasmanian Government collected over 25 taxes. As part of the national changes to the taxation system that commenced in 2000-01, which included introducing the Goods and Services Tax, all jurisdictions undertook to abolish some taxes. By July 2005, the Government had fully met its tax reform obligations under the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations. In addition, the Government also abolished the following taxes that were listed in the IGA only for review:

• lease duties;

• rental duties;

• non-quoted marketable securities duties;

• mortgage duties; and

• non-real commercial property transfer duties.

Tasmania abolished its IGA review taxes ahead of all other Australian jurisdictions, with the exception of Victoria.

In 2009-10 only 14 taxes will be collected. Overall, State tax revenue will be approximately $203.6 million lower in 2009-10 than it would have been had this tax reform not been undertaken.

In the mid-90's, Tasmania was assessed by the Commonwealth Grants Commission to be the second least competitive state in terms of tax severity. The State improved to be the second most competitive state by 2000-01 and has remained in this position since that time. Tasmania is one of only two jurisdictions that have been assessed as having an overall tax severity below the national average in every year since 2000-01.

The Tasmanian Government has also recently enacted the Tasmanian Payroll Tax Act 2008 to harmonise Tasmania's payroll tax legislation with Victoria, New South Wales and Queensland. This Act reduces the compliance and administration costs faced by Tasmanian businesses, particularly the 70 per cent of registered payroll taxpayers in Tasmania that also operate in other Australian jurisdictions.


The overall result of these reforms is a significant reduction in the taxation burden on consumers and businesses in Tasmania, stimulating economic growth by reducing input costs for business and leading to lower prices for consumers. The reforms have also enhanced the attraction of Tasmania as a competitive place to conduct business.

Reform of Tasmania's Port System As an island State, Tasmania relies heavily on an efficient and high productivity ports system. This is important for the competitiveness of Tasmania's exports and also ensures that the cost of imported goods is not unnecessarily high.

In 2006, the Government amalgamated its existing four port companies, the Hobart Ports Corporation, Port of Launceston, Port of Devonport Corporation and Burnie Port Corporation, to form a single state-owned entity, the Tasmanian Ports Corporation Pty Ltd (Tasports).

This reform allows Tasports to undertake state-wide strategic management of Tasmania's port operations and for each port to specialise in the areas where it has the capacity to be most efficient. Tasports also has a significantly stronger balance sheet than any of the former port companies that enables it to undertake large scale investments.

It is estimated that longer term savings and efficiencies from the reform are between $2 million and $5 million per year.

Broadband When Basslink was constructed in the early 2000s, it included an optic-fibre cable to provide connectivity between Tasmania and mainland Australia as alternative to Telstra's services.

In 2002, carrier Tas21 constructed a 420 km optic-fibre backbone connecting north, north-west and southern Tasmania, in conjunction with the transmission gas trench, after signing an agreement with the Tasmanian Government which allowed the State Government to acquire the asset for $23.1 million upon its completion. The gas distributor, Powerco Tasmania Pty Ltd, subsequently agreed to give the Government access to its pipeline trenches for the installation of conduit for optic-fibre.

The State Government is continuing to commercialise the State's optic fibre network to provide direct competition to Telstra for broadband services. The Government's strategic partner, Aurora Energy, has entered into commercial arrangements with Basslink Telecoms to deliver new broadband services in Tasmania. The network will also be used for the Australian Government's National Broadband Network in Tasmania.

The introduction of competition to the Tasmanian telecommunications market will deliver a wider choice of service for the Tasmanian community, facilitate competitive gains for key industries that are dependent upon affordable broadband internet access, and attract new business to the State.

Divestment of Government Businesses Recent governments in Tasmania have divested government businesses where it can be demonstrated that the business does not provide core functions of government and would provide greater benefits to the community in private sector ownership.


In keeping with this principle, the following businesses have been divested since 1998:

• Hobart International Airport Pty Ltd;

• Printing Authority of Tasmania;

• Civil Construction Corporation;

• Stanley Cool Stores Board;

• Tasmanian Grain Elevators Board; and

• Southern Regional Cemetery Trust.

Divestment of these businesses has realised over $360 million for the Tasmanian community, with these funds used for debt reduction and to fund essential public infrastructure.

In addition, the Government announced its intention to sell TOTE Tasmania in January 2009. Both Houses of Parliament have approved the sale of TOTE Tasmania by passing the TOTE Tasmania (Sale) Bill 2009. Further legislation that covers the ongoing regulatory and licensing environment, the Gaming Control Amendment Bill 2009, has also been passed by Parliament. It is anticipated the sale will be completed by September 2009.


3 INTERIM FISCAL STRATEGY Features

• The Global Financial Crisis has had a significant adverse impact on the State's Budget position. The unanticipated decline in revenues in 2008-09, 2009-10 and over the period of the Forward Estimates is unprecedented. In response, the Government has established an Interim Fiscal Strategy.

• The Interim Fiscal Strategy establishes a set of interim financial and budgetary targets. The progressive achievement of these targets will return the Budget to a sustainable position over the medium-term.

• The Tasmanian Government's Interim Fiscal Strategy will extend over a six-year period from 2009-10 to 2014-15.

• The 2009-10 Budget and Forward Estimates demonstrate that the Government is making significant progress towards the achievement of its Interim Fiscal Strategy targets.

Interim Fiscal Strategy 3.1

THE INTERIM FISCAL STRATEGY A fiscal strategy is an effective planning tool for the Government and it provides clear signals to financial markets, the business sector and the community of the Government's intentions in financial management. The purpose of a fiscal strategy is to establish a benchmark for the evaluation of the Government's fiscal performance, and, increase public awareness of its fiscal policies.

Since 1990, Tasmania has had a number of fiscal strategies. The initial fiscal strategy statements were prepared without a legislative reference. However, the Charter of Budget Responsibility Act 2007 now requires the Government and Opposition parties to prepare fiscal strategy statements. These fiscal strategy statements must be based on the principles of sound fiscal management as specified in the Act.

Tasmania's fiscal strategies have also evolved with the changing circumstances of the State's financial and economic position. The 2009-10 Budget has been developed in the context of a turbulent world economic environment. The State's current financial and economic position has been dramatically impacted by the Global Financial Crisis (GFC) and the downturn in the economies of its major trading partners. This has led to an unanticipated decline in Budget revenues, including GST Revenue, that is severe and unprecedented. The consequence is a significant deterioration in the State's Budget position.

As a result of the GFC, the Government could not achieve its previous Fiscal Strategy targets over the 2009-10 Budget and Forward Estimates without breaching the Government's commitment to maintain frontline services, minimise the impact on public sector jobs and invest in infrastructure.

The Interim Fiscal Strategy (IFS) establishes a set of targets, the progressive achievement of which will return the Budget to a sustainable position. The Government will set aside the current Fiscal Strategy until normal economic conditions resume. Whilst the timing of a return to normal economic conditions remains uncertain, it is intended that the IFS initially be adopted for the period 2009-10 to 2014-15.

The IFS has been developed in accordance with the principles of sound fiscal management as specified in the Charter of Budget Responsibility Act and is based on the Government's principles of:

• achieving and maintaining a sustainable Budget position;

• continuing to reduce the debt and liability burden on the Tasmanian community over the longer term;

• maintaining a competitive business and taxation environment;

• maintaining investment in core General Government infrastructure in real terms to support the delivery of government services and to foster economic and industry development;

• providing adequate mechanisms and financial provisions to minimise risks to the Tasmanian Government; and

• improving the efficiency of government services.

3.2 Interim Fiscal Strategy

INTERIM FISCAL STRATEGY TARGETS The targets that form the basis of the Interim Fiscal Strategy (IFS) are outlined below.

Budget Position Principle − To achieve and maintain a sustainable Budget position.

Interim Targets − By 2014-15, achieve a Net Operating Surplus, on average over a rolling four-year period for the General Government Sector.

− By 2014-15, achieve an underlying Net Operating Surplus, on average over a rolling four-year period for the General Government Sector.

− By 2014-15, achieve a modest Fiscal Surplus.

− By 2014-15, achieve a modest Consolidated Fund Surplus.

A key to maintaining a sustainable fiscal position is aligning expenditure growth and the need for infrastructure renewal and development, with long-term trend growth in revenue. This requires the maintenance of a Budget Net Operating Surplus, which ensures recurrent services can be funded from recurrent revenue.

The Net Operating Surplus reflects the on-going sustainability of a government's financial position. However, it is subject to some degree of volatility due to the cyclical nature of revenue growth, which is contrasted by the relatively steady nature of expenditure growth over which the Government has considerably more control. To remove the effect of this volatility, the Government will target the achievement of a General Government Sector (headline) Net Operating Surplus, on average over a rolling four-year period by 2014-15.

The provision of significant levels of one-off Australian Government funding for specific capital programs over the next few years, through programs such as the Nation Building – Economic Stimulus Plan, will significantly impact the Government's headline Net Operating Balance results over this period.

The Australian Government payments to the State for the Nation Building – Economic Stimulus Plan will be reflected in the Net Operating Balance. However, the corresponding capital expenditure is not included in the calculation of the Net Operating Balance. Accordingly, the headline Net Operating Balance results will portray a position that is significantly better than the Government's underlying financial position.

To remove the impact of the one-off Australian Government funding for specific major capital programs and ensure the Government is achieving an improvement in its operating position that is sustainable in the long-term, one measure of the IFS Net Operating Balance target will be on an underlying basis. For this purpose, the Net Operating Balance will be adjusted to remove the effects of one-off Australian Government funding for specific major capital programs.

The interim target of an underlying Net Operating Surplus, on average over four years, will be achieved through progressive improvement in the Net Operating Balance each year, until the target is achieved in 2014-15. Table 3.1 shows the calculation of the underlying Net Operating Balance for the 2009-10 Budget and Forward Estimates. Projections of the Net Operating Balance targets for the 2013-14 and 2014-15


years have also been included. An overview of the basis for two projection years is discussed in the Progress on the Interim Fiscal Strategy Targets section of this Chapter.

Table 3.1: Underlying Net Operating Balance

2009-10)

Budget)

2010-11)Forward)

Estimate)

2011-12)Forward)

Estimate)

2012-13) Forward) Estimate)

2013-14)

Projection)

2014-15

Projection $m) $m) $m) $m) $m) $m

Net Operating Balance (117) (87) (24) 74) 78) 185

Less Impact of One-off Australian

Government funding for Specific Major

Capital Programs1 318) 270) 106) 4) ….) ….

Underlying Net Operating Balance (435) (357) (130) 70) 78) 185

Underlying Net Operating Surplus on average

over four-year rolling period by 2014-15 (124) (240) (263) (213) (85) 51

Note: 1. The Impact of One-off Australian Government funding for Specific Major Capital Programs reflects the net impact of

the Nation Building - Economic Stimulus Plan of $404.0 million and additional funding for Nation Building (formerly AusLink) of $294.0 million over the 2009-10 Budget and Forward Estimates.

Of greater potential volatility than the Net Operating Surplus is the Fiscal Surplus, which is influenced by the variability of capital investment. For this reason, together with the Government's commitment to continue to maintain significant levels of capital investment funded from the proceeds of asset sales, the Government will target the achievement of a Fiscal Surplus by 2014-15.

To ensure continued fiscal discipline, the Government is committed to maintaining the Consolidated Fund in surplus. Similar to the Interim Targets established for the Fiscal Balance and the Net Operating Balance, the Interim Target is intended to be achieved through the progressive improvement in the Consolidated Fund Balance over the duration of the IFS.


Debt and Liability Reduction Principle − The debt and liability burden on the Tasmanian community will continue to be

reduced over the longer term.

Interim Targets − The State will continue to make the provisions necessary to extinguish the net unfunded superannuation liability by 2035.

− The ratio of Net Financial Liabilities to Revenue for the Non-Financial Public Sector will not exceed 110 per cent by 2014-15.

− The General Government Sector will remain Net Debt free.

Debt and liability reduction continues to be a focus of the IFS. The Government remains committed to eliminating its unfunded superannuation liability and to addressing debt and revenue risks associated with Government businesses.

The savings from interest payments that are no longer required to service General Government net debt have delivered increased Budget capacity to provide services to the Tasmanian community. The IFS commits to continuing reductions in the debt and liability burden on the Tasmanian community.

The IFS's target is consistent with extinguishing the State's net unfunded superannuation liability by 2035. The target balances the Government's commitment to put aside funds to meet the unfunded superannuation liability without placing an onerous burden on the current and next generation of Tasmanians. For the duration of the IFS, the Government will continue to make the provisions necessary to extinguish the liability by 2035.

Over the next few years, the Government will budget for cash deficits. A consequence is that its provisions against the unfunded superannuation liability will not be fully cash-backed. However, this position will be temporary and the interim target ensures that the budget capacity for those provisions is maintained. As the Budget returns to a sustainable position, and cash surpluses re-emerge, financial assets will rebuild over time to ensure that the superannuation provisions are fully cash-backed. The Government retains the capacity to meet its current and future superannuation payment obligations.

In the current financial environment, it will not be possible to achieve a decline in the Net Financial Liabilities to revenue ratio for the Non-Financial Public Sector. The impact of the Global Financial Crisis on revenues and superannuation liabilities across the State Sector is likely to lead to an increase in this ratio in the short-term. In recognition of the short-term increase, the IFS will be focussed on returning this ratio to a prudent level over the short to medium term.


Competitive Business and Taxation Environment Principle − A competitive business and taxation environment will be maintained.

Interim Targets − Tasmania's average tax severity is to be maintained below the average of all states (as measured by the Commonwealth Grants Commission).

− No new taxes and no increase in the rate of any existing State taxes.

A competitive business and taxation environment is important to ensure that Tasmania is an attractive place for businesses to invest and people to live.

A competitive tax regime, which raises sufficient revenues to fund infrastructure and service delivery needs, while not hindering business expansion and economic growth, is seen as a key factor in fostering robust economic growth. Over the period of the IFS, the Government will continue to maintain its commitment to remaining a low taxing State and not introduce any new taxes or increase the rate of existing State taxes.

Infrastructure Development Principle − Investment in core General Government infrastructure will be maintained in real

terms to support the delivery of Government services and to foster economic and industry development.

Interim Target − Capital expenditure will at least equal depreciation costs, on average, over rolling four-year periods.

− The proceeds from asset sales will continue to be invested in infrastructure and State assets.

Appropriate investment in infrastructure is necessary for effective delivery of services to the community, to promote economic growth and to avoid asset erosion and the creation of financial burdens for future generations.

The focus of infrastructure development in the IFS reflects the Government's commitment to provide, at a minimum, funding for infrastructure assets to ensure that the real value of those assets is maintained.

Similarly, the commitment to reinvest the proceeds from the sale of assets in infrastructure and State assets will ensure that the Government has the capacity to fund an expanded capital program.


Risk Management Principle − Adequate mechanisms and financial provisions will be in place to minimise the

risks to the Tasmanian Government.

Interim Target − The Government will continue to prudently manage financial risks faced by the State (having regard to economic circumstances).

The Government will continue to implement strategies and measures that ensure financial risks are managed prudently on the basis of sound risk management principles. For the purposes of this principle, financial risk includes contingent liabilities and commercial risks associated with the ownership of government businesses.

Efficient Government Services Principle − The achievement of a sustainable financial position will be underpinned by an

improvement in the efficiency of Government services.

2009-10 Budget Targets

− As agreements expire, new wage and salary agreements will be negotiated on the basis that funding, no greater than 1 per cent per annum in 2009-10 and 2010-11; and 2.5 per cent in 2011-12 and 2012-13, is provided to agencies.

− Agencies will not be supplemented for increases in non-salary operating costs.

The IFS establishes a range of short-term targets aimed at returning the State's finances to a sustainable position. A key to achieving this outcome is the establishment of expenditure targets that limit the growth in wage and operating costs.

In the longer term, the growth in wage and operating costs will be limited to levels that can be supported in the Forward Estimates.

In the short to medium-term, the Interim Target for wages growth will be supported by a new Government policy on Public Sector wages. The proposed Government Wages Policy is intended to apply until the Government achieves the targets and objectives set in its IFS.

This will include restoring wage parity with comparable interstate occupational groups as a key objective when the Government has achieved its Interim Fiscal Strategy targets and the Budget has been returned to a sustainable position.

Similarly, in the short-term, agencies will not be supplemented for increases in non-salary operating costs. Over the medium term this target will be reviewed and, where appropriate, revised to take account of changes in the State's financial position.


PROGRESS ON THE INTERIM FISCAL STRATEGY TARGETS Table 3.2 shows the Fiscal Strategy targets and an assessment of the current position against those measurable targets, based on Budget estimates.

The Table shows the current position for the 2009-10 Budget and Forward Estimates. As the IFS is focussed on the achievement of a number of targets in the two years beyond the current Forward Estimates, projections for 2013-14 and 2014-15 have been included. These are based on projected movements in key revenue and expense items from the 2012-13 Forward Estimate. The projections are prepared on a same policy basis and provide an indication of the Government's progress in achieving its IFS targets by 2014-15.

The Table shows that over the 2009-10 Budget and Forward Estimates period, the Government is estimated to make significant progress towards the achievement of its IFS targets. Further, based on projections for 2013-14 and 2014-15, the Government is currently on track to achieve the majority of its targets by 2014-15.


Table 3.2: Interim Fiscal Strategy Targets

Interim Target

2009-10)

Budget)

2010-11)Forward)

Estimate)

2011-12)Forward)

Estimate)

2012-13)Forward)Estimate)

2013-14)

Projection)

2014-15)

Projection) Progress Net Operating Surplus on average

over four-year rolling period by

2014-15 ($m) (38) (63) (83) (39) 10) 78) Underlying Net Operating Surplus

on average over four-year rolling

period by 2014-15 ($m)1 (124) (240) (263) (213) (85) 51)

Fiscal Surplus by 2014-15 ($m) (569) (492) (168) 33) 46) 91)

Consolidated Fund Surplus by

2014-15 ($m) (350) (232) (65) 23) 25) 27)

Net Unfunded Superannuation

Liability to be extinguished by

20352 3 107) 3 164) 3 213) 3 248) 3 331) 3 410)

Ratio of Net Financial Liabilities to

Revenue for the Non-Financial

Public Sector to not exceed

110 per cent in 2014-15 (%)3,4 116) 129) 123) 120) 118) 112) ☯

General Government Sector to

remain Net Debt free (487) (113) (72) (231) (309) (494)

Tasmania's Tax Severity (as

measured by the CGC) to be

maintained below the average of

all states (Avg=100) 5 <100) <100) <100) <100) <100) <100)

Capital Expenditure in excess of

depreciation, on average, over

four-year rolling period ($m) 637) 1 055) 1 219) 1 238) 779) 463) Source: Department of Treasury and Finance, Commonwealth Grants Commission (CGC) and the Australian Bureau

of Statistics (ABS).

Key: On Target, ☯ Issues to be addressed, X Remedial action required, na data not available Notes: 1. The Net Operating Surplus on average over a four-year rolling period by 2014-15 is measured on an underlying

basis that removes the impact of one-off Australian Government funding for specific major capital programs.


2. The Net Unfunded Superannuation Liability will continue to increase in the medium-term. The Government is making sufficient provisions to achieve the target in 2035.

3. For the purposes of the Interim Fiscal Strategy, Net Financial Liabilities represents Net Debt less Advances Paid plus the Superannuation liability. Net Financial Liabilities is divided by Revenue from Transactions to derive the Net Financial Liabilities to Revenue ratio. This is in accordance with the methodology used by Standard & Poor's ratings agency.

4. The Government has committed to record levels of infrastructure investment over the next four years that are significantly in excess of historical levels of capital expenditure. The current estimates of progress for the ratio of Net Financial Liabilities to Revenue for the Non-Financial Public Sector target assume that the current Budgeted levels of capital expenditure will be achieved. This target is sensitive to the achievement ratio of these capital expenditure estimates. The table below shows the estimated and projected Ratio based on capital expenditure at historical levels and at levels no higher than 50 per cent above historical levels.

Scenario

2009-10

Budget

2010-11Forward

Estimate

2011-12Forward

Estimate

2012-13 Forward Estimate

2013-14

Projection

2014-15

Projection Ratio of Net Financial Liabilities to

Revenue for the Non-Financial Public

Sector assuming capital expenditure

levels at historical levels (%) 108 114 106 102 99 92

Ratio of Net Financial Liabilities to

Revenue for the Non-Financial Public

Sector assuming capital expenditure

levels at levels no higher than

50 per cent above historical levels (%) 110 118 112 109 107 101 5. The Commonwealth Grants Commission's measure of relative Taxation Severity is calculated on the actual taxation

levels of states and territories. The Commission does not prepare forecasts of this measure. Tasmania's Taxation Severity for 2007-08 was 92.66 per cent of the national average.


CREDIT STATUS OF THE STATE PUBLIC SECTOR Since the mid 1980s, the two major rating agencies, Moody's Investors Service (Moody's) and Standard & Poor's (S&P), have progressively assigned a credit rating to each State. Tasmania was first rated in 1991. Both of the major rating agencies review the credit ratings of all States on an annual basis.

The credit rating influences the interest rate margin Tasmania must pay over AAA rated sovereign debt. Ratings, therefore, impact on interest paid on State debt and thus on the State Budget.

The current credit ratings for long-term domestic debt of the States and the Territories are detailed in Table 3.3.

Table 3.3: Government Ratings

Moody's Standard &

Poor's

New South Wales Aaa AAA

Queensland Aaa AA+

Australian Capital Territory na AAA

Western Australia Aaa AAA

Victoria Aaa AAA

South Australia Aaa AAA

Tasmania Aaa AA+

Northern Territory Aa1 na


4 REVENUE AND EXPENSE ESTIMATES

Features

• The Net Operating Balance projections on a same policy basis are:

− a deficit of $117.1 million in 2009-10;


− a deficit of $24.1 million in 2011-12; and

− a surplus of $73.6 million in 2012-13.

• The Fiscal Balance projections on a same policy basis are:



− a deficit of $167.6 million in 2011-12; and

− a surplus of $33.0 million in 2012-13.

• Total Revenue is estimated to be $4 215.8 million in 2009-10, an increase of $84.5 million or 2.0 per cent on 2008-09 budgeted revenue of $4 131.3 million. Over the Forward Estimates, revenue will increase by an average of $64.5 million or 1.5 per cent to $4 409.4 million in 2012-13.

• Total Expenses are anticipated to be $4 332.9 million, an increase of $307.3 million or 7.6 per cent above the 2008-09 budgeted expenses of $4 025.6 million. The implementation of the Government's Budget Management Strategies will hold Total Expenses relatively constant over the period of the Forward Estimates. Total Expenses are budgeted to be $4 335.8 million in 2012-13.

Revenue and Expense Estimates 4.1

INTRODUCTION This chapter provides detailed information on the major categories of revenues and expenses within the General Government Sector (GGS). Details of the components of net acquisition of non-financial assets and the impact on the Fiscal Balance are also provided.

The 2009-10 Budget and Forward Estimates presented in this chapter have been prepared in accordance with the Australian Accounting Standards Board standard AASB 1049 Whole of Government and General Government Sector Financial Reporting. The main focus remains on the key headline measures, the Net Operating Balance and the Fiscal Balance.

THE FORWARD ESTIMATES CONCEPT The Forward Estimates provide a mechanism for projecting the Budget revenues, expenses and headline measures on the assumption that existing revenue and expenditure policies are maintained and that the Government's planned objectives continue to be pursued; that is, on a 'same policy basis'. Therefore, the Forward Estimates represent the likely budget outcomes if planned service levels were to be provided in each of the three years following this Budget; the objectives of the Government's Budget Management Strategies are achieved; the existing regime of taxes and charges continues, but reflects previously announced changes in tax policy; expectations of the level of Australian Government transfer payments are realised; and assumptions underlying the economic parameters are realised. The existing regime for government charges is also assumed to be unchanged.

The Forward Estimates provide a framework for budgetary decision making in the medium-term, highlight the flow-on effects of revenue and expense measures contained in the current year's Budget, and facilitate the monitoring of achievements against existing Government strategies and objectives.

The Forward Estimates are not to be read as forecasts of expected outcomes. Future policy decisions, variations to the assumptions underlying economic parameters and external influences will all have an impact on the outcomes. In this sense, the Forward Estimates are projections of outcomes under a particular scenario, rather than forecasts.

To facilitate an understanding of the reasons for change through time in the Forward Estimates, a Policy and Parameter Statement is provided later in this chapter. This statement reconciles the Forward Estimates headline measures made at two points of time and classifies the changes in the estimates into policy changes (reflecting specific decisions at the discretion of the Government) and parameter changes (reflecting changes in the economic environment, an agency operating environment or the timing of a transaction).

4.2 Revenue and Expense Estimates

ASSUMPTIONS UNDERLYING THE FORWARD ESTIMATES The Forward Estimates for revenue and expenses are prepared on the basis of a number of assumptions and using information provided to Treasury by various entities, including government agencies, Government Business Enterprises (GBEs) and State-owned Companies (SOCs).

For Income Statement revenue, it is noted that:

• Grants are based on the continuation of agreements with the Australian Government, including the Intergovernmental Agreement on Federal Financial Relations (IGA). It is also assumed that, unless otherwise stated, Specific Purpose Payments and National Partnership Payments will continue at the same level of funding as advised by the Australian Government;

• Taxation revenue is estimated by Treasury using projections based on the methodology applied in the preparation of the Budget year information and on a continuation of the 'same policy' setting;

• Taxation revenue estimates therefore reflect previously announced changes in tax policy;

• Interest Income is estimated by Treasury and reflects anticipated cash holdings within the Public Account and forecast interest rates;

• Sale of Goods and Services; Fines, Fees and Charges; and Other Revenue are based on the best estimates of those agencies which provide the goods or services, or which actively manage the particular revenue item; and

• Dividend, Tax and Rate Equivalent Income from GBEs and SOCs is based on projected returns reflected in the corporate plans prepared by each Government business.

For Income Statement expenses, it is noted that:

• commitments announced by the Government during the 2009 Budget Speech are fully funded;

• projections reflect the level and timing of expenditure anticipated by agencies;

• agency expenses reflect the impact of the Government's Budget Management Strategies;

• all commitments in current wage agreements will be honoured, however, as agreements expire, new wage and salary agreements will be negotiated on the basis that funding, no greater than 1 per cent per annum in 2009-10 and 2010-11; and 2.5 per cent in 2011-12 and 2012-13, is provided to agencies.

• as wage agreements expire, new agreements will be negotiated within a framework of increases of no greater than 1.0 per cent per annum in 2009-10 and 2010-11, and 2.5 per cent in 2011-12 and 2012-13;

• no indexation for general operating expenses has been provided in 2009-10 and over the Forward Estimates;

• funding provided to the Department of Health and Human Services for medical and pharmaceutical supplies and grants is indexed at a rate of 4.0 per cent per annum; and

• agencies are fully funded for expected changes in Administered Items.


Table 4.1 highlights the projected Net Operating Balance and Fiscal Balance for each of the financial years from 2008-09 to 2012-13. The Forward Estimates Consolidated Fund Surpluses are detailed in Appendix 1 of Budget Paper No 2.


INCOME STATEMENT Table 4.1 details the General Government Sector Income Statement for 2009-10 and over the Forward Estimates period (2010-11 to 2012-13).

Table 4.1: Income Statement

2008-09))

Budget)

2009-10))

Budget)




$m) $m) $m) $m) $m) Revenue from Transactions

Grants 2 525.1) 2 759.1) 2 677.1) 2 719.6) 2 774.7)

Taxation 892.8) 810.0) 830.1) 871.8) 917.6)

Sales of Goods and Services 314.0) 375.0) 382.0) 392.3) 394.7)

Fines and Regulatory Fees 59.6) 64.1) 67.1) 68.8) 66.3)

Interest Income 94.6) 33.8) 31.2) 28.3) 34.1)

Dividend, Tax and Rate Equivalent Income 154.2) 100.0) 117.5) 119.7) 139.1)

Other Revenue 91.0) 73.8) 74.4) 79.3) 83.0)

4 131.3) 4 215.8) 4 179.4) 4 279.7) 4 409.4) Less Expenses from Transactions

Employee Expenses 1 760.6) 1 875.3) 1 885.0) 1 925.3) 1 951.0)

Superannuation 170.8) 213.3) 200.0) 197.3) 191.1)

Depreciation 223.2) 228.3) 235.7) 240.9) 246.8)

Supplies and Consumables 944.7) 937.9) 905.8) 903.8) 907.1)

Nominal Superannuation Interest Expense 168.4) 202.6) 209.2) 215.0) 220.4)

Borrowing Costs 17.1) 17.5) 17.7) 17.4) 15.8)

Grant Expenses 725.1) 814.4) 777.9) 773.1) 771.9)

Other Expenses 15.7) 43.6) 35.5) 31.0) 31.7)

4 025.6) 4 332.9) 4 266.7) 4 303.8) 4 335.8)

Equals NET OPERATING BALANCE 105.7) (117.1) (87.3) (24.1) 73.6)

Plus Other Economic Flows - Included in Operating

Result Gain/(Loss) on Sale of Non-Financial Assets 7.5) (5.5) 2.2) 3.6) 3.9)

Movement in Investments in GBEs and SOCs 147.0) 110.3) 163.6) 310.3) 305.0)

Movements in Superannuation Liability (24.6) ....) ....) ....) ....)

Other Gains/(Losses) (8.7) 1.7) 0.3) (10.2) (10.9)

121.3) 106.5) 166.2) 303.7) 298.1)

Equals Operating Result 227.0) (10.6) 78.9) 279.6) 371.7)


Table 4.1: Income Statement (continued)

2008-09))

Budget)

2009-10))

Budget)




$m) $m) $m) $m) $m) Plus Other Economic Flows - Other Movements in

Equity Revaluations of Non-Financial Assets 246.0) 222.7) 232.9) 239.3) 235.5)

Other Non-Owner Movements in Equity 14.7) (1.3) 16.9) 54.5) 48.2)

260.7) 221.4) 249.9) 293.8) 283.7)

Equals Comprehensive Result 487.7) 210.8) 328.8) 573.4) 655.4)

KEY FISCAL AGGREGATES NET OPERATING BALANCE 105.7) (117.1) (87.3) (24.1) 73.6) Less Net Acquisition/(Disposal) of Non-Financial

Assets Purchases of Non-Financial Assets 350.4 758.2 680.1 423.6 327.8

Sales of Non-Financial Assets (51.6) (77.6) (40.0) (39.2) (40.4)

Depreciation (223.2) (228.3) (235.7) (240.9) (246.8)

75.5 452.3 404.4 143.5 40.6

Equals FISCAL BALANCE 30.2) (569.5) (491.6) (167.6) 33.0)

Key Fiscal Aggregates Net Operating Balance The Net Operating Balance is estimated to be a deficit of $117.1 million in 2009-10, a deficit of $87.3 million in 2010-11, a deficit of $24.1 million in 2011-12 and a surplus of $73.6 million in 2012-13. A Net Operating Surplus indicates that the ordinary operations of government are sustainable and that there are funds available, on an accrual basis, to increase service delivery, increase assets, or to decrease liabilities. A deficit indicates that future adjustments will be required to achieve sustainability; that one-off expenditure may have occurred to meet one-off projects or programs; and/or revenues are not sufficient to meet all expenses for the current year. Further information on this expenditure is provided in this Chapter. Chart 4.1 illustrates the Net Operating Balance since 1999-00.


Chart 4.1: Net Operating Balance

(150)(100)

(50)....

50 100 150 200 250 300

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

$ m

illio

n

Actual Estimated Outcome Budget and Forward Estimates

Fiscal Balance The Fiscal Balance is estimated to be a deficit of $569.5 million in 2009-10, a deficit of $491.6 million in 2010-11, a deficit of $167.6 million in 2011-12, and a surplus of $33.0 million in 2012-13. A Fiscal Surplus indicates that the Government is saving more than enough to finance all of its capital spending, whilst a Fiscal Deficit indicates that the Government is spending reserves, including previously accumulated surpluses, to fund its capital spending. Chart 4.2 illustrates the Fiscal Balance since 1999-00.

Chart 4.2: Fiscal Balance

(800)

(600)

(400)

(200)

....

200

400

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

$ m

illio

n

Actual Estimated Outcome Budget and Forward Estimates


Other Fiscal Aggregates Operating Result The Operating Result is similar to the Net Operating Balance, however it also includes changes in asset and liability balances resulting from movements in market values rather than as a result of government operations. The movement in the Operating Result primarily reflects the increase in growth in the net assets of Government Businesses. These gains or losses on assets or liabilities are 'unrealised' and are not available to fund government operations.

The Operating Result is estimated to be a deficit of $10.6 million in 2009-10, and a surplus of $78.9 million in 2010-11, $279.6 million in 2011-12, and $371.7 million in 2012-13.

Comprehensive Result The Comprehensive Result is similar to the Operating Result in that it includes unrealised movements in the value of assets and liabilities that impact on net assets. The movement in the Comprehensive Result primarily reflects increases in the value of the Government's non-financial assets due to revaluations and is not available to fund operations.

The Comprehensive Result is estimated to be a surplus of $210.8 million in 2009-10, $328.8 million in 2010-11, $573.4 million in 2011-12, and $655.4 million in 2012-13.


REVENUE Total Revenue is estimated to be $4 215.8 million in 2009-10, an increase of $84.5 million or 2.0 per cent on 2008-09 budgeted revenue of $4 131.3 million. Total Revenue for the Forward Estimates on a same policy basis is estimated to be $4 179.4 million in 2010-11, $4 279.7 million in 2011-12 and $4 409.4 million in 2012-13. This Total Revenue profile reflects an average growth in revenue of 1.5 per cent or $64.5 million per annum over the Forward Estimates.

Grants Grants primarily reflect funding from the Australian Government. Significant reforms to Commonwealth-State financial relations were implemented on 1 January 2009, as a result of the Council of Australian Governments (COAG) Intergovernmental Agreement on Federal Financial Relations (IGA). The IGA has resulted in the reclassification of many Australian Government grants between the categories of Specific Purpose Payments, National Partnership Payments and Other Grants and Subsidies.

For further information on Commonwealth-State relations and the implementation of COAG's IGA, refer to Chapter 9 Commonwealth-State Financial Arrangements of this Budget Paper.

Grants is estimated to be $2 759.1 million in 2009-10, an increase of $234.0 million or 9.3 per cent on the 2008-09 Budget estimate of $2 525.1 million. Over the Forward Estimates, Grants will continue to increase by an average of $5.2 million or 0.2 per cent per annum to $2 774.7 million in 2012-13.

Detailed information on Grants is provided in Table 4.2.


Table 4.2: Grants 2008-09 2009-10 2010-11 2011-12 2012-13

Budget BudgetForward Estimate

Forward Estimate

Forward Estimate

$m $m $m $m $m General Purpose Payments

GST Revenue 1 751.7 1 526.5 1 558.7 1 707.8 1 801.6

1 751.7 1 526.5 1 558.7 1 707.8 1 801.6 Specific Purpose Payments

Education National Schools - Government Schools1 73.5 89.9 93.7 97.3 101.0

National Schools - Non-Government Schools2 .... 133.0 140.7 155.7 171.9

National Skills and Workforce Development3 32.3 30.8 31.3 31.6 31.8

Total Education Specific Purpose Payments 105.8 253.7 265.7 284.6 304.7 Health and Human Services

Healthcare4 226.0 246.1 263.6 282.9 304.6

Disability Services5 21.9 28.2 31.1 33.2 32.6

Affordable Housing6 30.2 34.4 33.7 32.7 31.7

Total Health and Human Services Specific Purpose Payment 278.1 308.7 328.4 348.8 368.9

Other2,7 389.5 .... .... .... ....

Total Specific Purpose Payments 773.4 562.4 594.1 633.4 673.6 Notes: 1. The 2008-09 estimate includes capital and recurrent funding for the Government Schools component under the

Primary and Secondary Education Specific Purpose Payment. 2. The 2008-09 estimate for the Non-Government Schools component under the Primary and Secondary Education

Specific Purpose Payment is reflected under Other and is $130.0 million. 3. The 2008-09 estimate for National Skills and Workforce Development includes capital and recurrent funding under

the Technical and Further Education Specific Purpose Payment only. 4. The 2008-09 estimate for Healthcare represents funding through the Australian Healthcare Grant only. 5. The 2008-09 estimate for Disability Services is funding under the Disability Services Grants only. 6. The 2008-09 estimate for Affordable Housing incorporates funding under the Commonwealth-State Housing

Agreement and the Supported Accommodation Assistance Program. 7. The 2008-09 estimate for Other represents the balance of the Specific Purpose Payments to the State. Most of these

other payments have been reclassified as National Partnership Payments for the 2009-10 Budget year.


Table 4.2: Grants (continued) 2008-09 2009-10 2010-11 2011-12 2012-13


Forward Estimate

Forward Estimate

$m $m $m $m $m National Partnerships

Education National Partnership Payments .... 0.9 0.5 .... ....

National Partnership Reform Payments

Digital Education Revolution - Government

Schools .... 4.8 3.4 3.3 3.3

Digital Education Revolution - Non-Government

Schools .... 2.3 1.7 1.7 1.7

Low SES School Communities .... 7.1 9.6 17.5 17.0

Trade Training Centres in Schools .... 6.2 6.4 6.6 6.8

Early Childhood Reform .... 1.8 2.2 6.2 10.6

Indigenous Early Childhood (Child and Family

Centres) .... 2.1 1.9 1.5 1.1

Other .... 4.3 0.7 5.2 4.2

Total .... 28.6 25.9 42.0 44.7


Building the Education Revolution - Government

Schools .... 151.3 98.6 .... ....

Building the Education Revolution –

Non-Government Schools .... 56.1 34.4 .... ....

Total .... 207.4 133.0 .... ....

Total Education National Partnerships .... 236.9 159.4 42.0 44.7 Healthcare

National Partnership Payments

Essential Vaccines .... 7.3 7.4 7.5 7.5

Launceston General Hospital - Acute Medical

and Surgical Unit .... 24.4 5.6 .... ....

PET Scanner .... 3.5 .... .... ....

Other .... 11.7 9.1 3.9 0.5

Total .... 46.9 22.1 11.4 8.0

National Partnership Reform Payments .... 0.5 0.8 3.6 5.5

Total Healthcare National Partnerships .... 47.4 22.9 15.0 13.5




Forward Estimate

Forward Estimate

$m $m $m $m $m Community Services (including Disability)

Home and Community Care .... 31.2 34.0 37.1 40.4

Other .... 3.6 3.7 3.7 1.2

Total Community Services (including Disability) National Partnerships .... 34.8 37.7 40.8 41.6

Housing

National Partnership Reform Payments Homelessness .... 4.3 4.5 2.6 2.6

Social Housing .... 4.9 2.1 3.1 2.8

Indigenous Housing .... 4.6 .... .... ....

Total .... 13.8 6.6 5.7 5.4


Social Housing .... 94.9 40.7 7.3 ....

Total Housing National Partnerships .... 108.7 47.3 13.0 5.4 Infrastructure

National Partnership Payments Nation Building (includes former AusLink)1 .... 102.0 125.4 123.4 58.4

Other .... 2.3 2.3 2.3 2.3

Total .... 104.3 127.7 125.7 60.7


Black Spots .... 2.0 .... .... ....

Level Crossings .... 3.6 .... .... ....

Total .... 5.6 .... .... ....

Total Infrastructure National Partnerships .... 109.9 127.7 125.7 60.7

Note: 1. The 2008-09 Budget estimate for AusLink was previously reflected as a Specific Purpose Payment.




Forward Estimate

Forward Estimate

$m $m $m $m $m Skills and Workforce Development

National Partnership Payments .... 0.6 0.6 0.6 0.6

National Partnership Reform Payments

Productivity Places Program .... 6.5 9.9 11.3 ....

Total Skills and Workforce Development National Partnerships .... 7.1 10.5 11.9 0.6

Environment


Caring for Our Country (National Resource

Management component only) .... 5.7 5.7 5.7 5.7

Other .... 16.3 5.4 6.6 6.6

Total Environment National Partnerships .... 22.0 11.1 12.3 12.3 Other

National Partnership Payments Financial Assistance Grants to Local Government .... 46.4 64.8 67.0 69.6

Other .... 29.4 14.8 14.3 14.6

Total Other National Partnerships .... 75.8 79.6 81.3 84.2

Total National Partnership Payments .... 642.6 496.2 342.0 263.0 Other Grants and Subsidies1 .... 27.6 28.1 36.4 36.5

TOTAL GRANTS AND SUBSIDIES 2 525.1 2 759.1 2 677.1 2 719.6 2 774.7

Note: 1. Other Grants and Subsidies primarily relates to payments to the State for Commonwealth Own Purpose

Expenditure.


General Purpose Payments General Purpose Payments are anticipated to be $1 526.5 million in 2009-10, a decrease of $225.2 million or 12.9 per cent below the 2008-09 Budget estimate of $1 751.7 million. The decrease between the 2008-09 and 2009-10 Budget estimates is due to a reduction in Goods and Services Tax (GST) collections as a result of a slowing Australian economy, as well as a reduction in Tasmania's share of the GST pool as a result of an improvement in Tasmania's relative fiscal capacity. Over the Forward Estimates, General Purpose Payments will increase by an average of $91.7 million or 6.0 per cent per annum to $1 801.6 million in 2012-13.

Since the discontinuation of National Competition Policy payments at the end of 2005-06, Tasmania's General Purpose Payments have consisted solely of GST Revenue. The decline in Tasmania's GST revenue is mainly driven by a fall in the GST pool in 2008-09 and 2009-10. This is the first time GST collections have declined since its inception, highlighting the impact of the national economic downturn. Furthermore, Tasmania's assessed GST relativity and the State's share of the national population have both declined for 2009-10, which will reduce Tasmania's potential GST revenue by an estimated $40.0 million and $19.0 million respectively. GST revenue for 2009-10 is also affected by the repayment of $11.0 million in net overpayments of GST deferral compensation to the Australian Government. This will be deducted directly from GST receipts.

Tasmania's GST Revenue is forecast to gradually return to growth in 2010-11, with an acceleration of growth expected to occur after 2010-11. As a result, in real per capita terms, Tasmania's GST revenue is forecast to decline by 6.7 per cent in 2009-10, and in 2010-11 grow by around 1.6 per cent.

In terms of the net benefit to Tasmania attributed to the GST and the accompanying national tax reforms, the Tasmanian Government has abolished a far wider range of taxes than was ever envisaged when the GST sharing agreement was negotiated. As a result of providing these tax cuts to the community and additional expenditures incurred under the Intergovernmental Agreement (IGA), the true net benefit to the State from the GST has been realised in this way.

Specific Purpose Payments Specific Purpose Payments are anticipated to be $562.4 million in 2009-10, a decrease of $211.0 million or 27.3 per cent below the 2008-09 Budget estimate of $773.4 million. The decrease reflects the reclassification of Specific Purpose Payments to National Partnership Payments and Other Grants and Subsidies, including AusLink. Over the Forward Estimates, Specific Purpose Payments will increase by an average of $37.1 million or 6.6 per cent per annum to $673.6 million in 2012-13. The increase in funding from the Australian Government primarily relates to the following grants:

• Healthcare;

• Schools;

• Skills and Workforce Development; and

• Disability Services.


National Partnership Payments National Partnership Payments are anticipated to be $642.6 million in 2009-10, $496.2 million in 2010-11, $342.0 million in 2011-12 and $263.0 million in 2012-13. The increase in funding from the Australian Government primarily relates to the following payments:

• Nation Building - Economic Stimulus Plan funding for:

− Building the Education Revolution ($207.4 million in 2009-10 and $133.0 million in 2010-11);

− Social Housing ($94.9 million in 2009-10, $40.7 million in 2010-11 and $7.3 million in 2011-12); and

− Black Spots and Level Crossings ($5.6 million in 2009-10);

• Launceston General Hospital – Acute Medical and Surgical Unit ($24.4 million in 2009-10 and $5.6 million in 2010-11); and

• a reclassification of Specific Purpose Payments to National Partnership Payments, and Other Grants and Subsidies.

Other Grants and Subsidies The majority of Other Grants and Subsidies reflect payments made by the Australian Government directly to agencies for Commonwealth Own Purpose Expenditure (COPEs). Other Grants and Subsidies is anticipated to be $27.6 million in 2009-10, $28.1 million in 2010-11, $36.4 million in 2011-12 and $36.5 million in 2012-13.

Taxation Total Taxation Revenue for 2009-10 is anticipated to be $810.0 million, a decrease of $82.8 million or 9.3 per cent below the 2008-09 Budget estimate of $892.8 million. Over the Forward Estimates, Taxation Revenue will increase by an average of $35.9 million or 4.4 per cent per annum to $917.6 million in 2012-13.

Chart 4.3 illustrates the estimated total Taxation Revenue in 2009-10 and a percentage breakdown of the Taxation Revenue categories.


Chart 4.3: Taxation Revenue, 2009-10

Land Tax$90.0m (11.1%)

Gambling Taxes$95.6m (11.8%)

Guarantee Fees$20.1m (2.5%)

Vehicle Registration Fees

$29.4m (3.6%)

Payroll Tax$257.0m (31.7%)

Duties$213.2m (26.3%)

Motor Taxation$54.2m (6.7%)

State Fire Commission

$50.7m (6.3%)

Table 4.3 provides details of the categories of Taxation Revenue.

Table 4.3: Taxation Revenue 2008-09) 2009-10) 2010-11) 2011-12) 2012-13)

Budget) Budget)Forward) Estimate)

Forward) Estimate)

Forward)Estimate)

$m) $m) $m) $m) $m) Financial Transaction Taxes

Duties 310.4) 213.2) 221.0) 229.1) 237.7)

Gambling Taxes

Betting Exchange Taxes and Levies 6.2) 7.3) 7.7) 8.1) 8.5)

Casino Tax and Licence Fees 60.3) 58.5) 59.8) 61.2) 62.7)

Lottery Tax 25.5) 23.8) 24.3) 24.8) 25.5)

Totalizator Wagering Levy ....) 6.0) 6.1) 6.3) 6.4)

Land Tax 83.9) 90.0) 90.0) 92.2) 94.5)

Motor Taxation 54.4) 54.2) 56.5) 58.5) 60.6)

Payroll Tax 266.1) 257.0) 252.4) 267.0) 282.8)

Receipts from Government Businesses

Guarantee Fees 11.6) 20.1) 29.6) 39.1) 50.9)

State Fire Commission Revenue 48.2) 50.7) 52.6) 54.7) 56.6)

Vehicle Registration Fees 26.2) 29.4) 30.0) 30.7) 31.4)

TOTAL TAXATION REVENUE 892.8) 810.0) 830.1) 871.8) 917.6)


The major elements of Taxation Revenue for the 2009-10 Budget are discussed below.

• Duties revenue is anticipated to be $213.2 million, a decrease of $97.2 million or 31.3 per cent below the 2008-09 Budget estimate of $310.4 million. The decrease in Duties revenue from 2008-09 to 2009-10 reflects a significant reduction in conveyance duty due to a reduction in sales activity in the residential property market. Over the Forward Estimates, Duties revenue will increase moderately by an average of $8.2 million or 3.8 per cent per annum to $237.7 million in 2012-13. The increase in Duties revenue across the Forward Estimates reflects a gradual return in consumer confidence and expected increases in conveyance duties resulting from sales activity in the residential and commercial property markets.

• Gambling Tax is anticipated to be $95.6 million, an increase of $3.6 million or 3.9 per cent above the 2008-09 Budget estimate of $92.0 million. Over the Forward Estimates, Gambling Taxes will continue to increase by an average of $2.5 million or 2.6 per cent per annum to $103.1 million in 2012-13. The increase over the Forward Estimates primarily reflects the introduction of the Totalizator Wagering Levy.

• Land Tax is anticipated to be $90.0 million, an increase of $6.1 million or 7.3 per cent above the 2008-09 Budget estimate of $83.9 million. Over the Forward Estimates, Land Tax will increase by an average of $1.5 million or 1.7 per cent per annum to $94.5 million in 2012-13. The increase in Land Tax over the Forward Estimates reflects expected increases in property values arising from revaluations. Based on advice from the Valuer-General, there have been increases in the land value of properties in the municipalities of Hobart, Devonport and Kingborough arising from a rolling-program of revaluations, albeit at a more moderate rate than in recent years.

• Motor Taxation is anticipated to be $54.2 million, a decrease of $200 000 or 0.4 per cent below the 2008-09 Budget estimate of $54.4 million. The decrease in 2009-10 reflects an expected decline in the number of registered motor vehicles, as a result of the current economic environment. Over the Forward Estimates, Motor Taxation will increase by an average of $2.1 million or 3.9 per cent per annum to $60.6 million in 2012-13. The increase over the Forward Estimates reflects the expected underlying growth in the number of registered motor vehicles, offset by the full-year impact of the Government's initiative to reduce the rates of motor tax on light vehicles, that came into effect on 1 October 2007.

• Payroll Tax is anticipated to be $257.0 million, a decrease of $9.1 million or 3.4 per cent below the 2008-09 Budget estimate of $266.1 million. Over the Forward Estimates, Payroll Tax is forecast to decrease by a further $4.6 million in 2010-11, before returning to growth by an average of $15.2 million or 6.0 per cent per annum from 2010-11 to $282.8 million in 2012-13. The increase in Payroll Tax from 2010-11 to 2012-13 reflects an expected return to employment growth and increases in the levels of average weekly earnings of Tasmanian employees.

• Guarantee Fee Receipts from Government Business Enterprises and State-owned Companies are estimated to be $20.1 million, an increase of $8.5 million or 73.3 per cent above the 2008-09 Budget estimate of $11.6 million. Over the Forward Estimates, Guarantee Fee Receipts will continue to increase by an average of $10.3 million per annum to $50.9 million in 2012-13. Guarantee Fees offset the borrowing cost advantage of State ownership. As the Global Financial Crisis has evolved, the cost of borrowing in the private sector has risen, which is reflected in higher Guarantee Fee rates that are applied to Government Business Enterprises and State-owned Companies borrowings, and hence increased Guarantee Fees. Higher borrowing levels by Aurora Energy and Transend Networks have also contributed to increased fees.

• State Fire Commission receipts represent the revenue raised by the State Fire Commission under the Fire Services Act 1979. In 2009-10, it is anticipated revenue raised by the Commission will be


$50.7 million, an increase of $2.5 million, or 5.2 per cent above the 2008-09 Budget estimate of $48.2 million. Over the Forward Estimates, State Fire Commission revenue will continue to increase by an average of $2.0 million or 3.9 per cent per annum to $56.6 million in 2012-13. State Fire Commission receipts reflect the Fire Service Contribution, Insurance Fire Levy and Motor Vehicle Fire Levy. The State Fire Commission determined that the Fire Service Contribution be increased by five per cent in 2009-10, and that the Motor Vehicle Fire Levy will increase by 5.5 per cent. This increase will continue to enable the Commission to: offset some of the decline in revenue from the Insurance Fire Levy; meet increases in operational costs; and continue its Fire Fighting Appliance Replacement Program.

• Vehicle Registration Fees are anticipated to be $29.4 million, an increase of $3.2 million or 12.2 per cent above the 2008-09 Budget estimate of $26.2 million. The increase reflects a slower than expected take-up rate of concessions, following the extension of the Motor Vehicle Registration concession to Health Care Card Holders. Over the Forward Estimates, Vehicle Registration Fees will increase by an average of $700 000 or 2.4 per cent per annum to $31.4 million in 2012-13.

Sale of Goods and Services Revenue from Sales of Goods and Services is estimated to be $375.0 million in 2009-10, an increase of $61.0 million or 19.4 per cent above the 2008-09 Budget of $314.0 million. Over the Forward Estimates, Sales of Goods and Services will continue to increase by an average of $6.6 million or 1.8 per cent per annum to $394.7 million in 2012-13.

Sale of Goods and Services includes:

• patient fees collected by the Department of Health and Human Services;

• rental revenue received by Housing Tasmania;

• rental revenue from other Government properties;

• revenue collected from student fees, levies and training services by the Department of Education, Tasmanian Academy, Tasmanian Polytechnic and Tasmanian Skills Institute;

• revenue earned by prison industries and revenue collected for various other services provided by the Department of Justice including fees for Magistrate Courts, Consumer Affairs, and the Registrar-General; and

• revenue collected for Land Titles Office fees by the Department of Primary Industries, Parks, Water and Environment.

Table 4.4 details the components of revenue from the Sale of Goods and Services by agency.


Table 4.4: Sale of Goods and Services1 2008-09) 2009-10) 2010-11) 2011-12) 2012-13)


Forward)Estimate)

Forward)Estimate)

$m) $m) $m) $m) $m) Departmental Fees and Recoveries

Economic Development, Tourism and the Arts2 8.5) 2.8) 2.6) 2.8) 3.0)

Education 44.2) 40.3) 41.4) 43.5) 44.2)

Finance-General3 1.9) 0.7) 0.8) 0.8) 0.8)

Health and Human Services4 148.4) 214.6) 220.2) 223.5) 222.9)

Infrastructure, Energy and Resources 6.0) 5.6) 5.7) 5.8) 6.0)

Justice 11.2) 12.0) 12.2) 12.4) 12.6)

Marine and Safety Tasmania5 4.3) 3.8) 3.4) 4.8) 4.1)

Police and Emergency Management 0.3) 0.3) 0.3) 0.4) 0.4)

Premier and Cabinet6 7.3) 8.7) 8.8) 8.8) 9.1)

Primary Industries, Parks, Water and Environment7 44.4) 36.5) 35.8) 36.0) 36.2

State Fire Commission 4.3) 4.2) 4.1) 3.8) 3.8)

Tasmanian Academy, Polytechnic and Skills

Institute8 17.1) 29.0) 29.4) 31.5) 33.7)

Tasmanian Audit Office9 3.7) 4.5) 4.7) 5.0) 5.2)

Treasury and Finance 10.4) 9.9) 10.4) 10.9) 10.7)

312.0) 372.9) 379.9) 390.1) 392.5)

Other Sales of Goods and Services 2.0) 2.1) 2.1) 2.2) 2.2)

TOTAL SALES OF GOODS AND SERVICES 314.0) 375.0) 382.0) 392.3) 394.7)

Notes: 1. The information provided in this section will differ from the Sales of Goods and Services for each agency in Budget

Paper No 2 Government Services due to the elimination of inter-agency transactions in the consolidation process. 2. The decrease in Economic Development, Tourism and the Arts reflects the closure of Tasmania's Temptations,

Launceston Call Centre, and the reclassification of the Hobart Technopark rental income to Other Revenue. 3. The decrease in Finance-General reflects a decrease in agency accommodation rental revenue. 4. The increase in Health and Human Services primarily reflects additional Australian Government funding for the

management and operation of the Mersey Community Hospital ($60.0 million). 5. The decrease in Marine and Safety Tasmania in 2009-10 and the increase in 2011-12 reflects the timing of

recreational licence renewals, which occur on a three-year basis. 6. The increase in Premier and Cabinet reflects an expected increase in business activity by TMD. 7. The decrease in Primary Industries, Parks, Water and Environment reflects revised Crown Land rental revenue

estimates. 8. The increase in Tasmanian Academy, Polytechnic and Skills Institute reflects a more accurate estimate based on

current projections of the revenue collected from student fees, levies and skills charges from the three new entities. 9. The increase in the Tasmanian Audit Office reflects an increase in fees charged for financial audits.


Fines and Regulatory Fees Revenue from Fines and Regulatory Fees is estimated to be $64.1 million in 2009-10, an increase of $4.5 million or 7.6 per cent above the 2008-09 Budget of $59.6 million. Over the Forward Estimates, Fines and Regulatory Fees will increase by $3.0 million in 2010-11, $1.7 million in 2011-12, and decrease by $2.5 million in 2012-13 to $66.3 million. Table 4.5 details revenue from Fines and Regulatory Fees.

Table 4.5: Fines and Regulatory Fees1 2008-09) 2009-10) 2010-11) 2011-12) 2012-13)


Forward) Estimate)

Forward)Estimate)

$m) $m) $m) $m) $m) Fines 27.4) 26.0) 27.0) 28.1) 29.1)

Fees Abalone Licences2 7.2) 6.5) 6.6) 6.7) 6.8)

Water Licence Fees3 0.5) 0.5) 2.1) 2.3) 2.3)

Environment Fees4 2.0) 2.5) 2.4) 2.4) 2.4)

Certificate of Competency Fees 0.2) 0.2) 0.2) 0.2) 0.2)

Driver's Licences5 4.9) 7.6) 7.8) 8.0) 8.3)

Photo Licence Fees 1.3) 1.5) 1.6) 1.6) 1.7)

Quarantine Fees 2.0) 2.0) 2.1) 2.1) 2.2)

Other6 14.1) 17.2) 17.2) 17.3) 13.3)

TOTAL FINES AND REGULATORY FEES 59.6) 64.1) 67.1) 68.8) 66.3)

Notes: 1. The information provided in this section will differ from the Fines and Regulatory Fees for each agency in Budget

Paper No 2 Government Services due to the elimination of inter-agency transactions in the consolidation process. 2. The decrease in Abalone Licences in 2009-10 reflects an expected fall in the beach price as a result of various

factors including the interrupted fishing season due to the detection of Abalone Viral Ganglioneuritis and the Global Financial Crisis.

3. The increase in Water Licence Fees in 2010-11 reflects additional revenue from the Water and Sewerage Reform Program. This revenue will meet costs incurred by those Departments responsible for administering the new regulatory environment under the Water and Sewerage Industry Bill 2008.

4. The increase in Environment Fees reflects a regulatory price increase in permit fees. 5. The increase in Driver's Licences Fees reflects the five year periodic licensing renewal profile, additional revenues

as part of the implementation of the Novice Driver Licensing Reforms and the introduction of new concession verification procedures for eligible concession card holders.

6. The increase in Other Fees in 2009-10 primarily reflects a more accurate estimate based on current projections for regulatory fees received for the Builders Accreditation Scheme and Building Administration Fund. The decrease in Other Fees in 2012-13 reflects the cessation of the Road Safety Levy in December 2012.


Interest Income Interest Income is estimated to be $33.8 million in 2009-10, a decrease of $60.8 million or 64.3 per cent below the 2008-09 Budget estimate of $94.6 million. The decrease reflects both a reduction in the levels of cash held in the Public Account and lower than forecast interest rates. Over the Forward Estimates, Interest Income will decrease by $2.6 million in 2010-11, $2.9 million in 2011-12 and increase by $5.8 million in 2012-13 to $34.1 million. The increase in 2012-13 reflects an increase in the levels of cash held in the Public Account.

Dividend, Tax and Rate Equivalent Income Dividend, Tax and Rate Equivalent Income is estimated to be $100.0 million in 2009-10, a decrease of $54.2 million or 35.1 per cent from the Budget estimate of $154.2 million in 2008-09. The decrease is attributable to the impact of the ongoing Global Financial Crisis on the financial performance of Government Business Enterprises and State-owned Companies, particularly the Motor Accidents Insurance Board (MAIB) which has been affected by declining investment values following several years of above average returns. The Tasmanian Ports Corporation (Tasports) will pay a Special Dividend of $7.0 million in 2009-10, and an additional Dividend of $3.0 million in 2009-10 representing a change in dividend policy to 100 per cent of profit after tax. The total Dividends paid by Tasports in 2009-10 will be $13.1 million.

Over the Forward Estimates period, Dividend, Tax and Rate Equivalent Income is forecast to grow steadily by an average of $13.0 million or 13.0 per cent per annum to $139.1 million in 2012-13. The growth is primarily driven by Hydro Tasmania's forecasted improvement in its financial performance, as water storages are replenished. As the economic conditions improve, it is expected that financial returns from Government businesses will also improve, although it will be some time before income will return to the level experienced in 2008-09.

Table 4.6 provides a breakdown of Dividend, Tax and Rate Equivalent Income.


Table 4.6: Dividend, Tax and Rate Equivalent Income 2008-09) 2009-10) 2010-11) 2011-12) 2012-13)


Forward) Estimate)

Forward)Estimate)

$m) $m) $m) $m) $m) Dividends

Aurora Energy Pty Ltd 10.6) 9.6) 9.6) 10.5) 11.3)

Forestry Tasmania1 0.5) ....) 0.6) 1.9) 1.8)

Hydro Tasmania2 ....) 2.7) 4.8) 12.4) 24.4)

Motor Accidents Insurance Board3 30.1) 17.4) 13.8) 6.4) ....)

Rivers and Water Supply Commission4 ....) ....) 6.7) 2.3) 2.0)

Tasmanian Ports Corporation5 4.2) 6.1) 2.0) 2.0) 2.0)

Tasmanian Public Finance Corporation6 3.5) 1.0) 1.0) 2.5) 2.7)

The Public Trustee 0.3) 0.3) 0.1) 0.1) 0.2)

Transend Networks Pty Ltd7 15.0) 1.1) 6.3) 4.0) 5.2)

64.2) 38.1) 44.9) 42.1) 49.6)

Special Dividends Motor Accidents Insurance Board 10.0) ....) ....) ....) ....)

Tasmanian Ports Corporation5 ....) 7.0) ....) ....) ....)

10.0) 7.0) .…) .…) .…)

Taxation Equivalents Aurora Energy Pty Ltd8 21.5) 22.1) 14.6) 13.4) 21.4)

Hydro Tasmania9 ....) ....) 23.2) 33.6) 34.7)

Motor Accidents Insurance Board10 30.0) 8.0) 12.6) 10.7) 12.7)

Tasmanian Ports Corporation 2.5) 2.3) 1.6) 1.6) 1.6)

Tasmanian Public Finance Corporation ....) 3.5) 2.5) 1.0) 0.8)

The Public Trustee 0.3) 0.1) 0.1) 0.1) 0.2)

TOTE Tasmania Pty Ltd 0.6) ....) ....) ....) ....)

Transend Networks Pty Ltd11 22.1) 16.0) 15.0) 14.0) 15.0)

77.1) 52.0) 69.5) 74.5) 86.4)

Rates Equivalents Hydro Tasmania 2.9) 2.9) 3.0) 3.1) 3.1)

2.9) 2.9) 3.0) 3.1) 3.1)

TOTAL DIVIDEND TAX AND RATE EQUIVALENT INCOME 154.2) 100.0) 117.5) 119.7) 139.1)

Notes: 1. The decrease in Dividends from Forestry Tasmania in 2009-10 reflects weaker performance than expected in

2008-09 and concerns relating to sales volumes going forward. 2. The increase in Dividends from Hydro Tasmania in 2011-12 and 2012-13 reflects improving financial performance as

water storages are replenished and increasing dividend payout ratios.


3. The decrease in Dividends from the Motor Accidents Insurance Board (MAIB) from 2009-10 to 2012-13 reflects the estimated impact of the Global Financial Crisis on its investment performance.

4. The Dividends from the Rivers and Water Supply Commission represent the repayment of the Government's equity contribution for the Meander Valley Pipeline Extensions Project.

5. The 2009-10 Budget figure for the Tasmanian Ports Corporation (Tasports) reflects an increased dividend arrangement for the year of 100.0 per cent of net profit after tax. Tasports will also pay an additional Special Dividend of $7.0 million in 2009-10.

6. The Tasmanian Public Finance Corporation (Tascorp) is anticipated to pay a discretionary dividend of at least $1.0 million in 2009-10, reflecting a surplus of retained earnings. This discretionary dividend will be in addition to its annual $3.5 million lump sum payment, which comprises a combination of income tax equivalents and ordinary dividends. Movements in Tascorp's ordinary dividends and income tax equivalents are offsetting over the Forward Estimates period.

7. The decrease in Transend Networks' Dividend estimates from 2008-09 to 2009-10 is due to the impact of increased interest expenses from higher borrowings, higher depreciation, higher superannuation expenses, partly offset by improved prescribed revenues in 2009-10 flowing from the Australian Energy Regulator's revenue cap determination.

8. The decrease in Tax Equivalents from Aurora Energy in 2010-11 reflects reduced forecast income, partly due to revenue timing movements in 2009-10. The increase in 2012-13 reflects higher forecast income due to the new Network revenue cap determination for 2012-13 onward.

9. The increase in Tax Equivalents from Hydro Tasmania in 2010-11 and 2011-12 reflects its improving financial performance which extinguishes accrued tax losses.

10. The decrease in Tax Equivalents from MAIB in 2009-10 reflects the estimated impact of the Global Financial Crisis on its financial performance.

11. The decrease in Tax Equivalents from Transend Networks in 2009-10 reflects higher interest, superannuation and depreciation expenses.


Other Revenue Other Revenue is anticipated to be $73.8 million, a decrease of $17.2 million or 18.9 per cent below the 2008-09 Budget estimate of $91.0 million. Over the Forward Estimates, Other Revenue will increase by $600 000 in 2010-11, $4.9 million in 2011-12, and $3.7 million in 2012-13 to $83.0 million. Table 4.7 lists the sources of Other Revenue.

Table 4.7: Other Revenue1

2008-09)

Budget)

2009-10)

Budget)




$m) $m) $m) $m) $m)

Mineral Royalties2 42.7) 19.3) 18.4) 18.4) 18.4)

Regional Water Authority Licence Fees 1.9) 2.2) 2.2) 2.2) 2.2)

Local Government Revenue Guarantee Recoveries3 ....) ....) 1.7) 6.2) 9.6)

Other Revenue by Agency

Economic Development, Tourism and the Arts4 ....) 1.0) 1.0) 1.1) 1.1)

Finance-General 0.7) 0.6) 0.6) 0.6) 0.6)

Health and Human Services5 22.0) 24.8) 24.6) 25.1) 25.5)

Infrastructure, Energy and Resources6 3.1) 1.1) 1.1) 1.1) 1.1)

Justice7 2.3) 8.9) 9.0) 9.0) 9.0)

Nominal Insurer – dividend payment from HIH

Liquidator8 0.2) ....) ....) ....) ....)

Police and Emergency Management 6.1) 5.9) 5.9) 5.9) 5.9)

Primary Industries, Parks, Water and Environment 8.8) 8.7) 8.6) 8.3) 8.2)

State Fire Commission9 1.1) 0.7) 0.7) 0.8) 0.8)

Tasmanian Academy, Polytechnic and Skills

Institute10 1.5) ….) ….) ….) ….)

Other 0.5) 0.5) 0.5) 0.5) 0.5)

TOTAL OTHER REVENUE 91.0) 73.8) 74.4) 79.3) 83.0)

Notes: 1. The information provided in this section will differ from the Other Revenue for each agency in Budget Paper No 2

Government Services due to the elimination of inter-agency transactions in the consolidation process. 2. The decrease in Mineral Royalties reflects the impact of the Global Financial Crisis on commodity prices for mineral

resources. 3. The increase in Local Government Revenue Guarantee Recoveries reflects estimated recoveries under the Local

Government Water and Sewerage Reform Revenue Guarantee offer announced by the Treasurer on 19 May 2009. 4. The increase in Other Revenue from the Department of Economic Development, Tourism and the Arts in 2009-10

primarily reflects the reclassification of the Hobart Technopark rental income from Sales of Goods and Services. 5. The increase in Other Revenue from the Department of Health and Human Services in 2009-10 primarily reflects a

more accurate estimate of revenue from recoveries. 6. The decrease in Other Revenue from the Department of Infrastructure, Energy and Resources reflects the

reclassification of Road Safety revenue previously recorded as Other Revenue to the Driver's Licenses Fees, Photo License Fees and Regulatory Fees.

7. The increase in Other Revenue from the Department of Justice reflects a more accurate estimate based on current projections of revenue from WorkCover Tasmania activities.


8. As at 30 June 2009, it is anticipated that all borrowings associated with the transfer of HIH claims to CGU Insurance will be repaid. The levy raised to fund the cost of claims will cease on 30 June 2009.

9. The decrease in Other Revenue from State Fire Commission reflects the reclassification of Australian Government Grants of $400 000, which is now classified as Grants.

10. The decrease in Other Revenue from the Tasmanian Academy, Polytechnic and Skills Institute reflects the reclassification of Other Revenue to Sales of Goods and Services.


EXPENSES Total Expenses are anticipated to be $4 332.9 million, an increase of $307.3 million or 7.6 per cent above the 2008-09 budgeted expenses of $4 025.6 million. The implementation of the Government's Budget Management Strategies will hold Total Expenses relatively constant over the period of the Forward Estimates.

Employee Expenses Employee Expenses in 2009-10 are anticipated to be $1 875.3 million, an increase of $114.7 million or 6.5 per cent above the 2008-09 budgeted estimate of $1 760.6 million. Over the Forward Estimates, Employee Expenses will continue to increase by an average of $25.2 million or 1.3 per cent per annum to $1 951.0 million in 2012-13. The increase in Employee Expenses primarily reflects the honouring of commitments in current wage agreements, offset by the implementation of the Government's Budget Management Strategies. As agreements expire, new wage and salary agreements will be negotiated on the basis that funding, no greater than 1 per cent per annum in 2009-10 and 2010-11; and 2.5 per cent in 2011-12 and 2012-13, is provided to agencies.

The additional estimated expenditure in the 2009-10 Budget and Forward Estimates for Employee Expenses primarily relates to:

• the Department of Health and Human Services and expenditure related to various reviews and reforms by the Department, employee expenditure from the Mersey Community Hospital, the employment of additional nurses, and additional funding provided by the Australian Government for acute health services; and

• the Department of Education including expenditure relating to In School Education, Post Compulsory Education in Schools, Learning Services, the Tasmanian Academy, Polytechnic and Skills Institute.

Superannuation Superannuation in 2009-10 is anticipated to be $213.3 million, an increase of $42.5 million or 24.9 per cent above the 2008-09 budgeted estimate of $170.8 million. The Superannuation expense will decrease over the Forward Estimates by an average of $7.4 million or 3.5 per cent per annum to $191.1 million in 2012-13. The decrease in Superannuation expense over the Forward Estimates is driven by the service cost of the closed Defined Benefits Scheme which is estimated to reduce as the number of members in the scheme declines.

Depreciation Depreciation in 2009-10 is anticipated to be $228.3 million, an increase of $5.1 million or 2.3 per cent above the 2008-09 Budget estimate of $223.2 million. Over the Forward Estimates, Depreciation will continue to increase by an average of $6.2 million per annum or 2.7 per cent per annum to $246.8 million in 2012-13. The additional Depreciation expense primarily reflects alignment to a level consistent with 2007-08 actual expenditure. However, Depreciation will increase over the Forward Estimates as infrastructure investment projects are completed by agencies.


Supplies and Consumables Supplies and Consumables in 2009-10 is anticipated to be $937.9 million, a decrease of $6.8 million or 0.7 per cent below the 2008-09 Budget estimate of $944.7 million. Over the Forward Estimates, Supplies and Consumables will decrease to $907.1 million in 2012-13.

The major components of Supplies and Consumables in 2009-10 include expenditure on: maintenance ($129.7 million); medical, surgical and pharmacy supplies ($153.1 million); property services ($130.3 million); information technology ($67.2 million); communications ($48.5 million); travel and transport ($36.0 million); and advertising and promotion ($15.5 million).

In 2009-10 and over the Forward Estimates, reductions in Supplies and Consumables expenditure primarily reflects the impact of the Government's Budget Management Strategies, partially offset by some increases in Australian Government funding.

Nominal Superannuation Interest Expense Nominal Superannuation Interest Expense is anticipated to be $202.6 million in 2009-10, an increase of $34.2 million or 20.3 per cent on the 2008-09 Budget estimate of $168.4 million. The increase reflects the current actuarial assessment of the Government's superannuation liability and the lower than anticipated value of the superannuation assets at 30 June 2008. Over the Forward Estimates, Nominal Superannuation Interest Expense will continue to increase by an average of $5.9 million or 2.9 per cent per annum to $220.4 million in 2012-13.

Borrowing Costs Borrowing Costs in 2009-10 are anticipated to be $17.5 million, an increase of $400 000 or 2.3 per cent above the 2008-09 Budget estimate of $17.1 million. Over the Forward Estimates, Borrowing Costs are forecast to remain relatively stable until decreasing to $15.8 million in 2012-13 as debt is repaid.

Grant Expenses Grant Expenses in 2009-10 are anticipated to be $814.4 million, an increase of $89.3 million or 12.3 per cent above the 2008-09 budgeted estimate of $725.1 million. Over the Forward Estimates, Grant Expenses is estimated to decrease by $36.5 million in 2010-11, $4.8 million 2011-12 and $1.2 million in 2012-13.

The movement in Grant Expenses primarily reflects:

• an increase in the Australian Government Contribution for Non-Government Schools Grants of $61.8 million in 2009-10, $51.2 million in 2010-11, $29.0 million in 2011-12 and $29.0 million in 2012-13, primarily reflecting increases in the Nation Building - Economic Stimulus Plan, Digital Education Revolution and Education Specific Purpose Payment; and

• payments to the Tasmanian Racing Board of $27.0 million per annum from 2009-10.

The decrease over the Forward Estimates primarily reflects the completion of projects funded from the Special Capital Investment Funds. Details of these Funds are provided in Chapter 4 of Budget Paper No 2 Government Services.


Other Expenses Other Expenses in 2009-10 are anticipated to be $43.6 million, an increase of $27.9 million or 177.7 per cent from the 2008-09 budgeted estimate of $15.7 million. Over the Forward Estimates, Other Expenses will decrease to $31.7 million in 2012-13.

The increase of $27.9 million from 2008-09 to 2009-10 primarily reflects an increase in support for Local Government Water and Sewerage Reform of $5.0 million; an increase of $4.7 million for Cellar Door Sales Rebates; and an increase of $3.9 million by the Department of Justice, including $2.1 million to reflect a more accurate estimate of this expense based on current projections associated with WorkCover Tasmania.

The decrease in Other Expenses in 2010-11 primarily reflects the final payments for Cellar Door Rebate Savings to the Australian Government of $5.7 million in 2009-10, which extinguishes future payment obligations.

OTHER ECONOMIC FLOWS – INCLUDED IN OPERATING RESULT Gain or Loss on Sale of Non-Financial Assets The Gain or Loss on the Sale of Non-Financial Assets is anticipated to be a $5.5 million loss in 2009-10, a reduction of $13.0 million from the 2008-09 budgeted estimate of a $7.5 million gain in 2008-09. Over the Forward Estimates, gains on the Sale of Non-Financial Assets are anticipated. The gains primarily reflect sales of motor vehicles from the government car fleet, disposal of Housing Tasmania stock and sales of Crown land. The loss in 2009-10 primarily relates to the transfer of the Cradle Mountain Sewage Treatment Plant to the North-West Water Authority.

Movement in Investments in GBEs and SOCs Investments in Government Business Enterprises (GBEs) and State-owned Companies (SOCs) are estimated to grow by $110.3 million in 2009-10, a decrease of $36.7 million from the 2008-09 budgeted estimate of $147.0 million. Over the Forward Estimates, the movement in Investments in GBEs and SOCs will grow to $305.0 million in 2012-13. The increase reflects anticipated growth in the net assets of Government businesses.

Movement in Superannuation Liability The Movement in Superannuation Liability is estimated to be nil in 2009-10 and over the Forward Estimates. The movement reflects revisions to the Superannuation Liability and Expense estimates on the basis of the revised actuarial projections.


Other Gains or Losses Other Gains or Losses are estimated to be a $1.7 million gain in 2009-10, an increase of $10.4 million from the 2008-09 budgeted estimate of an $8.7 million loss. This estimate primarily reflects a decrease in the liabilities of the Tasmanian Risk Management Fund in accordance with the latest actuarial estimates. Over the Forward Estimates, increases in the liability are expected of $10.2 million in 2011-12 and $10.9 million in 2012-13, with equivalent expense movements.

OTHER ECONOMIC FLOWS – OTHER MOVEMENTS IN EQUITY Revaluations of Non-Financial Assets Revaluations of Non-Financial Assets are anticipated to be $222.7 million in 2009-10, a decrease of $23.3 million from the 2008-09 Budget estimate of $246.0 million. Over the Forward Estimates, Revaluations of Non-Financial Assets are anticipated to increase to $235.5 million in 2012-13 reflecting increases in the valuation of land held by the Department of Health and Human Services; the increase in the valuation of Tasmanian Museum and Art Gallery Heritage and Cultural Assets held by the Department of Economic Development, Tourism and the Arts; and increases in the value of assets held by the Department of Infrastructure, Energy and Resources.

Other Non-Owner Movements in Equity Other Non-Owner Movements in Equity is anticipated to be a loss of $1.3 million in 2009-10, a decrease of $16.0 million from the 2008-09 budgeted estimate of $14.7 million. Over the Forward Estimates, Other Non-Owner Movements in Equity will increase to $48.2 million in 2012-13. The movement primarily reflects fluctuations in income tax equivalents receivable from Government businesses.

NET ACQUISITION/(DISPOSAL) OF NON-FINANCIAL ASSETS Non-Financial Assets comprise land and fixed assets such as buildings, plant and equipment, heritage and cultural assets and roads that are used to facilitate the provision of services by the General Government Sector. The Net Acquisition or (Disposal) of Non-Financial Assets reflects capital acquisitions or disposal (purchases of non-financial assets less the proceeds from sales of non-financial assets) less depreciation expense.

Purchases of Non-Financial Assets Purchases of Non-Financial Assets is estimated to be $758.2 million, an increase of $407.8 million or 116.4 per cent above the 2008-09 budgeted estimate of $350.4 million. Over the Forward Estimates, Purchases of Non-Financial Assets is estimated to be $680.1 million in 2010-11, $423.6 million in 2011-12 and $327.8 million in 2012-13.


The major elements of the additional capital expenditure allocated in the 2009-10 Budget and Forward Estimates include:

• Nation Building - Economic Stimulus Plan: Social Housing expenditure ($142.8 million over three years), $94.9 million in 2009-10, $40.6 million in 2010-11 and $7.3 million in 2011-12;

• Launceston General Hospital Acute Medical Unit expenditure ($40.0 million over four years), $15.0 million in 2009-10, $16.5 million in 2010-11, $7.5 million in 2011-12 and $1.0 million in 2012-13;

• Child and Family Centres expenditure ($75.4 million over three years), $27.4 million in 2009-10 and 2010-11 and $20.5 million in 2011-12;

• Nation Building - Economic Stimulus Plan: Building the Education Revolution expenditure ($249.9 million over two years), $151.3 million in 2009-10 and $98.6 million in 2010-11; and

• additional Rail Infrastructure expenditure ($125.8 million over four years), $7.5 million in 2009-10, $30.5 million in 2010-11, $52.8 million in 2011-12 and $35.0 million in 2012-13.

For further information on infrastructure, refer to Chapter 7 Infrastructure Investment of this Budget Paper.

Sales of Non-Financial Assets Sales of Non-Financial Assets is estimated to be $77.6 million in 2009-10, an increase of $26.0 million or 50.4 per cent above the 2008-09 Budget estimate of $51.6 million. The increase in Sales of Non-Financial Assets in 2009-10 of $26.0 million primarily reflects sales of assets by the Department of Education; and the timing of major asset sales through the Crown Lands Administration Fund.

Over the Forward Estimates, Sales of Non-Financial Assets is anticipated to remain relatively constant at approximately $40.0 million per annum. The profile reflects the timing of major asset sales through the Crown Lands Administration Fund and includes the expected proceeds from the sale of non-core business assets previously held by the Hobart Ports Corporation; the sale of vehicles from the Government Motor Vehicle Fleet; and the sale of stock from the Housing portfolio. For reasons of commercial confidentiality, no estimate of the proceeds from the expected sale of TOTE Tasmania is included.


CASH FLOW STATEMENT A summary of the 2009-10 Cash Flow Statement is provided in Table 4.8.

Table 4.8: Cash Flow Statement

2008-09))

Budget)

2009-10))

Budget)




$m) $m) $m) $m) $m) Cash Flows from Operating Activities

Cash Receipts from Operating Activities Grants Received 2 525.1) 2 759.1) 2 677.1) 2 719.6) 2 774.7)

Taxation 892.8) 810.0) 830.1) 871.8) 917.6)



Interest Received 94.6) 33.2) 30.5) 27.6) 33.3)

Dividend, Tax and Rate Equivalents 154.2) 100.0) 117.5) 119.7) 139.1)

Other Receipts 224.7) 206.6) 207.6) 213.9) 219.2)

4 262.9) 4 336.7) 4 303.6) 4 404.8) 4 535.3)

Cash Payments for Operating Activities Employee Entitlements (1 734.0) (1 873.7) (1 855.5) (1 899.7) (1 921.1)

Superannuation (237.1) (268.0) (283.4) (296.3) (309.4)

Supplies and Consumables (946.6) (936.8) (905.5) (903.8) (906.8)

Borrowing Costs (16.6) (17.1) (17.2) (17.0) (15.3)

Grants and Subsidies Paid (724.9) (814.2) (777.7) (772.9) (771.7)

Other Payments (145.2) (171.5) (164.9) (164.8) (165.2)

(3 804.4) (4 081.4) (4 004.2) (4 054.4) (4 089.5)

Net Cash Flows from Operating Activities 458.4) 255.3) 299.4) 350.4) 445.8) Cash Flows from Investing Activities

Net Cash Flows from Non-Financial Assets Purchases of Non-Financial Assets (350.0) (757.9) (679.8) (423.3) (327.5)

Sales of Non-Financial Assets 51.6) 73.3) 38.4) 39.2) 40.4)

(298.4) (684.6) (641.4) (384.1) (287.1)

Net Cash Flows from Financial Assets (Policy Purposes) Equity Injections 2.7) (31.4) (31.3) (8.2) ....)

Net Advances Paid 3.4) (25.4) (18.7) 12.0) 21.5)

6.1) (56.8) (50.0) 3.7) 21.5)


Table 4.8: Cash Flow Statement (continued)

2008-09))

Budget)

2009-10))

Budget)




$m) $m) $m) $m) $m) Net Cash Flows from Financial Assets (Liquidity

Purposes) ....) ....) ....) ....) ....) Net Cash Flows from Investing Activities (292.3) (741.4) (691.5) (380.3) (265.6) Net Cash Flows from Financing Activities

Net Borrowing (23.1) 13.1) 11.7) (25.6) (37.3)

(23.1) 13.1) 11.7) (25.6) (37.3) Net Increase/(Decrease) in Cash Held 143.0) (473.0) (380.4) (55.6) 142.9) Cash at Beginning of the Year 1 243.0) 1 201.3) 728.3) 347.9) 292.2)Cash at End of the Year 1 386.0) 728.3) 347.9) 292.2) 435.1) KEY FISCAL AGGREGATES Net Cash Flows from Operating Activities 458.4) 255.3) 299.4) 350.4) 445.8)

Plus Net Cash Flows from Non-Financial Assets (298.4) (684.6) (641.4) (384.1) (287.1)

Equals CASH SURPLUS/(DEFICIT) 160.1) (429.2) (342.0) (33.7) 158.7)

Cash Surplus/(Deficit) The Cash Surplus/(Deficit) measure represents the net cash flows from operating activities plus the net cash flows from investments in non-financial assets. During periods when high capital spending is occurring, Cash Deficits (or substantially lower Cash Surpluses) will be realised.


POLICY AND PARAMETER STATEMENT A Policy and Parameter Statement (PPS) is a reconciliation of the major movements in a set of estimates of the Net Operating Balance made at two points in time. In this section, the movement reflects changes between the Forward Estimates reported in the 2008-09 Budget Papers and the current Budget Forward Estimates. These differ from movements presented earlier in this chapter, which report movements between the 2008-09 Budget estimates and the 2009-10 Budget.

The movements in the PPS are classified as revenue or expenses, and then further categorised as a policy or parameter change. The classification of a variation as a policy or parameter change is a matter of judgment and there may be some instances where part of a Government initiative may have both policy and parameter components.

Policy Variation For the purpose of the PPS in this chapter, a policy variation reflects a specific decision by the Government that has an impact on the Budget and Forward Estimates and is related to a new policy or represents a change in the Government's existing policy position. A decision to change a Budget or Forward Estimate aggregate, which is consistent with an existing policy, is not reflective of a policy decision.

Parameter Variation A parameter variation reflects changes to the Budget and Forward Estimates due to the economic environment, the agency operating environment or the timing of a transaction.

Parameter variations will reflect the impact of demand and cost variations in agency service delivery, including the provision of indexation. Variations resulting from the rollover of a new Forward Estimate year and changes in accounting policies, such as a change in an agency depreciation policy, or where financial estimates are affected by a change in an accounting standard are classified as parameter variations.

Table 4.9 lists those policy and parameter changes that have impacted on the formulation of the 2009-10 Budget and Forward Estimates.


Table 4.9: Policy and Parameter Statement, 2009-10 to 2012-13

2008-09)Estimated)Outcome)

2009-10)

Budget)



2012-13)Forward)

Estimate1)

$m) $m) $m) $m) $m) Forward Estimates (Net Operating Balance) as per

the 2008-09 Budget (A) 105.7) 203.2) 170.8) 275.3) ....)Forward Estimates (Fiscal Balance) as per the

2008-09 Budget (B) 30.2) 50.5) 22.3) 154.8) ....) REVENUE

Policy Decisions Dividend, Tax and Rate Equivalent Income

TOTE Tasmania Pty Ltd2 ....) (3.6) (4.3) (4.4) (4.4)

Motor Accidents Insurance Board3 ....) (10.0) ....) ....) ....)

Rivers and Water Supply Commission4 ....) ....) 6.7) 2.3) 2.0)

Tasmanian Ports Corporation5 ....) 10.0) ....) ....) ....)

Local Government Revenue Guarantee

Recoveries6 ....) ....) 1.7) 6.2) 9.6)

Novice Driver Licensing Reforms7 ....) 1.1) 1.1) 1.2) 1.2)

Tasmanian Industry Support Scheme (TISS)8 0.2) 1.8) 2.0) 2.1) 1.8)

Totalizator Wagering Levy9,39 ....) 6.0) 6.1) 6.3) 6.4)

Tasmania's Temptations10 ....) (2.7) (3.0) (3.0) (3.0)

Total Policy Decisions 0.2) 2.5) 10.3) 10.7) 13.6) Parameter Adjustments

Taxation11 Betting Exchange Taxes and Levies 2.0) 0.7) 0.8) 0.8) ....)

Casino Tax and Licence Fees 1.0) (3.7) (4.2) (4.7) ....)

Duties12 (85.8) (115.1) (125.8) (137.1) ....)

Guarantee Fees (2.4) 7.0) 16.1) 25.5) ....)

Land Tax (9.1) 2.5) (0.8) (2.0) ....)

Lottery Tax (2.3) (2.5) (2.7) (3.0) ....)

Motor Taxation (0.2) (2.9) (3.5) (4.3) ....)

Payroll Tax (0.4) (25.0) (41.2) (38.7) ....)

State Fire Commission Receipts .…) 0.2) 0.5) 0.8) ....)

Vehicle Registration Fees 2.6) 2.3) 2.3) 2.3) ....)

Total Taxation (94.6) (136.4) (158.5) (160.3) ....)


Table 4.9 Policy and Parameter Statement, 2009-10 to 2012-13 (continued)


2009-10)

Budget)




$m) $m) $m) $m) $m) REVENUE (continued)

Parameter Adjustments (continued) Dividend, Tax and Rate Equivalent Income13

Dividends Aurora Energy Pty Ltd (0.7) (4.7) (3.0) (8.4) ....)

Forestry Tasmania (0.5) (3.0) ....) 1.3) ....)

Hydro Tasmania ....) 2.7) 4.8) 12.4) ....)

Motor Accidents Insurance Board (0.5) (13.0) (16.6) (19.3) ....)

Tasmanian Public Finance Corporation ....) (0.4) ....) 1.2) ....)

Tasmanian Ports Corporation 1.2) 0.5) (0.7) (1.0) ....)

The Public Trustee 0.2) ....) (0.2) (0.1) ....)

Transend Networks Pty Ltd (5.6) (11.9) (14.6) (16.7) ....)

(5.9) (29.7) (30.2) (30.6) ....)Rates Equivalents

Hydro Tasmania (0.1) ....) 0.1) 0.2) ....) Income Tax Equivalents

Aurora Energy Pty Ltd (7.4) (1.0) (5.9) (7.1) ....)

Forestry Tasmania 0.3) ....) (0.5) (0.5) ....)

Hydro Tasmania ....) ....) 21.2) 24.9) ....)

Motor Accidents Insurance Board 14.1) (17.0) (7.4) (9.3) ....)

Tasmanian Public Finance Corporation ....) 1.4) ....) (1.2) ....)

Tasmanian Ports Corporation ....) 0.2) (0.5) (0.8) ....)

The Public Trustee (0.1) (0.3) (0.3) (0.2) ....)

TOTE Tasmania Pty Ltd 0.5) ....) ....) ....) ....)

Transend Networks Pty Ltd (3.5) (3.0) (4.9) (7.5) ....)

4.0) (19.6) 1.7) (1.7) ....)

Total Dividend, Tax and Rate Equivalent Income (2.0) (49.3) (28.4) (32.1) ....)

Interest Income (20.3) (72.3) (81.1) (97.9) ....)


Table 4.9 Policy and Parameter Statement, 2009-10 to 2012-13 (continued)


2009-10)

Budget)




$m) $m) $m) $m) $m) REVENUE (continued)

Parameter Adjustments (continued) Australian Government Grants14

Education 79.5) 256.3) 190.3) 91.5) ....)

Skills and Workforce Development 0.7) 5.6) 9.5) 11.2) ....)

Healthcare 81.4) 69.3) 51.1) 50.7) ....)

Community Services 37.7) 40.7) 46.0) 50.8) ....)

Housing 16.2) 112.2) 50.7) 15.2) ....)

Infrastructure 2.4) 63.9) 107.0) 104.4) ....)

Other15 49.0) (66.6) (65.6) (61.1) ....)

Total Australian Government Grants 266.9) 481.6) 389.0) 262.7) ....) GST Revenue16 (124.8) (305.1) (323.1) (274.2) ....) Agency Revenue

Economic Development, Tourism and the Arts (1.0) (1.8) (1.6) (1.5) ....)

Education ....) (5.1) (5.6) (5.1) ....)

Finance-General 2.1) ....) ....) ....) ....)

Health and Human Services15 (5.9) 62.8) 61.3) 58.1) ....)

Infrastructure, Energy and Resources17 (16.4) (23.8) (25.2) (26.2) ....)

Justice 4.0) 3.6) 3.1) 2.6) ....)

Police and Emergency Management ....) (0.2) (0.2) (0.2) ....)

Premier and Cabinet 0.3) 1.0) 1.1) 0.9) ....)

Primary Industries, Parks, Water and

Environment18 ....) (8.2) (7.9) (7.6)

....)

State Fire Commission (0.4) (0.5) (0.7) (1.1) ....)

Tasmania Tomorrow Statutory Authorities ....) 8.2) 7.0) 7.6) ....)

Other 0.1 1.2) 1.2) 0.8) ....)

Total Agency Revenue (17.1) 37.1) 32.5) 28.3) ....)

Total Parameter Adjustments 8.1) (44.4) (169.6) (273.5) ....)

TOTAL REVENUE VARIATIONS (C) 8.3) (41.9) (159.3) (262.8) ....)


Table 4.9: Policy and Parameter Statement, 2009-10 to 2012-13 (continued)


2009-10)

Budget)




$m) $m) $m) $m) $m) EXPENSES

Policy Decisions19 Budget Management Strategies

Employment Management Strategies Agency Cost Reduction Requirements ....) (16.5) (39.6) (39.6) (39.6)

Reduction in Senior Executive Service (SES) ....) (5.0) (5.0) (5.0) (5.0)

Review of Middle Management ....) (13.2) (17.5) (17.5) (17.5)

Amalgamation Efficiencies ....) (2.2) (4.3) (4.3) (4.3)

Boards and Committees ....) (0.5) (1.0) (1.0) (1.0)

Efficiency Dividends (32.6) (61.4) (76.2) (85.4) (85.4)

Non-Salary Indexation (4.0) (7.8) (15.8) (23.9) (31.5)

Public Sector Wage Restraint ....) ....) (15.9) (31.9) (51.3)

Whole-of-Government Non-Salary Savings

Advertising ....) (2.7) (2.3) (1.9) (1.7)

Members of Parliament Resource Allowance ....) (0.1) (0.1) (0.1) (0.1)

Mobile Phones ....) (0.9) (0.8) (0.8) (0.8)

Travel and Vehicle Fleet ....) (6.4) (5.7) (5.2) (4.8)

Total Budget Management Strategies (36.6) (116.5) (184.3) (216.7) (243.0) Economic Development, Tourism and the Arts

Brand Tasmania ….) (1.2) (1.2) ….) ….)

Celebrate Tasmania Day ….) 0.2) 0.2) 0.2) 0.2)

Festival of Music and Art 0.4) ….) ….) ….) ….)

Tasmania's Temptations10 (2.7) (3.0) (3.0) (3.0)

Finance-General

Basslink Telecommunications Agreement (1.7) (2.3) (2.3) (2.3) (2.3)

Contribution to the Tasmanian Racing

Industry20,39 ….) (4.8) (5.1) (5.4) (5.4)

Government Business Divestment Costs – TOTE

Tasmania Pty Ltd 2.5) 0.9) ….) ….) ….)

Loan Interest Subsidy Scheme for Local

Government Infrastructure ….) ….) 0.6) 1.0) 0.9)

Local Government Water and Sewerage Reform

Guarantee Payments ….) 5.0) 6.9) 7.1) 7.2)

Employment Incentive Scheme (Payroll Tax

Rebate) ….) 2.0) 2.4) 0.6) ….)

Pensioner Rate Remissions ….) (5.6) (5.6) (5.6) (5.6)




2009-10)

Budget)




$m) $m) $m) $m) $m) EXPENSES (continued)

Policy Decisions (continued) Finance-General (continued)

Provision for Agency Cost Reduction

Requirements - Costs ….) 5.6) 7.9) ….) ….)

Provision for Agency Cost Reduction

Requirements - Recoveries ….) ….) (1.9) (4.5) (4.5)

Tamar Valley Power Station Acquisition Costs 1.0) ….) ….) ….) ….)

TTAIS Payroll Tax assistance Grants 3.7) 4.0) 4.0) 4.0) 4.0)

Water and Sewerage Reform Due Diligence 1.4) ….) ….) ….) ….)

Health and Human Services

Abuse in State Care 4.5) 14.4) ….) ….) ….)

Ambulance Service – Patient Transport ….) 8.3) 11.3) 13.3) 15.3)

Disability Services Industry Wage Agreement ….) 7.0) 7.0) 7.0) 7.0)

Infrastructure, Energy and Resources

Grant to the Tasmanian Racing Board21,39 ….) 26.0) 26.2) 26.3) 26.6)

Racing Integrity ….) 0.2) 0.2) 0.2) 0.2)

Novice Driver Licensing Reforms 1.1) 1.1) 1.2) 1.2)

Justice

Trust in Government Package 0.3) ….) ….) ….) ….)

Premier and Cabinet

Emergency Relief Fund ….) 1.0) ….) ….) ….)

National Broadband Network ….) 1.0) ….) ….) ….)

Tasmanian Community Transport Trust ….) 0.5) 0.5) 0.5) ….)

Tasmanian Electronic Commerce Centre ….) 0.4) 0.4) 0.4) ….)

Telepresence for COAG ….) ….) 0.1) 0.1) 0.1)

Victorian Bushfires Appeal 1.0) ….) ….) ….) ….)

Volunteers Tasmania ….) 0.3) 0.3) 0.3) 0.3)

Treasury and Finance

Tasmanian Gaming Licence Totalizator

Administration ….) 0.5) 0.5) 0.5) 0.5) Special Capital Investment Funds22

Urban Renewal and Heritage Fund 1.6 4.9 ….) ….) 2.3

Economic and Social Infrastructure Fund 1.2 5.1 ….) ….) ….)

Total Policy Decisions (20.7) (44.7) (133.8) (174.8) (198.0)




2009-10)

Budget)




$m) $m) $m) $m) $m) EXPENSES (continued)

Parameter Adjustments Depreciation ….) (0.2) 2.0) 1.1) ….)Nominal Superannuation Interest Expense 27.3) 28.9) 30.8) 32.3) ….)Borrowing Costs 0.3) 0.6) 0.9) 0.8) ….) Agency Expenditure

Economic Development, Tourism and the Arts 3.5) (2.2) (1.3) (1.3) ….)

Education23 48.9) 72.1) 69.8) 77.7) ….)

Finance-General24 27.1) 48.4) 27.8) 11.6)

Health and Human Services25 84.0) 114.2) 72.7) 61.1) ….)

Infrastructure, Energy and Resources26 3.7) 12.7) 11.6) 11.8) ….)

Justice27 9.0) 15.7) 14.1) 14.4) ….)

Police and Emergency Management 4.5) (0.2) (1.1) (1.1) ….)

Premier and Cabinet 23.6) (0.8) 1.3) 0.7) ….)


Environment 9.4) (1.0) (12.4) (6.9) ….)

Tasmania Tomorrow Statutory Authorities28 (1.3) 42.1) 39.6) 38.3) ….)

Tasmanian Audit Office 0.3) 0.7) 0.8) 1.2) ….)

Treasury and Finance29 (0.7) 2.9) 0.6) ….) ….)

Other30 (2.7) (10.7) (24.6) (30.0 ) ….)

Total Agency Expenditure 209.3) 293.9) 199.1) 177.5) ….)

Total Parameter Adjustments 236.8) 323.2) 232.8) 211.7) ….)

TOTAL EXPENSE VARIANCE (D) 216.2) 278.5) 98.8) 36.6) ….)

NET OPERATING BALANCE31 (102.2) (117.1) (87.3) (24.1) 73.6)




2009-10)

Budget)




$m) $m) $m) $m) $m) less NET ACQUISITION OF NON-FINANCIAL

ASSETS FROM TRANSACTIONS Purchases of Non-Financial Assets

Policy Decisions19 Economic Development, Tourism and the

Arts

Tasmanian Museum and Art Gallery Revised

Cashflows ....) (7.3) (4.0) 6.0) ....)

Education

Child and Family Centres ....) 27.4) 27.4) 20.5) ....)

Health and Human Services Hospitals Capital Fund

Royal Hobart Hospital ....) 11.0) 17.5) 20.5) 26.0)

Launceston General Hospital Car Park ....) 10.0) 5.0) ....) ....)

New Royal Project ....) (50.0) (80.0) (100.0) (130.0)

Justice Prisons Infrastructure Redevelopment Revised

Cashflows ....) (0.5) (2.5) (10.5) 10.3)

Premier and Cabinet Telepresence for COAG ....) 0.3) ....) ....) ....)

Total Policy Decisions ....) (9.1) (36.6) (63.5) (93.7) Parameter Adjustments

Economic Development, Tourism and the Arts (5.8) 4.4) 0.5) ....) ....)

Education32 18.8) 166.9) 100.4) 1.5) ....)

Finance-General 8.4) 2.1) 2.1) 2.2) ....)

Health and Human Services33 (3.3) 100.2) 76.8) 14.0) ....)

Infrastructure, Energy and Resources34 (16.0) 45.6) 121.9) 98.7) ....)


Environment35 0.6) (4.4) (2.1) (18.4) ....)

Tasmania Tomorrow Statutory Authorities (6.6) 8.5) 0.1) 0.2) ....)

Other36 (61.4) (2.0) (8.5) (12.6) ....)

Total Parameter Adjustments (65.3) 322.4) 291.2) 85.6) ....)

Total Purchases of Non-Financial Assets (E) (65.3) 313.3) 254.7) 22.1) ....)




2009-10)

Budget)




$m) $m) $m) $m) $m) Sales of Non-Financial Assets (F) (7.4) 13.9) (3.2) (1.9) ....) Depreciation (G) ....) (0.2) 2.0) 1.1) ....)

TOTAL NET ACQUISITION OF NON-FINANCIAL ASSETS VARIANCE (H)37 (58.0) 299.6) 255.9) 22.9) ....)

FISCAL BALANCE38 (119.8) (569.5) (491.6) (167.6) 33.0)

Notes: 1. The 2012-13 parameter adjustments are not reflected in the Table as the 2012-13 Forward Estimate was not

published in the 2008-09 Budget. However, policy adjustments are reflected to show their full impact on the Budget and Forward Estimates.

2. The decrease in Dividend, Tax and Rate Equivalent Income from TOTE Tasmania Pty Ltd reflects the Government's decision to sell TOTE Tasmania Pty Ltd.

3. Due to the estimated impact of the Global Financial Crisis on the Motor Accident Insurance Board's investment performance, the Government agreed not to proceed with the 2009-10 Special Dividend.

4. The Returns from the Rivers and Water Supply Commission represent the repayment of the Government's Equity Injection for the Meander Valley Pipeline Extensions Project.

5. The Tasmanian Ports Corporation (Tasports) will pay a Special Dividend of $7.0 million in 2009-10, and an additional Dividend of $3.0 million in 2009-10 representing a change in dividend policy to 100 per cent of profit after tax. The total Dividends paid by Tasports in 2009-10 will be $13.1 million.

6. The Local Government Revenue Guarantee Recoveries reflects the recovery of revenue guarantees from local governments as part of the Water and Sewerage reforms.

7. The Novice Driver Licensing Reforms will be implemented in accordance with the Tasmanian Road Safety Strategy 2007-2016.

8. The increase in the Tasmanian Industry Support Scheme reflects the estimated interest revenue received on the loans made under the Scheme.

9. The Totalizator Wagering Levy will commence in 2009-10 and is indexed in line with the Consumer Price Index. The Levy will be paid by the holder of the Tasmanian Gaming Licence with a totalizator (parimutuel) endorsement.

10. The decrease in Tasmania's Temptations revenue and expenses reflects the closure of the Tasmania's Temptations Holidays business.

11. Further information on Taxation is provided in Chapter 5 of this Budget Paper. 12. The movement in Duties in 2008-09 was $97.1 million on a cash basis. This movement is reflected in Chapter 5 of

this Budget Paper. For the purpose of this chapter, the accrual impact of the duty from a major transaction has been taken into account. This reduces the movement by $11.3 million to $85.8 million

13. Further information on Dividend, Tax and Rate Equivalent Income is detailed in Table 4.6 of this chapter. 14. The increase in Australian Government Grants is detailed in Table 4.2 of this chapter. The larger increases reflect

increased transfers from the Australian Government under various National Partnership Agreements. 15. The Mersey Community Hospital revenue ($60 million) is recognised as an Australian Government Grant in 2008-09,

and as Agency Revenue from 2009-10. 16. The decrease in GST revenue primarily reflects a slowing of the Australian economy resulting in revised GST

payments to Tasmania. Further details are provided in this chapter and Chapter 9 of this Budget Paper. 17. The decrease in Infrastructure, Energy and Resources primarily reflects the reduction in Mineral Royalties. 18. The decrease in Primary Industries, Parks, Water and Environment reflects reductions in Land Titles Office Fees,

Abalone Licences and rental revenue from Crown Lands. 19. Further information on the Government's Budget Management Strategies and other agency initiatives is provided in

Budget Paper No 2 Government Services. 20. Funding to the Tasmanian Racing Industry from taxes and product levies collected from the betting exchange

operator is no longer required to be made from 2009-10.


21. The total Grant to the Tasmanian Racing Board is $27.0 million per annum indexed. The payment comprises of additional funding of $26.0 million per annum indexed and existing funding of $1.0 million per annum.

22. Further information on the Special Capital Investment Funds is provided in Chapter 4 of Budget Paper No 2 Government Services.

23. The increase in Education primarily reflects additional Australian Government funding for Non-Government Schools, partially offset by a transfer of funding for Public Sector Colleges to the new entities as part of the Tasmania Tomorrow reforms.

24. The increase in Finance-General reflects the most recently available actuarial projections of movements in the superannuation liability.

25. The increase in Health and Human Services primarily reflects the recognition of expenditure for the Mersey Community Hospital, and the provision of one-off Australian Government funding for health care in 2009-10.

26. The increase in Infrastructure, Energy and Resources primarily reflects additional Australian Government funding. 27. The increase in Justice primarily reflects the change to the administration of Australian Government funding for Legal

Aid resulting from the Council of Australian Governments Intergovernmental Agreement on Federal Financial Relations.

28. The increase in funding for the Tasmania Tomorrow Statutory Authorities reflects the transfer of the State's Public Sector Colleges to the new post-Year 10 entities as part of the Tasmania Tomorrow reforms. This increase in funding is largely offset by a decrease in funding for the Department of Education.

29. The increase in Treasury and Finance expenditure in 2009-10 primarily reflects funding of $350 000 for the Crown Solicitor; costs associated with the parliament square project of $234 000; short term Departmental projects totalling $420 000; and minor adjustments to the Tasmanian Community Fund, Tasmanian Risk Management Fund, Responsible Service of Alcohol and other gaming activities. The increase in expenditure is partially offset by additional revenue of $948 000.

30. Other primarily reflects the impact of whole-of-government eliminations and other minor movements in Statutory Authorities.

31. Net Operating Balance is equal to A + C - D 32. The increase in Education primarily reflects the expenditure of Australian Government funding under the Nation

Building - Economic Stimulus Plan for the Building the Education Revolution. 33. The increase in Health and Human Services primarily reflects the expenditure of Australian Government funding,

including the Nation Building - Economic Stimulus Plan for the Social Housing. 34. The increase in Infrastructure, Energy and Resources primarily reflects the expenditure of Australian Government

funding. 35. The movement Primary Industries, Parks, Water and Environment includes the Water Infrastructure Fund. In

2008-09, expenditure from the fund was reclassified to an Equity Injection to the Rivers and Water Supply Commission.

36. In 2008-09, Other includes a $60.0 million adjustment which allows for anticipated changes to capital expenditure estimates which will occur between the date of formulation of the budget estimates and the end of the financial year.

37. Net Acquisition of Non-Financial Assets is equal to E – F – G. 38. Fiscal Balance is equal to B + C – D – H. 39. The Government has implemented significant reforms to the Tasmania Racing Industry including establishing

funding arrangements for the Tasmanian Racing Board. These reforms have resulted in the removal of previous funding provided through TOTE Tasmania and its replacement by funding directly from the Consolidated Fund. The total industry assistance cost is now reflected in the item in this table Grant to the Tasmanian Racing Board. This amount is offset by the reduced expenditure shown in the item Contribution to the Tasmanian Racing Industry and the increased revenue shown in the form of Totalizator Wagering Levy. The remaining difference in the funding represents assistance previously provided directly by TOTE Tasmania to the racing industry which could have otherwise been returned to the Government in the form of dividends.


STATEMENT OF RISKS AND SENSITIVITIES To the degree possible, the 2009-10 Budget and Forward Estimates take into account known risk factors in terms of the timing and level of revenue and expenditure. However, these estimates are subject to uncertainty due to either unforseen events or delays, or the realisation of risks to a greater or lesser extent than have been anticipated. Specific factors that are considered potential risks to the revenue and expenditure estimates are discussed below.

Revenue Estimates State Taxes ($810.0 million in 2009-10) State tax revenue estimates are sensitive to changes in a range of economic parameters, such as employment, wages growth, and inflation, as well as prevailing economic conditions in Tasmania more generally. These parameters can result in either more or less state taxation revenue being collected.

Payroll Tax

Payroll tax receipts are primarily driven by employment outcomes within the Tasmanian economy and wages growth. Estimates of payroll tax revenue are, therefore, subject to risk in the form of wages or employment outcomes that exceed, or fall short of, expectations.

It is estimated that a one per cent variation in the number of people employed within the Tasmanian economy, relative to forecast employment levels, would result in an estimated variation of $3.0 million in Tasmania's payroll tax revenue in 2009-10. In addition, it is estimated that a one per cent variation in Average Weekly Earnings in Tasmania would result in a variation of $2.8 million in payroll tax receipts in 2009-10.

Conveyance Duty

Revenue from conveyance duty relies upon the number of dutiable property transfers as well as the value of the property transferred. In recent years, Tasmania has experienced strong growth in both the demand for property and property values until 2008 when price growth slowed.

Relatively small variations between forecasts and actual property market outcomes have the potential to lead to appreciable variations in conveyance duty revenue. For instance, a one per cent variation in the number of property sales, or the average value of properties sold, would lead to a $1.3 million variation in conveyance duty revenue in 2009-10.

However, conveyance duty estimates are more vulnerable to significant upside risk, in the form of large, one-off commercial related transactions, which typically involve the transfer of significant business assets or large-scale infrastructure. It is not possible to anticipate these transactions when framing the Budget, but a moderate contingency is included each year to reduce this revenue variation risk.


Revenue from the Australian Government

Goods and Services Tax Revenue Grants ($1 526.5 million in 2009-10)

The risks to Tasmania's GST revenue estimate in 2009-10 are linked directly to the State's share of the national population; the amount of GST revenue collected by the Australian Government; and Tasmania's relativity factor (as recommended by the Commonwealth Grants Commission). For 2010-11 in particular, the State's relativity factor will be subject to the outcome of a major review of the Commission's assessment methodology.

Despite Tasmania's growing population, its share of the national population has been steadily declining for some time, on average by 0.017 per cent per annum, and this is factored into the Budget estimates. However, an unexpected change in Tasmania's population share of 0.01 per cent (or 2 200 people), would result in a variation in Tasmania's GST revenue of approximately $6.5 million in 2009-10.

GST revenue collections are highly sensitive to changes in national consumer spending. Although GST collections have grown strongly since its introduction, the impacts of the national and global recessions have caused a decline in collections, beginning in 2008-09. GST revenue collection in 2009-10 and over the Forward Estimates period will be dependent on the rate of recovery of the global and Australian economies. A one per cent variation in the amount of GST collected by the Australian Government would result in Tasmania's GST revenue varying by an estimated $15.4 million in 2009-10.

Other Australian Government Funding ($1 205.0 million in 2009-10) Commonwealth-State funding arrangements have undergone substantial reform as a result of the new Intergovernmental Agreement on Federal Financial Relations agreed by COAG in November 2008. The risks associated with Australian Government payments to Tasmania for specific purposes now vary depending on whether a payment is a Specific Purpose Payment (SPP) or a National Partnership (NP).

Specific Purpose Payments ($562.4 million in 2009-10)

Under the IGA, SPPs are indexed so that the level of SPP funding moves broadly in line with changes in the costs of providing services. This provides the states with some certainty as to their future receipts of SPP funding. However, because SPP indexation is based on certain economic and other parameters (such as cost indexes), estimates of SPP revenue to Tasmania are sensitive to assumptions underlying these parameters. SPP estimates for the 2009-10 Budget and for the Forward Estimates are certain to change marginally once the actual parameters are known.

In contrast to previous arrangements, SPP payments are now ongoing, meaning that there is now less risk of an agreement not being renewed than was previously the case. The basis of States' shares of SPPs are also now agreed under the Intergovernmental Agreement on Federal Financial Relations and provide further certainty regarding funding levels, compared with the previous arrangements where SPP shares had to be negotiated between the Australian Government and the states.


National Partnerships ($642.6 million in 2009-10)

Funding provided to each state under a National Partnership Agreement is generally written into the agreement itself. Once a NP Agreement is signed, therefore, it is unlikely that Tasmania would not receive the agreed amount of Australian Government funding relevant to that NP. The only exception is in relation to National Partnership Reform Payments, which are contingent upon a state achieving certain minimum requirements. However, National Partnership Reform Payments comprise a very small proportion of total National Partnership funding.

Returns from Government Businesses Government businesses, including the MAIB, Aurora Energy and Hydro Tasmania, are subject to external influences that can significantly impact their returns to Government.

The MAIB's operating results are largely driven by the performance of its investment portfolio and its claims expenses each year. The MAIB is forecasting a larger operating loss in 2008-09 than that incurred in 2007-08 due to the impact of the current Global Financial Crisis. Investment revenue is forecast to recover to a positive figure in 2009-10 to return the MAIB to an operating profit in that year. However, the outlook for financial markets is unclear which suggests a wide range of possible outcomes for the MAIB in 2009-10 and, hence, its returns over the Forward Estimates period.

Aurora Energy is currently completing the Tamar Valley Power Station development. Aurora's returns to Government in 2009-10 will be influenced by the commercial arrangements that are currently being negotiated for this project, including its exposure to market electricity prices.

Hydrology is the key variable in Hydro Tasmania's revenue. Hydro Tasmania is rebuilding its storages in accordance with prudent water management principles. With a return to normal hydrological conditions, Hydro Tasmania is well placed to improve its financial performance and hence its returns over the Forward Estimates period.

Expenditure The following factors represent a potential risk to the 2009-10 Budget and Forward Estimates of expenditure.

Health Expenditure Pressures The Department of Health and Human Services continues to face particular cost and demand pressures in relation to the services it provides that make expense management a difficult task. In particular, the cost of medical, surgical and pharmaceutical supplies has grown at a significantly higher rate than the consumer price index in recent years. These cost increases have been exacerbated by significant increases in the demand for the services provided by the Department since 2001-02. However, the Department is expected to remain within its Budget, and any expenditure risks will be managed by the Government in accordance with its financial priorities and objectives.

Specific Purpose Payments Consistent with Specific Purpose Payment revenue, there is a risk that the estimates of Specific Purpose Payment expenditure will be impacted by conditions imposed upon these payments by the Australian Government and the need to renegotiate some of these agreements during the Forward Estimate period.


National Partnership Payments Consistent with National Partnership Payment revenue, there is a risk that the estimates of National Partnership Payment expenditure will be impacted by conditions imposed on the State through these payments by the Australian Government and the need to renegotiate some of these agreements during the Forward Estimate period. In addition, reform payments (not included in any Budget estimates) are subject to certain terms and conditions and performance targets being met.

Nominal Superannuation Interest Expense The estimates of the Nominal Superannuation Interest Expense are based upon actuarial advice on the extent of the liability and discount rate at the time that the 2009-10 Budget was developed. This estimate is subject to change depending on changes in the discount rate as determined by the actuary.

Infrastructure Expenditure The Government has committed to a significant level of infrastructure spending over the next four years and every endeavour will be made by agencies to progress the infrastructure works in accordance with the Budget and Forward Estimate allocations. However, the shortage of available contracting and sub-contracting services in Tasmania continues to place pressure on the cost and timing of infrastructure provision.

In addition, the Australian Government has committed a significant level of extra capital funding, for example, under the Nation Building - Economic Stimulus Plan. The State has an obligation to complete these works in a timely manner.

Whilst the 2009-10 Budget and Forward Estimates reflect the best estimate of infrastructure cash flows at the time the Budget is released, the risk of cost increases or unforeseen delays affecting the timing of this expenditure remains.


5 TAXATION REVENUE Features

• Total State taxation revenue is expected to be $786.9 million in 2008-09, which is $105.9 million or 11.9 per cent less than the Budget Estimate for 2008-09.

• In 2009-10, revenue from state taxes is estimated to increase to $810.0 million, which is $23.1 million or 2.9 per cent above the estimated outcome for 2008-09.

• During 2009-10, the regulation of TOTE Tasmania, and any subsequent holder of a Tasmanian Gaming Licence with a totalizator endorsement, will come under the jurisdiction of the Gaming Control Act 1993. A fixed annual totalizator wagering levy of $6.0 million (indexed) will apply in 2009-10 to the holder of such a licence.

• Payroll tax relief will be made available to all employers liable for payroll tax, by way of a rebate on the payroll tax payable for any new positions created during the period from 11 June 2009 to 30 June 2010. The measure is designed to encourage employers to support employment at a time when employment is under threat due to the current economic environment. This measure is estimated to cost $2.0 million in 2009-10.

• Duty on agreements for sale will be abolished from 1 July 2009, which will simplify the treatment of duty on conditional and off-the-plan sales.

• From 1 July 2009, ongoing tax relief measures provided by the Tasmanian Government since the 2001-02 Budget will combine to deliver over $200 million per annum in recurrent tax relief to Tasmanian businesses and households.

• In relation to GST-related tax reform, from 1 July 2005 Tasmania had fully met its obligations under the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations (IGA), having abolished financial institutions duty, duties on quoted marketable securities and debits duty. With the abolition of duty on non-real property (business) conveyances from 1 July 2008, Tasmania has abolished its final 'review' tax ahead of all other jurisdictions except Victoria.

• Tasmania is only one of two states or territories which have been assessed as having overall taxation severity below the national average in every year since 2000-01. This is consistent with the Government's Interim Fiscal Strategy target of Tasmania's taxation severity being below the national average.

Taxation Revenue 5.1

INTRODUCTION State taxation revenue is an essential source of funds to support the provision of services to Tasmanians. However, the capacity of Tasmania and the other states and territories to raise tax revenues is constrained by the Constitution and by Australia's Commonwealth-State financial arrangements. As a result, the states are restricted in the range of taxes available to them, compared to the Australian Government. An effective State taxation regime must balance the need to raise revenue with the need to foster a sound and expanding business environment. This should be achieved while maintaining the lowest reasonable burden of taxation on the community.

This chapter includes estimated taxation collections for the current financial year, the 2009-10 Budget year and the Forward Estimates period from 2010-11 to 2012-13. Details of historical taxation collections are also provided.

For each of the major taxes, a description of the tax base and its operation is provided, including tax concessions, along with a summary of any legislative and other changes that have occurred since the 2008-09 Budget.

The tables in this chapter generally refer to actual tax collections for 2007-08, while estimates for 2009-10 are compared with Budget estimates for 2008-09. An estimated outcome of tax receipts for 2008-09 is also provided. The charts in this chapter refer to Budget estimates for 2009-10 unless otherwise specified.

Year-on-year changes in taxation revenue are reported in nominal terms.

TAX COMPETITIVENESS Tax competitiveness plays a key role in facilitating an expanding business environment. The independent Commonwealth Grants Commission (CGC) provides a measure of taxation competitiveness across jurisdictions. Comparisons published by the CGC in March 2009 show that Tasmania has the second lowest taxation severity of all states and territories. This is a significant turnaround from the mid-1990s, when Tasmania was the second least competitive state in terms of its overall tax regime.

In line with the objectives of the Government's Interim Fiscal Strategy, Tasmania's overall tax severity was also below the average of all states and territories, based on the taxation arrangements in place in each jurisdiction in 2007-08. Since 2000-01, Tasmania's tax severity has been assessed as being amongst the lowest three jurisdictions, and the State is one of only two jurisdictions that have been assessed as having overall tax severity below the national average in every year from 2000-01.

5.2 Taxation Revenue

Chart 5.1: Taxation Severity, 2007-08

80

85

90

95

100

105

110

115

120

NSW Vic Qld WA SA Tas ACT NT

Tota

l Tax

atio

n Se

verit

y

Source: Report on State Revenue Sharing Relativities, 2009 Update, Commonwealth Grants Commission.

A sustained program of tax relief and tax abolition is the principal driver of Tasmania retaining its relatively low tax severity. In 1999-00, the year before the GST was introduced, Tasmania collected over 25 taxes. In 2009-10, the State will collect only 14 taxes.

Beginning with the 2001-02 Budget, a series of complementary tax relief measures have combined to deliver what will be approximately $203.6 million per annum in reduced State taxes (in real terms) from 1 July 2009 onwards.

In relation to GST-related tax reform, from 1 July 2005 Tasmania had fully met its obligations under the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations (IGA), having abolished financial institutions duty, duties on quoted marketable securities and debits duty.

Tasmania, along with the other states and territories, also committed to abolish a range of taxes that were listed in the IGA for review.

With the abolition of duty on non-real property (business) conveyances from 1 July 2008, Tasmania has abolished its final 'review' tax ahead of all other jurisdictions except Victoria. Three jurisdictions are not scheduled to abolish their final 'review' taxes until 2012-13. Therefore, the Tasmanian business sector has received accelerated benefits from this national tax reform by comparison with most other jurisdictions.

BUDGET INITIATIVES Payroll Tax Relief Payroll tax relief will be made available to all employers liable for payroll tax, by way of rebate on the payroll tax payable for any new positions created during the period from 11 June 2009 to 30 June 2010. The measure is designed to encourage employers to support employment at a time when employment is under threat due to the current economic environment.


Eligible employers will be required to declare their total taxable wages, including wages paid to new employees, in payroll tax returns and to pay the tax by the due date. A rebate equivalent to the full payroll tax liability on wages paid to an eligible employee in 2009-10 and 2010-11 will then be paid.

The net cost of the rebate is expected to be $2.0 million in 2009-10 and $2.4 million in 2010-11, with a further cost of $625 000 in 2011-12 relating to rebates paid in that year with respect to claims made for 2010-11.

Duty on Agreements for Sale Duty on agreements for sale will be abolished from 1 July 2009, which will simplify the treatment of duty on conditional and off-the-plan sales. Duty is currently payable on both the agreement for sale and the consequent transfer. This creates an additional layer of complexity by requiring the agreement and transfer to be in conformity with each other to ensure that duty is not charged on both instruments.

As duty will only be payable at the time of the transfer of property, taxpayers will benefit by not being required to pay duty before taking possession of the property, which can currently occur where an agreement is entered into well before the transfer date.

The change will provide considerable benefits in terms of reducing compliance costs. The impact on revenue in the long-term will be negligible as duty will still be required to be paid.

Totalizator Wagering Levy During 2009-10, the regulation of TOTE Tasmania will come under the jurisdiction of the Gaming Control Act 1993. The Government has announced its intention to sell TOTE Tasmania and, if it is sold, the new operator will also be licensed and regulated under the Gaming Control Act. A fixed annual wagering levy will be applied to TOTE Tasmania and any new totalizator operator. There will be no turnover tax in relation to parimutuel wagering.

The Government has also abolished turnover tax on Tasmanian Gaming Licences with race wagering and sports betting endorsements to facilitate the attraction to Tasmania of corporate bookmakers.


ESTIMATED TAXATION REVENUE Total taxation revenue for the period 2004-05 to 2012-13 is shown in Chart 5.2. The 2009-10 Budget estimates are displayed alongside the 2008-09 Budget estimates to illustrate the impact of the current economic environment on total taxation revenue.

Chart 5.2: Total and Estimated Taxation Revenue, 2004-05 to 2012-13

600

650

700

750

800

850

900

950

1 000

1 050

2004-05 2005-06 2006-07 2007-08 2008-09(Expected)

2009-10(Budget)

2010-11(Est)

2011-12(Est)

2012-13(Est)

$ m

illio

n

Actual 2008-09 Budget 2009-10 Budget

Chart 5.2 above shows that taxation revenue in 2008-09 will have fallen by $105.9 million when compared with the 2008-09 Budget Estimate. This is primarily due to a sharp reduction this financial year in conveyance duty and motor vehicle registration duty receipts. The chart also shows that while growth in revenue is expected to recover from 2010-11, this growth will remain below the year-on-year change experienced in the three years to 2007-08. By 2011-12 estimated taxation revenue will be $154.0 million less than forecast in the 2008-09 Budget.

Residential property values have not declined, as they have tended to do in other jurisdictions. This is partly due to the impact of first home buyer assistance from the State and Commonwealth Governments. However, restricted access to financing as a result of the Global Financial Crisis and a reduced appetite for debt amongst consumers has resulted in fewer residential and commercial property transactions than experienced in recent years. This marked decline in the turnover of properties has had a significant impact on conveyance duty receipts.

Motor vehicle sales (especially for new vehicles) have also fallen appreciably throughout the year as consumers and businesses have reduced discretionary expenditure.

State taxation receipts are expected to recover slightly in 2009-10 (primarily due to growth in land tax, guarantee fees and the introduction of the totalizator wagering levy). However, revenue growth is expected to be constrained by the current economic environment and a return to stronger growth is not expected until 2011-12 and 2012-13.


The moderate rate of overall tax revenue growth is also a result of the Government's tax relief program which, since 2001-02, has returned to the community a significant proportion of the growth that would otherwise have occurred in own-source revenue.

Table 5.1 sets out, by head of tax: actual receipts for 2007-08; budgeted and expected 2008-09 outcomes; Budget estimates for 2009-10; and Forward Estimates for the years 2010-11 to 2012-13. Chart 5.3 illustrates the expected contribution of each tax to total State taxation revenue in 2009-10.

Table 5.1: Taxation Revenue Collection

2007-08

Actual

2008-09

Budget

2008-09 Estimated Outcome1

2009-10

Budget




$m $m $m $m $m $m $m Financial Transaction Taxes

Debits Duty2 0.2 …. …. …. …. …. ….

Duties3 299.4 310.4 213.3 213.2 221.0 229.1 237.7

Gambling Taxes

Betting Exchange Revenue4 6.1 6.2 8.2 7.3 7.7 8.1 8.5

Casino Tax and Licence Fees 58.7 60.3 61.3 58.5 59.8 61.2 62.7

Lottery Tax 25.3 25.5 23.2 23.8 24.3 24.8 25.5

Totalizator Wagering Levy5 …. …. …. 6.0 6.1 6.3 6.4

Guarantee Fees6 8.5 11.6 9.2 20.1 29.6 39.1 50.9

Land Tax7 72.5 83.9 74.8 90.0 90.0 92.2 94.5

Motor Tax 54.5 54.4 54.2 54.2 56.5 58.5 60.6

Payroll Tax8 250.0 266.1 265.8 257.0 252.4 267.0 282.8

State Fire Commission Receipts9 47.4 48.2 48.2 50.7 52.6 54.7 56.6

Vehicle Registration Fees 28.5 26.2 28.8 29.4 30.0 30.7 31.4

Total 851.1 892.8 786.9 810.0 830.1 871.8 917.6

Notes: 1. The 2008-09 estimated outcome is based on receipts to the end of April 2009. There will be some variance between

the expected outcome and the actual outcome, depending on the level of receipts in the final two months of the financial year, relative to what is expected based on the preceding ten months.

2. Debits duty was abolished from 1 July 2005 and the receipts in 2007-08 relate to debits duty incurred prior to 1 July 2005, but not received until after that date. No debits duty receipts are expected in 2008-09.

3. The reduction in the estimated duty receipts outcome for 2008-09, when compared to the 2008-09 Budget Estimate, reflects a significant reduction in the turnover of real property and motor vehicles. Total duty receipts are expected to remain close to 2008-09 levels in 2009-10.

4. The 2009-10 Budget Estimate for betting exchange revenue is lower than the estimated outcome for 2008-09 due to the potential impact of race fields publication fees being introduced in other jurisdictions.

5. The totalizator wagering levy will commence in 2009-10 and is indexed in line with the Consumer Price Index. The levy will be paid by the holder of a Tasmanian Gaming Licence with a totalizator endorsement.

6. The increase in guarantee fees from 2008-09 to 2009-10 reflects the growing difference between the financing costs to Government Business Enterprises and State-owned Companies that borrow through Tascorp, and the costs they would face if the businesses were to borrow from the commercial finance market.

7. The increase in budgeted land tax receipts for 2009-10 reflects increased property values over recent years as assessed by the Valuer-General as part of a rolling program of six-year municipal revaluations.

8. The reduction in budgeted payroll tax receipts in 2009-10 and 2010-11 is due to an anticipated decline in employment and hours worked in the payroll tax paying sector as a result of the current economic environment.

9. State Fire Commission Revenue is reported as a tax for the purposes of the Uniform Presentation Framework. However, all revenue goes directly to the funding of the State Fire Commission.


Chart 5.3: Taxation Revenue Collections, Budget Estimate of Collections for 2009-10

Duties $213.2m (26.3%)

Vehicle Registration Fees

$29.4m (3.6%) Payroll Tax $257.0m (31.7%)

Land Tax $90.0m (11.1%)

Motor Tax $54.2m (6.7%)

State Fire Commission

$50.7m (6.3%)

Gambling Taxes $95.6m (11.8%)

Guarantee Fees $20.1m (2.5%)

Based on current estimates, taxation revenue for 2008-09 is expected to total $786.9 million. This represents a nominal reduction of $64.2 million, or 7.5 per cent when compared to taxation revenue for 2007-08.

ESTIMATED TAXATION REVENUE FOR 2009-10 Total taxation revenue for 2009-10 is estimated to be $810.0 million, a reduction of $82.8 million or 9.3 per cent when compared to the 2008-09 Budget estimate, and an increase of $23.1 million or 2.9 per cent on the estimated outcome for 2008-09.

Financial Transaction Taxes Duties (including debits duty) are classed as financial transaction taxes. Chart 5.4 shows the Budget estimate for collections of financial transaction taxes for 2009-10. Duty on property conveyances accounts for 62.7 per cent of total financial taxes.


Chart 5.4: Financial Transaction Taxes, Budget Estimate of Collections for 2009-10

Conveyances $133.7m (62.7%)

Motor Vehicles $35.3m (16.6%)

Insurances $44.1m (20.7%)

Duties Description Duties are imposed under the Duties Act 2001. The Act imposes duty on a range of instruments, transactions and arrangements, with the majority of revenue derived from transfers of real property, motor vehicle registrations and insurance policies.

The Commissioner of State Revenue collects all duties, except for duties on motor vehicle registrations and transfers and third party insurance. The Department of Infrastructure, Energy and Resources collects duties related to motor vehicles on behalf of the Commissioner.

The 2009-10 Budget estimates for duty receipts are reported by category in Table 5.2, along with: the 2007-08 final outcome; the 2008-09 Budget estimates and an estimated outcome for the year; and Forward Estimates for 2010-11 to 2012-13.


Table 5.2: Duties

Actual

2007-08

2008-09

Budget

2008-09 Estimated Outcome1

2009-10

Budget




$m $m $m $m $m $m $m Conveyances2 216.4 224.7 133.7 133.7 139.1 144.6 150.4

Insurances 40.7 43.5 42.4 44.1 45.9 47.8 49.8

Mortgages3 1.6 …. …. …. …. …. ….

Motor Vehicles 40.7 42.1 37.1 35.3 36.0 36.7 37.4

Sundry Legal Documents4 …. 0.1 …. …. …. …. ….

Total 299.4 310.4 213.3 213.2 221.0 229.1 237.7

Notes: 1. The 2008-09 estimated outcome is based on the level of receipts to the end of April 2009. There may be some

variance between the estimated outcome and the actual outcome, subject to receipts in the final two months of the financial year.

2. No growth in conveyance duty receipts is expected in 2009-10 as a result of similar property market conditions to those experienced in 2008-09.

3. Mortgage duty was abolished from 1 July 2007. The mortgage duty received in 2007-08 relates to transactions made prior to 1 July 2007, but not received until after this date. The 2008-09 estimated outcome is $50 000.

4. The 2008-09 estimated outcome for sundry legal documents is $40 000.

Estimated Receipts for 2009-10 Duty receipts for 2009-10 are estimated to be $213.2 million, a reduction of $97.2 million or 31.3 per cent when compared to the Budget estimate for 2008-09 and a reduction of $147 000 when compared to the estimated outcome for 2008-09. Conveyance duty receipts are expected to remain steady in 2009-10 as a result of similar property market conditions to those experienced in 2008-09. The relatively small reduction in total duty receipts in 2009-10 reflects an increase in expected insurance duty, offset by a reduction in expected motor vehicle registration duty. The turnover of motor vehicles is expected to continue to fall as a result of the current economic environment.

Gambling Taxes Gambling revenue in Tasmania covers activities associated with lotteries, casinos (including table gaming, video gaming machines and keno), keno and video gaming machines in hotels and clubs, and betting exchanges. In 2009-10 a fixed annual wagering levy for the conduct of totalizator wagering will also be applied to a totalizator operator.

The Tasmanian Gaming Commission is responsible for the supervision of gambling activities in Tasmania. Information about the operations of the Tasmanian Gaming Commission and the regulation of gambling under the Gaming Control Act 1993 and TT-Line Gaming Act 1993 can be found on the Liquor and Gaming page of the Department of Treasury and Finance website. These Acts also establish the arrangements for taxation of licensed gambling activities, more details of which are provided below.

Chart 5.5 provides details of the Budget estimate for gambling receipts, including the components of total estimated casino revenue, for 2009-10. Tax revenue from video gaming machines accounts for 55.6 per cent of total gambling tax revenue.


Chart 5.5: Gambling Tax Revenue, Budget Estimate of Collections for 2009-10

Totalizator Wagering Levy $6.0m (6.3%)

Licence Fees $3.5m (3.6%)

Betting Exchanges $7.3m (7.6%)

Lottery Tax $23.8m (25.0%)

Table Gaming $0.1m (0.1%)

Keno $1.4 m (1.5%)

Video Gaming Machines

$52.9m (55.6%)

Penalties and Unclaimed Prizes

$0.0m (0.0%)

Spirit of Tasmania $0.3m (0.3%)

Betting Exchange Revenue Description Under the Gaming Control Act, the Tasmanian Gaming Commission can issue Tasmanian Gaming Licences for an operator to effectively trade bets between punters and gamblers in respect of approved gaming and wagering activities. The operator does not hold any direct risk on the outcome and takes a commission for winning bets. The exchange of bets can be conducted via any electronic means, such as over the internet or telephone. Only one betting exchange operator, Betfair Pty Ltd, holds such a Tasmanian Gaming Licence.

The Act provides for the payment of an annual licence fee for a betting exchange endorsement. In addition, a betting exchange operator is required to pay tax of 10 per cent of commissions on winning wagers lodged through its Australian-based system on all events held outside of Australia and 15 per cent of commissions on events held within Australia. A product levy of 20 per cent of commissions from Australian racing events is also payable.

From all the taxes collected from events held in Australia, and which relate to wagering by Tasmanians on a betting exchange, four per cent is directed to the Community Support Levy.

Estimated Receipts for 2009-10 Taxation revenue from betting exchanges in 2009-10 is estimated to be $7.3 million. This represents an increase of $1.1 million over the 2008-09 Budget estimate, but a reduction of $930 000 or 11.4 per cent when compared the estimated outcome for 2008-09.

Betting exchange revenue has grown strongly in 2008-09 after being adversely affected by betting exchange advertising bans that were put in place in some jurisdictions. Revenues are also recovering after the impact of the equine influenza outbreak that occurred in early 2007-08.


As a result of a decision by the High Court of Australia, advertising restrictions on betting exchange operators have now been lifted in other jurisdictions. The imposition of race fields publishing fees on wagering operators that use racing product has resulted in the Tasmanian betting exchange operator being required to remit a product levy to Tasmania and a similar fee to other jurisdictions. The Government has legislated to overcome this potential for double taxation by adjusting the tax base applying to betting exchanges to take into account the actual payment of publishing fees, product fees or levies in each jurisdiction. Under the Gaming Control Act 1993 the product levy tax base can be defined in a regulation. This will give flexibility to deal with unforeseen but legitimate needs for change as the racing environment and the use of direct product fees evolves further.

As a result, revenue from the product levy component of total betting exchange revenue is expected to fall in 2009-10.

Casino Tax and Licence Fees Description The Gaming Control Act provides for the payment of licence fees by Tasmania's two casinos and a tax on the gross profit from casino operations, including gaming in hotels and clubs. The tax rates for keno and table gaming are 5.88 per cent and 0.88 per cent respectively; and for gaming machines a sliding scale as follows:

• 20.88 per cent for the first $35.0 million of gross profit per annum; and

• 25.88 per cent for gross profit in excess of $35.0 million per annum.

From 1 July 2013, a single flat tax rate of 25.88 per cent will apply to all gross profit on gaming machines.

The licence fee payable by the casino operator in respect of each casino is indexed by movements in the Consumer Price Index. In 2008-09, it is expected that the fees paid in respect of the two casinos will total $3.4 million and in 2009-10 will total $3.5 million.

The Act also provides for the payment of a Community Support Levy of four per cent of gross profit from gaming machines in clubs and hotels. The Levy is disbursed as follows:

• 25 per cent for the benefit of sport and recreation clubs;

• 25 per cent for the benefit of charitable organisations; and

• 50 per cent for the provision of:

− research into gambling;

− services for the prevention of compulsive gambling;

− the treatment or rehabilitation of compulsive gamblers;

− community education concerning gambling; and

− other health services.

It is estimated that the levy will raise $4.9 million in 2008-09.

The TT-Line Gaming Act provides for the payment of licence fees and tax on gross profits from gaming operations on board Spirit of Tasmania I and II. The Act also provides for the Treasurer to enter into a


revenue sharing agreement with the Victorian Government in respect of the tax on gaming operations aboard Spirit of Tasmania I and II. Under the agreement, 25 per cent of the tax received is paid to the Victorian Government in recognition of gaming operations that occur when the vessels are in Victorian waters.

Annual lucky envelope permit fees, reported under Other Gaming in previous Budgets, are expected to raise $35 000 in 2008-09.

Estimated Receipts for 2009-10 Taxation revenue from casino operations for 2009-10 is estimated to be $58.5 million, representing a reduction of $1.8 million or 3.0 per cent when compared to the 2008-09 Budget estimate and a reduction of $2.8 million or 4.6 per cent when compared to the estimated outcome for 2008-09. This reduction reflects the estimated impact on revenue of the harm-minimisation strategies announced by the Government in response to the Social and Economic Impact Study into Gambling in Tasmania.

Lottery Tax Description Since 1960, successive agreements have been in place between the Governments of Tasmania and Victoria regarding the sale of lottery tickets in Tasmania and the sharing of duty attributable to Tasmanian lottery subscriptions.

Under the current agreement, Victoria remits to Tasmania 100 per cent of the duty paid on all Tattersall's products sold in Tasmania, together with a proportionate share of unclaimed prizes. The agreement is not time-limited although, under the Gaming Control Act, Tattersall's Tasmanian permit authorises it to sell lottery tickets in Tasmania until 30 June 2010. All Tattersall's lottery tax is collected by the Victorian Government, which remits the required payment to Tasmania each month.

A similar agreement with the Queensland Government was entered into during 2008-09 with regards to lottery tickets sold in Tasmania by Golden Casket, a Queensland based wholly owned subsidiary of Tatts Group Ltd.

Since 1 July 2008, Tattersall's has, under its Victorian licence, only been able to sell lottery products that are 'national bloc' products, such as Tattslotto. This is because the right to sell products such as instant lotteries or 'scratchies' was awarded by the Victorian Government to Intralot Australia Pty Ltd with effect from 1 July 2008.

Since 1 July 2008, Intralot Australia Pty Ltd and Golden Casket have sold instant lotteries or 'scratchies' products in Tasmania. Under revenue sharing agreements with the Victorian and Queensland Governments, 100 per cent of the tax on sales of these products in Tasmania is remitted to Tasmania.

Estimated Receipts for 2009-10 It is estimated that taxation revenue in relation to Tasmanian lottery products will be $23.8 million in 2009-10, representing a reduction of $1.7 million or 6.7 per cent when compared to the 2008-09 Budget estimate, but an increase of $521 000 or 2.2 per cent on the 2008-09 estimated outcome.


Totalizator Wagering Levy Description Amendments made to the Gaming Control Act in 2009 provide for the establishment of a Tasmanian Gaming Licence with a totalizator endorsement. The licence will initially be held by TOTE Tasmania, but a new licence will be issued if TOTE Tasmania is sold to another operation. The Act provides for the holder of that licence to pay a fixed annual wagering levy of 4.7 million fee units. Fee units are adjusted annually in line with movements in the Consumer Price Index. There will not be any turnover tax on totalizator (parimutuel) wagering activities.

Estimated receipts for 2009-10 It is estimated that totalizator wagering levy revenue will be $6.0 million in 2009-10.

Guarantee Fees Description Guarantee fees are payable by Government businesses, Government Business Enterprises and State-owned Companies, on financial accommodation (primarily loans obtained from the Tasmanian Public Finance Corporation) to offset the borrowing cost advantage of public ownership. Without the payment of guarantee fees, Government businesses would receive an unfair advantage over their public sector counterparts as they would be able to access borrowings at lower costs given the implicit Government support.

Estimated Receipts for 2009-10 It is expected that revenue from guarantee fees will be $20.1 million in 2009-10, an increase of $8.5 million or 73.3 per cent on the 2008-09 Budget estimate and $10.9 million or 118.5 per cent above the estimated outcome for 2008-09. The Global Financial Crisis has led to materially higher borrowing costs for corporate borrowers – whether from credit markets or bank debt – and consequently guarantee fees are considerably higher in 2009-10 compared to the 2008-09 Budget, particularly for those with high levels of debt. In addition, Aurora Energy is raising up to $260.0 million of additional debt, on which guarantee fees are payable, to fund the completion of the Tamar Valley Power Station.

Land Tax Description Land tax is imposed under the Land Tax Act 2000. It is levied on the basis of three land categories: general; primary production; and principal residence land. However, since 1 July 1996, the rate of tax on principal residence and primary production land has been set at zero, thereby effectively exempting such land from land tax. The land tax scales are currently fixed by the Land Tax Rating Act 2000.

The principal residence category applies to land on which there is a dwelling or stratum unit that is occupied as the principal residence of the owner, or a related person as defined by the Act. This category also includes retirement village units occupied as principal residences.


The primary production land category applies to land that is used substantially for the business of primary production. It includes land that has been declared a private timber reserve under the Forest Practices Act 1985, or a State forest under the Forestry Act 1920.

General land relates to any land that is not classified as principal residence or primary production land. It includes commercial and industrial land, land used for the rental of residential housing and vacant land.

Land tax is calculated on the assessed land value and is payable by the owner of the land as at 1 July each year. The assessed land value is the value adjusted by a valuation adjustment factor, as determined by the Valuer-General on 1 March each year. This aims to bring all properties in the State to a common valuation date each year. The valuation adjustment factor for a given valuation district is determined for each land category within that district and represents an estimate of the general movement in land values since the last full revaluation was undertaken for that district.

Certain non-profit sporting organisations and bodies that control or promote horse racing, dog racing, athletic sports or motor racing, are eligible for a concessional rate of land tax that is equal to 0.4 per cent of the assessed land value. All land owned by persons who hold a Commonwealth Pensioner Concession Card and who have a 50 per cent or greater ownership stake in the property is exempt from land tax.

Table 5.3 shows the land tax scale that applies in Tasmania.

Table 5.3: Land Tax Scale, 2009-10 Assessed Land Value Tax Rate

$

below 25 000 Nil

25 000 - 349 999 $50 plus 0.55 cents per $1 above $25 000

350 000 - 749 999 $1 837.50 plus 2.0 cents per $1 above $350 000

750 000 and above $9 837.50 plus 2.5 cents per $1 above $750 000

A rebate is available to home owners who incur a land tax liability in transitional circumstances when they are moving from one residence to another. The rebate is paid to those home owners who have paid the land tax liability and have sold their former residence, provided no income is earned from the property during the transitional period.

Table 5.4 provides detail of the number of properties and the land tax assessed for each category of land in 2008-09.


Table 5.4: Land Tax Calculation, 2008-09 Principal Residence Primary Production General Number of Tax Number of Tax Number of Tax

Property Value Properties Payable Properties Payable Properties Payable $ $m $m $m

1 - 1 000 0 .... 0 .... 121 ....

1 001 - 15 000 1 034 .... 18 .... 2 264 ....

15 001 - 20 000 453 .... 18 .... 949 ....

20 001 - 25 000 768 .... 16 .... 1 205 ....

25 001 - 35 000 3 268 .... 33 .... 2 719 0.2

35 001 - 40 000 2 611 .... 21 .... 1 610 0.2

40 001 - 50 000 5 001 .... 63 .... 3 552 0.6

50 001 - 65 000 13 479 .... 143 .... 6 509 1.5

65 001 - 68 750 4 753 .... 36 .... 1 979 0.6

68 751 - 100 000 25 526 .... 432 .... 10 723 3.9

100 001 - 125 000 12 768 .... 471 .... 5 773 3.0

125 001 - 170 000 15 937 .... 935 .... 6 796 4.8

170 001 - 210 000 6 889 .... 724 .... 3 629 3.4

210 001 - 250 000 2 575 .... 567 .... 2 016 2.3

250 001 - 500 000 4 652 .... 2 162 .... 4 980 10.4

500 001 - 1 000 000 569 .... 1 495 .... 1 358 11.2

1 000 001 and over 92 .... 1 217 .... 610 37.7

Total1 100 375 .... 8 351 .... 56 793 79.7

Note: 1. Assessed land tax differs from tax collected as shown in table 5.1, due to the timing of receipts, as well as

adjustments made after the issuing of land tax assessments to reflect changes in property use.

Estimated Receipts for 2009-10 It is expected that land tax collections in 2009-10 will be $90.0 million, an increase of $6.1 million or 7.3 per cent on the 2008-09 Budget estimate. The 2009-10 Budget estimate for land tax collections is $15.2 million or 20.3 per cent higher than the estimated 2008-09 outcome. This is due to a significant increase in property values, as determined by the Valuer-General, across a number of municipalities arising from revaluations.

Motor Tax Description Motor tax is imposed under the Vehicle and Traffic Act 1999 on the owners of motor vehicles or trailers, at the time of initial registration and annual renewal. Depending on the type of vehicle, the tax is determined by the number of cylinders and/or weight, seating capacity, or the number of axles and mass of each vehicle. The legislation specifies six classes of vehicles, each attracting its own scale of rates. A rebate of 40 per cent is available in certain cases to eligible pensioners owning commercial goods vehicles, provided they are not engaged in any trade or business, and commercial vehicles used predominantly for farming or


horticultural purposes. Motor tax rates are indexed annually. The National Transport Commission determines the rates applying to heavy vehicles.

Estimated Receipts for 2009-10 Motor tax collections are estimated to be $54.2 million in 2009-10, a reduction of $200 000 or 0.4 per cent on the 2008-09 Budget estimate. Motor tax collections in 2009-10 are expected to equal the estimated outcome for 2008-09. This reflects an expected decline in the number of registered motor vehicles, as a result of the current economic environment.

Payroll Tax Description Payroll tax is imposed under the Payroll Tax Act 2008 and is levied on employee wages and salaries, commissions, bonuses, fringe benefits and allowances, directors' remuneration and employer superannuation contributions paid to employees who provide services to their employer in Tasmania. The tax also applies to contract payments (where an employer-employee relationship is deemed to exist) and to employment agencies.

Payroll tax is levied at a rate of 6.1 per cent of an employer's total taxable wages above a $1.01 million tax free threshold.

Table 5.5 provides details of the number of employers in each tax liability range and the total tax paid by employers in each liability range in 2007-08. The majority of employers liable for payroll tax pay less than $50 000 tax per annum.

Table 5.5: Payroll Tax, 2007-08

Tax Liability Range

Number of Employers Tax Paid

$ $m

1 - 50 000 1 438 20.1

50 001 - 100 000 245 17.7

100 001 - 250 000 220 34.2

250 001 - 500 000 88 30.8

500 001 - 1 000 000 43 29.7

1 000 001 and above 47 113.8

Total1 2 081 246.2

Note: 1. Assessed payroll tax differs from tax collected as shown in Table 5.1, due to the timing of receipts and the

application of penalty and interest to assessed tax.

Following agreement between all the states and territories, harmonised payroll tax legislation has been put in place, with the Tasmanian legislation taking effect from 1 July 2008.

Tasmania's payroll tax arrangements mirror those in other jurisdictions, except in terms of the tax-free threshold and the rate of tax which applies in each state.


The harmonised arrangements provide widespread benefits for taxpayers including a reduction in compliance costs and increased certainty through the adoption of uniform payroll tax laws. In addition to the harmonisation benefits, there have also been direct benefits to taxpayers through the expansion of existing, and the introduction of new, concessions and exemptions.

During 2008-09, the Government reinstated the Tasmanian Trainee and Apprentice Incentive Scheme (TTAIS), with an effective date of 1 July 2008. This program provides industry development and training incentives through the payroll tax system.

The payroll tax rebate for eligible employers in the information technology sector is being phased out, and will cease completely on 30 June 2010. Funding for this rebate is being redirected to the Enterprise Growth Program delivered by the Department of Economic Development, Tourism and the Arts.

Payroll tax relief will also be made available to all employers liable for payroll tax, by way of rebate for the payroll tax payable for any new positions created during the period from 11 June 2009 to 30 June 2010. The measure is designed to encourage employers to support employment at a time when employment is under threat due to the current economic environment.

Eligible employers will be required to declare their total taxable wages, including wages paid to new employees, in payroll tax returns and to pay the tax by the due date. A rebate equivalent to the full payroll tax liability on wages paid to an eligible employee in 2009-10 and 2010-11 will then be paid.

The net cost of the rebate is expected to be $2.0 million in 2009-10 and $2.4 million in 2010-11, with a further cost of $625 000 in 2011-12 relating to rebates paid in that year with respect to claims made for 2010-11.

Payroll tax is also paid by Government Departments and Agencies, but receipts from these organisations are excluded from the actual and estimated payroll tax receipts reported in this Chapter.

Estimated Receipts for 2009-10 Receipts from payroll tax in 2009-10 are estimated to be $257.0 million, representing a reduction of $9.1 million or 3.4 per cent when compared to the 2008-09 Budget estimate and a reduction of $8.8 million or 3.3 per cent when compared to the 2008-09 estimated outcome. The expected reduction in collections is the result of an anticipated decline in the number of people employed as a result of the current economic environment.

State Fire Commission Receipts Description The major source of revenue for meeting operational costs and capital needs of the State Fire Commission is provided via a number of levies in accordance with the Fire Service Act 1979. The levies are a fire service contribution on property (levied on assessed annual values) that is collected by councils; a motor vehicle fire levy on all vehicle registration (excluding motor cycles); and a fire levy on prescribed classes of insurance.

State Fire Commission Revenue is reported as a tax for the purposes of the General Government Sector reporting. However, all revenue is passed directly to the State Fire Commission.


Estimated Receipts for 2009-10 It is expected that revenue generated by fire service levies will be $50.7 million in 2009-10, representing an increase of $2.5 million or 5.0 per cent on the 2008-09 Budget estimate and estimated outcome.

Vehicle Registration Fees Description Vehicle registration fees, payable in accordance with the Vehicle and Traffic Act 1999, are collected on the registration and transfer of vehicle ownership.

Estimated Receipts for 2009-10

Total vehicle registration fees are estimated to be $29.4 million in 2009-10, representing an increase of $3.2 million or 12.2 per cent on the 2008-09 Budget estimate and an increase of $633 000 or 2.2 per cent on the estimated outcome for 2008-09.


MAJOR LEGISLATIVE AND OTHER CHANGES Since the 2008-09 Budget, two changes have been made to Tasmania's taxation legislation framework.

Gaming Control Amendment Act 2009 The Gaming Control Amendment Act 2009 amended the Gaming Control Act 1993, and repealed the Racing (Totalizator Betting) Act 1952 and the TOTE Tasmania (Racing Regulation) Act 2004.

The Act provided for the regulation of TOTE Tasmania's gaming and wagering activities under the Gaming Control Act. This was achieved by creating a new totalizator endorsement for a Tasmanian Gaming Licence, for the conduct of parimutuel wagering. The Act repealed the legislation previously governing the operation of TOTE Tasmania, namely the Racing (Totalizator Betting) Act and the TOTE Tasmania (Racing Regulation) Act.

The Act provides for a new totalizator operator, in the event that the TOTE is sold, to be licensed and regulated under the Gaming Control Act, and also contained changes to the endorsement fees and the abolition of tax rates for sports-betting and race wagering that will facilitate the attraction to Tasmania of corporate bookmakers.

The Act also addressed issues that have arisen out of administering the regulatory and tax arrangements specific to its betting exchange activities.

The Act will commence on a day to be proclaimed.

Taxation and Related Legislation (Miscellaneous Amendments) Act (No.2) 2008 The Taxation and Related Legislation (Miscellaneous Amendments) Act (No. 2) 2008 amended the Duties Act 2001, the Land Tax Act 2000, the Payroll Tax Act 2008, the First Home Owner Grant Act 2000, the Taxation Administration Act 1997, the Land Titles Act 1980 and the Strata Titles Act 1998.

The Act contained amendments to redress a number of minor inequities; ensure consistency with comparable Acts in other jurisdictions; deter tax avoidance; remove redundant provisions; clarify the intent of certain provisions; and align legislation with current administrative practices.

The Act also included some measures to enable the collection of taxes that should be paid, according to the original policy intent of the legislation, but were being avoided.

The ability of the Commissioner of State Revenue to recover First Home Owner Grants from ineligible applicants, such as those who fail to comply with the conditions under which the grants are paid, or who make false or misleading statements in their applications, was also enhanced, along with the Commissioner's ability to recoup the costs incurred in their recovery.


6 ASSETS AND LIABILITIES Features

• The General Government Sector assets and liabilities in this chapter are presented in a Balance Sheet which complies with the Australian Accounting Standard AASB 1049.

• Net Worth is estimated to be $11 112.3 million as at 30 June 2010, an increase of $345.0 million or 3.2 per cent above the 2008-09 Budget estimate of $10 767.3 million. Net Worth is estimated to increase over the Forward Estimates to $12 669.8 million by 30 June 2013.

• Net Financial Worth is estimated to be $291.7 million as at 30 June 2010, a decrease of $1 129.6 million or 79.5 per cent below the 2008-09 Budget estimate of $1 421.3 million. Net Financial Worth is anticipated to increase to $573.0 million by 30 June 2013.

• Net Financial Liabilities are estimated to be $3 674.3 million as at 30 June 2010, an increase of $1 273.1 million or 53.0 per cent above the 2008-09 Budget estimate of $2 401.2 million. Net Financial Liabilities are estimated to increase to $4 213.1 million by 30 June 2013.

• It is estimated that Financial Assets will exceed Gross Debt by $486.5 million as at 30 June 2010, decreasing to be $231.4 million by 30 June 2013.

Assets and Liabilities 6.1

INTRODUCTION This chapter provides detailed information on the major categories of assets and liabilities for the General Government Sector. The information presented in this chapter complies with the Australian Accounting Standard AASB 1049, Whole of Government and General Government Sector Financial Reporting.

BALANCE SHEET The Balance Sheet presented in this chapter provides a financial snap-shot of assets and liabilities taken at the end of the financial year and discloses the resources over which the Government maintains control. By providing information on the nature of assets and liabilities held by the Government, this statement gives an indication of the State's financial strength.

The key measures presented in the Balance Sheet are Net Worth, Net Financial Worth, Net Financial Liabilities and Net Debt.

Table 6.1 details the estimated General Government Sector Balance Sheet as at 30 June from 2009 to 2013.

6.2 Assets and Liabilities

Table 6.1: General Government Balance Sheet as at 30 June

2009)

Budget)

2010)

Budget)

2011) Forward) Estimate)

2012)Forward)Estimate)


$m) $m) $m) $m) $m) Assets

Financial Assets Cash and Deposits 1 386.0) 728.3) 347.9) 292.2) 435.1)

Investments 44.8) 70.1) 88.6) 76.4) 54.7)

Equity Investments 3 826.6) 3 969.1) 4 164.5) 4 483.6) 4 788.7)

Receivables 133.9) 153.9) 161.4) 169.3) 176.7)

Other Financial Assets 1 017.4) 922.0) 950.4) 1 013.4) 1 059.1)

6 408.7) 5 843.4) 5 712.7) 6 034.9) 6 514.2)

Non-Financial Assets Land and Buildings 4 432.3) 5 234.9) 5 565.9) 5 726.6) 5 859.5)

Infrastructure 4 149.1) 4 906.3) 5 188.6) 5 402.1) 5 543.9)

Plant and Equipment 280.4) 156.8) 163.2) 155.6) 145.7)

Heritage and Cultural Assets 409.3) 454.2) 465.0) 475.6) 486.7)

Investment Property 9.7) 11.1) 11.1) 11.1) 11.1)

Intangibles 21.9) 24.3) 21.9) 19.1) 16.5)

Assets Held for Sale 1.4) 7.0) 5.5) 5.5) 5.5)

Other Non-Financial Assets 42.0) 26.1) 26.6) 27.2) 27.9)

9 346.0) 10 820.6) 11 447.8) 11 822.9) 12 096.8)

Total Assets 15 754.7) 16 664.0) 17 160.5) 17 857.8) 18 611.0) Liabilities

Borrowings 308.0) 311.9) 323.5) 296.8) 258.4)

Superannuation 3 885.9) 4 493.8) 4 619.5) 4 735.4) 4 836.5)

Employee Entitlements 439.5) 416.1) 445.9) 469.8) 493.1)

Payables 123.9) 75.6) 78.2) 80.9) 83.7)

Other Liabilities 230.1) 254.4) 252.4) 260.4) 269.5)

Total Liabilities 4 987.4) 5 551.7) 5 719.4) 5 843.3) 5 941.2)

NET ASSETS 10 767.3) 11 112.3) 11 441.1) 12 014.5) 12 669.8)


Table 6.1 General Government Balance Sheet as at 30 June (continued)

2009)

Budget)

2010)

Budget)




$m) $m) $m) $m) $m) Equity

Accumulated Funds 6 666.8) 6 280.3) 6 369.1) 6 700.6) 7 117.7)

Asset Revaluation Reserve 3 427.0) 4 701.2) 4 934.1) 5 173.4) 5 409.0)

Other Equity 673.5) 130.9) 137.8) 140.5) 143.2)

Total Equity 10 767.3) 11 112.3) 11 441.1) 12 014.5) 12 669.8)

NET WORTH1 10 767.3) 11 112.3) 11 441.1) 12 014.5) 12 669.8) NET FINANCIAL WORTH2 1 421.3) 291.7) (6.7) 191.6) 573.0) NET FINANCIAL LIABILITIES3 2 401.2) 3 674.3) 4 168.2) 4 289.5) 4 213.1) NET DEBT4 (1 122.8) (486.5) (112.9) (71.8) (231.4) Notes: 1. Net Worth represents total assets (both financial and non-financial) minus total liabilities. 2. Net Financial Worth represents financial assets less total liabilities. 3. Net Financial Liabilities represents total liabilities less financial assets, excluding equity investments in Government

businesses. 4. Net Debt represents borrowings less selected financial assets.


KEY MEASURES Net Worth Net Worth is calculated as total assets (both financial and non-financial) minus total liabilities. Net Worth incorporates non-financial assets such as land and other infrastructure assets, which may be sold and used to repay debt. It uses certain financial liabilities not captured by the Net Debt measure, most notably, accrued employee superannuation liabilities and creditors. Amongst the assets recognised, it includes ownership of equities and debtors.

Table 6.2: Net Worth as at 30 June 2009)

Budget)

2010)

Budget)




$m) $m) $m) $m) $m) Total Assets 15 754.7) 16 664.0) 17 160.5) 17 857.8) 18 611.0)

less Total Liabilities 4 987.4) 5 551.7) 5 719.4) 5 843.3) 5 941.2)

NET WORTH 10 767.3) 11 112.3) 11 441.1) 12 014.5) 12 669.8)

Movement

$m na) 345.0) 328.8) 573.4) 655.3)% na) 3.2) 3.0) 5.0) 5.5)

It is estimated that Total Assets will exceed Total Liabilities by $11 112.3 million as at 30 June 2010.

An increase in Net Worth indicates that the value of financial and non-financial assets is growing by more than liabilities. A positive Net Worth reflects the strength of the State's financial position.

The major factors influencing the increase in Net Worth are an increase in Fixed Assets and Equity Investments, decreases in Payables, partially offset by an increase in the Superannuation Liability. The increase in Fixed Assets reflects the Government's increased investment in infrastructure through the Infrastructure Tasmania Fund, Hospitals Capital Fund, Housing Fund, and Water Infrastructure Fund; and the Australian Government's Nation Building – Economic Stimulus Plan. Further information regarding infrastructure investment is provided in Chapter 7 Infrastructure Investment of this Budget Paper.


Net Financial Worth Net Financial Worth is calculated as total financial assets (including ownership equity) minus total liabilities. This measure is more specific than Net Worth and uses a broader definition of liabilities than Net Debt, as it incorporates certain provisions (such as superannuation, but not depreciation and bad debts).

Table 6.3: Net Financial Worth as at 30 June 2009)

Budget)

2010)

Budget)




$m) $m) $m) $m) $m) Financial Assets 6 408.7) 5 843.4) 5 712.7) 6 034.9) 6 514.2)

less Total Liabilities 4 987.4) 5 551.7) 5 719.4) 5 843.3) 5 941.2)

NET FINANCIAL WORTH 1 421.3) 291.7) (6.7) 191.6) 573.0)

Movement

$m na) (1 129.6) (298.4) 198.3) 381.4)% na) (79.5) (102.3) 2 959.7) 199.1)

It is estimated that Net Financial Worth will be $291.7 million as at 30 June 2010.

The major factors influencing the temporary decrease in Net Financial Worth in 2010 and 2011 are the decrease in Cash and Deposits reflecting the impact of the Global Financial Crisis on revenues, and the equity contribution to Aurora Energy Pty Ltd for the construction of the Tamar Valley Power Station; the decrease in Other Financial Assets reflecting the impact of the Global Financial Crisis on the Income Tax Equivalent receivable; and an increase in the Superannuation Liability. Net Financial Worth is anticipated to increase in 2012.


Net Financial Liabilities Net Financial Liabilities comprises total liabilities less financial assets, excluding equity investments in Government Businesses. This uses a broader definition of liabilities than Net Debt, as it incorporates other liabilities such as superannuation. The Net Financial Liabilities measure is similar to the Net Financial Worth measure, however, amongst the assets recognised, it excludes equity investments in Government businesses.

Table 6.4: Net Financial Liabilities as at 30 June 2009)

Budget)

2010)

Budget)




$m) $m) $m) $m) $m) Total Liabilities 4 987.4) 5 551.7) 5 719.4) 5 843.3) 5 941.2)

less Financial Assets 6 408.7) 5 843.4) 5 712.7) 6 034.9) 6 514.2)

excluding Equity Investments in Government

Businesses1 3 822.5) 3 966.0) 4 161.5) 4 481.1) 4 786.1)

NET FINANCIAL LIABILITIES 2 401.2) 3 674.3) 4 168.2) 4 289.5) 4 213.1)

Movement

$m na) 1 273.1) 493.9) 121.3) (76.4)% na) 53.0) 13.4) 2.9) (1.8)

Note: 1. This amount differs from the Balance Sheet Equity Investments because the Balance Sheet includes both equity

investments in Government businesses and other equity investments.

It is estimated that Net Financial Liabilities will be $3 674.3 million as at 30 June 2010.

The major factors influencing the increase in Net Financial Liabilities in 2010, 2011 and 2012 are a decrease in Cash and Deposits and an increase in the Superannuation Liability.


Net Debt Net Debt is a measure used to help judge the overall strength of a jurisdiction's fiscal position. Net Debt comprises a stock of selected gross financial liabilities less selected financial assets.

Table 6.5: Net Debt as at 30 June 2009)

Budget)

2010)

Budget)




$m) $m) $m) $m) $m) Borrowings 308.0) 311.9) 323.5) 296.8) 258.4)

less Cash and Deposits 1 386.0) 728.3) 347.9) 292.2) 435.1)

less Investments 44.8) 70.1) 88.6) 76.4) 54.7)

NET DEBT (1 122.8) (486.5) (112.9) (71.8) (231.4)

Movement

$m na) (636.3) (373.6) (41.1) 159.6% na) (56.7) (76.8) (36.4) 222.3

It is estimated that financial assets associated with Net Debt will exceed gross debt by $486.5 million as at 30 June 2010.

The estimated 2010 Net Debt position shows a significant decline from 2009 in Cash and Deposits due to lower than anticipated revenues and the utilisation of cash reserves. The Net Debt position will continue to be impacted by these factors until 2012 and improve thereafter.


ASSETS Total assets are estimated to be $16 664.0 million as at 30 June 2010, an increase of $909.3 million or 5.8 per cent above the 2008-09 Budget estimate of $15 754.7 million.

Chart 6.1 shows the estimated total assets as at 30 June 2010 and a percentage breakdown of the asset categories.

Chart 6.1: Assets by Category as at 30 June 2010

Cash and Deposits

$728.3m (4.4%)

Other Financial Assets $922.0m

(5.5%)

Receivables$153.9m (0.9%)

Non-Financial Assets

$10 820.6m (65.0%)

Investments$70.1m (0.4%)

Equity Investments$3 969.1m

(23.8%)

Cash and Deposits Cash and Deposits are estimated to be $728.3 million as at 30 June 2010, a decrease of $657.7 million or 47.5 per cent below the 2008-09 Budget estimate of $1 386.0 million. The decrease reflects a number of key factors including:

• the impact of the Global Financial Crisis resulting in:

− a significant decrease in GST revenue;

− a reduction in State-based taxation receipts; and

− a decrease in returns from Government businesses;

• a reduction in interest revenue;

• an equity contribution to Aurora Energy Pty Ltd for the construction of the Tamar Valley Power Station; and

• a more accurate estimate of Cash and Deposits, after taking into account 2008 actual balances that were not known at the time of preparing the 2008-09 Budget.


Investments Investments is estimated to be $70.1 million as at 30 June 2010, an increase of $25.3 million or 56.5 per cent above the 2008-09 Budget estimate of $44.8 million. The increases in 2010 and 2011 reflect additional loans to the private sector primarily as a result of the establishment of the Tasmanian Industry Support Scheme. The decrease in Investments in 2012 and 2013 reflects the repayment of loans made from the Tasmanian Industry Support Scheme.

Equity Investments This item consists of the Government's investment in the net assets of the Public Non-Financial Corporations (PNFC) and Public Financial Corporations (PFC) sectors, and equity investments in private sector businesses by the Department of Economic Development, Tourism and the Arts.

Equity Investments are estimated to be $3 969.1 million as at 30 June 2010, an increase of $142.5 million, or 3.7 per cent above the 2008-09 Budget estimate of $3 826.6 million as at 30 June 2009.

This increase reflects the reclassification of funds in the Water Infrastructure Fund to equity contributions to the Rivers and Water Supply Commission for construction and completion of various water infrastructure projects.

Chart 6.2 illustrates the components of the Government's holdings of Equity Investments.

Chart 6.2: Equity Investments as at 30 June 2010

Electricity$2 711.4m

(68.2%)Resource

Management$581.8m (14.7%)

Financial $161.6m (4.1%)

Other$97.4m (2.5%)

Transport$290.9m (7.3%)Ports

$125.8m (3.2%)

Receivables Receivables is estimated to be $153.9 million as at 30 June 2010, an increase of $20.0 million or 14.9 per cent above the 2008-09 Budget estimate of $133.9 million. Receivables continue to increase over the Forward Estimates at a rate of approximately 5.0 per cent per annum. The increase in Receivables primarily reflects an increase in receivables anticipated by the Department of Justice in relation to Fines and


Regulatory Fees, and a more accurate estimate of Receivables, after taking into account 2008 actual balances that were not known at the time of preparing the 2008-09 Budget.

Other Financial Assets Other Financial Assets include Income Tax Equivalents Receivable, Prepayments, Accrued Revenue, GST Receivable and Other Financial Assets. Table 6.6 provides a summary of Other Financial Assets.

Table 6.6: Other Financial Assets as at 30 June 2009)

Budget)

2010)

Budget)




$m) $m) $m) $m) $m) Income Tax Equivalents Receivable 972.3 874.1 901.3 963.1 1 007.7

Prepayments 13.8 15.1 15.4 15.6 15.8

Accrued Revenue 13.1 14.5 15.3 16.2 17.0

GST Receivable 6.9 9.3 9.5 9.6 9.7

Other Financial Assets 11.3 8.8 8.8 8.7 8.7

1 017.4 922.0 950.4 1 013.4 1 059.1

Income Tax Equivalents Income Tax Equivalents Receivable relates to an asset held by the General Government Sector that mirrors the Income Tax Liabilities held by the Government Business Enterprises and State-owned Companies in the Public Non-Financial Corporation and Public Financial Corporation sectors, reflecting timing differences in the payment of income tax equivalents in accordance with Australian Accounting Standards.

Income Tax Equivalents Receivable is estimated to be $874.1 million as at 30 June 2010, a decrease of $98.2 million or 10.1 per cent below the 2008-09 Budget estimate of $972.3 million. The decrease in 2010 reflects a more accurate estimate based on 2007-08 actuals (which were not known at the time the 2008-09 Budget was prepared). This temporary decrease also reflects the impact of the Global Financial Crisis on Tasmanian government businesses. Income Tax Equivalents Receivable are projected to increase steadily through the Forward Estimates.


Non-Financial Assets Non-Financial Assets includes Fixed Assets, Intangibles and Other Non-Financial Assets. Non-Financial Assets are estimated to be $10 820.6 million as at 30 June 2010, an increase of $1 474.6 million or 15.8 per cent above the 2008-09 Budget estimate of $9 346.0 million as at 30 June 2009.

Fixed Assets Fixed Assets include Land and Buildings, Infrastructure, Plant and Equipment, Heritage and Cultural Assets, Investment Property and Assets Held for Sale. The Fixed Assets represent the value of Crown Land and other land holdings, including national parks and conservation areas, schools, hospitals and other buildings held by the Government, infrastructure assets such as roads and bridges, and plant and equipment held by the Government for the provision of goods and services.

Fixed Assets are estimated to be $10 770.2 million as at 30 June 2010, an increase of $1 488.1 million or 16.0 per cent above the 2008-09 Budget estimate of $9 282.1 million.

The increase in Fixed Assets primarily reflects increases in Land and Buildings and Infrastructure as a result of increased capital expenditure by the Government through the Infrastructure Tasmania Fund, Hospitals Capital Fund, and Housing Fund: and the Australian Government's Nation Building - Economic Stimulus Plan. Further information regarding infrastructure investment is provided in Chapter 7 Infrastructure Investment of this Budget Paper.

Chart 6.3 illustrates the categories of Fixed Assets as at 30 June 2010.

Chart 6.3: Fixed Assets by Category as at 30 June 2010

Heritage and Cultural Assets$454.2m (4.2%)

Land and Buildings

$5 234.9m (48.5%)

Assets Held for Sale

$7.0m (0.1%)

Infrastructure$4 906.3m

(45.6%)

Plant and Equipment

$156.8m (1.5%)

Investment Property

$11.1m (0.1%)


Intangibles Intangibles is estimated to be $24.3 million as at 30 June 2010, an increase of $2.4 million or 11.0 per cent above the 2008-09 Budget estimate of $21.9 million. The increase reflects a more accurate estimate of Intangibles, after taking into account 2008 actual balances that were not known at the time of preparing the 2008-09 Budget.

Other Non-Financial Assets Other Non-Financial Assets includes Inventories and Other Non-Financial Assets. Other Non-Financial Assets are estimated to be $26.1 million as at 30 June 2010, a decrease of $15.9 million or 37.9 per cent below the 2008-09 Budget estimate of $42.0 million. The decrease reflects a more accurate estimate of Other Non-Financial Assets, after taking into account 2008 actual balances that were not known at the time of preparing the 2008-09 Budget.


LIABILITIES Total Liabilities are estimated to be $5 551.7 million as at 30 June 2010, an increase of $564.3 million or 11.3 per cent above the 2008-09 Budget estimate of $4 987.4 million.

Chart 6.4 shows the estimated Total Liabilities as at 30 June 2010 and a percentage breakdown of the liability categories.

Chart 6.4: Liabilities by Category as at 30 June 2010

Employee Entitlements

$416.1m (7.5%)

Payables$75.6m (1.4%)

Superannuation $4 493.8m

(80.9%)

Borrowings$311.9m (5.6%)

Other Liabilities$254.4m (4.6%)

Borrowings Borrowings is estimated to be $311.9 million as at 30 June 2010, $3.9 million or 1.3 per cent above the 2008-09 Budget estimate of $308.0 million. The increase in Borrowings in 2010 reflects an increase in borrowing by the Department of Economic Development, Tourism and the Arts for the Tasmanian Industry Support Scheme. The projected decrease in borrowings from 2012 represents the repayment of loans from the Australian Government.

Superannuation Liability The Tasmanian Government's superannuation liability is an estimate of the obligations of the State with respect to liabilities arising from the current and former members of unfunded or partially funded Public Sector superannuation schemes, all of which are now closed to new membership.

The General Government Sector superannuation liability is estimated to be $4 493.8 million as at 30 June 2010, an increase of $607.9 million, or 15.6 per cent above the 2008-09 Budget estimate of $3 885.9 million for 30 June 2009. The increase in the projected value of the liability reflects the most recent assessment of the superannuation liability that has been prepared by the State Actuary on the basis of Australian Accounting Standards.

Actuarial estimates of the superannuation liability are based on a wide range of economic, financial and demographic assumptions. Over time, actual outcomes in relation to salary growth, investment returns, the


number of resignations and retirements, mortality, morbidity, inflation and the preference for lump sum benefits over pensions can vary from those assumed by the State Actuary.

For this reason, the State Actuary is requested to annually review both the cash flow and unfunded liability estimates and, at three yearly intervals, undertake a comprehensive review of the assumptions underpinning the unfunded liability calculation.

The introduction of AASB 119 Employee Benefits by the Australian Accounting Standards Board, applicable from 30 June 2006, resulted in a number of changes to the calculation of the valuation of the unfunded superannuation liability by the State Actuary. The nature of AASB 119 is such that the calculation of valuation of the liabilities is likely to fluctuate more significantly than has previously been the case. The requirement to use the current Commonwealth long term bond rate at 30 June introduces the potential for greater variability in the valuation of the liability.

Due to current market volatility and the long term nature of the liability, the current projections of the unfunded superannuation liability do not use the current Commonwealth long term bond rate as would be required under AASB 119. The current projections are based on an average discount rate of 6.0 per cent. This rate has been determined by Treasury after an analysis of Reserve Bank of Australia historical data and more appropriately reflects the average bond rate over the life of the liability, than the current bond rate.

Further information regarding the General Government Sector superannuation liability and the Government's strategies to manage the liability is provided later in this Chapter.


Table 6.7: Superannuation Liability as at 30 June

All Schemes – Past Service Liabilities1

2009)

Budget

2010)

) Budget)




$m) $m) $m) $m) $m) Retirement Benefit Fund

Defined Benefit scheme

Finance-General Funded 3 821.2) 4 431.7) 4 557.5) 4 674.1) 4 775.8)

Housing Tasmania 17.2) 16.3) 16.3) 16.5) 16.4)

State Fire Commission ….) 1.3) 1.3) 1.3) 1.3)

3 838.4) 4 449.4) 4 575.5) 4 691.9) 4 793.5)

1973 Parliamentary Superannuation Scheme 16.9) 15.6) 15.4) 15.2) 15.0)

1985 Parliamentary Retiring Benefits Scheme 0.2) 0.7) 0.4) 0.2) (0.1)

1968 Judges' Scheme 30.4) 28.1) 28.1) 28.1) 28.0)

)

Total 3 885.9) 4 493.8) 4 619.5) 4 735.4) 4 836.5)

Note: 1. All of the schemes shown in this table are closed to new entrants.

Employee Entitlements This category includes provisions for accrued salaries, annual leave and long service leave.

Employee Entitlements is estimated to be $416.1 million as at 30 June 2010, a decrease of $23.4 million, or 5.3 per cent below the 2008-09 Budget estimate of $439.5 million.

The decrease in 2010 primarily reflects a reduction in the level of accrued salaries by the Department of Health and Human Services due to the final pay of the financial year falling on 30 June. The increase of Employee Entitlements over the Forward Estimates reflects salary and wage growth.

Payables Payables is estimated to be $75.6 million as at 30 June 2010, a decrease of $48.3 million, or 39.0 per cent below the 2008-09 Budget estimate of $123.9 million. The decrease reflects a more accurate estimate, after taking into account 2008 actual balances that were not known at the time of preparing the 2008-09 Budget.

Other Liabilities Other Liabilities is estimated to be $254.4 million as at 30 June 2010, an increase of $24.3 million, or 10.6 per cent above the 2008-09 Budget estimate of $230.1 million. The increase reflects a more accurate estimate, after taking into account 2008 actual balances that were not known at the time of preparing the 2008-09 Budget.


MANAGING THE STATE'S SUPERANNUATION AND INSURANCE LIABILITIES The following section provides further information on the State's Superannuation Liability and the management of the State's self insured risks through the Tasmanian Risk Management Fund.

Superannuation Liability The Interim Fiscal Strategy target date for extinguishing the State's net unfunded superannuation liability, as noted in Chapter 3 of this Budget Paper, has been extended from 2033 to 2035 as part of the Government's response to manage the Budget and Forward Estimates in light of the impact of the Global Financial Crisis.

Actuarial estimates of the Superannuation Liability, together with revised outlay estimates and the revised Interim Fiscal Strategy target of eliminating the State's net unfunded superannuation liability by 30 June 2035, form the basis on which the Government determines funding strategies required to manage the Superannuation Liability.

The Superannuation Liability of the Government arises from its defined benefits superannuation schemes, which are unfunded in terms of employer contributions, with the cost of the benefits paid to scheme members met on an emerging basis. The defined benefits schemes have now all been closed to new members. A Superannuation Provision Account (SPA) was established within the Special Deposits and Trust Fund in July 1994 to provide for the payment of the employer share of superannuation benefits of defined benefit scheme members employed in agencies and by some Statutory Authorities. These agencies and authorities are currently required to pay into the SPA at an employer contribution rate determined by the Treasurer, on the advice of the State Actuary. Currently, the agencies and authorities contribute an employer contribution rate of 11.0 per cent of salary. In addition, agencies are also required to pay into the SPA a 'gap' payment equivalent to two per cent of salary in respect of each permanent employee appointed after 15 May 1999.

It is current practice for these contribution rates to be reviewed at each triennial review of the fund. After the 30 June 2007 triennial review, it was advised by the Actuary that strong investment returns had increased the fund surplus and there was no need to increase the employer-funded share in the short-term.

Since then however, the funded surplus has diminished due to poor investment markets. As a result, consistent with actuarial advice, the employer component of a benefit will now need to increase from 70.0 per cent to 75.0 per cent from 1 July 2010 and, accordingly, the employer contribution level will increase to a standard 12.3 per cent of salary from that date. This means that, from 1 July 2010, for contributory scheme members the employer contribution will be increased from the current 11.0 per cent to 12.3 per cent of salary, for accumulation scheme members it will comprise the current employer contribution of 9 per cent of salary and the 'gap payment', which will be increased from 2.0 per cent to 3.3 per cent of salary.

The employer share of pensions and lump sum payments payable to retiring RBF Defined Benefit Scheme members in these agencies and authorities are reimbursed to the RBF Board from the SPA.

Finance-General (through a Reserved By Law item) funding is used to meet the emerging cost of pension and lump sum benefits, as well as to provide for the accumulation of funds in SPA capable of fully funding


the liability by 2035. In the 2009-10 Budget and over the Forward Estimate period, there are sufficient receipts from agencies and from interest on the SPA balance to meet the emerging costs.

Table 6.8 below provides details of the movements of the SPA over the Forward Estimates period.

Table 6.8: Superannuation Provision Account as at 30 June

2008 2009

Estimated 2010 2011

Forward 2012

Forward 2013

Forward Actual Outcome Budget Estimate Estimate Estimate

$'000 $'000 $'000 $'000 $'000 $'000 Opening Balance 1 145.3 1 250.2 1 335.0 1 387.2 1 455.3 1 522.7 Receipts

Agency contributions 82.5 80.4 80.4 99.1 99.8 100.4

Interest 82.8 73.5 36.9 48.7 51.0 53.3

Finance-General (R069) 81.5 86.0 90.7 95.7 101.0 106.5

Total Receipts 246.8 239.8 207.9 243.4 251.7 260.1 Expenditure

Pensions 89.8 91.0 97.3 109.0 114.1 119.8

Lump sums 52.2 64.0 58.5 66.3 70.2 74.3

Total Expenditure 142.0 155.0 155.7 175.3 184.3 194.0

Closing Balance 1 250.2 1 335.0 1 387.2 1 455.3 1 522.7 1 588.8


Tasmanian Risk Management Fund Purpose of the Fund The Tasmanian Risk Management Fund was established on 1 January 1999 to provide a whole-of-government approach to funding and managing the insurable liabilities of inner-Budget agencies.

Agencies are covered for the majority of insurable risks to which they are exposed, or for which they choose to accept responsibility for, and the Fund agrees to cover, including:

• personal injury (including workers' compensation and personal accident);

• property (including buildings and contents, business interruption, motor vehicles, machinery, marine hull, transit and fraud);

• liability (including public and products, professional, and directors and officers liability);

• medical liability; and

• travel.

All classes are self-insured by the Fund except for marine hull and travel, which remain insured through the private sector, as this is more cost-effective than self-insurance for these two categories of risk.

Performance of the Fund The Fund operates on a cost recovery basis with all inner-Budget agencies making relatively stable contributions each year in order to build up reserves to meet current and emerging costs. Contributions are based on advice from an independent actuary and are adjusted over time according to the claims experience of agencies.

In recent years, there have been only minimal increases in agency contributions in most risk categories, with the exception of medical liability, which has experienced moderate annual increases, and general property, which increased significantly in 2008-09 as a result of several large fire and storm claims, most notably the fire at Bridgewater High School.

In 2009-10, contributions for most categories of risk are expected to increase, with the most significant increases relating to workers' compensation and medical liability. These increases are mainly due to the impact of the financial crisis and the subsequent decline in the value of Australian Government bond yields, which increases the cost of funding new claims. Overall, total agency contributions are estimated to increase from $32.9 million in 2008-09 to $37.0 million in 2009-10.

In terms of the financial position of the Fund, it is expected that as at 30 June 2010 the Fund will have assets of $157.5 million and liabilities of $162.3 million. This will result in the Fund being in a net liability position of $4.8 million, as shown below in Table 6.10. This negative outcome is again largely the result of reductions in the Commonwealth long term bond rate, which increases the value placed on the Fund's outstanding claims liabilities.


Table 6.9: Financial Position of the Tasmanian Risk Management Fund as at 30 June

2008 2009 2010 2011 2012 2013

ActualEstimated Outcome Budget

Forward Estimate

Forward Estimate

Forward Estimate

$m $m $m $m $m $m Current Assets

Special Deposits and Trust Fund Account1 152.0 161.3 156.9 154.9 162.7 170.8

Receivables 0.6 0.6 0.6 0.6 0.6 0.6

152.6 161.9 157.5 155.5 163.3 171.4 Liabilities

Personal Injury2 63.4 71.2 73.8 76.1 79.0 82.3

Property3 27.8 23.8 12.9 3.3 3.4 3.4

Motor Vehicle 0.2 0.1 0.1 0.1 0.1 0.1

Liability4 7.3 10.5 10.5 10.5 10.5 10.6

Medical2 47.4 59.7 63.6 67.8 72.3 77.1

Payables and Provisions 1.4 1.4 1.4 1.4 1.4 1.4

147.5 166.7 162.3 159.2 166.7 174.9 NET ASSETS 5.1 (4.8) (4.8) (3.7) (3.4) (3.5)

Notes: 1. The reduction in the balance in the Special Deposits and Trust Fund Account in 2010 and 2011 reflects significant

claims costs that will be paid by the Fund towards the rebuilding of Bridgewater High School following the fire in October 2007.

2. The significant increases in Personal Injury and Medical Liabilities between 2008 and 2009 are largely as a result of the impact of the decline in the Commonwealth long term bond rate on the calculation of the value of long tail claims.

3. The reductions in the Property liability in 2010 and over the Forward Estimates reflect the future costs that will be paid out of the Fund towards the rebuilding of the Bridgewater High School over that period.

4. The increase in Liabilities for the liability risk category is largely as a result of a significant claim reported in 2009.


7 INFRASTRUCTURE INVESTMENT

Features

• The 2009-10 Budget commits $2.0 billion to General Government Sector infrastructure investment over the next four years.

• The planned level of infrastructure investment is $745.7 million in 2009-10. This is an increase of $375.7 million on the 2008-09 Budget allocation for infrastructure investment of $370.0 million.

• In 2009-10, infrastructure investment will comprise:

− $275.4 million for roads and rail infrastructure;

− $240.8 million for schools and education infrastructure;

− $130.4 million for housing;

− $79.3 million for hospitals and health infrastructure; and

− $13.8 million for tourism, recreation and culture.

• The Australian Government's Nation Building - Economic Stimulus Plan will provide infrastructure investment in Tasmania of $307.9 million in 2009-10. This is part of a total investment by the Australian Government of $530.7 million over the four year period 2008-09 to 2011-12.

• In addition to the $745.7 million of planned infrastructure investment, it is estimated that $87.8 million will be spent by agencies on general asset maintenance in 2009-10.


INTRODUCTION Investment in infrastructure is essential to support a strong Tasmanian economy and to keep Tasmania competitive in a challenging global economic environment. Infrastructure investment places the State in a better position to manage the impact of the Global Financial Crisis and supports Tasmanian jobs.

Infrastructure Investment activities include:

• health and housing infrastructure;

• road and rail development and maintenance;

• education infrastructure;

• building construction and maintenance;

• information technology systems and telecommunications development; and

• appropriate land acquisitions.

This chapter provides information on major infrastructure investment in 2009-10 for the General Government Sector. Infrastructure investments made by Government Business Enterprises or State-owned Companies are outside the General Government Sector and are therefore not included in this chapter.

Infrastructure investment is funded from the Capital Investment Program (CIP) and the Special Capital Investment Funds (SCIF). Sundry asset acquisition expenditure that represents general ongoing asset management activity is not included.

INFRASTRUCTURE INVESTMENT In 2009-10, total expenditure by agencies on infrastructure related projects is estimated to be $745.7 million, an increase of $375.7 million (approximately 100 per cent) on the 2008-09 Budget estimate of $370.0 million. Over the 2009-10 Budget and Forward Estimates period, the Government will invest $2.0 billion in infrastructure. This investment will upgrade Tasmania's hospital and health infrastructure, housing, education, roads and transport infrastructure.

The Government's infrastructure investment program is designed to drive economic growth, support jobs, maintain effective service delivery and sustain Tasmania's regional communities. Efficient and well maintained transport systems, along with modern health and education services, are the basis of strong social infrastructure needed to support a growing economy.

The State Government's own infrastructure funds and the Australian Government's Nation Building - Economic Stimulus Plan provide the basis for the record level of infrastructure investment in Tasmania.

7.2 Infrastructure Investment

Nation Building – Economic Stimulus Plan In February 2009, the Australian Government announced the Nation Building - Economic Stimulus Plan to improve nation building and support economic growth and jobs. The Plan has been formally agreed at the bilateral level through a National Partnership Agreement between the Australian Government and Tasmania. Commencing in 2008-09, it is anticipated that Tasmania will receive approximately $530.7 million over four years. In addition, Tasmania may also receive funding under the Science and Language Centres for the 21st Century program. Tasmania's final share of the total funding allocation is not yet known, as the Australian Government is still to determine the overall allocation of funding to states and territories.

The National Partnership Agreement details the infrastructure and other programs for which the Australian Government will provide funding. The programs include:

• Building the Education Revolution – commencing in 2008-09, funding of $372.8 million has been made available over three years ($32.5 million in 2008-09, $207.4 million in 2009-10, and $133.0 million in 2010-11) for major and minor infrastructure projects and upgrades for government and non-government schools. The majority of the Building the Education Revolution funding will be directed to primary schools, with the Department of Education estimated to spend $275.8 million, whilst grants totalling $97.0 million will be provided to non-government schools.

• In addition to the funding provided under the Building the Education Revolution initiative, further funding may become available under the Australian Government's Science and Language Centres for the 21st Century Schools initiative. Funding for this initiative will be subject to a competitive application process and will be allocated by the Australian Government on the basis of demonstrated need and evidence of being able to construct facilities during the 2009-10 financial year.

• Social Housing – commencing in 2008-09, funding of $148.9 million has been made available over four years for the construction of new social housing and repairs and maintenance of existing social housing. It is estimated that $6.1 million will be spent in 2008-09, $94.9 million in 2009-10, $40.7 million in 2010-11 and $7.3 million in 2011-12.

• High Risk Rail Crossings - commencing in 2008-09, funding of $3.9 million has been allocated over two years ($360 000 in 2008-09 and $3.6 million in 2009-10), for the implementation of safety measures at high risk rail crossings.

• Black Spots – commencing in 2008-09, funding of $4.0 million has been allocated over two years ($2.0 per annum) to address road safety issues at known black spots.

• Additional Road Maintenance – funding of $1.0 million is allocated in 2008-09 for additional maintenance of Tasmania's roads.

Housing Fund The Housing Fund was established in 2007-08 with an allocation of $60.0 million for the purpose of increasing the supply of public housing. In 2009-10, it is anticipated that $10.0 million will be expended from the Housing Fund on public housing projects.

Further details on the Housing Fund are provided in Chapter 4 of Budget Paper No 2 Government Services.


Hospitals Capital Fund The Hospitals Capital Fund (HCF) provides the Government with a capacity to invest in the State's major hospital facilities at Hobart, Launceston and Burnie.

In 2009-10, $21.8 million has been allocated from the HCF for the purchase of medical equipment for the North West Regional Hospital ($761 000); the construction of the Launceston General Hospital Car Park ($10.0 million); and to address issues associated with the ageing buildings and infrastructure at the Royal Hobart Hospital ($11.0 million).

The HCF will provide $100.0 million over five years to address the Royal Hobart Hospital's ageing buildings and infrastructure, and to improve and expand key services such as intensive care.

Further details on the HCF are provided in Chapter 4 of Budget Paper No 2 Government Services.

Infrastructure Tasmania Fund The Infrastructure Tasmania Fund (ITF) allows significant investment in Tasmania's major infrastructure including roads, health infrastructure and information technology. The Fund was established in 2007-08 with the allocation of $312.9 million from the proceeds of the divestments of the Hobart International Airport Pty Ltd and Printing Authority of Tasmania.

In 2009-10, $35.6 million will be expended from the ITF for health infrastructure upgrades ($11.8 million), health information technology projects ($5.5 million), the development of the Brighton Transport Hub ($9.5 million), and for the Tarkine Drive ($8.8 million).

Further details on the ITF are provided in Chapter 4 of Budget Paper No 2 Government Services.

Table 7.1 provides a summary of projected expenditure by General Government Sector agencies on infrastructure projects.

Water Infrastructure Fund The $80.0 million Water Infrastructure Fund (WIF) was established by the Government to enable major investment in Tasmania's water infrastructure. This investment by the Government will include the development of a number of significant irrigation projects with the potential to provide the State with an additional 250 gigalitres per annum of irrigation water.

Funds are transferred from the WIF to the Rivers and Water Supply Commission for the construction of water infrastructure. These transfers are primarily classified as equity contributions to a government business. As equity contributions, the transfers from the WIF are not reflected in the General Government Sector infrastructure expenditure. However, the WIF allocations make a significant contribution to the development of key infrastructure in Tasmania.


Table 7.1: Infrastructure Expenditure by Agency1

2008-09

Budget

2009-10

Budget


2011-12ForwardEstimate


$m $m $m $m $m Economic Development, Tourism and the Arts 2 6.2 8.0 6.0 6.0 5.3

Education3 38.2 239.9 169.2 42.8 4.6

Finance-General4 0.1 …. …. …. ….

Health and Human Services5 74.5 209.7 166.4 85.9 45.7

Infrastructure, Energy and Resources6 216.3 275.4 291.5 227.3 159.4

Justice7 12.3 …. 0.5 3.0 13.5

Legislature-General8 3.5 …. …. …. ….

Marine and Safety Tasmania9 2.0 1.3 0.6 …. ….

Police and Emergency Management 1.2 3.1 6.4 9.4 ….

Premier and Cabinet 0.3 0.5 0.3 0.3 0.3

Primary Industries, Parks, Water and Environment10 12.0 6.9 0.6 0.6 0.6

Tasmania Tomorrow Statutory Authorities11 3.7 0.9 0.9 0.9 0.9

370.0 745.7 642.3 376.1 230.0

Notes: 1. This Table includes expenditure (both purchases of non-financial assets and associated expenses) for all

infrastructure projects, but does not include minor asset purchases for non-infrastructure projects. For these reasons, the Table is not equivalent to the Net Acquisition of Non-Financial Assets presented in Chapter 4 of Budget Paper No 1 The Budget.

2. The 2008-09 Budget estimates for Economic Development, Tourism and the Arts have been recast to reflect the transfer of the Tasmanian Museum and Art Gallery project from the former Department of Environment, Parks, Heritage and the Arts.

3. The increase in Education reflects expenditure on Building the Education Revolution ($151.3 million in 2009-10) as part of the Australian Government's Nation Building - Economic Stimulus Plan, and expenditure on eight Child and Family Centres ($27.4 million in 2009-10).

4. The decrease in Finance-General reflects the completion of the Telecommunications Infrastructure Project. 5. The increase in Health and Human Services reflects expenditure on social housing ($94.9 million in 2009-10) as part

of the Australian Government's Nation Building - Economic Stimulus Plan. 6. The increase in Infrastructure, Energy and Resources reflects the Government's significant commitment to road

infrastructure projects. Further details are provided in the Roads Program section of this chapter. 7. The decrease in Justice in 2009-10 reflects the completion of the Risdon Prison Stage C project under the Prisons

Infrastructure Redevelopment Program. The increase over the Forward Estimates reflects the commencement of the Risdon Prison Stage D project.

8. The decrease in Legislature-General reflects the completion of the redevelopment and restoration of Parliament House.

9. Infrastructure expenditure by Marine and Safety Tasmania reflects the redevelopment of jetty infrastructure around the State.

10. The decrease in Primary Industries, Parks, Water and Environment largely reflects the reclassification of Water Infrastructure Fund expenditure from works and services (capital) to equity. As an equity contribution from the Government to the Rivers and Water Supply Commission, the expenditure is no longer included in General Government Sector infrastructure investment estimates. This reclassification impact is partly offset by the transfer of the Cradle Mountain Sewage Treatment project in 2009-10 from the former Department of Environment, Parks, Heritage and the Arts.

11. The Tasmania Tomorrow Statutory Authorities include the Tasmanian Academy, the Tasmanian Skills Institute and the Tasmanian Polytechnic. The decrease in Tasmania Tomorrow entities expenditure reflects the completion of the Alanvale Campus Upgrade, the Burnie Campus and the State-wide – Multi site projects.


Infrastructure Investment Framework Infrastructure investment decisions are managed through the Government's Capital Investment Program (CIP). The CIP includes the Roads and Housing Programs, and is supplemented through allocations from Special Capital Investment Funds such as the Housing Fund, the Hospitals Capital Fund and the Infrastructure Tasmania Fund.

The Government's Strategic Asset Management Framework (SAMF) sets the strategic direction for infrastructure investment spending in Tasmania. The SAMF was introduced in 1997 as a result of the Tasmania Financial Management Reform Strategy, which identified the need for an integrated policy framework for the strategic management of assets. As part of the SAMF, the Government introduced agency specific SAMPs (Strategic Asset Management Plans). SAMPs are part of a strategic asset management framework which establishes:

• criteria and standards for control and management of assets;

• strategies and processes for asset acquisition, maintenance, disposal and for risk management; and

• priorities for allocating resources for asset management.

The development, replacement and maintenance of assets through specific infrastructure investment projects reflects the Government's commitment to maintain existing infrastructure, and is complemented by general asset maintenance expenditure not included in specific projects.

In addition to the $745.7 million in infrastructure investment projects outlined in this chapter, the Government:

• will spend an estimated $87.8 million on general asset maintenance in 2009-10; and

• supports infrastructure developments through capital grant payments and equity contributions to entities outside the General Government Sector.

Details of expenditure from the Special Capital Investment Funds (including capital grant payments) are provided in Chapter 4 of Budget Paper No 2 Government Services.

Funding Sources The significant increase in infrastructure spending in 2009-10 and over the Forward Estimates reflects the State and Australian Government's commitment to infrastructure investment in Tasmania.

Table 7.2 identifies the funding sources for infrastructure project expenditure.


Table 7.2: Infrastructure Projects Funding Sources 2008-09)

Budget)

2009-10)

Budget))




$m) $m) $m) $m) $m) Infrastructure Funding Sources

State Funding Works and Services Appropriation1 160.9) 205.1 185.7 157.4 122.4

Special Capital Investment Funds2 61.5) 78.4 103.8 60.9 31.3

Asset Sale Proceeds3 14.3) 15.5 8.5 8.8 9.1

Other4 19.9) 28.9 15.0 6.8 4.3

Australian Government Funding5 113.3) 417.8 329.3 142.2 62.9

Total Funding 370.0) 745.7 642.3 376.1 230.0

Notes: 1. Table 7.2 shows the State funded Works and Services Appropriation for projects within the Capital Investment

Program. The Works and Services Appropriation detailed in Appendix 1 of Budget Paper No 2 Government Services includes Australian Government funding (which is reflected in Australian Government Funding in this table) and allocations to the Special Capital Investment Funds.

2. Details of Special Capital Investment Funds are provided in Chapter 4 of Budget Paper No 2 Government Services. 3. Asset sales relate to the Housing Program. Funds received from the sale of assets are reinvested into the Housing

Program. 4. Other Infrastructure Funding Sources includes funding carried forward from previous years in accordance with

section 8A(2) of the Public Account Act 1986, Road Safety Levy funding, funding from the Tasmanian Risk Management Fund for the Bridgewater and Southern Midlands Education Renewal project and funding from the Special Deposits and Trust Fund related to Housing.

5. Australian Government Funding consists of funding for roads infrastructure, education and the Housing Program.


MAJOR AREAS OF INFRASTRUCTURE INVESTMENT The most significant areas of infrastructure expenditure typically consist of roads, health, housing and education. Chart 7.1 illustrates the areas of infrastructure expenditure in 2009-10. The major areas of Infrastructure Investment in 2009-10 by sector are detailed below.

Chart 7.1: Infrastructure Investment Expenditure by Classification, 2009-10

Education1

$240.8m (32.3%)

Tourism, Recreation and

Culture2

$13.8m (1.9%)

Housing3

$130.4m (17.5%)Other4

$6.0m (0.8%)Health5

$79.3m (10.6%)

Roads and Rail6

$275.4m (36.9%)

Notes: 1. Education includes infrastructure investment by the Department of Education ($239.9 million) and the Tasmania

Tomorrow statutory authorities ($850 000). 2. Tourism, Recreation and Culture reflects infrastructure investment by the Department of Economic Development,

Tourism and the Arts ($8.0 million), and expenditure by the Department of Primary Industries, Parks, Water and Environment ($5.8 million).

3. Housing infrastructure investment is provided through Housing Tasmania, a Division of the Department of Health and Human Services.

4. Other includes infrastructure investment by the Department of Primary Industries, Parks, Water and Environment ($1.1 million), the Department of Police and Emergency Management ($3.1 million), the Department of Premier and Cabinet ($500 000) and Marine and Safety Tasmania ($1.3 million).

5. Health infrastructure investment reflects expenditure by the Department of Health and Human Services, not including expenditure by Housing Tasmania.

6. Roads and Rail includes infrastructure investment by the Department of Infrastructure, Energy and Resources ($275.4 million).


Education In 2009-10, total education infrastructure expenditure is $240.8 million. This includes expenditure by the Department of Education of $239.9 million and by the Tasmania Tomorrow statutory authorities of $850 000. In addition to the $151.3 million allocated in 2009-10 under the Australian Government's Building the Education Revolution Program, other major infrastructure projects include:

• Building for the Future – funding of $30.0 million was allocated in 2007-08 for projects to upgrade education infrastructure. These projects will include refurbishing and redeveloping a number of schools and libraries across the State and establishing an additional Learning and Information Network Centre. It is estimated $14.5 million of the $30.0 million total allocation will be spent in 2009-10, with all projects in the funding package expected to be complete by June 2011. Elements of the package in 2009-10 include:

− renewing the structures and locations of schools ($5.1 million);

− redeveloping the canteen, administration and general learning areas at Ogilvie High School ($3.5 million);

− refurbishing science laboratories at Rose Bay High School ($3.1 million); and

− upgrading secondary schools science laboratories ($1.0 million).

• Bridgewater Child and Family Centre – funding of $8.0 million is provided for a Bridgewater Child and Family Centre. It is estimated that $2.5 million of the $8.0 million total allocation will be spent in 2009-10, with the project expected to be completed by June 2013.

• Bridgewater and Southern Midlands Educational Renewal – $30.0 million was allocated in 2008-09 to undertake the redevelopment of education infrastructure in the Bridgewater and Southern Midlands area. It is estimated that $9.3 million of the $30.0 million total will be spent in 2009-10.

• Child and Family Centres (CFCs) – this $76.1 million program will deliver up to 30 CFCs in Tasmania that will provide a range of easily accessible services that support families with the health, care and education of children aged from birth to four years. A comprehensive infrastructure scoping process has begun to ensure that the CFCs are situated to maximise accessibility. Capital funding of $27.4 million will be provided in both 2009-10 and 2010-11, with a further $20.5 million in 2011-12 to complete the initiative. This will provide for up to 22 greenfield centres and eight collocated centres. The eight Centres identified to date will be located at Beaconsfield, East Devonport, Queenstown, George Town, Ravenswood, Clarendon Vale, Chigwell and Risdon Cove.

• Community Knowledge Network Infrastructure (Learning and Information Network Centres) – an additional $3.5 million has been allocated in 2012-13 for the establishment of a further Learning and Information Network Centre (LINC). This funding is in addition to the $3.6 million for the establishment of a LINC under the Building for the Future Infrastructure Package in the 2007-08 Budget and $10.5 million announced for three LINCs in the 2008-09 Budget. This will result in five LINCs to be established in regional areas. The LINCs will improve access to skills and training opportunities and engage community members in life long learning. It is estimated that construction of the first of these new LINCs will commence in 2009-10, with the project expected to be completed by 2013.

• Kingston Education Infrastructure Initiative – $33.0 million is allocated to construct a new Kingston High School in the Kingborough Sports Centre precinct. The new school will cater for approximately 700


secondary students from Years 7 to 10 and will be equipped with modern information and technology systems and multi-purpose learning areas. It will also provide state-of-the-art specialist facilities to accommodate innovative programs in key areas such as science and technology, music, languages, the arts, design and sport. It is estimated that $9.5 million of the $33.0 million total allocation will be spent in 2009-10, with the project expected to be completed by 2011.

• Lauderdale Primary School – funding of $2.5 million is allocated to refurbish general learning areas and undertake external works, including a car park upgrade. It is estimated $2.0 million of the $2.5 million total allocation will be spent in 2009-10, with the project expected to be completed by June 2010.

• Secondary School Renewal Program - commencing in 2009-10, funding of $6.0 million is allocated over three years to provide for significant facility modernisation works to be undertaken at a number of secondary and district high schools. All funds will be expended by June 2012.

• Tasmania Tomorrow – funding of $7.8 million has been allocated to enable work on the transformation of existing senior secondary college and Tasmania Tomorrow facilities for the Tasmanian Polytechnic, the Tasmanian Academy and the Tasmanian Skills Institute. It is estimated that $4.3 million of the $7.8 million total allocation will be spent in 2009-10. All funds will be expended by June 2011.

Health In 2009-10, total health infrastructure expenditure will be $79.3 million. This includes expenditure from the Capital Investment Program ($38.7 million), the Infrastructure Tasmania Fund for Health Infrastructure ($11.8 million), for Information Technology ($5.5 million), the Hospital Medical Equipment Fund ($1.5 million) and the Hospitals Capital Fund ($21.8 million). The major infrastructure projects include:

• Clarence GP Superclinic and Integrated Care Centre (ICC) – funding of $18.0 million over three years is provided to develop a GP Superclinic/ICC that will combine services from existing facilities and provide new models of care for persons currently receiving treatment at the Royal Hobart Hospital and other Departmental service locations. The GP Superclinic/ICC will relieve demand pressures on acute health services and improve services for people with chronic disease. The project includes an allocation of $4.5 million in 2009-10 from the Australian Government, and has allocations of $3.5 million in 2009-10, and $9.5 million in 2010-11 from the Infrastructure Tasmania Fund (Health Infrastructure). It is estimated that $8.0 million of the total $18.0 million allocation will be spent during 2009-10, with the project expected to be completed by 2010-11.

• Glenorchy – Tier Three Community Health Services Facility – funding of $8.5 million over four years is provided to expand and upgrade the Glenorchy Community Health Centre. It is estimated that $1.2 million of the total $8.5 million allocation will be spent during 2009-10, with the project expected to be completed by 2011-12.

• Royal Hobart Hospital – funding of $100.0 million will be provided over five years from the Hospitals Capital Fund to address the Royal Hobart Hospital's ageing buildings and infrastructure, and to improve and expand key services such as intensive care. Future anticipated projects for the Royal Hobart Hospital include:

− creation of a combined clinic area where out-patient functions can be consolidated in one location to improve efficiency and free up space in other parts of the Hospital;

− relocation and expansion of the Ambulatory Care Unit and Oncology Unit;


− expansion of the recovery area in the Day Procedures Unit, including a 23 hour Recovery Unit to provide clinical staff with more flexibility in scheduling elective surgery; and

− upgrading the general wards to optimise bed capacity and bathroom facilities, information and communication services, electrical services, air-conditioning, lift services and plumbing and fire safety.

• Integrated Care Centre (ICC) Launceston – funding of $18.0 million over three years is provided to develop a centralised Integrated Care Centre that will combine services from existing facilities and provide new models of care for persons currently receiving treatment at the Launceston General Hospital and other Departmental service locations. The Launceston ICC will focus on non-emergency services, including a broad range of non-admitted primary, secondary and tertiary services, and short-stay elective services and specialised subacute services. It is estimated that $5.6 million of the total $18.0 million allocation will be spent during 2009-10, with the project expected to be completed by 2010-11.

• LAN and Infrastructure Upgrade – total funding of $4.0 million is provided to upgrade and expand the service capabilities of the Department's Local Area Network (LAN). It is estimated that $1.0 million of the total $4.0 million allocation will be spent during 2009-10, with the project expected to be completed by 2012.

• Launceston General Hospital Acute Medical and Surgical Services Unit – total funding of $40.0 million will be provided by the Australian Government over four years for the construction of a new Acute Medical Assessment Unit and the upgrade of the Surgical Services Unit and Intensive Care Unit. Services proposed include providing patient assessment, early treatment and care planning. It is estimated that $15.0 million of the total $40.0 million allocation will be spent during 2009-10, with the project expected to be completed by 2013.

• Launceston General Hospital Car Park – funding of $15.0 million is provided over two years for the construction of a new low-level, multi-storey car park. It is expected that 400 additional car parking spaces will be available for medical staff and patients. It is estimated that $10.0 million of the total $15.0 million allocation will be spent during 2009-10, with the project expected to be completed by 2011.

• Launceston General Hospital Emergency Department – this 2006 Election commitment provides $12.0 million for the redevelopment of the Department of Emergency Medicine including increasing available floor space, creating a short stay observation ward and a separate triage area. It is estimated that $8.1 million of the total $12.0 million allocation will be spent during 2009-10, with the project expected to be completed by 2010.

• Longford/Westbury Health Centre Upgrade – funding of $2.0 million over two years is provided to re-locate Longford's child health, community nursing and oral health facilities services into one central community health centre and to increase client access to and the delivery of health care services in Westbury. It is estimated that $1.9 million of the total $2.0 million allocation will be spent during 2009-10, with the project expected to be completed by June 2010.

• New Ambulances – this 2006 Election commitment provides $10.7 million for the purchase of 100 new ambulances to replace ageing vehicles in Tasmania's ambulance fleet. This funding will ensure that virtually the entire ambulance fleet will be upgraded over a period of four years. It is estimated that $2.0 million of the total $10.7 million allocation will be spent during 2009-10 on the purchase and fit out of ambulance vehicles. Completion of this initiative is expected by June 2010.


• Patient Administration System – funding of $3.5 million is provided over three years to update the ageing Patient Administration System to improve patient management within Tasmanian hospitals and lay the foundation for a range of clinical information systems. It is estimated that $1.5 million of the total $3.5 million allocation will be spent during 2009-10, with the project expected to be completed by 2011.

• PET-CT Scanner at the Royal Hobart Hospital – funding of $3.5 million in 2009-10 is provided for the purchase of a Positron Emission Tomography – Computerised Tomography (PET-CT) scanner, to be installed at the Royal Hobart Hospital. The PET-CT scanner will be used in the detection and treatment planning of cancer, and in the investigation of cardiovascular disease and some complex neurological conditions. The acquisition of the scanner will ensure that Tasmanians have access to a comprehensive cancer service in the public sector.

Housing During 2009-10, total housing infrastructure expenditure is $130.4 million. Expenditure includes $94.9 million for social housing as part of the Australian Government's Nation Building – Economic Stimulus Plan and $10.0 million from the Housing Fund to increase the supply of public housing. Other housing expenditure includes $15.1 million for the General Program, $2.8 million for the Remote Indigenous Housing Program and $1.0 million for the Hobart Homelessness Facility Program.

Further details regarding the Housing Program are provided in a separate section of this chapter.

Law and Order During 2009-10, total law and order infrastructure expenditure is $3.1 million. Over the Forward Estimates period, the Department of Justice and the Department of Police and Emergency Management will invest significantly in major infrastructure projects including the:

• Prisons Infrastructure Redevelopment Program – expenditure of $20.2 million has been provided over four years for Stage D of the Prisons Infrastructure Redevelopment Program. The Stage D Redevelopment Program will provide for a new maximum security accommodation unit. Completion of the program is expected in 2013-14.

• Divisional Headquarters Refurbishment Program – funding of $18.9 million is allocated for the redevelopment and refurbishment of Police Headquarters at Bellerive, Devonport and Glenorchy. In 2009-10, it is estimated that $2.6 million of a total $6.5 million allocation will be spent on the Bellerive Headquarters, with the project expected to be completed by June 2011.

Roads and Rail In 2009-10, total roads and rail expenditure is $275.4 million ($242.9 for road projects and $32.5 million for rail projects). Major roads infrastructure projects include the construction of the Brighton Transport Hub, the Brighton Bypass and the Tarkine Drive. Further details on the Roads Program are provided in a separate section of this chapter. Other major infrastructure projects with expenditure totalling $32.5 million during 2009-10 include:

• Rail Infrastructure Development – as part of the Rail Rescue Package, the Australian Government has allocated $78.0 million for the redevelopment of the State's rail infrastructure. In 2009-10, $16.7 million will be spent for this purpose;


• Rail Infrastructure Maintenance – as part of the State Rail Rescue Package, the State Government has provided $40.0 million (indexed) over ten years to meet costs associated with the ongoing maintenance of the State's rail infrastructure. In 2009-10, the State will provide $4.3 million for this purpose;

• Rail Management – the Department of Infrastructure, Energy and Resources has been allocated $4.0 million in 2009-10 as part of an ongoing program aimed at meeting costs associated with the ongoing management, assessment and oversight functions of the State's investment in rail infrastructure;

• Capacity improvements to Rhyndaston – the Australian Government has provided funding of $24.0 million over four years to significantly increase the pulling capacity of trains between Rhyndaston and Antill Ponds. It is estimated that $4.0 million of the $24.0 million allocation will be spent during 2009-10, with the project expected to be completed by June 2013; and

• Main line improvements – the Australian Government has provided $31.6 million over four years for the increase of freight capacity and rail safety between Brighton and Antill Ponds. It is estimated that $3.5 million of the $31.6 million allocation will be spent during 2009-10, with the project expected to be completed by June 2013.

Tourism, Recreation and Culture In 2009-10, total tourism, recreation and culture expenditure is $13.8 million. This includes expenditure by the Department of Primary Industries, Parks, Water and Environment on the Cradle Mountain Central Sewage Treatment project ($5.8 million) and expenditure by the Department of Economic Development, Tourism and the Arts on the Tasmanian Museum and Art Gallery ($8.0 million). These projects are described below.

• Cradle Mountain Central Sewage Treatment – funding is provided for the staged construction of new central sewage treatment infrastructure to support current and future tourism development at the site. It is estimated that $5.8 million of a total $16.0 million allocation will be spent during 2009-10. These works are anticipated to be completed during 2010.

• Tasmanian Museum and Art Gallery (TMAG) Infrastructure – this 2006 Election commitment provides for a major redevelopment of the Hobart TMAG site. It is estimated that $8.0 million of the total $30.0 million allocation will be spent during 2009-10 including architectural concept designs with subsequent documentation for works.


INFRASTRUCTURE INVESTMENT PROJECT DETAILS BY AGENCY Table 7.3 details the estimated cost of individual infrastructure investment projects by agency. Costs will vary as projects proceed to tender and some re-scheduling of individual projects is likely to occur over the life of projects.

Table 7.3: Infrastructure Investment Project Details by Agency1,2,3

Start Complete

EstimatedTotal Cost

2009-10

Budget




$m $m $m $m $m DEPARTMENT OF ECONOMIC

DEVELOPMENT, TOURISM AND THE ARTS Tasmanian Museum and Art Gallery

Infrastructure 2007 2013 30.0 8.0 6.0 6.0 5.3

TOTAL 8.0 6.0 6.0 5.3 DEPARTMENT OF EDUCATION4

Beaconsfield Early Learning and

Care Centres* 2009 2010 1.8 1.8 …. …. ….

Blackmans Bay Primary School 2008 2010 1.8 1.6 .... .... ....

Bridgewater and Southern Midlands

Educational Renewal 2008 2012 30.0 9.3 8.2 11.8 ....

Building the Education Revolution* 2009 2011 275.8 151.3 98.6 .... ....

Bridgewater Child and Family

Centre* 2009 2013 8.0 2.5 1.9 1.5 1.1

Child and Family Centres* 2009 2012 76.1 27.4 27.4 20.5 ....

Community Knowledge Network

Infrastructure – Learning and

Information Network Centres 2009 2013 14.0 1.0 2.6 7.0 3.5

Deloraine High School 2008 2010 1.5 0.7 .... .... ....

Geilston Bay High School 2010 2011 1.3 .... 1.3 .... ....

Howrah Primary School 2008 2010 1.8 1.5 .... .... ....

Huonville High School 2008 2009 2.3 0.4 …. …. ….

Invermay Primary School 2008 2009 1.9 0.6 …. …. ….

King Island District High School 2010 2011 0.8 .... 0.8 .... ....

Kings Meadows High School 2008 2010 1.0 0.3 .... .... ....

Kingston High School (EC) 2006 2011 33.0 9.5 13.8 .... ....

Kingston Primary School 2008 2010 1.4 0.5 .... .... ....

Lauderdale Primary School 2008 2010 2.5 2.0 .... .... ....

Local Schools Working Together* 2009 2010 2.5 2.5 .... .... ....


Table 7.3: Infrastructure Investment Project Details by Agency (continued)1,2,3

Start Complete

EstimatedTotal Cost

2009-10

Budget




$m $m $m $m $m DEPARTMENT OF EDUCATION4

(CONTINUED) Margate Primary School 2008 2010 1.2 0.6 .... .... ....

New Norfolk Primary School 2007 2009 2.6 1.4 …. …. ….

Parklands High School 2008 2010 1.5 0.9 .... .... ....

Port Dalrymple School 2008 2010 1.8 1.0 .... .... ....

Reducing Class Sizes from Years 2

to 7 State-wide (EC) 2008 2010 2.3 0.5 0.5 .... ....

Rosebery District High School 2008 2010 2.0 1.2 .... .... ....

Secondary School Renewal Program 2008 2012 6.0 2.0 2.0 2.0 ....

Southern Support School and

Inclusive Education 2005 2009 3.1 0.6 …. …. ….

Taroona High School 2010 2011 1.8 .... 1.8 .... ....

Tasmania Tomorrow 2008 2011 7.8 4.3 2.5 .... ....

225.4 161.2 42.8 4.6Building for the Future

Infrastructure Package Albuera Primary School 2010 2011 2.0 .... 2.0 .... ....

City Library – Multi-sites Project 2008 2009 1.5 0.5 .... .... ....

Elizabeth College – Refurbish

Science Areas 2010 2011 2.2 .... 2.2 .... ....

Learning and Information Network

Centre (LINC) 2009 2011 3.6 1.3 2.3 .... ....

Ogilvie High School 2008 2010 4.1 3.5 .... .... ....

Renewing Structures and

Locations of Schools 2008 2010 5.7 5.1 .... .... ....

Rose Bay High School 2008 2009 3.4 3.1 .... .... ....

Secondary Schools Science

Laboratories Upgrade 2009 2011 1.8 1.0 0.8 .... ....

St Leonards Primary 2010 2011 0.8 .... 0.8 .... ....

14.5 8.0 .... ....

TOTAL 239.9 169.2 42.8 4.6



Start Complete

EstimatedTotal Cost

2009-10

Budget




$m $m $m $m $m

DEPARTMENT OF HEALTH AND HUMAN SERVICES Housing Fund 2008 2012 60.0 10.0 20.0 20.0 ....Housing Program (refer to Table

7.4) Ongoing na 25.5 20.0 17.4 18.7

Nation Building – Economic Stimulus Plan: Social Housing 2009 2011 148.9 94.9 40.7 7.3 ….

130.4 80.7 44.6 18.7Health Infrastructure

CCTV Project at Ashley Youth

Detention Centre 2008 2010 0.3 0.3 …. …. ….

Clarence GP Superclinic and

Integrated Care Centre (ICC)5 2008 2010 5.0 4.5 …. …. ….

Hospital Equipment Fund (EC) 2007 2011 25.0 1.5 5.0 0.8 ....

Integrated Care Centre (ICC)

Launceston6 2008 2011 15.0 5.6 8.7 …. ….

Launceston General Hospital Acute

Medical and Surgical Unit* 2009 2013 40.0 15.0 16.5 7.5 1.0

Launceston General Hospital

Emergency Department (EC) 2008 2010 12.0 8.1 3.2 …. ….

New Ambulances (EC) 2006 2010 10.7 2.0 .... .... ....

PET – CT Scanner at the Royal

Hobart Hospital* 2010 2010 3.5 3.5 …. …. ….

40.5 33.4 8.3 1.0Infrastructure Tasmania Fund

(Health Infrastructure) Bruny Island Community Health

Centre Upgrade 2008 2010 3.0 2.0 .... …. ….

Clarence GP Superclinic and

Integrated Care Centre (ICC)5 2008 2011 13.0 3.5 9.5 .... ….

Flinders Island Multi Purpose

Centre Upgrade 2009 2012 6.0 1.0 2.0 3.0 ....

Glenorchy – Tier Three Community

Health Services Facility 2009 2012 8.5 1.2 4.3 3.0 ....

Integrated Care Centre (ICC)

Launceston6 2008 2011 3.0 …. 3.0 .... ….



Start Complete

EstimatedTotal Cost

2009-10

Budget




$m $m $m $m $m

DEPARTMENT OF HEALTH AND HUMAN SERVICES (continued) Infrastructure Tasmania Fund

(Health Infrastructure) (continued) King Island Hospital and Health

Centre Upgrade 2009 2012 5.0 1.0 2.0 2.0 ….

Kingston – Tier Three Community

Health Services Facility 2010 2012 6.5 0.5 3.0 3.0 ….

Longford / Westbury Health Centre

Upgrade 2008 2010 2.0 1.9 …. …. ….

Tasmanian Ambulance Service

Station Upgrade 2008 2010 1.7 0.8 …. .... ....

11.8 23.8 11.0 ….Infrastructure Tasmania Fund

(Health Information Technology) Child Protection Information

System Phase 2 2008 2009 0.7 0.2 …. …. ….

Enterprise Storage Solution 2009 2011 3.0 0.5 0.5 …. ….

LAN and Infrastructure Upgrade 2009 2012 4.0 1.0 0.5 1.0 ….

Medical Imaging Project 2009 2011 3.7 1.0 2.7 …. ….

Mental Health Services Electronic

Client Management and

Reporting System 2008 2011 1.6 0.8 0.5 …. ....

Messaging and Identifier Systems 2009 2012 2.0 0.5 0.5 0.5 ….

Patient Administration System 2008 2011 3.5 1.5 1.5 …. ....

5.5 6.2 1.5 ….Hospitals Capital Fund

Royal Hobart Hospital 2008 2014 100.0 11.0 17.5 20.5 26.0

Launceston General Hospital Car

Park* 2009 2011 15.0 10.0 5.0 .... ....

North West Regional Hospital

Capital and Equipment Upgrade 2008 2009 3.0 0.8 .... .... ....

21.8 22.5 20.5 26.0

TOTAL 209.7 166.4 85.9 45.7



Start Complete

EstimatedTotal Cost

2009-10

Budget




$m $m $m $m $m DEPARTMENT OF

INFRASTRUCTURE, ENERGY AND RESOURCES7 Roads Program Expenditure (refer

to Table 7.5) Ongoing na 242.9 243.5 160.8 109.3

242.9 243.5 160.8 109.3

Other Expenditure Rail Infrastructure Development 2006 2016 78.0 16.7 9.2 5.8 7.2

Rail Infrastructure Maintenance 2006 2016 40.0 4.3 4.4 4.4 4.4

Rail Management 2006 Ongoing na 4.0 4.0 3.5 3.5

Rail – Capacity Improvements to

Rhyndaston* 2009 2013 24.0 4.0 7.0 7.0 6.0

Rail – Boyer to Karanja* 2010 2014 30.0 …. 5.0 14.5 10.0

Rail – Main Line Improvements* 2009 2013 31.6 3.5 8.5 10.6 9.0

Rail – Upgrade North West Line to

Wiltshire* 2010 2014 30.0 …. 5.0 14.5 10.0

Rail – West Coast Mines Upgrade* 2010 2014 11.7 …. 5.0 6.2 ....

32.5 48.0 66.5 50.0

TOTAL 275.4 291.5 227.3 159.4

DEPARTMENT OF JUSTICE

Prison Infrastructure Redevelopment

Program Stage D 2011 2014 20.2 .... 0.5 3.0 13.5

TOTAL …. 0.5 3.0 13.5

MARINE AND SAFETY TASMANIA

Jetties (EC) 2006 2011 5.0 1.3 0.6 .... ....

TOTAL 1.3 0.6 .... ....

DEPARTMENT OF POLICE AND

EMERGENCY MANAGEMENT Automatic Vehicle Location Project 2008 2010 1.3 0.6 .... .... ....

Bellerive Headquarters 2008 2011 6.5 2.6 3.7 .... ....

Devonport Headquarters 2009 2012 6.2 .... 2.3 3.9 ....

Glenorchy Headquarters 2008 2012 6.2 .... 0.5 5.5 ....

TOTAL 3.1 6.4 9.4 ….



Start Complete

EstimatedTotal Cost

2009-10

Budget




$m $m $m $m $m DEPARTMENT OF PREMIER AND

CABINET Service Tasmania Shops Capital

Investment 2006 Ongoing na 0.3 0.3 0.3 0.3

Telepresence for COAG* 2009 2009 0.3 0.3 …. …. ….

TOTAL 0.5 0.3 0.3 0.3

DEPARTMENT OF PRIMARY

INDUSTRIES, PARKS, WATER AND ENVIRONMENT8 Agricultural Research Centres (EC) 2007 2010 2.0 0.5 .... .... ....

Cradle Mt Central Sewage

Treatment (EC) 2006 2010 16.0 5.8 .... .... ....

Crown Land Services – Structural

Asset Upgrades Ongoing na 0.6 0.6 0.6 0.6

TOTAL 6.9 0.6 0.6 0.6

TASMANIA TOMORROW

STATUTORY AUTHORITIES Infrastructure Support Ongoing na 0.9 0.9 0.9 0.9

TOTAL 0.9 0.9 0.9 0.9

TOTAL INFRASTRUCTURE PROJECTS 745.7 642.3 376.1 230.0

Notes: 1. '*' indicates a new project in the 2009-10 Budget. 2. 'EC' indicates a 2006 Election commitment. 3. This Table does not include expenditure from the Urban Renewal and Heritage Fund and the Water Infrastructure

Fund as specific expenditures from these funds are in the form of grants or equity injections outside of the General Government Sector, or relate to projects that are yet to be finalised.

4. Tasmania Tomorrow Statutory Authorities Infrastructure projects are listed separately in this Table under the heading 'Tasmania Tomorrow Statutory Authorities'.

5. Total funding for the Clarence GP Superclinic and Integrated Care Centre (ICC) is $18.0 million, consisting of $5.0 million from the Australian Government and a further $13.0 million from the Infrastructure Tasmania Fund between 2009-10 and 2010-11.

6. Total funding for the Integrated Care Centre (ICC) Launceston is $18.0 million, consisting of $15.0 million from the Capital Investment Program between 2008-09 and 2010-11 and $3.0 million from the Infrastructure Tasmania Fund in 2010-11.

7. Marine and Safety Tasmania Infrastructure projects are listed separately in this Table. 8. The decrease in the Department of Primary Industries, Parks, Water and Environment largely reflects the

reclassification of Water Infrastructure Fund expenditure from works and services (capital) to equity. As an equity


contribution from the Government to the Rivers and Water Supply Commission, the expenditure is no longer included in General Government Sector infrastructure investment estimates. This reclassification impact is partly offset by the transfer of the Cradle Mountain Sewage Treatment project in 2009-10 from the former Department of Environment, Parks, Heritage and the Arts.

Housing Program The Housing Program relates to the capital program of Housing Tasmania, a division of the Department of Health and Human Services.

The Housing Program aims to provide low income Tasmanians with access to sustainable, affordable, appropriate and secure housing options through the acquisition and/or construction of new social housing dwellings, and the upgrading of existing social housing dwellings. The Program also allows for the sale to eligible applicants of properties and surplus land, with sale proceeds being reinvested into the capital program to continue the delivery of affordable housing. The Program is aimed at delivering a range of housing options that meet community needs and offer a range of opportunities that contribute to the capacity of families and individuals to participate in society and improve their quality of life.

In 2009-10, Housing Program capital expenditure will include:

• construction and upgrading activity under the Remote Indigenous Housing National Partnership Agreement. This will include works on both Cape Barron and Flinders Islands, as well as a facility in Launceston to support employment related activities ($2.8 million);

• the construction of the Hobart Homelessness Facility ($1.0 million);

• construction of a facility to respond to the needs of young people in residential aged care ($1.4 million);

• construction of a replacement property for the Orana young persons facility in Launceston ($3.1 million);

• providing additional semi-independent living units to create up to 18 new accommodation places state-wide ($1.4 million);

• infrastructure works for the proposed development of housing projects in Chigwell ($2.9 million); and

• paying $6.5 million to the Australian Government under the former Commonwealth-State Housing Agreement (CSHA) for the ongoing repayment of outstanding CSHA loans.

Table 7.4 details Housing Program Expenditure for 2009-10 to 2012-13.


Table 7.4: Housing Program Expenditure

Start Complete

EstimatedTotal Cost

2009-10

Budget




$m $m $m $m $m A Place To Call Home

Construction of Hobart

Homelessness Facility1 2009 2013 9.6 1.0 5.6 1.0 2.0

General Program

Construction of replacement for the

Orana young persons facility in

Launceston 2009 2010 3.1 3.1 …. …. ….

Infrastructure Works Chigwell 2009 2010 2.9 2.9 …. …. ….

Young People in Residential Aged

Care 2009 2010 1.4 1.4 …. …. ….

Other New Dwelling Construction Ongoing na 4.5 5.1 5.7 6.0

Dwelling Purchase Ongoing na 1.0 1.0 1.2 1.2

Upgrade of Supported

Accommodation Properties State-

wide 2008 2010 1.4 …. …. ….

Other Capital Upgrades Ongoing na 0.8 1.2 1.2 1.2

Remote Indigenous Housing2

New Dwelling Construction 2009 2014 5.3 1.7 0.2 1.4 1.0

Capital Upgrades 2009 2014 1.9 1.1 0.2 0.1 0.2

Non Works Capital

CSHA Principal Repayment3 na na 229.8 6.5 6.7 6.8 7.0

25.5 20.0 17.4 18.7

Notes: 1. Funding for the construction of the Hobart Homelessness Facility is provided by the Australian Government under

the Social Housing and Homelessness National Partnership Agreements. 2. Funding for the Remote Indigenous Housing is provided by the Australian Government under the Remote

Indigenous Housing National Partnership Agreement. 3. CSHA Principal Repayment represents principal loan repayments to the Australian Government due under the

former Commonwealth-State Housing Agreement (CSHA). Up until 1989, funding under the CSHA was through repayable loan funds, with Tasmania having an estimated debt of $229.8 million at June 2009. Debt repayments are in excess of $6.5 million per year, with final repayments not due until 2042.

Housing Program Funding The capital component of Housing Tasmania was in prior years jointly funded by the Australian and State Governments under the terms of the Commonwealth-State Housing Agreement (CSHA). This Agreement ended in December 2008 and has been replaced by the National Affordable Housing Agreement (NAHA). The NAHA outlines Australian Government funding and joint outcomes required, but is not prescriptive in


terms of State funding requirements. However, for 2009-10, State funding has been maintained at equivalent levels to that required under the prior CSHA. Total capital funding for the Housing Program in Tasmania in 2009-10 is $25.5 million, an increase of $6.0 million on the 2008-09 Budget of $19.5 million.

Proceeds from the sale of properties to eligible applicants and the sale of surplus land will continue to be reinvested into the capital program. This will assist eligible applicants to purchase their own home and will also provide funds to the Housing Program to continue in the delivery of affordable housing. Proceeds from this source are estimated at $15.4 million for 2009-10 and include sales under the Shared Equity sales program.

Housing Fund The Housing Fund was established in 2007-08 with an allocation of $60.0 million for the purpose of increasing the supply of affordable housing. In 2009-10, it is anticipated that $10.0 million will be expended from the Housing Fund on public projects.

Projects funded from the Housing Fund during 2008-09 included:

• the release of land for the development of affordable housing sites ($1.0 million);

• transitional accommodation for parolees' (Bethlehem House - $200 000);

• commencement of construction of 50 Quick Build Homes ($8.0 million); and

• a contribution of $6.0 million to Community Housing Limited under the National Rental Affordability Scheme.

Roads Program The Roads Program comprises new works projects and the upgrade and maintenance of established roads. The State and Australian Governments fund the Roads Program, with State funding being provided from the CIP and Special Capital Investment Funds. In 2009-10, the total Roads Program is $242.9 million, an increase of $56.1 million from $186.8 million in 2008-09.

In 2009-10, the State funded Roads Program expenditure is $139.2 million, an increase of $22.8 million from $116.4 million in 2008-09. The major components of the increase include:

• Brighton Transport Hub, $33.0 million, an increase of $27.5 million on 2008-09 expenditure of $5.5 million; and

• Tarkine Drive, $8.8 million, an increase of $7.8 million on 2008-09 expenditure of $1.0 million.

These increases are partially offset by the completion of a number of projects totalling to $12.5 million, including:

• East Tamar Highway – Approaches to Launceston;

• Sorell Traffic Management project;

• Midlands/ Lyell Highway Junction Upgrade; and

• Mornington Roundabout.

In 2009-10, Australian Government funded Roads Program expenditure is $103.7 million, an increase of $33.3 million from $70.4 million in 2008-09. The major components of the increase include:


• Brighton Bypass; $46.6 million, an increase of $46.1 million on 2008-09 expenditure of $500 000; and

• Kingston Bypass; $7.0 million, an increase of $5.9 million on 2008-09 expenditure of $1.1 million.

These components are partially offset by the completion of numerous projects totalling $18.7 million, including:

• Mornington Roundabout; and

• Bass Highway – Penguin to Ulverstone Stage 2.

A summary of the Roads Program expenditure is shown in Table 7.5.

Table 7.5: Roads Program Expenditure1

Start Complete

EstimatedTotal Cost

2009-10

Budget




$m $m $m $m $m STATE FUNDED

Environmental Management Ongoing na 0.5 0.5 0.5 0.5

0.5 0.5 0.5 0.5Infrastructure Development

Bell Bay Intermodal Terminal 2010 2011 3.9 …. 3.9 …. ….

Brighton Transport Hub2 2008 2013 79.0 33.0 22.7 6.7 10.6

Brooker Highway (EC) 2006 2011 10.0 4.5 3.7 …. ….

Bruny Island Road Sealing 2009 2011 4.9 2.5 1.8 …. ….

East Tamar Highway3 2006 2011 13.0 …. 13.0 …. ….

Illawarra Main Road (EC) 2008 2011 3.1 1.4 1.3 …. ….

Kingston Bypass4 2008 2012 15.0 0.5 4.5 10.0 ….

Lyell Highway – Granton to New

Norfolk (EC) 2006 2009 14.0 5.1 …. …. ….

Main Access Routes to Central

Highlands (EC) 2008 2010 8.0 3.8 …. …. ….

Macquarie Street Traffic Flow (EC) 2006 2009 1.5 0.8 …. …. ….

North East Freight Roads5 2009 2013 8.5 …. …. …. 8.0

Tarkine Drive 2009 2011 23.0 8.8 12.2 1.2 ….

Port Sorell Main Road (EC) 2011 2012 3.0 …. …. 3.0 ….

Sisters Hills (Better Roads Fund) 2005 2010 15.0 1.7 0.2 …. ….

South Arm Road (EC) 2006 2010 10.0 1.0 3.0 …. ….

Tasman Highway - Sorell Traffic

Management (EC) 2006 2009 2.5 1.9 …. …. ….

Tea Tree Secondary Road (EC) 2006 2009 4.0 2.7 …. …. ….

West Coast Wilderness Railway Ongoing na 0.1 …. 0.1 0.1


Table 7.5: Roads Program Expenditure (continued)1

Start Complete

EstimatedTotal Cost

2009-10

Budget




$m $m $m $m $m

Infrastructure Development (continued) Roads of National Importance

North East Tasmania Access

(NETAS) 2004 2010 10.0 0.2 …. …. ….

68.2 66.3 21.0 18.7

Infrastructure Maintenance

Assistance to Local Government Ongoing na 0.3 0.3 0.3 0.3

Bridge Maintenance Ongoing na 5.4 5.4 5.0 4.8

Bridge Reinstatement

Arthur Highway, Sorell River

Bridge 2012 2013 1.4 …. …. 0.1 1.3

Channel Highway Bridges 2011 2011 0.5 …. …. 0.5 ….

Gordon River Main Road, Styx

and Derwent River Bridges 2012 2014 4.1 …. …. 1.2 2.6

Leven River Bridge Ulverstone 2005 2011 6.8 1.8 4.7 …. ….

Lyell Highway, Nive River

(Bronte) 2010 2012 2.6 …. 1.4 1.2 ….

Tasman Highway, George River 2009 2010 2.3 2.0 0.1 …. ….

Other 2009 2013 na 1.2 …. 0.3 1.5

Emergency and Flood Repairs Ongoing na 0.8 0.4 0.8 0.8

Maintenance of Other

Infrastructure Ongoing na 0.1 0.1 0.1 0.1

Bridge Lightning Maintenance Ongoing na 0.7 0.7 0.8 0.7

Vehicle Mass and Dimension

Management Ongoing na 0.3 0.3 0.4 0.4

Road Reinstatement Birralee Main Road (Bass

Highway off ramp to Frankford

Main Road) 2011 2012 3.7 …. …. 2.0 1.7

Bridport Main Road (Maslins

Road to Nourses Road) 2012 2013 1.5 …. …. …. 0.1

Brooker Highway (Upper Hilton

Road to DEC and Clearys

Gates to Derwent Park Road) 2008 2011 na 2.0 …. 1.4 ….



Start Complete

EstimatedTotal Cost

2009-10

Budget




$m $m $m $m $m

Infrastructure Maintenance (continued) Road Reinstatement (continued)

Evandale Main Road (Novak

Roundabout to Airport

Entrance) 2010 2011 1.4 0.2 1.2 …. ….

Frankford Main Road (Priestleys

Lane to Pughs Road) 2012 2013 3.2 …. …. 0.2 3.0

Lyell Highway (King River

Deviation to Iron Blow Rd and

Ellendale Road to Victoria

Valley Road) 2012 2013 3.9 …. …. 1.3 2.6

Mudwalls Secondary Road 2010 2011 2.0 0.9 1.0 …. ….

Murchison Highway (South of

Cradle Development Road) 2013 2013 1.7 …. …. …. 1.7

Ridgley Main Road (North and

South of Ridgley) 2011 2012 4.6 …. 1.8 2.8 ….

Tasman Highway (Tasman

Bridge to Mornington

Interchange) 2009 2010 na 3.0 …. …. ….

Other Ongoing na 0.9 3.4 0.6 1.5

Road Routine Maintenance Ongoing na 15.3 16.2 16.2 16.1

Road Specific Maintenance Ongoing na 13.5 13.6 16.4 13.9

48.4 50.6 51.6 53.1Other Roads Infrastructure

Infrastructure Policy and Planning Ongoing na 2.3 2.3 2.4 2.5

Program Management Ongoing na 2.8 2.8 2.8 2.9

Road Safety and Traffic


Road Safety Strategy –

Infrastructure6 Ongoing na 7.1 5.4 5.4 3.0

Transport Infrastructure Ongoing na 5.2 5.3 5.6 5.6

22.1 20.4 21.3 19.2

TOTAL STATE FUNDED ROADS 139.2 137.8 94.4 91.5



Start Complete

EstimatedTotal Cost

2009-10

Budget




$m $m $m $m $m AUSTRALIAN GOVERNMENT

FUNDED National Highway System Infrastructure Development

Improving the Network East Tamar Highway 2006 2010 60.0 17.5 18.3 …. ….

Road and Bridge Upgrading

Bagdad Bypass 2009 2011 6.2 3.8 1.1 …. ….

Bass Highway – Penguin to

Ulverstone Stage 2 2005 2009 42.0 0.4 …. …. ….

Bass Highway – Westbury to

Hagley 2005 2009 40.0 0.3 …. …. ….

Bridgewater Bridge

Refurbishment7 2009 2010 14.0 7.5 …. …. ….

Brighton Bypass8 2008 2012 164.0 46.6 64.5 40.6 ….

Strategic Regional Program

Bell Bay Intermodal 2010 2012 5.2 0.8 3.0 1.4 ….

Illawarra Main Road 2009 2010 3.1 3.1 …. …. ….

Kingston Bypass4 2008 2012 15.0 7.0 …. 5.6 ….

North East Freight Roads5 2009 2013 34.0 2.0 11.0 10.0 10.0

Port Sorell Main Road 2012 2012 1.0 …. …. 1.0 ….

Sisters Hill 2005 2010 15.0 1.3 …. …. ….

90.3 97.9 58.6 10.0Infrastructure Maintenance

Bridge Maintenance Ongoing na 0.8 0.8 0.8 0.8

Bridge and Road Lightning

Maintenance Ongoing na 0.1 0.1 0.1 0.1

Road Reinstatement Ongoing na 0.5 0.5 0.5 0.5

Road Routine Maintenance Ongoing na 2.9 2.9 2.9 2.9

Road Specific Maintenance Ongoing na 1.9 1.9 1.9 1.9

6.2 6.2 6.2 6.2



Start Complete

EstimatedTotal Cost

2009-10

Budget




$m $m $m $m $m

Other Roads Infrastructure

Road Safety and Traffic



Black Spot Funding 2009 2010 4.0 2.0 …. …. ….

High Risk Rail Crossings 2009 2010 3.9 3.6 …. …. ….

7.2 1.6 1.6 1.6

TOTAL AUSTRALIAN GOVERNMENT FUNDED ROADS 103.7 105.7 66.4 17.8

TOTAL ROADS PROGRAM EXPENDITURE 242.9 243.5 160.8 109.3

Notes: 1. 'EC' indicates a State Government 2006 Election commitment. 2. The total cost of the project is $79.0 million, fully funded by the State Government. Formerly, this project was jointly

funded by the State and Australian Governments. 3. This portion of the East Tamar Highway project is funded from interest earned by the State on funds provided in

advance from the Australian Government ($60.0 million). 4. The total cost of the project is $30.0 million, consisting of $15.0 million from the State Government and $15.0 million

from the Australian Government. The $30.0 million represents the total cost of construction, which is in addition to a previous allocation by the State for land acquisitions and planning.

5. The total cost of the project is $42.5 million, consisting of $8.5 million from the State Government and $34.0 million from the Australian Government.

6. The reduction in 2012-13 reflects completion of the Program. 7. The $14.0 million provision for the Bridgewater Bridge Refurbishment includes the Midland and Lyell Highways

Junction Upgrade project. 8. The total cost of the project is $164.0 million, fully funded by the Australian Government. Formerly, this project was

jointly funded by the State and Australian Governments.


8 ESTIMATED OUTCOME, 2008-09

Features

• The estimated Net Operating Balance for 2008-09 is a $102.2 million deficit, $207.9 million below the 2008-09 Budget estimate of a $105.7 million surplus.

• The estimated Fiscal Balance for 2008-09 is a $119.8 million deficit, $150.0 million below the 2008-09 Budget estimate of a $30.2 million surplus.

• Total revenue for 2008-09 is estimated to be $4 139.6 million, $8.3 million or 0.2 per cent above the Budget estimate of $4 131.3 million.

• Total expenses for 2008-09 are estimated to be $4 241.8 million, $216.2 million or 5.4 per cent above the Budget estimate of $4 025.6 million.

Estimated Outcome, 2008-09 8.1

INTRODUCTION The 2008-09 Estimated Outcome and the 2008-09 Budget presented in this chapter have been prepared in accordance with the Australian Accounting Standards Board standard AASB 1049 Whole of Government and General Government Sector Financial Reporting. The main focus remains on the key headline measures, the Net Operating Balance and the Fiscal Balance.

The Net Operating Balance represents the excess of revenues over expenses. A Net Operating Surplus indicates that the ordinary operations of government are sustainable and that there are funds available, on an accrual basis, to increase service delivery, increase assets, or to decrease liabilities. A deficit indicates that future adjustments will be required to achieve sustainability; that one-off expenditure may have occurred to meet one-off projects or programs; and/or revenues are not sufficient to meet all expenses for the current year.

The Fiscal Balance represents the difference between General Government Sector revenues, and expenses (excluding depreciation) plus capital expenditure. A Fiscal Surplus indicates that the Government is saving more than enough to finance all of its investment spending, while a Fiscal Deficit indicates that the Government is spending reserves to fund its investment spending.

For further information on these concepts and the Budget Framework, refer to the Guide to the Budget document published with the 2009-10 Budget Papers.

The 2008-09 Estimated Outcome is based on agency assessments of their indicative additional funding requirements or potential savings, and revised revenue estimates. The latest available information prior to the finalisation of the 2009-10 Budget Papers, is used to inform the Estimated Outcome. Estimates are determined using information from a number of sources including the latest advice from the Australian Government, Government Business Enterprises, State-owned Companies and agencies.

Detailed information on the final Outcome for 2008-09 will be published in:

• the Preliminary Outcomes Report, which will be published by 15 August 2009;

• the Treasurer's Annual Financial Report, which will be tabled in Parliament by 31 October 2009; and

• agency Annual Reports, which will be tabled in Parliament by 31 October 2009.

Net Operating Balance The estimated Net Operating Balance for 2008-09 is a $102.2 million deficit, $207.9 million below the 2008-09 Budget estimate of a $105.7 million surplus. Details of the movement in the estimated result are provided in this chapter.

Fiscal Balance The estimated Fiscal Balance for 2008-09 is a $119.8 million deficit, $150.0 million below the 2008-09 Budget estimate of a $30.2 million surplus. Details of the movement in the estimated result are provided in this chapter.

Table 8.1 provides details of the Estimated Outcome for 2008-09.

8.2 Estimated Outcome, 2008-09

Table 8.1: Estimated Outcome, 2008-09 2008-09) 2008-09) Estimated) Budget) Outcome) Variation) $m) $m) $m) Revenue from Transactions

Grants General Purpose Payments 1 751.7) 1 626.9) (124.8)

Specific Purpose Payments 578.6) 529.8) (48.8)

National Partnership Payments1 ....) 387.3) 387.3)

Other Grants and Subsidies 194.8) 120.3) (74.5)

2 525.1) 2 664.3) 139.2)

Taxation Taxation 881.2) 789.0) (92.2)

Government Businesses and State Authorities - Guarantee Fees 11.6) 9.2) (2.4)

892.8) 798.2) (94.6)

Sales of Goods and Services 314.0) 310.7) (3.3)Fines and Regulatory Fees 59.6) 61.7) 2.1)Interest Income 94.6) 74.6) (20.0) Dividend, Tax and Rate Equivalent Income

Receipts from Government Businesses and State Authorities 64.2) 58.3) (5.9)

Other Dividends, Special Dividends, Tax and Rate Equivalents 90.0) 93.9) 3.9)

154.2) 152.2) (2.0)

Other Revenue 91.0) 78.0) (13.0)

Total Revenue from Transactions 4 131.3) 4 139.6) 8.3) Less Expenses from Transactions

Employee Expenses 1 760.6) 1 795.0) 34.4)

Superannuation 170.8) 212.7) 41.9)

Depreciation 223.2) 223.2) ....)

Supplies and Consumables 944.7) 973.5) 28.8)

Nominal Superannuation Interest Expense 168.4) 195.7) 27.3)

Borrowing Costs 17.1) 17.4) 0.3)

Grant Expenses 725.1) 776.2) 51.1)

Other Expenses 15.7) 48.1) 32.4)

Total Expenses from Transactions 4 025.6) 4 241.8) 216.2)

Equals NET OPERATING BALANCE 105.7) (102.2) (207.9)


Table 8.1: Estimated Outcome, 2008-09 (continued) 2008-09) 2008-09) Estimated) Budget) Outcome) Variation) $m) $m) $m) Plus Other Economic Flows - Included in Operating Result

Gain/(Loss) on Sale of Non-Financial Assets 7.5) 3.6) (3.9)

Movement in Investments in GBEs and SOCs 147.0) (13.4) (160.4)

Movements in Superannuation Liability (24.6) (477.9) (453.3)

Other Gains/(Losses) (8.7) (7.7) 1.0)

121.3) (495.5) (616.8) Equals Operating Result 227.0) (597.6) (824.6) Plus Other Economic Flows - Other Movements in Equity

Revaluations of Non-Financial Assets 246.0) 206.8) (39.2)

Other Non-Owner Movements in Equity 14.7) (89.3) (104.0)

260.7) 117.5) (143.2) Equals Comprehensive Result 487.7) (480.1) (967.8) KEY FISCAL AGGREGATES NET OPERATING BALANCE 105.7) (102.2) (207.9)

Less Net Acquisition/(Disposal) of Non-Financial Assets Purchases of Non-Financial Assets 350.4 285.1 (65.3))

Sales of Non-Financial Assets (51.6) (44.2) 7.4)

Depreciation (223.2) (223.2) ....)

Total Net Acquisition/(Disposal) of Non-Financial Assets 75.5 17.6 (57.9)) Equals FISCAL BALANCE 30.2) (119.8) (150.0)

Note: 1. The National Partnership Payments are provided to the State as a result of the Council of Australian Governments

(COAG) Intergovernmental Agreement on Federal Financial Relations (IGA). The IGA has resulted in the reclassification of many Australian Government grants between the categories of Specific Purpose Payments, National Partnership Payments and Other Grants and Subsidies. National Partnership Payments are provided for Healthcare, Housing, Community Services (including Disability), Education, Skills and Workforce Development, Infrastructure, Environment, and funding provided for the Nation Building - Economic Stimulus Plan. For further information, refer to Chapter 9 Commonwealth-State Financial Arrangements.


REVENUE Total revenue for 2008-09 is estimated to be $4 139.6 million, an increase of $8.3 million or 0.2 per cent above the budgeted revenue of $4 131.3 million.

Explanation of Estimated Revenue Variations The major revenue variations summarised in Table 8.1 are explained below.

Grants Grants primarily reflect funding from the Australian Government. Significant reforms to Commonwealth-State financial relations were implemented on 1 January 2009, as a result of the Council of Australian Governments (COAG) Intergovernmental Agreement on Federal Financial Relations (IGA). The IGA has resulted in the reclassification of many Australian Government grants between the categories of Specific Purpose Payments, National Partnership Payments and Other Grants and Subsidies.

For further information on Commonwealth-State relations and the implementation of COAG's IGA, refer to Chapter 9 Commonwealth-State Financial Arrangements of Budget Paper No 1.

General Purpose Payments

General Purpose Payments revenue for 2008-09 is anticipated to be $1 626.9 million, a decrease of $124.8 million or 7.1 per cent from the Budget estimate of $1 751.7 million. The decrease reflects a reduction in Goods and Services Tax (GST) collections as a result of a slowing Australian economy, as well as a reduction in Tasmania's share of the GST pool as a result of an improvement in Tasmania's relative fiscal capacity.

Specific Purpose Payments

Specific Purpose Payments revenue for 2008-09 is anticipated to be $529.8 million, a decrease of $48.8 million or 8.4 per cent from the Budget estimate of $578.6 million. The decrease in Specific Purpose Payments primarily reflects the reclassification of the grants for infrastructure to a National Partnership Payment.


National Partnership Payments revenue for 2008-09 is anticipated to be $387.3 million. National Partnership Payments were implemented from 1 January 2009 as a result of the IGA. The increase reflects the new National Partnership Payments from the Australian Government for Healthcare, Housing, Community Services (including Disability), Education, Skills and Workforce Development, Infrastructure, Environment, and funding provided for the Nation Building - Economic Stimulus Plan.


Other Grants and Subsidies

Other Grants and Subsidies revenue for 2008-09 is anticipated to be $120.3 million, a decrease of $74.5 million or 38.2 per cent from the Budget estimate of $194.8 million. The decrease primarily reflects the reclassification of Australian Government Grants to Specific Purpose Payments and National Partnership Payments, including the Australian Government grant to non-government schools ($130.0 million). This is partly offset by the recognition of funding to the Department of Health and Human Services to provide services at the Mersey Community Hospital ($60.0 million) and funding received for the Tasmanian Community Forest Agreement, originally anticipated to be received in 2007-08 ($19.0 million).

Taxation Revenue Total Taxation revenue, which includes Taxation revenue and Guarantee Fees from Government Business Enterprises, State-owned Companies and State Authorities, is expected to be $798.2 million, $94.6 million or 10.6 per cent below the Budget Estimate of $892.8 million.

Taxation

Taxation revenue for 2008-09 is anticipated to be $789.0 million, a decrease of $92.2 million or 10.5 per cent from the Budget estimate of $881.2 million. The decrease in Taxation revenue primarily reflects a reduction in Duties revenue of $85.8 million and Land Tax revenue of $9.1 million.

Government Business and State Authorities – Guarantee Fees

Government Business and State Authorities Guarantee Fees are anticipated to be $9.2 million, a decrease of $2.4 million or 20.7 per cent from the Budget estimate of $11.6 million. The decrease in Guarantee Fees primarily reflects lower than anticipated receipts from Transend Networks Pty Ltd reflecting finalisation of the Guarantee Fee rate applicable to its increased borrowings following the equity restructure of Hydro Tasmania.

Sales of Goods and Services Revenue from Sales of Goods and Services is anticipated to be $310.7 million, a decrease of $3.3 million or 1.1 per cent from the 2008-09 Budget estimate of $314.0 million. The decrease primarily reflects a reduction in revenue within the Department of Economic Development and Tourism from bookings through Tasmania's Temptations Holidays of $3.1 million and Land Titles Office revenue of $2.4 million. The decreases are partly offset by an increase in other sales of services of $1.4 million and an increase in rental revenue of $1.1 million.

Fines and Regulatory Fees Fines and Regulatory Fees income for 2008-09 is anticipated to be $61.7 million, an increase of $2.1 million or 3.5 per cent from the Budget estimate of $59.6 million. The increase primarily reflects additional regulatory fees of $2.4 million received for the Builders Accreditation Scheme and Building Administration Fund by the Department of Justice, and Drivers License fees of $1.4 million received by the Department of Infrastructure, Energy and Resources. These increases are partly offset by a decrease in Fines and Fees and Infringement Notices receipts of $1.6 million raised by the Department of Justice.


Interest Income Interest Income for 2008-09 is anticipated to be $74.6 million, a decrease of $20.0 million or 21.1 per cent from the Budget estimate of $94.6 million. The decrease primarily reflects lower levels of cash held in the Public Account and lower than forecast interest rates.

Dividend, Tax and Rate Equivalent Income Dividend, Tax and Rate Equivalent Income for 2008-09 is anticipated to be $152.2 million, a decrease of $2.0 million or 1.3 per cent from the Budget estimate of $154.2 million. The decrease consists of a $5.9 million reduction in Dividend Income, largely offset by a $4.0 million increase in Tax Equivalents.

The reduction in Dividend Income of $5.9 million primarily reflects lower Dividends from Transend Networks Pty Ltd of $5.6 million due to additional costs relating to the transfer of equity to Hydro Tasmania.

The increase in Tax Equivalents reflects additional Motor Accidents Insurance Board tax equivalent payments of $14.1 million. This increase is partly offset by a decrease in tax equivalent receipts from Aurora Energy Pty Ltd ($7.4 million) and Transend Networks Pty Ltd ($3.5 million) due to weaker than expected financial performance.

Other Revenue Other Revenue for 2008-09 is anticipated to be $78.0 million, a decrease of $13.0 million or 14.3 per cent from the Budget estimate of $91.0 million. The decrease is primarily due to a reduction in Mineral Royalty receipts of $16.6 million reflecting weaker commodity prices on the world market for mineral resources. This decrease is partly offset by an increase in revenue of $5.0 million from WorkCover Tasmania activities reflecting a more accurate estimate based on current projections.


EXPENSES Total expenses for 2008-09 are estimated to be $4 241.8 million, an increase of $216.2 million or 5.4 per cent from the Budget estimate of $4 025.6 million.

Explanation of Estimated Expense Variations The major expenditure variations summarised in Table 8.1 are explained below.

Employee Expenses Employee Expenses for 2008-09 is anticipated to be $1 795.0 million, an increase of $34.4 million or 2.0 per cent from the Budget estimate of $1 760.6 million. This outcome primarily reflects an increase of $40.1 million in employee expenses by the Department of Health and Human Services, representing the recognition of the employee expenses at the Mersey Community Hospital. This increase is partly offset by a decrease in salary expenditure due to the impact of the Government's Budget Management Strategies. Details of the Budget Management Strategies are provided in Chapter 1 of Budget Paper No 2 Government Services.

Superannuation Superannuation is anticipated to be $212.7 million, an increase of $41.9 million or 24.5 per cent from the Budget estimate of $170.8 million. The increase reflects the current actuarial assessment of the Government's unfunded superannuation liability and lump sum payments made to the Retirement Benefits Fund.

Supplies and Consumables Supplies and Consumables is anticipated to be $973.5 million, $28.8 million or 3.0 per cent increase from the Budget estimate of $944.7 million. The increase primarily reflects:

• recognition of expenditure of $20.6 million at the Mersey Community Hospital; and

• additional information technology expenditure of $6.5 million by the Department of Education for pre-compulsory and compulsory education funded by the Australian Government.

Nominal Superannuation Interest Expense The Nominal Superannuation Interest Expense is anticipated to be $195.7 million, $27.3 million or 16.2 per cent above the Budget estimate of $168.4 million. The increase reflects the current actuarial assessment of the Government's unfunded superannuation liability and the lower than anticipated value of the superannuation assets at 30 June 2008. Further details regarding Superannuation are provided in Chapter 6 of this Budget Paper.


Grant Expenses Grant Expenses for 2008-09 is anticipated to be $776.2 million, an increase of $51.1 million or 7.0 per cent from the Budget estimate of $725.1 million. The increase primarily reflects additional Australian Government funding of $20.4 million to non-government schools; Australian Government payments of $10.0 million to the Department of Primary Industries, and Water for conservation of flora and fauna; additional funding to the Department of Infrastructure, Energy and Resources of $6.8 million for Transport Concessions; funding of $5.3 million for the State First Home Owners Scheme; and $4.5 million reflecting payments to TOTE Tasmania Pty Ltd for Betting Exchange contributions toward the Tasmanian Racing Industry.

Other Expenses Other Expenses is anticipated to be $48.1 million, an increase of $32.4 million or 206.4 per cent from the Budget estimate of $15.7 million. The increase in Other Expenses primarily reflects:

• additional expenditure of $19.0 million due to the receipt and payment of the final Australian Government contribution under the Tasmanian Community Forest Agreement, which was originally anticipated to be received in 2007-08; and

• an increase in expenditure of $4.1 million by the Department of Justice, including $2.1 million to reflect a more accurate estimate based on current projections associated with WorkCover Tasmania.


OTHER ECONOMIC FLOWS – INCLUDED IN OPERATING RESULT Gain/(Loss) on Sale of Non-Financial Assets Gain/(Loss) on Sale of Non-Financial Assets is anticipated to be a gain of $3.6 million, $3.9 million less than the Budget estimate of a $7.5 million gain. The result reflects a decrease in the level of major asset sales managed through the Crown Lands Administration Fund.

Movement in Investments in GBEs and SOCs Movement in Investments in GBEs and SOCs is anticipated to be a loss of $13.4 million, $160.4 million below the Budget estimate of a $147.0 million gain. The movement reflects the change in the net asset value of the Government Businesses.

Movements in Superannuation Liability Movements in Superannuation Liability is anticipated to be a loss of $477.9 million, or $453.3 million below the Budget estimate of a $24.6 million loss. The movement reflects the revision to the Superannuation Liability and Expense estimates on the basis of the revised actuarial projections.

Other Gains/(Losses) Other Gains/(Losses) is anticipated to be a loss of $7.7 million, $1.0 million less than the Budget estimate of an $8.7 million loss. This result primarily reflects a decrease in the liabilities of the Tasmanian Risk Management Fund as determined by the latest actuarial estimates.

PLUS OTHER ECONOMIC FLOWS – OTHER MOVEMENTS IN EQUITY Revaluations of Non-Financial Assets Revaluations of Non-Financial Assets for 2008-09 is anticipated to be $206.8 million, a decrease of $39.2 million or 15.9 per cent from the Budget estimate of $246.0 million. This outcome primarily reflects a decrease of $21.7 million in the valuation of land held by the Department of Environment, Parks, Heritage and the Arts, and a decrease of $13.9 million in the valuation of Land and Buildings held by the Department of Education.

Other Non-Owner Movements in Equity Other Non-Owner Movements in Equity for 2008-09 is anticipated to be a loss of $89.3 million, a decrease of $104.0 million from the Budget estimate of a $14.7 million gain. The decrease primarily reflects movement in Income Tax Equivalents receivable from Government Businesses.


NET ACQUISITION/(DISPOSAL) OF NON-FINANCIAL ASSETS The Net Acquisition/(Disposal) of Non-Financial Assets for 2008-09 is anticipated to be $17.6 million, a decrease of $57.9 million or 76.7 per cent from the Budget estimate of $75.5 million. The decrease reflects Purchases of Non-Financial Assets of $285.1 million, Sales of Non-Financial Assets of $44.2 million and Depreciation of $223.2 million.

Purchases of Non-Financial Assets Purchases of Non-Financial Assets is anticipated to be $285.1 million, a decrease of $65.3 million or 18.6 per cent from the Budget estimate of $350.4 million. The decrease reflects changes in the timing of cashflows for some capital projects, partly offset by an increase in buildings purchased by the Department of Education relating to the Australian Government's Building the Education Revolution capital program.

Sales of Non-Financial Assets Sales of Non-Financial Assets is anticipated to be $44.2 million, a decrease of $7.4 million or 14.3 per cent from the Budget estimate of $51.6 million. The decrease reflects delays in the sale of Government assets.


9 COMMONWEALTH-STATE FINANCIAL ARRANGEMENTS

Features

• It is estimated that revenue transfers from the Australian Government to Tasmania will total $2 731.6 million in 2009-10, and constitute 64.8 per cent of total Tasmanian General Government revenue.

• In 2009-10, Tasmania's share of revenue from the Goods and Services Tax (GST) is forecast to be $1 526.5 million, which equates to 36.2 per cent of total Tasmanian General Government revenue.

• In 2009-10, payments for specific purposes are expected to total $1 205.1 million.

• The GST is a growth tax dependent on the performance of the national economy. Tasmania's reliance on GST revenue means that Tasmania's Budget can be significantly affected by national economic conditions, even when Tasmania's own economic performance is different from that of the national economy. The present circumstance highlights this risk as the Australian Government has estimated substantially reduced GST collections for 2008-09; 2009-10 and for the period of the Forward Estimates.

• Tasmania's estimated share of GST revenue in 2009-10 is significantly below the expected final outcome for 2008-09. The decrease is largely due to a decrease in Tasmania's assessed relativity factor (as assessed by the independent Commonwealth Grants Commission (CGC)) and a decline in Tasmania's share of the national population.

• Commonwealth-State financial relations have undergone substantial reform that aims to deliver better outcomes for the community through simplification, flexibility and improved transparency. The Australian Government and the states have entered into a new Intergovernmental Agreement that has substantially streamlined Specific Purpose Payments (SPPs); will provide for more robust and transparent performance reporting in a range of service areas jointly funded by the two levels of government; and introduced a new category of Australian Government transfers in the form of National Partnership Payments that aim to facilitate joint reform effort in areas of national significance.

Commonwealth-State Financial Arrangements 9.1

INTRODUCTION Revenue transfers from the Australian Government are a vital source of revenue for states. These transfers are required to address the significant imbalance between the respective revenue raising powers and functional responsibilities of the Australian and state governments. In 2008-09, it is estimated that the Australian Government will collect 74.0 per cent of total national General Government revenue, but will only be directly responsible for 54.6 per cent of all General Government expenditure. This creates a national fiscal imbalance between the Australian Government and the states and territories.

In 2009-10, it is expected that revenue transfers from the Australian Government will comprise 64.8 per cent of Tasmania's total General Government Sector revenue. These payments fall into two categories:

• General Purpose Payments (GPP), which are untied payments that can be used at the State's discretion. The GST distribution will be the only GPP received by Tasmania in 2009-10; and

• conditional (tied) funding in the form of Specific Purpose Payments (SPPs) and National Partnership Payments (NPPs), which must only be spent for purposes as agreed with the Australian Government.

There are many different factors that influence the quantum of revenue transferred from the Australian Government to the states. Foremost amongst these factors are: the provisions of the Intergovernmental Agreement on Federal Financial Relations (IGA); national economic conditions which directly impact the size of the GST pool; actions taken by the Australian Government in relation to the IGA; the determinations of the Commonwealth Grants Commission (CGC); and the outcomes of SPP/NPP negotiations.

Significant reforms to Commonwealth-State financial relations were implemented on 1 January 2009. These reforms focus on improving tied-funding (SPPs and NPPs) arrangements in order to address a number of issues which previously acted as a barrier to the states implementing innovative service delivery developments, through providing greater flexibility and capacity to improve efficiency in service and program design and delivery. The previous arrangements were heavily focused on inputs to service delivery rather than the broader outcomes that benefit the community.

The purpose of this chapter is to provide information regarding:

• the importance of revenue transfers from the Australian Government to the State Budget;

• the significant issues currently affecting Commonwealth-State financial arrangements, including the new reforms; and

• the size and nature of the estimated revenue transfers from the Australian Government to Tasmania during 2009-10.

Background information is also provided in the appendices to this chapter that explains: why Australian Government payments to the states are essential; the role of the CGC; how the CGC treats payments for specific purposes in its assessment of states' GST relativities; and the total level of funding by broad expenditure area.

9.2 Commonwealth-State Financial Arrangements

SUMMARY OF REVENUE TRANSFERS FROM THE AUSTRALIAN GOVERNMENT Table 9.1 provides a summary of the estimated amount and nature of revenue transfers from the Australian Government to Tasmania in 2009-10. Estimates for particular SPPs shown in Table 9.1 are not directly comparable across the Budget years 2008-09 and 2009-10, because new SPPs have been created which broadband a number of SPPs that were in existence at the time of the 2008-09 Budget.

Table 9.1: Summary of Revenue Transfers from the Australian Government, 2009-10

2008-09 Budget

2009-10 Budget

$m $m General Purpose Payments (Untied Funding)

GST Revenue 1 751.7 1 526.5 Payments for Specific Purposes (Tied Funding)

Specific Purpose Payments

Healthcare1 226.0 246.1

Schools2 73.5 222.9

Skills and Workforce Development3 32.3 30.8

Disability Services4 21.9 28.2

Affordable Housing5 30.2 34.4

Other6 389.5 ....

Total 773.4 562.5 National Partnership Payments7 .... 642.6

Total Payments for Specific Purposes 773.4 1 205.1 Total Revenue Transfers from the Australian Government 2 525.1 2 731.6

Source: Department of Treasury and Finance estimates; Tasmanian Budget Paper No 1 The Budget, Chapter 4. Notes: 1. The 2008-09 estimate represents funding through the Australian Health Care Grant only. 2. The 2008-09 estimate includes capital and recurrent funding for the Government schools component only under the

Primary and Secondary Education SPP, whereas the 2009-10 estimate includes funding for Government and Non-government schools.

3. The 2008-09 estimate includes capital and recurrent funding under the Technical and Further Education SPP only. 4. The 2008-09 estimate is funding under the Disability Services Grant only. 5. The 2008-09 estimate incorporates funding under the Commonwealth-State Housing Agreement and the Supported

Accommodated Assistance Program. 6. The 2008-09 estimate represents the balance of SPPs to the State. Most of these other payments have been

reclassified as NPPs for the 2009-10 Budget year.


7. Estimates of some NPPs may differ from those published in the Australian Government's 2009-10 Budget. This is because Tasmanian Government agencies sometimes have more detailed advice from Australian Government portfolio agencies regarding payment estimates, whereas the Australian Government Budget sometimes uses notional state shares of particular payments. The estimate includes payments previously classified as SPPs that have been reclassified as NPPs.

Tasmania's GST revenue will constitute 55.9 per cent of the Australian Government's total revenue transfers to the State in 2009-10. This has decreased from an estimated 69.4 per cent at the time of the 2008-09 Budget. The GST is a growth tax dependent on the performance of the national economy. Tasmania's reliance on GST revenue means that Tasmania's Budget can be significantly affected by national economic conditions, even when Tasmania's own economic performance is different from that of the national economy. The second largest individual transfer of funding from the Australian Government will be the National Healthcare SPP, which will form 9.0 per cent of the total estimated financial transfers to Tasmania.

Overall, total receipts from the Australian Government in 2009-10 are projected to increase by 8.2 per cent on 2008-09 Budget levels. This is due to a substantial increase in SPP funding and the additional NPP funding, particularly for the Nation Building - Economic Stimulus Plan. While these payments do increase the amount of Australian Government transfers to the State, it must be remembered that most of this funding is tied to particular projects and is in addition to pre-existing State spending plans. Therefore, while the additional funding is welcome, it does not necessarily provide greater Budget flexibility for the State and in this regard does not replace the estimated shortfall in GST revenues.

Chart 9.1 shows a break-down of revenue to the Tasmanian Budget between own-source revenue (State Taxation and Other State Own Source Revenue) and transfers to Tasmania by the Australian Government.

In 2009-10, it is estimated that total transfers to Tasmania by the Australian Government will comprise 64.8 per cent of total State revenue, 3.4 times the level of funding that the State generates from its own taxation revenue sources. This will leave Tasmania more heavily dependent on financial transfers from the Australian Government than has previously been the case.


Chart 9.1: Revenue Transfers from the Australian Government as a Proportion of Total Revenue, 2009-101

SPPs to the State $429.6m (10.2%)

Other State Own Source Revenue $674.2m (16%)

GST Revenue $1 526.5m

(36.2%)

SPPs through the State $133.0m

(3.2%)

State Taxation $810.0m (19.2%)

NPPs to the State $537.8m (12.8%)

NPPs through the State $104.8m

(2.5%)

Source: Department of Treasury and Finance estimates. Note: 1. There are two categories of payments for specific purposes (both SPPs and NPPs):

- those directly to a state government to assist in meeting its expenditure responsibilities. These are referred to as payments 'to' the state; or

- those to a state government for on-passing to other bodies such as local government and non-government organisations (principally non-government schools). These are referred to as payments 'through' the state.

Chart 9.2 summarises the major trends that have occurred in State revenue sourced from the Australian Government, as well as own-source taxation revenue, in the years since the implementation of the previous IGA in 2000-01. The main points to note from Chart 9.2 are:

• a major change in the composition of transfers of revenue by the Australian Government to the states occurred in 2000-01 as a result of the implementation of the previous IGA arrangements relating to the GST. This change resulted in a significant increase in the level of General Purpose Payments to Tasmania;

• despite the GST having increased the level of GPPs, this increase has under the present circumstances been largely offset by decreases in revenue arising from the abolition of State taxes required under the agreement governing state access to the GST. In addition, the increase in GPPs has been offset further by the significantly increased expenditure required of the State under the national tax reform arrangements (such as the First Home Owners Grant Scheme), as well as Tasmania's decision to abolish additional State taxes that had merely been listed for review under the GST sharing agreement;

• since 2000, the State Government has, of its own volition, also provided significant tax relief, which has returned much of the benefit associated with the growth in GPPs directly to the Tasmanian community;


• the extent of this tax relief can be seen in the fact that total state tax receipts, in real terms, have grown only moderately in recent years (and in some years declined), despite Tasmania's buoyant property market and strong economic performance over most of the period (see Chapter 5 Taxation Revenue);

• when both revenue, sourced from the Australian Government, and the revenue derived from State taxes is taken into account, since 2000 the total revenue to Tasmania from these sources, in real terms, has grown at an average annual rate of 3.0 per cent; and

• the estimates for 2008-09 and 2009-10 show an increase in payments for specific purposes as a result of the Commonwealth-State financial reforms, and a decrease in GST revenues and the State's ability to raise own source revenue through State taxes as a result of the current economic downturn.

Chart 9.2: Changes in Major Sources of Budget Revenue (Real Terms) for Tasmania1

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Sources: Australian Government Final Budget Outcome (1999-00 to 2007-08); Tasmanian Budget Paper No 1 The Budget (various years).

Note: 1. 2008-09 data represents estimated Budget outcomes (Tasmania).


MAJOR ISSUES IN COMMONWEALTH-STATE FINANCIAL RELATIONS The following sections highlight a number of current major issues in the area of Commonwealth-State financial relations.

Reform of Commonwealth-State Financial Relations In November 2008, the Council of Australian Governments (COAG) agreed to a new Intergovernmental Agreement on Federal Financial Relations (IGA) that for the first time provides an overarching framework for all Commonwealth-State financial relations. The new IGA was signed by the Australian Government and all states and territories in December 2008.

The IGA aims to improve the quality and effectiveness of government services by reducing prescriptive input controls, which in the past have tended to stifle innovation and flexibility, resulting in duplication, overlap, cost shifting and wastage in the form of unnecessary and unproductive administration costs.

The IGA provides a clearer specification of the roles and responsibilities of each level of government and an improved focus on accountability for better outcomes and service delivery through reduced administration and compliance overheads. It also provides incentives for and a means of facilitating the implementation of nationally significant social and economic reforms. The IGA establishes six National Agreements in the key service delivery areas of healthcare, education, skills and workforce development, disability services, affordable housing and indigenous reform. Each of the new National Agreements include a clear, mutually-agreed statement of policy objectives, specified as far as possible in terms of outcomes and the accountabilities of each level of government. The performance of all governments in achieving the objectives and outcomes is monitored and assessed by the independent COAG Reform Council and reported publicly on an annual basis.

A key feature of the reforms is rationalisation of the number of SPPs. Five national SPPs have been created which provide base level funding support for expenditure areas covered by five of the six National Agreements. Under the new IGA the only condition imposed on states in respect of the National SPPs is that they are spent in the sector for which they are provided. This provides states with greater budget, policy and service delivery flexibility to tailor spending in key sectors where they will produce the best community results.

The five national SPPs consist of some pre-existing SPPs. For example, the Australian Health Care Grants have been combined with some smaller health-related payments into one SPP. The new SPPs are:

• National Healthcare SPP;

• National Schools SPP;

• National Skills and Workforce Development SPP;

• National Disability SPP; and

• National Affordable Housing SPP.


The new SPPs will be ongoing, rather than subject to four or five yearly agreements as was previously the case. There will, however, be an opportunity to review the appropriateness of funding levels and high-level objectives from time-to-time.

As part of the reform package, the level of funding to be delivered through the newly formed SPPs has been significantly increased. This increase represents an additional $7.1 billion in Australian Government funding to the states and territories over the five years to 2012-13. Tasmania's estimated share of this package is $125.6 million. New indexation arrangements to be applied to the National SPPs have also been agreed. These are more reflective of the demand and cost increases faced by the states and are more likely to maintain the Australian Government's relative share of SPP funding over time.

Another key feature of the IGA reforms is the creation of National Partnership Agreements, which are generally supported by National Partnership Payments. There are three types of National Partnership Payments: project; facilitation; and reward payments. The difference between these types of National Partnership Payments is explained later in this chapter.

While the rationalisation of SPPs represents significant progress toward simplifying and streamlining the administrative arrangements between the Australian Government and the states, there still remain a significant number of SPPs that were not included in the new National SPPs. These have now been re-classified as National Partnership Payments. The vast majority of these NPPs involve small amounts of funding over fixed periods and are for very specific, detailed purposes. As such, there remains scope to further rationalise and streamline Australian Government payments to the states in line with the intent of the IGA reforms.

Ministerial Council for Federal Financial Relations Under the IGA, the Treasurer's Ministerial Council for Commonwealth-State Financial Relations was renamed the Ministerial Council for Federal Financial Relations. This Ministerial Council has been charged with the responsibility for overseeing the general operation of the new IGA and in doing this will play an active role in monitoring and implementing the financial reforms, reporting annually to COAG. This new role of the Ministerial Council represents a shift in, and consolidation of, the responsibility for federal financial relations.


General Purpose Payments Description Unlike Specific Purpose Payments and National Partnership Payments, General Purpose Payments from the Australian Government can be applied at the State's discretion. The GST revenue distributed to the states is classified as a GPP. In addition, the Budget Balancing Assistance that Tasmania is entitled to receive in 2008-09 is treated as a GPP.

GST Revenue Under the terms of the IGA, the Australian Government distributes to the states all the revenue it receives from the GST. Like all states, Tasmania's share of GST revenue is based on its share of the national population, adjusted by a weighting factor known as the GST relativity, which reflects the State's assessed need for financial assistance. The relativities for each state are determined by the Commonwealth Grants Commission (CGC), in accordance with the principle of Horizontal Fiscal Equalisation (HFE). HFE, the CGC, and its most recent recommendations are discussed later in this chapter and in the Appendices.

Since the 2008-09 State Budget, estimates of national GST revenue collections for 2008-09 and 2009-10 have been revised downwards on a number of occasions. This is due, in large part, to the impact that the global economic downturn has had on the Australian economy and on domestic consumption. Chart 9.3 shows the major revisions to Tasmanian GST revenue estimates since the 2008-09 Budget.

Chart 9.3: GST revenue to Tasmania, 2000-01 to 2011-12

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Actual 2008-09 Budget EstimateMid-Year Financial Report 2009-10 Budget EstimateUpdated Economic & Fiscal Outlook

Sources: Australian Government estimates; Australian Government Updated Economic and Fiscal Update; Mid-Year

Financial Report 2008-09; Budget Paper No 1 The Budget 2008-09.

It is estimated that Tasmania's share of GST revenue will be $1 526.5 million in 2009-10, a decrease of $100.4 million (6.2 per cent) compared to the expected final outcome for 2008-09 of $1 626.9 million (which includes $31.4 million in Budget Balancing Assistance). The expected final outcome for 2008-09 is $124.8 million (7.1 per cent) lower than was forecast in the 2008-09 Budget.


Table 9.2 provides an explanation of the change in Tasmania's share of GST revenue between the 2008-09 and 2009-10 Budget Estimates.

Table 9.2: Reconciliation of the Change1 in Tasmania's 2009-10 GST Revenue Estimates (2008-09 to 2009-10 Budget)

$m $m GST Revenue Estimate 2009-10 (2008-09 Budget Forward Estimate) 1 831.6

Plus

Change due to lower GST relativity (33.2)

Change due to decline in share of national population (9.0)

Change due to decline in GST pool (262.8)

(305.1)

GST Revenue Share 2009-10 (2009-10 Budget Estimate) 1 526.5

Sources: Budget Paper No 1 The Budget 2008-09; Australian Government Budget 2009-10 Budget Paper No 3:

Australia's Federal Relations. Note: 1. Changes to GST attributed to each factor here are estimates only, as the incremental changes vary with the order in

which they are applied. In practice, the factors are applied simultaneously.

In real per capita terms, Tasmania's GST revenue is forecast to decrease by 6.7 per cent in 2009-10 when compared to the estimated final outcome for 2008-09.

Up to and including the 2008-09 financial year, states are eligible for Budget Balancing Assistance (BBA) from the Australian Government where their share of GST revenue falls below a guaranteed minimum amount (which reflects the amount of GPPs a state would have expected to receive in a year had the GST and associated arrangements under the original IGA not been introduced). Because of the large decline in GST revenue to Tasmania in 2008-09, it is expected that Tasmania will be eligible for $31.4 million in BBA in 2008-09. This is the first time that BBA has been paid to Tasmania since 2002-03. This compares with the greatest difference for Tasmania between the GST and guaranteed minimum amount, which in 2001-02 was $141.7 million (which was paid in BBA).

The GST revenue estimate for 2009-10 is net of GST deferral compensation repayments. This relates to the Australian Government's decision in 2004-05 to allow taxpayers that voluntarily register for GST to lodge their Business Activity Statements annually, rather than quarterly or monthly, which had previously been the case. As a result of lower than expected take-up rates by eligible taxpayers the amount of GST deferral was over estimated and therefore there has been an overpayment by the Australian Government of GST deferral compensation to the states.

The Australian Government will recover the net overpayment in 2009-10. The amount to be recovered is the present value of the overpayment less the present value of the stream of future annual payments, this being $11.0 million. This arrangement will extinguish all current and future Commonwealth and state commitments in respect of this measure.


Commonwealth Grants Commission 2009 Update Report The CGC's 2009 Update Report provides information on relativities for the distribution of GST revenue amongst the states for 2009-10. The Report shows that Tasmania's assessed per capita GST relativity has declined since the 2008 Update Report, meaning that Tasmania will receive an estimated $40.2 million less in GST revenue for 2009-10 than it would have done were the 2009-10 GST pool to be distributed to the states according to the 2008-09 relativities.

Tasmania's relativity has decreased because the CGC assessed that, compared to the average of other states, Tasmania's:

• costs of providing various services, such as inpatient services, has marginally decreased;

• ability to raise some types of revenue, particularly stamp duty on conveyances, has increased; and

• share of SPP payments from the Australian Government has increased.

Tasmania's share of the national population is forecast to decrease in 2009-10, which will further reduce the State's share of the national GST revenue pool compared to 2008-09. Tasmania's population is still forecast to increase over this period, but at a lower rate than the national population. This continues a longer term trend of Tasmania's population increasing (see Chapter 2 Tasmanian Economy), but at a lower rate than the national average, meaning that its population share – and its share of GST revenue – is declining over time. For example between 2002-03 and 2007-08, Tasmania's share of the national population declined from 2.40 per cent to 2.34 per cent. By 2012-13, Tasmania's share of the national population is expected to decrease further to 2.25 per cent. This projection has been incorporated into Tasmania's Forward Estimates of GST revenue.

Commonwealth Grants Commission 2010 Review Every five years the CGC conducts a substantive review of the methodology used to determine the distribution of GST revenue, according to terms of reference given to it by the Australian Government.

Any change in methodology can have significant financial implications for Tasmania and the other states because all changes necessarily result in a redistribution of GST shares between jurisdictions. A review is currently underway, and the outcomes will determine the calculation of relativities to be used from 2010-11 onwards. The terms of reference for the 2010 Review instruct the CGC to undertake a wider and more fundamental review of its methodology than in past reviews. In particular, the CGC has been instructed to:

• simplify (where reasonably possible) existing assessments including, where possible, the structure of them;

• eliminate unreliable category assessments; and

• apply materiality thresholds to assessments to ensure that only those assessments that have an appreciable impact on the redistribution outcome are included, with a view to streamlining the overall assessment process.

The current Review is due to be completed in early 2010. The new methods have still not been finalised and it is too early to determine what the financial impact on Tasmania is likely to be.

However, the terms of reference require that the outcome of the simplification process remains consistent with the principle of HFE. This will ensure that, even under the new 2010 Review methods, Tasmania will


still be recognised as having greater needs on average than most other states and will, as a result, continue to receive a share of GST revenue above an equal per capita share.

Specific Purpose Payments Description Specific Purpose Payments (SPPs) are grants provided for specific purposes as set out under the Commonwealth Federal Financial Relations Act 2009. As discussed earlier in this chapter, SPPs have been subject to significant reforms which came into place on 1 January 2009. The newly created national broadbanded SPPs align with five of the six new National Agreements and consist of many of the pre-existing SPPs. The National Agreements embody objectives and outcomes for both state governments and the Australian Government.

The National Agreements cover the totality of Commonwealth and state government effort required to achieve the objectives and outcomes which extends beyond that which can be achieved through SPP funding alone. Hence, SPP funding may be considered a base level of funding support toward a broad expenditure area covered by a National Agreement, but the funding is not conditional on performance and is no longer tied directly to specific programs or services. This is consistent with the IGA intent which aims to provide states the flexibility to design and deliver services according to local circumstances, with the focus of government accountability being on the outcomes they achieve, rather than on how they deliver services.

A state's share of a National SPP in a financial year will be equivalent to its population share, based on the Australian Statistician's determination of state population shares as at 31 December for that year. In the case of the government schools component of the National Schools SPP, the relevant population will be each state's share of full-time equivalent student enrolments in government schools. The distribution of the non-government schools component of the National Schools SPP will be determined in accordance with the Commonwealth Schools Assistance Act 2008.

National Healthcare SPP

The National Healthcare SPP assists in supporting the objectives and outcomes embodied in the new National Healthcare Agreement, replacing the Australian Health Care Agreements (AHCA) and a range of smaller health-related SPPs. The National Healthcare Agreement covers health services more broadly, encompassing preventative health, primary, acute and aged care; whereas the AHCA was predominantly a hospital focussed SPP. The new agreement requires states to be responsible for a wider range of health outcomes.

National Schools SPP

The National Schools SPP assists in supporting the objectives and outcomes embodied in the National Education Agreement. It incorporates recurrent and capital components of previous government and non-government SPPs, as well as targeted programs and a number of Indigenous education initiatives. While non-government school funding is included in this SPP, it is 'partitioned' so that it continues to be passed through states onto non-government schools.


National Skills and Workforce Development SPP

The National Skills and Workforce Development SPP assists in supporting the objectives and outcomes embodied in the new National Skills and Workforce Development Agreement. This SPP provides support for states' responsibilities for vocational education and training and incorporates funding under the previous Skilling Australia's Workforce SPP, as well as a number of smaller payments.

National Disability SPP

The National Disability SPP assists in supporting the objectives and outcomes embodied in the new National Disability Agreement which combines the previous Commonwealth State/Territory Disability Agreement (CSTDA) and the Younger People in Residential Aged Care SPP, together with funding for the Disabilities Assistance Package (DAP).

National Affordable Housing SPP

The National Affordable Housing SPP assists in supporting the objectives and outcomes embodied in the new National Affordable Housing Agreement. It also provides funding support for the states' efforts in delivering affordable housing services. The new agreement consolidates a number of previous agreements including the Commonwealth-State Housing Agreement and the Supported Accommodated Assistance Program.

Distribution of SPPs Among the States Historically, the Commonwealth has distributed SPPs amongst the states on a notional 'needs' basis, with the shares for the agencies in each jurisdiction having to be negotiated with their Australian Government counterpart. The result of this was that some states received greater than per capita shares of a given SPP payment while other states received less than a per capita share. However, the methods for determining the share that each state needs are not particularly robust. For example, in recent years Tasmania has received a below average share of the health care grants, despite the CGC's assessments showing that Tasmania has above average needs in providing health services.

COAG agreed at its November 2008 meeting that, commencing in 2010-11, the distribution of the five SPP payments would transition to equal per capita (EPC) shares to each state over a period of five years. In 2010-11, 20 per cent of each SPP will be distributed to states on an EPC basis, and the remaining 80 per cent on a historical basis. In 2011-12, 40 per cent will be distributed EPC, and 60 per cent on a historical share basis, and so on, until all SPP funding is distributed on an EPC basis by 2014-15.

Table 9.3 shows estimates of Tasmania's share of National SPPs over the transition period.


Table 9.3: Estimated Share of Specific Purpose Payment Funding to Tasmania

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

historical historical80 per cent

historical60 per cent

historical40 per cent

historical 20 per cent

historical SPP share basis

20 per cent

EPC40 per cent

EPC60 per cent

EPC 80 per cent

EPC EPC % % % % % % %

Tasmania's share of national

population1 2.31 2.29 2.28 2.26 2.25 2.25 2.25

Tasmania's historical SPP

share 2.42 2.40 2.39 2.38 2.39 2.39 2.39

Tasmania's new SPP share 2.42 2.40 2.37 2.34 2.30 2.28 2.25

Sources: Australian Government Budget 2009-10 Budget Paper No 3: Australia's Federal Relations; Department of

Treasury and Finance estimates. Note: 1. Forecasts of Tasmania's share of the national population are not available for 2013-14 and 2014-15. For these

years, the 2012-13 estimate (2.25 per cent) has been used.

In past years, Tasmania has received a share of total SPPs greater than an EPC share. However, while Tasmania's share of SPP funding will decrease as a result of the transition to an EPC distribution, the State will not be disadvantaged overall. This is because the CGC's equalisation process takes into account each state's share of SPP funding when calculating its GST revenue needs. Effectively, where a state receives a share of Commonwealth payments above an EPC share, its assessed GST revenue is reduced by an amount equivalent to that difference, and vice versa.

Therefore, the SPP funding that Tasmania loses as a result of the transition to an EPC distribution will be offset by additional GST revenue to the State, increasing the mix of general purpose payments relative to payments for specific purposes. Further explanation of how SPPs and NPPs are treated by the CGC is provided in Appendix 3.


National Partnerships Description The Australian Government provides National Partnership Payments (NPPs) to states to support the delivery of specified outputs or projects, to facilitate reforms or to reward those jurisdictions that deliver on nationally significant reforms, as agreed in National Partnership Agreements. These Agreements involve reforms or projects of national significance and are multi-lateral; that is they are typically between all states and the Australian Government. A state may choose not to be a party to particular agreements, particularly when the agreement is not relevant to that state. Once signed, National Partnership Agreements are published on the COAG website (www.COAG.gov.au). As discussed earlier in this chapter, a large number of pre-existing SPPs that were not broad banded into the five new National SPPs have been re-classified as NPPs.

There are three types of NPPs that may be made to states, these are:

• project payments – to support the delivery of projects of national importance (including for example new infrastructure projects);

• facilitation payments – to assist a state undertake priority reforms and pursue continuous improvement in service delivery; and

• reward payments – to reward states which deliver reform progress or continuous improvement in service delivery.

National Partnerships are generally expected to have limited time horizons. On delivery of the particular initiative which is subject to a NPP:

• funding would cease because the project, output or reform has been delivered; or

• where on-going funding is required to maintain a new level of output, such funding may more appropriately be provided through the relevant National SPP Agreement or general revenue assistance.

Such decisions on the future of expiring National Partnership funding will be made by the Ministerial Council for Federal Financial Relations.

COAG November 2008 National Partnerships The following is a summary of some of the main National Partnerships that Tasmania is participating in. Most of these agreements require Tasmania to make a significant contribution alongside the Australian Government funding. Further detail about many of these programs can be found in the appropriate agency chapters of Budget Paper No 2 Government Services.

Hospitals and Health Workforce Reform

The National Partnership Agreement on Hospitals and Health Workforce Reform aims to improve efficiency and capacity in public hospitals through four reform components:

• introducing a nationally consistent Activity Based Funding approach;

• improving health workforce capability and supply;

• enhancing the provision of subacute services; and


• increasing funding for primary care in emergency departments.

It is estimated that Tasmania will receive $2.9 million for this Agreement over the four years to 2012-13.

Smarter Schools - Literacy and Numeracy

The National Partnership Agreement on Literacy and Numeracy focuses on achieving sustainable improvements in literacy and numeracy, as a key indicator of ability to go on and complete Year 12 for all students; improving literacy and numeracy for primary school students, especially Indigenous students; and developing a national understanding of the most effective way to teach literacy and numeracy. Tasmania is estimated to receive $2.1 million for this Agreement over the four years to 2012-13.

Low Socio-economic Status School Communities

The National Partnership Agreement on Low Socio-economic Status School Communities addresses the needs of disadvantaged government and non-government schools through funding a range of within school and out-of-school reforms. The Agreement aims to improve student engagement and educational achievement, and address entrenched disadvantage. Some of the key elements of this Agreement include: incentives to attract high-performing principals and teachers; operational arrangements in schools that encourage innovation and flexibility; strengthened school accountability; and providing innovative and tailored learning opportunities. It is estimated that Tasmania will receive $51.2 million for this Agreement over the four years to 2012-13.

Trade Training Centres in Schools

The Trade Training Centres in Schools National Partnership aims to raise the status of vocational education and training and better integrate the school and tertiary education sectors. It provides funding to establish Trade Training Centres in secondary schools to help increase the proportion of students achieving Year 12 or an equivalent qualification and help address skill shortages in traditional trades and emerging industries. It is estimated that Tasmania will receive $26.1 million for this Agreement over the four years to 2012-13.

Productivity Places Program

The National Partnership Agreement on Productivity Places Program is part of the Australian Government's Skilling Australia for the Future initiative and aims to reduce skills shortages and increase the productivity of industry and enterprises. Through this program all governments aim to increase the number of people with qualifications and the number of people with higher level qualifications. It is estimated that Tasmania will receive $27.7 million for this Agreement over the four years to 2012-13.

Homelessness

The National Partnership Agreement on Homelessness aims to significantly reduce homelessness by 2013. It recognises that providing more crisis beds and extra housing is important but not sufficient to resolve homelessness. This Agreement focuses on three broad strategies to reduce homelessness and increase economic and social participation. These are: prevention and early intervention to stop people becoming homeless; breaking the cycle of homelessness; and improving and expanding the service response to homelessness. It is estimated that Tasmania will receive $13.9 million for this Agreement over the four years to 2012-13.


Nation Building - Economic Stimulus Plan On 3 February 2009 the Australian Government announced $42 billion over the four years to 2011-12 for the Nation Building - Economic Stimulus Plan. The Plan is part of the Australian Government and states' response to the current economic downturn.

There are three main components of the Plan. The Building the Education Revolution provides extra funding for capital infrastructure for schools, over and above all existing and planned investments. The 20 000 Social and Defence Homes component provides funding for the construction of new public and community housing dwellings and for repairs and maintenance of existing housing stock. The Repairing Regional Roads program provides funding to repair regional roads across Australia. Between 2008-09 and 2011-12, it is estimated that Tasmania will receive $148.9 million for the 20 000 Social and Defence Homes program and $372.8 million for the Building the Education Revolution program. This is in addition to funding for Science and Language Centres in the 21st Century, which will be allocated on a competitive basis.

Summary of National Partnership Payments Table 9.4 provides a summary of total estimated NPPs for 2009-10.

Table 9.4: Summary of National Partnership Payments

2009-10 Budget

$m National Partnership Payments

To the State 238.8

Through the State 46.4

Total National Partnership Payments 285.2 National Partnership Reform Payments 49.4 National Partnership (Nation Building - Economic Stimulus Plan)

To the State 251.8


Total National Partnership (Nation Building - Economic Stimulus Plan) 307.9 Total National Partnerships

Total to the State 537.8

Total Through the State 104.8

Total National Partnerships 642.6


Treasury and Finance estimates.

Table 9.4 shows that the Nation Building – Economic Stimulus Plan is estimated to contribute $307.9 million or 47.9 per cent of total NPPs to Tasmania in 2009-10. This large contribution is of a short-term nature, which as discussed earlier, is a response to the current economic downturn. From 2011-12, nearly all the


funding under the Plan will have ceased. Therefore, when comparing funding levels over time, only funding provided under National Partnerships and National Partnership Reforms will provide a more accurate reflection of longer term funding trends.

Appendix 4 provides tables showing total payments for specific purposes (both NPPs and SPPs) for particular sectors, including funding details of significant NPPs.

Total Revenue Transfers from the Australian Government Reforms associated with the original IGA significantly increased the level of revenue sourced from the Australian Government by the states, commencing from 2000-01.

Chart 9.4 compares the decline in Tasmania's share of revenue transfers by the Australian Government to the states with the change in the State's share of the national population. It shows that, despite the continuous use of horizontal fiscal equalisation (since the 1930s) to distribute financial transfers between the two levels of government, over the long term, Tasmania's share of Australian Government funding has declined at a faster rate than the State's share of the national population.

Between the mid-1970s and mid-1980s, the difference between Tasmania's grant share and population share fell from around 1.5 percentage points to around 1.0 percentage point, where it has essentially remained unchanged until very recently.

Chart 9.4: Tasmania's Share of Australian Government Revenue Transfers

0

1

2

3

4

5

1979

-80

1981

-82

1983

-84

1985

-86

1987

-88

1989

-90

1991

-92

1993

-94

1995

-96

1997

-98

1999

-00

2001

-02

2003

-04

2005

-06

2007

-08

2009

-10

(est

)

Perc

enta

ge o

f Nat

iona

l Tot

al

Population Total transfers

Sources: Australian Government Final Budget Outcome, Part 4: Federal Financial Relations (numerous years);

Australian Government Final Budget Outcome 2008-09, Part 3: Australia's Federal Relations; Australian Government Budget 2008-09 Budget Paper No 3: Australia's Federal Relations; Australian Government Budget 2009-10 Budget Paper No 3: Australia's Federal Relations.


APPENDIX 1 Why Revenue Transfers from the Australian Government are Essential The transfer of revenue from the Australian Government to the states is an essential part of the financial relations that exist between the different levels of government in Australia. These transfers are fundamentally linked to the nature of the Australian Federation and the way in which it has developed. In particular, Commonwealth-State financial relations both derive from and reflect the differing powers and responsibilities of each level of government. The need for these revenue transfers to the states and principles governing the distribution of them is outlined in further detail in the following sections on Vertical Fiscal Imbalance (VFI) and Horizontal Fiscal Equalisation (HFE).

Vertical Fiscal Imbalance Since Federation, a financial relationship between the Australian Government and state governments has evolved in which the dominant characteristic is the fundamental imbalance between the revenue raising powers and functional responsibilities of each level of government. While the seeds of the present vertical fiscal imbalance (VFI) lie in the original Constitution agreed at Federation, the practical limits to reducing this imbalance have been reinforced by Constitutional amendments and by High Court interpretations of the Constitution.

The term VFI refers to the difference between own source revenue and own purpose expenditure commitments for a level of government. This is illustrated in Chart 9.5, which compares the percentage shares of revenue and expenditure on a consolidated basis for the Australian Government, state, and local governments. It shows that, in 2008-09, the Australian Government will have raised 74.0 per cent of total (General Government) revenue (including the GST pool as Australian Government revenues), whereas its own purpose (General Government) spending will have only been 54.6 per cent of total General Government outlays. In contrast, the states' share of this revenue will have only been 21.0 per cent, while combined state General Government outlays will have represented 38.8 per cent of the national total. Revenues and expenditures for local government are estimated to be much more closely aligned.


Chart 9.5: Vertical Fiscal Imbalance, 2008-09

0

10

20

30

40

50

60

70

80

Australian Government State Government Local Government

Perc

enta

ge o

f Ow

n So

urce

Rev

enue

and

Ow

n Pu

rpos

e Ex

pend

iture

Own Purpose Outlays Own Source Revenue

Source: Government Financial Estimates 2008-09, ABS cat no 5501.0.55.001.

As a result of VFI, there is a requirement for significant financial transfers from the Australian Government to the states on an ongoing basis. As detailed in this chapter, Australian Government financial assistance to the states is provided in a variety of ways.

Reforms to Commonwealth-State financial relations, which commenced under the original IGA on 1 July 2000, and continued under the new IGA agreed by COAG in November 2008, resulted in a substantial increase in VFI. The states have abolished a number of taxes under the previous IGA and have foregone revenue replacement payments and Financial Assistance Grants. States have also abolished, or agreed to abolish, all but part of one of the taxes listed for review under the IGA, and by so doing are going beyond what they committed to do in terms of taxation reform. Nevertheless, the new IGA arrangements provide the states with a source of funds that have greater growth potential, although the current economic downturn highlights the risks to governments of the cyclical nature of their tax bases. On the other hand, the new arrangements provide a greater degree of certainty because they sever the link between the quantum of revenue transfers and Australian Government fiscal policy decisions, and, in the case of SPPs, include provisions for indexation to better reflect changes in the costs of service provision over time.

Horizontal Fiscal Equalisation In addition to the differences that exist between the powers and responsibilities of the Australian and state governments, another fundamental characteristic of financial relations in the Australian Federation is the degree to which the fiscal capacities of the states differ. In per capita terms, there are differences between states in the cost of providing a range of common services and the financial resources available to fund them, including own source revenues and certain transfers from the Australian Government (apart from General Purpose Payments). The causes of this horizontal fiscal imbalance are complex and varied (demographic, geographic and economic to name a few). Those causes over which a state has no policy control are the explicit focus of the Horizontal Fiscal Equalisation (HFE) process.


In the absence of an arrangement whereby General Purpose Payments are distributed in accordance with HFE, those states that face unduly high costs and/or a lesser ability to raise revenues, through no fault of their own, would be required to deprive their communities of the opportunity to access similar levels and standards of service than those offered elsewhere in Australia. The principle of HFE addresses this imbalance and is therefore an integral element of Commonwealth-State financial relations.

The HFE framework that is now used takes, as its starting point, the scope of state transactions and functions, including all related recurrent expenditures and revenues, which are considered the normal responsibility of state governments. The CGC's assessments attempt to measure the level of services each state could provide, and the amount of revenue it could raise, if it made the average Australian effort. The difference between the assessed levels of service and revenue and the Australian average determines the shares of GST revenue. It does not 'compensate' for differences attributable to policy, practice and relative efficiency. In this way, the smaller states such as South Australia, Tasmania, the ACT and the Northern Territory, which on the whole face higher than average per capita costs and/or lower than average revenue raising abilities, are granted a greater than proportional share of general revenue assistance. This enables them to discharge their standard functions without necessarily having to impose above average revenue raising measures on their communities.

The Australian Government estimates that in 2009-10, Tasmania will receive approximately $589 million more in GST revenue than it would if the GST revenue were distributed on an equal per capita basis. Without HFE, Tasmania would therefore be significantly disadvantaged, relative to the average fiscal circumstances of all states, because of its higher costs of providing services and lower capacity to raise revenue, both of which are unavoidable.


APPENDIX 2 The Commonwealth Grants Commission Established in 1933, the CGC is an independent Australian Government statutory body charged with the task of making recommendations to the Australian Treasurer, in the form of per capita relativity factors, on how GST revenue should be distributed between the states each year.

Since 1981, the basis for its recommendations has been an assessment of the relative fiscal capacities of the states. These assessments are carried out in accordance with the principle of HFE.

The CGC's assessments also provide the states with an important source of comparable data on which to assess their relative performance in the areas of expenditure efficiency and revenue raising effort.

The degree to which a state exploits its available own-source revenue raising opportunities is captured by the CGC through a revenue raising effort ratio. This is expressed as a ratio of the revenue that a state actually raised from its own sources to how much it could have raised if it applied the average Australian tax (or other revenue) raising effort. The average Australian effort is effectively an average of states' tax and other revenue policies, as judged by the CGC. What a state could raise if it made the average Australian effort is based on the CGC's assessment of its relative revenue raising capacity, which takes into account the differences between states in the value of their tax bases.

This is a similar concept to tax severity except that, in addition to state taxation, revenue raising effort also includes property and mining royalties, and contributions to government from public trading enterprises.

A ratio above 100 indicates that a state is applying a revenue raising effort above the Australian average. A ratio below 100 indicates that it is making an effort below the Australian average.

Chart 9.6 shows the revenue raising effort ratio of each state for the 2007-08 financial year, the most recent year for which Commission data are available.


Chart 9.6: State Revenue Raising Effort Ratios, 2007-08

85

95

105

115

125


Rat

io

Source: 2009 Update Report supporting tables, Commonwealth Grants Commission.

Similar concepts apply to service delivery. The CGC examines the effort that states go to in providing services relative to other states, through the calculation of the level of service provision ratio. The ratio measures what a state is spending on service delivery compared to what it would need to spend (taking into account its cost advantages and disadvantages) in order to provide the Australian average level of services. The Australian average level of service is calculated by the CGC and covers all areas of state general government expenditure, including: health; education; law, order and public safety; and culture and recreation.

A ratio greater than 100 indicates that a state is providing a level of services above the Australian average. A ratio below 100 indicates a level of service provision below the Australian average.

The figures are shown graphically in Chart 9.7 for 2007-08, which is the most recent year for which Commission data are available.


Chart 9.7: State Level of Service Provision Ratios, 2007-08

90

95

100

105

110

115

120

125


Rat

io

Source: 2009 Update Report supporting tables, Commonwealth Grants Commission.


APPENDIX 3 Commonwealth Grants Commission Assessments and the Treatment of Specific Purpose Payments and National Partnership Payments When the Australian Government funds states for particular projects or to assist with the provision of state-type services, these payments are taken into account by the CGC in assessing the relative financial needs and GST requirements of each state. This means that there are generally no 'winners' or 'losers' when the Australian Government announces funding for specific purposes for particular states or territories.

Therefore, the fact that Tasmania did not receive any funding in the Australian Government's 2009-10 Budget for major infrastructure projects under one specific program such as the Building Australia Fund (BAF) does not mean that Tasmania will 'miss out' on its fair share of Australian Government funding. Rather, the funding provided to other states from the BAF will simply mean that the Australian Government is meeting an increased share of those states' financial needs through tied funding payments, which will therefore reduce the amount of GST revenue they require, as assessed by the CGC. This will result in a redistribution of GST revenue over time to Tasmania so that it receives a greater share of total Australian Government transfers to the states, regardless of the composition of that funding (eg GPP or SPP/NPP funding).

Similarly, in cases where Tasmania is the only recipient of a payment for a particular purpose, the opposite is true in that the CGC assessments will eventually in effect redistribute most if not all of the payment away from Tasmania to the other states. This is because, as stated above, the Australian Government is assessed as providing financial support for a part of Tasmania's assessed financial needs through this payment and, hence, the need for an equivalent amount of GST funding is no longer necessary.


APPENDIX 4 Payments for Specific Purposes by Expenditure Category

Table 9.5: Payments for Specific Purposes for Healthcare

2009-10 Budget

$m HEALTHCARE

National Healthcare Specific Purpose Payment 246.1 National Partnerships

National Partnership Payments Essential Vaccines 7.3

Launceston General Hospital - Acute Medical and Surgical Unit 24.4

Other 15.2

46.9

National Partnership Reform Payments 0.5

Total Healthcare National Partnerships 47.4

Total Payments for Healthcare 293.5




Table 9.6: Payments for Specific Purposes for Education

2009-10 Budget

$m EDUCATION

National Schools Specific Purpose Payment 222.9 National Partnerships

National Partnership Payments 0.9 National Partnership Reform Payments

Digital Education Revolution 7.1

Low Socio-economic Status School Communities 7.1

Trade Training Centres in Schools 6.2

Other 8.2

28.6 National Partnership (Nation Building - Economic Stimulus Plan) 207.4

Total Education National Partnerships 236.9

Total Payments for Education 459.8

Specific Purpose Payments to the State 89.9

Specific Purpose Payments through the State 133.0

National Partnership Payments to the State 178.5

National Partnership Payments through the State 58.4 Sources: Australian Government Budget 2009-10 Budget Paper No 3: Australia's Federal Relations; Department of



Table 9.7: Payments for Specific Purposes for Skills and Workforce Development

2009-10 Budget

$m SKILLS AND WORKFORCE DEVELOPMENT

National Skills and Workforce Development Specific Purpose Payment 30.8 National Partnerships

National Partnership Payments 0.6

National Partnership Reform Payments 6.5

Total Skills and Workforce Development National Partnerships 7.1 Total Payments for Skills and Workforce Development 38.0



Table 9.8: Payments for Specific Purposes for Community Services (Including Disability)

2009-10 Budget

$m COMMUNITY SERVICES

National Disability Services Specific Purpose Payment 28.2 National Partnership Payments

Home and Community Care 31.2

Other 3.5

34.8

Total Payments for Community Services 63.0




Table 9.9: Payments for Specific Purposes for Housing

2009-10 Budget

$m HOUSING

National Affordable Housing Specific Purpose Payment 34.4 National Partnerships

National Partnership Reform Payments Homelessness 4.3

Social Housing 4.9

Indigenous Housing 4.6

13.8

National Partnership (Nation Building – Economic Stimulus Plan) 94.9

Total Housing National Partnerships 108.7

Total Payments for Housing 143.2



Table 9.10: Payments for Specific Purposes for Infrastructure

2009-10 Budget

$m INFRASTRUCTURE

National Partnership Payments Nation Building Program (includes former AusLink) 102.0

Other 2.3

104.3 National Partnership (Nation Building – Economic Stimulus Plan) 5.6

Total Payments for Infrastructure 109.9




Table 9.11: Payments for Specific Purposes for Environment

2009-10 Budget

$m ENVIRONMENT

National Partnership Payments Caring for Our Country (Natural Resource Management component only) 5.7

Other 16.3

22.0 Total Payments for Environment 22.0



Table 9.12: Other Payments for Specific Purposes

2009-10 Budget

$m OTHER

National Partnership Payments Financial Assistance Grants to Local Government (through the State) 46.4

Other (to the State) 29.4

75.8 Total Payments for Other 75.8




Table 9.13: Summary of Total Payments for Specific Purposes

2009-10 Budget

$m TOTAL SPECIFIC PURPOSE PAYMENTS

To the State 429.6


562.5 TOTAL NATIONAL PARTNERSHIP PAYMENTS

To the State 537.8


642.6 TOTAL PAYMENTS FOR SPECIFIC PURPOSES TO TASMANIA 1 205.1

To the State 967.3

Through the State 237.8 Sources: Australian Government Budget 2009-10 Budget Paper No 3: Australia's Federal Relations; Department of



APPENDIX 1 UNIFORM GOVERNMENT REPORTING

Features

• To satisfy Loan Council requirements, this Appendix brings together information presented elsewhere in the Budget Papers for the General Government Sector, together with Budget information for the Public Non-Financial Corporations (PNFC) Sector, Total Non-Financial Public Sector, Public Financial Corporations (PFC) Sector and the Total State Sector.

• The data is consistent with the Uniform Presentation Framework and Australian Accounting Standards, in particular, AASB 1049 Whole of Government and General Government Sector Financial Reporting.

• The budgeted Net Operating Balance for 2009-10 is a deficit of $117.1 million for the General Government Sector, a surplus of $75.0 million for the PNFC Sector, a surplus of $24.9 million for the PFC Sector and a deficit of $17.4 million for the Total State Sector.

• The budgeted Fiscal Balance for 2009-10 is a deficit of $569.5 million for the General Government Sector, a deficit of $193.7 million for the PNFC Sector, a surplus of $25.1 million for the PFC Sector and a deficit of $738.2 million for the Total State Sector.

• Between 30 June 2009 and 30 June 2010, General Government Net Debt is forecast to deteriorate from negative $947.5 million to negative $486.5 million, Public Non-Financial Corporations Net Debt is forecast to increase from $2 245.9 million to $2 454.1 million and Total State Sector Net Debt is forecast to increase from $1 056.4 million to $1 567.7 million.

• Tasmania's budgeted Loan Council Allocation for 2009-10 is a deficit of $722 million compared with the nominated deficit of $78 million.

Uniform Government Reporting A1.1

INTRODUCTION The financial performance information in this Appendix has been prepared in accordance with the Uniform Presentation Framework (UPF). This Appendix provides Income Statement, Balance Sheet and Cash Flow Statement estimates for the:

• General Government Sector;

• Public Non-Financial Corporations Sector;

• Total Non-Financial Public Sector;

• Public Financial Corporations Sector; and

• Total State Sector.

The statements present the 2008-09 estimated outcome, the 2009-10 Budget Estimates and Forward Estimates for the period 2010-11 to 2012-13.

In accordance with the UPF, the actual end of year results will be released in the Treasurer's Annual Financial Report 2008-09. The Report will be publicly released by no later than 31 October 2009.

Information for the Public Financial Corporations Sector and the Total State Sector has been included in the Appendix for the first time. While the inclusion of this information is not a requirement of the UPF, it has been included in the Budget Papers in the interest of continuing to improve the level of disclosure and transparency.

A detailed description of the key fiscal aggregates presented under the UPF is provided in the Guide to the Budget.

A1.2 Uniform Government Reporting

GOVERNMENT FINANCIAL ESTIMATES Tables A1.1 to A1.15 provide details of the Income Statements, Balance Sheets and Cash Flow Statements for the General Government Sector, Public Non-Financial Corporations Sector, Total Non-Financial Public Sector, Public Financial Corporations Sector and Total State Sector respectively.

Table A1.1: General Government Income Statement 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) ) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)


Grants 2 664.3) 2 759.1) 2 677.1) 2 719.6) 2 774.7)

Taxation 798.2) 810.0) 830.1) 871.8) 917.6)



Interest Income 74.6) 33.8) 31.2) 28.3) 34.1)


Other Revenue 78.0) 73.8) 74.4) 79.3) 83.0)



Superannuation 212.7) 213.3) 200.0) 197.3) 191.1)

Depreciation 223.2) 228.3) 235.7) 240.9) 246.8)

Supplies and Consumables 973.5) 937.9) 905.8) 903.8) 907.1)


Borrowing Costs 17.4) 17.5) 17.7) 17.4) 15.8)

Grant Expenses 776.2) 814.4) 777.9) 773.1) 771.9)

Other Expenses 48.1) 43.6) 35.5) 31.0) 31.7)

4 241.8) 4 332.9) 4 266.7) 4 303.8) 4 335.8)

Equals NET OPERATING BALANCE (102.2) (117.1) (87.3) (24.1) 73.6)


Result Gain/(Loss) on Sale of Non-Financial Assets 3.6) (5.5) 2.2) 3.6) 3.9)

Movement in Investments in GBEs and SOCs (13.4) 110.3) 163.6) 310.3) 305.0)

Movements in Superannuation Liability (477.9) ....) ....) ....) ....)

Other Gains/(Losses) (7.7) 1.7) 0.3) (10.2) (10.9)

(495.5) 106.5) 166.2) 303.7) 298.1)

Equals Operating Result (597.6) (10.6) 78.9) 279.6) 371.7)


Table A1.1 General Government Income Statement (continued) 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) ) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)

$m) $m) $m) $m) $m) Plus Other Economic Flows - Other Movements in

Equity

Revaluations of Non-Financial Assets 206.8) 222.7) 232.9) 239.3) 235.5)

Other Non-Owner Movements in Equity (89.3) (1.3) 16.9) 54.5) 48.2)

117.5) 221.4) 249.9) 293.8) 283.7)

Equals Comprehensive Result (480.1) 210.8( 328.8( 573.4( 655.4(

KEY FISCAL AGGREGATES NET OPERATING BALANCE (102.2) (117.1) (87.3) (24.1) 73.6) Less Net Acquisition of Non-Financial Assets

Purchase of Non-Financial Assets 285.1) 758.2) 680.1) 423.6) 327.8)

Less Sale of Non-Financial Assets 44.2) 77.6) 40.0) 39.2) 40.4)

Less Depreciation 223.2) 228.3) 235.7) 240.9) 246.8)

17.6) 452.3) 404.4) 143.5) 40.6)

Equals FISCAL BALANCE (119.8) (569.5) (491.6) (167.6) 33.0)


Table A1.2: General Government Balance Sheet as at 30 June 2009) 2010) 2011) 2012) 2013) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)


Financial Assets Cash and Deposits 1 201.3) 728.3) 347.9) 292.2) 435.1(

Investments 45.0) 70.1) 88.6) 76.4) 54.7(

Equity Investment in PNFC and PFC Sectors 3 823.7) 3 966.0) 4 161.5) 4 481.1) 4 786.1(

Other Equity Investments 3.2) 3.0) 3.0) 2.6) 2.6(

Receivables 144.1) 153.9) 161.4) 169.3) 176.7(

Other Financial Assets 913.6) 922.0) 950.4) 1 013.4) 1 059.1(

6 130.8) 5 843.4) 5 712.7) 6 034.9) 6 514.2(

Non-Financial Assets Land and Buildings 4 792.5) 5 234.9) 5 565.9) 5 726.6) 5 859.5)

Infrastructure 4 692.8) 4 906.3) 5 188.6) 5 402.1) 5 543.9)




Intangibles 26.1) 24.3) 21.9) 19.1) 16.5)



10 157.5) 10 820.6) 11 447.8) 11 822.9) 12 096.8)

Total Assets 16 288.3) 16 664.0) 17 160.5) 17 857.8) 18 611.0( Liabilities

Borrowings 298.8) 311.9) 323.5) 296.8) 258.4)

Superannuation 4 346.0) 4 493.8) 4 619.5) 4 735.4) 4 836.5)


Payables 72.0) 75.6) 78.2) 80.9) 83.7)

Other Liabilities 257.9) 254.4) 252.4) 260.4) 269.5)


NET ASSETS 10 901.5) 11 112.3) 11 441.1) 12 014.5) 12 669.8(

Equity



Other Equity 133.4) 130.9) 137.8) 140.5) 143.2)

Total Equity 10 901.5) 11 112.3) 11 441.1) 12 014.5) 12 669.8)


Table A1.2 General Government Balance Sheet as at 30 June (continued)

2009) 2010) 2011) 2012) 2013) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)

$m) $m) $m) $m) $m) NET WORTH 1 10 901.5) 11 112.3) 11 441.1) 12 014.5) 12 669.8( NET FINANCIAL WORTH 2 744.0) 291.7) (6.7) 191.6) 573.0( NET FINANCIAL LIABILITIES 3 3 079.7) 3 674.3) 4 168.2) 4 289.5) 4 213.1( NET DEBT4 (947.5) (486.5) (112.9) (71.8) (231.4) Notes: 1. Net Worth represents total assets (both financial and non-financial) minus total liabilities. 2. Net Financial Worth represents total financial assets minus total liabilities. 3. Net Financial Liabilities represents total liabilities less financial assets, excluding equity investment in the PNFC and

PFC Sectors. 4. Net Debt represents borrowings less the sum of cash and deposits and investments.


Table A1.3: General Government Cash Flow Statement 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) ) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)


Cash Received from Operating Activities Grants Received 2 664.3) 2 759.1) 2 677.1) 2 719.6) 2 774.7)

Taxation 787.0) 810.0) 830.1) 871.8) 917.6)





Other Receipts 209.4) 206.6) 207.6) 213.9) 219.2)

4 256.9) 4 336.7) 4 303.6) 4 404.8) 4 535.3)


Superannuation (250.5) (268.0) (283.4) (296.3) (309.4)

Supplies and Consumables (982.7) (936.8) (905.5) (903.8) (906.8)

Borrowing Costs (17.2) (17.1) (17.2) (17.0) (15.3)


Other Payments (170.5) (171.5) (164.9) (164.8) (165.2)

(3 969.0) (4 081.4) (4 004.2) (4 054.4) (4 089.5)

Net Cash Flows from Operating Activities 287.9) 255.3) 299.4) 350.4) 445.8) Cash Flows from Investing Activities



(244.6) (684.6) (641.4) (384.1) (287.1)

Net Cash Flows from Financial Assets (Policy Purposes) Equity Injections (116.9) (31.4) (31.3) (8.2) ....)

Net Advances Paid (11.8) (25.4) (18.7) 12.0) 21.5)

(128.6) (56.8) (50.0) 3.7) 21.5)

Net Cash Flows from Investing Activities (373.3) (741.4) (691.5) (380.3) (265.6)


Table A1.3 General Government Cash Flow Statement (continued) 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)

$m) $m) $m) $m) $m) Net Cash Flows from Financing Activities

Net Borrowing (19.4) 13.1) 11.7) (25.6) (37.3)

(19.4) 13.1) 11.7) (25.6) (37.3) Net Increase/(Decrease) in Cash Held (104.7) (473.0) (380.4) (55.6) 142.9) Cash at Beginning of the Year 1 306.0) 1 201.3) 728.3) 347.9) 292.2)Cash at End of the Year 1 201.3) 728.3) 347.9) 292.2) 435.1( KEY FISCAL AGGREGATES Net Cash Flows from Operating Activities 287.9) 255.3) 299.4) 350.4) 445.8)

Plus Net Cash from Investments in Non-Financial

Assets (244.6) (684.6) (641.4) (384.1) (287.1)

Equals CASH SURPLUS/(DEFICIT) 43.3) (429.2) (342.0) (33.7) 158.7)


Table A1.4: Public Non-Financial Corporations Sector Income Statement

2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)


Grants 78.9( 102.7( 103.7( 105.9( 106.4(

Sales of Goods and Services 1 835.6( 1 941.8( 1 978.8( 2 143.3( 2 225.7(

Interest Income 6.8( 4.5( 4.7( 5.1( 6.3(

Other Revenue 56.5( 49.4( 58.2( 83.2( 70.6(

1 977.8( 2 098.5( 2 145.4( 2 337.4( 2 409.0( Less Expenses from Transactions

Employee Expenses 303.3( 289.7( 303.9( 322.0( 340.0(

Superannuation 40.3( 39.9( 40.3( 41.0( 41.5(

Depreciation 250.8( 267.2( 288.3( 300.3( 311.3(

Supplies and Consumables 1 113.8( 1 161.2( 1 156.2( 1 222.9( 1 254.9(

Borrowing Costs 145.5( 158.0( 176.3( 192.6( 202.1(

Dividend, Tax and Rate Equivalent Expenses 65.0( 70.1( 87.6( 99.1( 122.9(

Grant Expenses 20.0( 21.5( 22.0( 22.6( 23.4(

Other Expenses 16.9( 15.9( 16.9( 19.0( 20.1(

1 955.5( 2 023.5( 2 091.5( 2 219.4( 2 316.3(

Equals NET OPERATING BALANCE 22.3( 75.0( 53.8( 118.0( 92.7(


Result

Gain/(Loss) on Sale of Non-Financial Assets 2.2( 1.1( 1.2( 1.2( 1.2(

Other Gains/(Losses) (42.2) 2.9( 93.3( 129.0( 131.0(

(40.0) 4.0( 94.5( 130.2( 132.2( Equals Operating Result (17.7) 79.0( 148.3( 248.3( 225.0( Plus Other Economic Flows - Other Movements in

Equity

Revaluations of Non-Financial Assets 117.0( 36.3( 35.4( 59.5( 65.8(

Other Flows 132.4( 31.4( (0.9) (18.8) (22.0)

249.4( 67.7( 34.4( 40.7( 43.7(

Equals Comprehensive Result 231.7( 146.7( 182.8( 288.9( 268.7(


Table A1.4 Public Non-Financial Corporations Sector Income Statement (continued)


$m) $m) $m) $m) $m) KEY FISCAL AGGREGATES NET OPERATING BALANCE 22.3( 75.0( 53.8( 118.0( 92.7( Less Net Acquisition of Non-Financial Assets

Purchase of Non-Financial Assets 454.7( 538.8( 516.4( 426.2( 435.0(

Less Sale of Non-Financial Assets 18.9( 2.9( 6.9( 2.9( 3.0(

Less Depreciation 250.8( 267.2( 288.3( 300.3( 311.3(

185.1( 268.7( 221.2( 123.0( 120.7(

Equals FISCAL BALANCE (162.7) (193.7) (167.3) (4.9) (28.0)


Table A1.5: Public Non-Financial Corporations Sector Balance Sheet as at 30 June



Financial Assets Cash and Deposits 211.3( 134.9( 120.4( 153.8( 175.0(

Investments 22.1( 15.9( 16.7( 14.5( 37.8(

Equity Investments 514.5( 567.9( 660.8( 682.7( 682.7(

Receivables 299.5( 308.6( 335.6( 349.1( 359.1(

Other Financial Assets 1 313.8( 1 307.4( 1 271.0( 1 256.5( 1 276.1(

2 361.2( 2 334.6( 2 404.5( 2 456.5( 2 530.7(

Non-Financial Assets Land, Buildings and Forest Estate 860.9( 883.3( 903.0( 919.9( 925.9(

Infrastructure 6 965.4( 7 204.2( 7 416.5( 7 569.0( 7 721.7(

Plant and Equipment 253.3( 259.5( 274.6( 282.0( 288.5(

Assets Held for Sale 2.9( 2.7( 2.5( 2.4( 2.4(

Other Non-Financial Assets 69.6( 74.8( 71.8( 73.1( 73.5(

8 152.1( 8 424.4( 8 668.4( 8 846.3( 9 012.0( Total Assets 10 513.2( 10 759.0( 11 072.9( 11 302.9( 11 542.6( Liabilities

Borrowing 2 479.3( 2 604.9( 2 800.2( 2 823.0( 2 867.8(

Superannuation 519.5( 527.0( 534.9( 543.7( 548.4(

Employee Entitlements 93.1( 99.9( 102.3( 108.9( 113.8(

Payables 334.0( 325.2( 348.8( 337.9( 347.5(

Other Liabilities 3 429.6( 3 397.7( 3 299.5( 3 213.3( 3 120.3(

Total Liabilities 6 855.5( 6 954.5( 7 085.7( 7 026.7( 6 997.8(

NET ASSETS 3 657.7( 3 804.4( 3 987.2( 4 276.2( 4 544.8(

Equity

Accumulated Funds 1 182.1( 1 234.4( 1 352.7( 1 567.7( 1 745.7(

Asset Revaluation Reserve 1 001.0( 1 037.3( 1 072.7( 1 132.2( 1 198.0(

Other Equity 1 474.6( 1 532.7( 1 561.9( 1 576.3( 1 601.1(

Total Equity 3 657.7( 3 804.4( 3 987.2( 4 276.2( 4 544.8(


Table A1.5 Public Non-Financial Corporations Sector Balance Sheet as at 30 June (continued)


$m) $m) $m) $m) $m) NET WORTH 1 3 657.7) 3 804.4) 3 987.2) 4 276.2) 4 544.8) NET FINANCIAL WORTH 2 (4 494.3) (4 619.9) (4 681.2) (4 570.2) (4 467.1) NET FINANCIAL LIABILITIES 3 4 494.3( 4 619.9( 4 681.2( 4 570.2( 4 467.1( NET DEBT 4 2 245.9( 2 454.1( 2 663.1( 2 654.8( 2 655.1( Notes: 1. Net Worth represents total assets (both financial and non-financial) minus total liabilities. 2. Net Financial Worth represents total financial assets minus total liabilities. 3. Net Financial Liabilities represents total liabilities less financial assets. For the PNFC Sector this is equivalent to

negative Net Financial Worth. 4. Net Debt represents borrowings less the sum of cash and deposits and investments.


Table A1.6: Public Non-Financial Corporations Sector Cash Flow Statement

2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate) $m) $m) $m) $m) $m) Cash Flows from Operating Activities

Cash Received from Operating Activities Grants Received 78.2( 98.3( 103.3( 105.5( 106.2(


Interest Received 4.4( 4.1( 4.0( 4.4( 5.5(

Other Receipts 167.7( 185.4( 182.9( 209.7( 197.7(

2 080.0( 2 378.0( 2 423.9( 2 586.8( 2 656.5(

Cash Payments from Operating Activities Employee Entitlements (319.2) (303.7) (323.0) (338.6) (360.0)

Superannuation (34.7) (34.2) (34.3) (34.8) (35.2)

Supplies and Consumables (856.0) (1 104.4) (1 118.0) (1 175.2) (1 199.4)

Borrowing Costs (142.3) (154.2) (171.8) (187.4) (197.4)


Other Payments (330.3) (311.9) (271.3) (281.5) (288.3)

(1 702.4) (1 929.8) (1 940.3) (2 040.1) (2 103.8) Net Cash Flows from Operating Activities 377.5( 448.1( 483.7( 546.7( 552.8( Cash Flows from Investing Activities


Sales of Non-Financial Assets 18.9( 2.9( 6.9( 2.9( 3.0(

(435.8) (535.9) (509.5) (423.3) (432.0) Net Cash Flows from Financial Assets (Policy

Purposes) 116.9( 31.4( 31.3( 8.2( ....( Net Cash Flows from Financial Assets (Liquidity

Purposes) (240.7) (76.5) (134.7) (27.9) (21.6)

Net Cash Flows from Investing Activities (559.7) (581.0) (612.9) (443.0) (453.7)


Table A1.6 Public Non-Financial Corporations Sector Cash Flow Statement (continued)

2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate) $m) $m) $m) $m) $m) Net Cash Flows from Financing Activities

Dividends and Tax Equivalents Paid (65.0) (70.1) (87.6) (99.1) (122.9)

Net Borrowing 371.4( 126.5( 202.4( 28.7( 45.0(

306.5( 56.4( 114.8( (70.5) (77.9) Net Increase/(Decrease) in Cash Held 124.3( (76.5) (14.4) 33.3( 21.2( Cash at Beginning of the Year 87.0) 211.3) 134.9) 120.4) 153.8)Cash at End of the Year 211.3) 134.9) 120.4) 153.8) 175.0) KEY FISCAL AGGREGATES Net Cash Flows from Operating Activities 377.5( 448.1( 483.7( 546.7( 552.8(


Plus Dividends, Tax and Rate Equivalents Paid (65.0) (70.1) (87.6) (99.1) (122.9)

Equals CASH SURPLUS/(DEFICIT) (123.2) (157.8) (113.4) 24.3( (2.1)


Table A1.7: Total Non-Financial Public Sector Income Statement 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)


Grants 2 664.3) 2 759.1) 2 677.1) 2 719.6) 2 774.7)

Taxation 772.1) 773.9) 783.6) 813.7) 846.5)

Sales of Goods and Services 2 111.2) 2 278.9) 2 321.4) 2 494.3) 2 577.6)


Interest Income 82.0) 36.5) 33.9) 31.5) 38.4)


Other Revenue 134.6) 123.2) 132.6) 162.5) 153.6)



Superannuation 253.0) 253.2) 240.4) 238.2) 232.6)

Depreciation 474.0) 495.5) 524.0) 541.2) 558.1)

Supplies and Consumables 2 052.2) 2 061.2) 2 022.6) 2 085.4) 2 119.2)


Borrowing Costs 154.4) 153.5) 162.4) 168.9) 164.9)

Grant Expenses 717.2) 733.1) 696.3) 689.9) 689.0)

Other Expenses 48.1) 43.6) 35.5) 31.0) 31.7)

5 992.9) 6 107.8) 6 079.1) 6 216.9) 6 307.0) ( ( ( ( (

Equals NET OPERATING BALANCE (79.9) (42.2) (33.4) 94.0) 166.3)


Result

Gain/(Loss) on Sale of Non-Financial Assets 5.9) (4.3) 3.4) 4.8) 5.1)

Movement in Investments in GBEs and SOCs (128.3) (5.0) 12.1) 29.6) 36.3)

Movement in Superannuation Liability (477.9) ....) ....) ....) ....)

Other Gains/(Losses) (166.8) (26.8) 62.4) 110.6) 120.2)

(767.1) (36.1) 77.9) 145.0) 161.6)

Equals Operating Result (847.0) (78.3) 44.5) 238.9) 328.0)


Table A1.7 Total Non-Financial Public Sector Income Statement (continued)

2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate) $m) $m) $m) $m) $m) Plus Other Economic Flows - Other Movements in

Equity

Revaluations of Non-Financial Assets 323.8) 259.0) 268.3) 298.8) 301.3)

Other Flows 43.1) 30.1) 16.0) 35.7) 26.1)

366.9) 289.1) 284.3) 334.5) 327.4)

Equals Comprehensive Result (480.1) 210.8) 328.8) 573.4) 655.4) KEY FISCAL AGGREGATES NET OPERATING BALANCE (79.9) (42.2) (33.4) 94.0( 166.3( Less Net Acquisition of Non-Financial Assets

Purchase of Non-Financial Assets 739.8) 1 297.0) 1 196.4) 849.8) 762.8)

Less Sale of Non-Financial Assets 63.2) 80.5) 46.9) 42.1) 43.4)

Less Depreciation 474.0) 495.5) 524.0) 541.2) 558.1)

202.6) 721.0) 625.5) 266.4) 161.3)

Equals FISCAL BALANCE (282.5) (763.2) (659.0) (172.5) 5.0)


Table A1.8: Total Non-Financial Public Sector Balance Sheet as at 30 June

2009) 2010) 2011) 2012) 2013)

Estimated) Forward) Forward) Forward)

Outcome) Budget) Estimate) Estimate) Estimate)

$m) $m) $m) $m) $m)

Assets

Financial Assets

Cash and Deposits 1 412.6) 863.1) 468.3) 446.0) 610.1)

Investments 67.1) 86.0) 105.3) 90.8) 92.5)

Equity Investment in PFC Sector 165.9) 161.6) 174.3) 204.9) 241.3)

Other Equity Investments 517.7) 571.0) 663.8) 685.2) 685.2)

Receivables 443.5) 462.5) 497.0) 518.3) 535.8)

Other Financial Assets 1 279.6) 1 272.0) 1 235.9) 1 222.2) 1 243.0)

3 886.4) 3 416.1) 3 144.5) 3 167.6) 3 407.8)


Land and Buildings 5 653.4) 6 118.2) 6 468.9) 6 646.5) 6 785.4)

Infrastructure 11 658.2) 12 110.5) 12 605.1) 12 971.1) 13 265.5)





Intangibles 15.9) 9.7) 8.0) 7.9) 7.9)


18 309.6) 19 245.0) 20 116.2) 20 669.2) 21 108.8)

Total Assets 22 196.0) 22 661.1) 23 260.7) 23 836.8) 24 516.7)

Liabilities

Borrowings 2 778.1) 2 916.7) 3 123.7) 3 119.8) 3 126.2)

Superannuation 4 865.5) 5 020.8) 5 154.3) 5 279.0) 5 384.9)


Payables 405.9) 400.8) 426.9) 418.7) 431.2)

Other Liabilities 2 739.7) 2 694.6) 2 566.4) 2 426.0) 2 297.6)


NET ASSETS 10 901.5) 11 112.3) 11 441.1) 12 014.5) 12 669.8)


Table A1.8 Total Non-Financial Public Sector Balance Sheet as at 30 June (continued)

2009) 2010) 2011) 2012) 2013)



$m) $m) $m) $m) $m)

Equity



Other Equity 526.2) 550.3) 555.1) 564.0) 591.5)

Total Equity 10 901.5) 11 112.3) 11 441.1) 12 014.5) 12 669.8)

NET WORTH 1 10 901.5) 11 112.3) 11 441.1) 12 014.5) 12 669.8(

NET FINANCIAL WORTH 2 (7 408.1) (8 132.7) (8 675.1) (8 654.7) (8 439.0)

NET FINANCIAL LIABILITIES 3 7 574.0) 8 294.3) 8 849.4) 8 859.7) 8 680.2(

NET DEBT 4 1 298.5) 1 967.6) 2 550.1) 2 583.0) 2 423.6(

Notes: 1. Net Worth represents total assets (both financial and non-financial) minus total liabilities. 2. Net Financial Worth represents total financial assets less total liabilities. 3. Net Financial Liabilities represents total liabilities less financial assets, excluding equity investment in the PFC

Sector. 4. Net Debt represents borrowings less the sum of cash and deposits and investments.


Table A1.9: Total Non-Financial Public Sector Cash Flow Statement 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)


Cash Receipts from Operating Activities Grants Received 2 664.3) 2 759.1) 2 677.1) 2 719.6) 2 774.7)

Taxation 760.9) 773.9) 783.6) 813.7) 846.5)

Sales of Goods and Services 2 102.6) 2 422.1) 2 474.0) 2 615.4) 2 695.3)




Other Receipts 377.2) 392.0) 390.5) 423.6) 416.9)

6 133.2) 6 470.4) 6 448.8) 6 685.7) 6 846.9)


Superannuation (285.3) (302.2) (317.7) (331.0) (344.6)

Supplies and Consumables (1 803.5) (2 003.3) (1 984.1) (2 037.8) (2 063.3)

Borrowing Costs (151.0) (149.4) (157.3) (163.3) (159.8)


Other Payments (483.9) (467.5) (419.3) (427.4) (433.4)

(5 532.7) (5 837.1) (5 753.3) (5 887.7) (5 971.2) Net Cash Flows from Operating Activities 600.5) 633.4) 695.5) 798.0) 875.7) Cash flows from Investing Activities

Net Cash Flows from Non-Financial Assets Purchases of Non-Financial Assets (739.4) (1 296.7) (1 196.2) (849.5) (762.5)


(680.5) (1 220.4) (1 150.9) (807.3) (719.1)

Net Cash Flows from Financial Assets (Policy Purposes) (11.8) (25.4) (18.7) 12.0) 21.5)

Net Cash Flows from Financial Assets (Liquidity

Purposes) (240.7) (76.5) (134.7) (27.9) (21.6)

Net Cash Flows from Investing Activities (932.9) (1 322.3) (1 304.3) (823.3) (719.3)


Table A1.9 Total Non-Financial Public Sector Cash Flow Statement (continued)



Net Borrowings 356.0) 139.5) 214.0) 3.0) 7.7)

356.0( 139.5( 214.0( 3.0( 7.7( Net Increase/(Decrease) in Cash Held 23.6) (549.5) (394.8) (22.3) 164.1) Cash at Beginning of the Year 1 389.0) 1 412.6) 863.1) 468.3) 446.0)Cash at End of the Year 1 412.6) 863.1) 468.3) 446.0) 610.1) KEY FISCAL AGGREGATES Net Cash Flows from Operating Activities 600.5) 633.4) 695.5) 798.0) 875.7)

Plus Net Cash Flows from Non-Financial Assets (680.5) (1 220.4) (1 150.9) (807.3) (719.1)

Equals CASH SURPLUS/(DEFICIT) (80.0) (587.1) (455.4) (9.4) 156.6)


Table A1.10: Public Financial Corporations Sector Income Statement 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)


Sales of Goods and Services 1.5( 1.5( 1.5( 1.6( 1.6(

Interest Income 619.0( 552.3( 563.2( 547.7( 559.2(

Other Revenue 123.6( 128.6( 134.3( 142.5( 151.3(

744.1( 682.4( 699.1( 691.8( 712.0( Less Expenses from Transactions

Employee Expenses 2.4( 2.5( 2.6( 2.7( 3.0(

Superannuation 0.4( 0.4( 0.4( 0.5( 0.5(

Depreciation 0.4( 0.4( 0.4( 0.4( 0.4(

Supplies and Consumables 126.8( 153.9( 154.2( 168.3( 178.2(

Borrowing Costs 442.9( 470.3( 472.7( 445.9( 450.7(

Dividend and Income Tax Equivalent Expenses 87.2( 29.9( 29.9( 20.6( 16.2(

Other Expenses 0.9( 0.1( 0.1( 0.1( 0.2(

660.8( 657.5( 660.4( 638.4( 649.1(

Equals NET OPERATING BALANCE 83.3( 24.9( 38.7( 53.3( 62.9(


Result

Other Gains/(Losses) 239.0( ....( ....( ....( ....(

239.0( ....( ....( ....( ....(

Equals Operating Result 322.3( 24.9( 38.7( 53.3( 62.9(

Plus Other Economic Flows - Other Movements in

Equity

Other Flows (447.4) (29.2) (26.0) (22.7) (26.6)

(447.4) (29.2) (26.0) (22.7) (26.6)

Equals Comprehensive Result (125.1) (4.4) 12.7( 30.6( 36.3(


Table A1.10 Public Financial Corporations Sector Income Statement (continued)


$m) $m) $m) $m) $m) KEY FISCAL AGGREGATES NET OPERATING BALANCE 83.3( 24.9( 38.7( 53.3( 62.9( Less Net Acquisition of Non-Financial Assets

Purchase of Non-Financial Assets 0.2( 0.3( 0.2( 0.2( 0.2(



(0.3) (0.2) (0.3) (0.3) (0.3)

Equals FISCAL BALANCE 83.5( 25.1( 39.0( 53.6( 63.2(


Table A1.11: Public Financial Corporations Sector Balance Sheet as at 30 June



Financial Assets Cash and Deposits 1.0( 0.2( 0.2( 0.2( 0.2(

Investments 6 758.9( 6 980.7( 7 051.8( 6 766.4( 6 930.9(

Equity Investments 550.0( 550.0( 550.0( 550.0( 550.0(

Receivables 16.8( 16.9( 17.1( 18.6( 18.7(

Other Financial Assets 191.9( 84.7( 87.2( 86.5( 87.3(

7 518.6( 7 632.6( 7 706.3( 7 421.7( 7 587.1( Non-Financial Assets


0.8( 0.8( 0.8( 0.8( 0.8( Total Assets 7 519.3( 7 633.3( 7 707.0( 7 422.5( 7 587.9( Liabilities

Borrowing 6 517.8( 6 581.0( 6 562.1( 6 161.8( 6 201.3(

Superannuation 2.5( 2.6( 2.7( 2.7( 2.8(


Payables 2.2( 2.3( 2.3( 2.3( 2.3(

Other Liabilities 830.5( 885.5( 965.4( 1 050.4( 1 139.9(


NET ASSETS 165.9( 161.6( 174.3( 204.9( 241.3(

Equity

Accumulated Funds 155.9( 151.6( 164.3( 194.9( 231.3(

Other Equity 10.0( 10.0( 10.0( 10.0( 10.0(

Total Equity 165.9( 161.6( 174.3( 204.9( 241.3(


Table A1.11 Public Financial Corporations Sector Balance Sheet as at 30 June (continued)


$m) $m) $m) $m) $m) NET WORTH 1 165.9( 161.6( 174.3( 204.9( 241.3( NET FINANCIAL WORTH 2 165.2( 160.8( 173.6( 204.2( 240.5( NET FINANCIAL LIABILITIES 3 (165.2) (160.8) (173.6) (204.2) (240.5) NET DEBT 4 (242.1) (399.9) (489.9) (604.8) (729.8) Notes: 1. Net Worth represents total assets (both financial and non-financial) minus total liabilities. 2. Net Financial Worth represents total financial assets minus total liabilities. 3. Net Financial Liabilities represents total liabilities less financial assets. For the PFC Sector this is equivalent to



Table A1.12: Public Financial Corporations Sector Cash Flow Statement

2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate) $m) $m) $m $m $m Cash Flows from Operating Activities

Cash Received from Operating Activities Sales of Goods and Services 138.2( 144.3( 153.1( 162.4( 172.3(


701.6( 665.0( 679.2( 667.4( 685.4(

Cash Payments from Operating Activities Employee Entitlements (2.4) (2.5) (2.6) (2.7) (2.7)

Borrowing Costs (442.9) (470.3) (472.7) (445.9) (450.7)

Other Payments (99.4) (99.2) (106.7) (116.7) (127.5)

(544.7) (572.0) (582.0) (565.3) (580.9)

Net Cash Flows from Operating Activities 156.8( 93.1( 97.2( 102.1( 104.4( Cash Flows from Investing Activities



(0.1) (0.2) (0.1) (0.1) (0.1) Net Cash Flows from Financial Assets (Liquidity

Purposes) (258.1) (63.8) (67.1) (81.3) (88.1)

Net Cash Flows from Investing Activities (258.2) (63.9) (67.3) (81.5) (88.2) Net Cash Flows from Financing Activities

Dividends and Tax Equivalents Paid (87.2) (29.9) (29.9) (20.6) (16.2)

(87.2) (29.9) (29.9) (20.6) (16.2) Net Increase/(Decrease) in Cash Held (188.5) (0.8) ....( ....( ....( Cash at Beginning of the Year 189.5) 1.0) 0.2) 0.2) 0.2)Cash at End of the Year 1.0) 0.2) 0.2) 0.2) 0.2)


Table A1.12 Public Financial Corporations Sector Cash Flow Statement (continued)

2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate) $m) $m) $m) $m) $m)KEY FISCAL AGGREGATES Net Cash Flows from Operating Activities 156.8( 93.1( 97.2( 102.1( 104.4(


Plus Dividends and Tax Equivalents Paid (87.2) (29.9) (29.9) (20.6) (16.2)

Equals CASH SURPLUS/(DEFICIT) 69.6( 63.0( 67.1( 81.3( 88.1(


Table A1.13: Total State Sector Income Statement 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)


Grants 2 664.2( 2 759.0( 2 677.0( 2 719.6( 2 774.7(

Taxation 772.0( 773.9( 783.5( 813.5( 846.3(


Fines and Regulatory Fees 61.7( 64.1( 67.1( 68.8( 66.3(

Interest Income 420.6( 353.3( 358.3( 347.5( 358.6(

Other Revenue 258.2( 251.8( 266.9( 305.0( 304.8(

6 283.0( 6 478.2( 6 471.3( 6 745.5( 6 925.0( Less Expenses from Transactions

Employee Expenses 2 100.6( 2 167.3( 2 191.3( 2 249.8( 2 293.9(

Superannuation 253.4( 253.6( 240.8( 238.7( 233.1(

Depreciation 474.4( 495.9( 524.3( 541.6( 558.5(

Supplies and Consumables 2 172.6( 2 211.0( 2 172.4( 2 249.0( 2 292.3(

Nominal Superannuation Interest Expense 195.7( 202.6( 209.2( 215.0( 220.4(

Borrowing Costs 316.8( 388.4( 396.2( 383.1( 376.6(

Grant Expenses 717.2( 733.1( 696.3( 689.9( 689.0(

Other Expenses 49.0( 43.7( 35.6( 31.2( 31.9(

6 279.6( 6 495.6( 6 466.1( 6 598.2( 6 695.7( ( ( ( ( (

Equals NET OPERATING BALANCE 3.3( (17.4) 5.1( 147.3( 229.2(


Result

Gain/(Loss) on Sale of Non-Financial Assets 5.9( (4.3) 3.4( 4.8( 5.1(

Movement in Superannuation Liability (477.9) ....( ....( ....( ....(

Other Gains/(Losses) 68.9( (27.4) 61.8( 109.6( 120.2(

(403.1) (31.8) 65.2( 114.3( 125.3(

Equals Operating Result (399.8) (49.2) 70.3( 261.6( 354.5(

Plus Other Economic Flows - Other Movements in

Equity

Revaluations of Non-Financial Assets 323.8( 259.0( 268.3( 298.8( 301.3(

Other Flows (404.3) 0.8( (10.0) 12.9( (0.4)

(80.5) 259.9( 258.3( 311.7( 300.9(

Equals Comprehensive Result (480.2) 210.8( 328.8( 573.4( 655.4(


Table A1.13 Total State Sector Income Statement (continued) 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)

$m) $m) $m) $m) $m) KEY FISCAL AGGREGATES NET OPERATING BALANCE 3.3( (17.4) 5.1( 147.3( 229.2( Less Net Acquisition of Non-Financial Assets

Purchase of Non-Financial Assets 740.0( 1 297.2( 1 196.6( 850.0( 763.0(



202.4) 720.8) 625.3) 266.2) 161.0)

Equals FISCAL BALANCE (199.0) (738.2) (620.1) (118.9) 68.2(


Table A1.14: Total State Sector Balance Sheet as at 30 June 2009) 2010) 2011) 2012) 2013)



$m) $m) $m) $m) $m)

Assets

Financial Assets

Cash and Deposits 151.0( 152.6( 148.8( 154.2( 152.8(

Investments 4 368.6( 4 522.7( 4 580.5( 4 388.7( 4 495.0(

Other Equity Investments 1 067.7( 1 121.0( 1 213.8( 1 235.2( 1 235.2(

Receivables 460.3( 479.4( 514.1( 536.9( 554.5(

Other Financial Assets 1 390.6( 1 273.1( 1 238.7( 1 223.9( 1 245.5(

7 438.2( 7 548.8( 7 695.9( 7 538.9( 7 683.1(


Land and Buildings 5 653.4( 6 118.2( 6 468.9( 6 646.5( 6 785.4(

Infrastructure 11 658.2( 12 110.5( 12 605.1( 12 971.1( 13 265.5(


Heritage and Cultural Assets 443.5( 454.2( 465.0( 475.6( 486.7(

Investment Property 11.1( 11.1( 11.1( 11.1( 11.1(

Assets Held for Sale 26.1( 24.3( 21.9( 19.1( 16.5(

Intangibles 15.9( 9.7( 8.0( 7.9( 7.9(

Other Non-Financial Assets 95.1( 100.9( 98.4( 100.3( 101.4(

18 310.3( 19 245.8( 20 116.9( 20 670.0( 21 109.6(

Total Assets 25 748.6( 26 794.6( 27 812.8( 28 208.9( 28 792.6(

Liabilities

Borrowings 5 576.0( 6 243.0( 6 789.6( 6 521.0( 6 341.6(

Superannuation 4 868.0( 5 023.4( 5 157.0( 5 281.7( 5 387.7(


Payables 408.2( 403.0( 429.2( 421.0( 433.4(

Other Liabilities 3 489.3( 3 496.6( 3 447.4( 3 391.6( 3 352.8(


NET ASSETS 10 901.5( 11 112.3( 11 441.1( 12 014.5( 12 669.8(


Table A1.14: Total State Sector Balance Sheet as at 30 June (continued)

2009) 2010) 2011) 2012) 2013)



$m) $m) $m) $m) $m)

Equity

Accumulated Funds 4 895.9( 4 823.6( 4 879.1( 5 144.9( 5 471.4(

Asset Revaluation Reserve 5 479.5( 5 738.5( 6 006.8( 6 305.6( 6 606.9(

Other Equity 526.2( 550.3( 555.1( 564.0( 591.5(

Total Equity 10 901.5( 11 112.3( 11 441.1( 12 014.5( 12 669.8(

NET WORTH 1 10 901.5( 11 112.3( 11 441.1( 12 014.5( 12 669.8(

NET FINANCIAL WORTH 2 (7 408.8) (8 133.4) (8 675.9) (8 655.5) (8 439.7)

NET FINANCIAL LIABILITIES 3 7 408.8( 8 133.4( 8 675.9( 8 655.5( 8 439.7(

NET DEBT 4 1 056.4( 1 567.7( 2 060.2( 1 978.2( 1 693.8(

Notes: 1. Net Worth represents total assets (both financial and non-financial) minus total liabilities. 2. Net Financial Worth represents total financial assets minus total liabilities. 3. Net Financial Liabilities represents total liabilities less financial assets. For the Total State Sector this is equivalent to



Table A1.15: Total State Sector Cash Flow Statement 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)


Cash Receipts from Operating Activities Grants Received 2 664.3( 2 759.1( 2 677.1( 2 719.6( 2 774.7(

Taxation 760.8( 773.9( 783.5( 813.5( 846.3(


Fines and Regulatory Fees 61.5( 58.1( 61.1( 62.8( 60.3(


Other Receipts 377.2( 392.0( 390.5( 423.6( 416.9(

6 483.9( 6 878.8( 6 870.0( 7 113.6( 7 290.9(


Superannuation (285.3) (302.2) (317.7) (331.0) (344.6)

Supplies and Consumables (1 797.1) (1 999.2) (1 979.6) (2 033.1) (2 058.3)

Borrowing Costs (336.7) (397.2) (406.6) (395.2) (390.5)


Other Payments (583.3) (566.7) (526.0) (544.1) (561.0)

(5 813.7) (6 182.3) (6 107.2) (6 234.2) (6 327.0)

Net Cash Flows from Operating Activities 670.1( 696.5( 762.8( 879.4( 963.9( Cash flows from Investing Activities

Net Cash Flows from Non-Financial Assets Purchases of Non-Financial Assets (739.6) (1 296.9) (1 196.4) (849.7) (762.7)


(680.5) (1 220.6) (1 151.0) (807.5) (719.2)

Net Cash Flows from Financial Assets (Policy Purposes) (11.8) (25.4) (18.7) 12.0( 21.5(

Net Cash Flows from Financial Assets (Liquidity

Purposes) (498.8) (140.3) (201.9) (109.3) (109.8)

Net Cash Flows from Investing Activities (1 191.1) (1 386.3) (1 371.6) (904.8) (807.5)


Table A1.15 Total State Sector Cash Flow Statement (continued) 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)


Net Borrowings 325.9( 691.4( 605.0( 30.7( (157.8)

325.9( 691.4( 605.0( 30.7( (157.8) Net Increase/(Decrease) in Cash Held (195.0) 1.6) (3.8) 5.4) (1.4) Cash at Beginning of the Year 346.0) 151.0) 152.6) 148.8) 154.2)Cash at End of the Year 151.0) 152.6) 148.8) 154.2) 152.8) KEY FISCAL AGGREGATES Net Cash Flows from Operating Activities 670.1( 696.5( 762.8( 879.4( 963.9(

Plus Net Cash Flows from Non-Financial Assets (680.5) (1 220.6) (1 151.0) (807.5) (719.2)

Equals CASH SURPLUS/(DEFICIT) (10.4) (524.1) (388.2) 72.0( 244.7(


Table A1.16: General Government Expenses from Transactions by Purpose


$m) $m) $m) $m) $m) General Public Services 160.7 218.7 191.3 169.8 151.4

Public Order and Safety 390.0 377.9 384.0 388.3 397.3

Education 1 083.8 1 151.3 1 165.9 1 182.3 1 195.0

Health 1 154.5 1 169.7 1 166.8 1 190.8 1 200.5

Social Security and Welfare 294.9 305.4 306.2 314.6 320.1

Housing and Community Amenities 243.4 223.6 210.5 221.0 222.5

Recreation and Culture 135.8 156.5 148.0 144.9 144.7

Fuel and Energy 1.9 1.8 1.9 1.9 1.9

Agriculture, Forestry, Fishing and Hunting 121.0 90.3 64.4 64.7 65.4

Mining and Mineral Resources other than Fuels,

Manufacturing and Construction 7.0 6.4 5.9 6.2 6.3

Transport and Communications 208.0 209.7 211.4 217.0 221.9

Other Economic Affairs 174.8 150.4 130.1 113.5 113.3

Nominal Interest on Superannuation 195.7 202.6 209.2 215.0 220.4

Other Purposes 70.4 68.6 71.1 73.8 75.1

4 241.8 4 332.9 4 266.7 4 303.8 4 335.8

Table A1.16 presents General Government Expenses from Transactions classified by purpose. This is done in accordance with the Government Purpose Classification (GPC) which is based on the Australian Bureau of Statistics classifications used as part of the Government Finance Statistics reporting framework. The GPC provides a standard framework to allocate Government expenditure according to functions. Disclosure of this information can assist users in identifying the resources committed to particular functions and the costs of service delivery that are reliably attributable to those functions.


Table A1.17: General Government Taxation Revenue 2008-09) 2009-10) 2010-11) 2011-12) 2012-13) Estimated) Forward) Forward) Forward) Outcome) Budget) Estimate) Estimate) Estimate)

$m) $m) $m) $m) $m) Employers' Payroll Taxes 265.8( 257.0( 252.4( 267.0( 282.8( Taxes on Property

Land Tax 74.8( 90.0( 90.0( 92.2( 94.5(

Fire Service Levies 42.8( 45.0( 46.9( 48.7( 50.6(

Government Guarantee Fees 9.2( 20.1( 29.6( 39.1( 50.9(

Taxes on Financial and Capital Transactions 145.1( 133.8( 139.1( 144.7( 150.5(

271.9( 288.8( 305.7( 324.8( 346.4( Taxes on the Provision of Goods and Services

Taxes on Gambling Casino Taxes 61.3( 58.5( 59.8( 61.2( 62.7(

Other Gambling Taxes 31.4( 37.0( 38.1( 39.2( 40.3(

Total Taxes on Gambling 92.7( 95.5( 97.9( 100.3( 103.0(

Taxes on Insurance 42.4( 44.1( 45.9( 47.8( 49.8(

135.1( 139.6( 143.8( 148.1( 152.9( Taxes on Use of Goods and Performance of

Activities

Motor Vehicle Fees and Taxes 125.4( 124.5( 128.2( 131.9( 135.4(

125.4( 124.5( 128.2( 131.9( 135.4(

TOTAL TAXATION REVENUE 798.2( 810.0( 830.1( 871.8( 917.6(


TREND IN FISCAL MEASURES Fiscal Balance Chart A1.1 illustrates the Fiscal Balance for the General Government, PNFC, Total Non-Financial Public Sector, PFC and Total State Sectors from 2003-04 to 2012-13.

Chart A1.1 shows that the General Government Sector maintained a Fiscal Surplus position from 2003-04 to 2005-06 and in 2007-08. Fiscal Deficits are forecast from 2008-09 to 2011-12, with a return to a Fiscal Surplus forecast in 2012-13. Further information on the budgeted Fiscal Balance for 2009-10 is provided in Chapter 4 Revenue and Expense Estimates. In response to the Global Financial Crisis, the Government has established an Interim Fiscal Strategy. Further information on the Interim Fiscal Strategy is provided in Chapter 3 Fiscal Strategy.

The PNFC Sector recorded Fiscal Deficits from 2003-04 to 2005-06 and is estimated to record a Fiscal Deficit of $193.7 million in 2009-10, a decrease of $31 million from the 2008-09 estimated Fiscal Deficit of $162.7 million. After 2009-10, the trend indicates a steady improvement with an estimated Fiscal Deficit of $28.0 million in 2012-13. Despite recording Fiscal Deficits, the Net Operating Balance for the PNFC Sector is in a surplus position for the Budget and Forward estimates. A Net Operating Surplus indicates that the Sector has sufficient revenue to fund its operations and contribute to an increase in its asset base.

The Government announced its intention to sell TOTE Tasmania on 8 January 2009. Accordingly, estimates for TOTE Tasmania have not been included in the Budget and Forward Estimates for the PNFC Sector. Given that a sale process is underway, estimated sale proceeds have not been included within the Estimates.

The PFC Sector is estimated to record a Fiscal Surplus of $25.1 million in 2009-10, a decrease of $58.4 million from the 2008-09 estimated Fiscal Surplus of $83.5 million. The decrease reflects expected reductions in revenue arising from the impact of the GFC. After 2009-10, the trend indicates a steady improvement with an estimated Fiscal Surplus of $63.2 million in 2012-13.

The Total State Sector is estimated to record a Fiscal Deficit of $738.2 million in 2009-10, a decrease of $539.2 million from the estimated 2008-09 Fiscal Deficit of $199 million.


Chart A1.1: Fiscal Balance, 2003-04 to 2012-13

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2003

-04

2004

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$ m

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General Government Public Non-Financial CorporationsPublic Financial Corporations Total State


Net Debt Chart A1.2 shows Net Debt from 2004 to the estimated Net Debt outcomes for 2013.

Net Debt for the Total State Sector is estimated to be $1 567.7 million as at 30 June 2010. This is a decrease of $511.3 million from the 2008-09 revised estimate of $1 056.4 million. This reflects a deterioration in estimated General Government Sector Net Debt of $461.0 million in 2009-10, an increase in the PNFC Sector Net Debt of $208.2 million and an offsetting improvement in PFC Net Debt of $157.8 million. Net Debt for the Total State Sector is forecast to reduce from 30 June 2011.

Chart A1.2: Net Debt as at 30 June 2004 to 2013

-1 500

-1 000

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500

1 000

1 500

2 000

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2004

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General Government Public Non-Financial CorporationsPublic Financial Corporations Total State Sector


Cash Surplus/(Deficit) Chart A1.3 shows the Cash Surplus/(Deficit) from 2003-04 to 2012-13.

The 2009-10 Cash Surplus/(Deficit) for the Total State Sector is estimated to be a deficit of $524.1 million, a decrease of $513.7 million from the 2008-09 estimated Cash Deficit of $10.4 million.

The Cash Deficit is forecasted to improve from 2010-11 and return to a Cash Surplus from 2011-12.

Chart A1.3: Cash Surplus/(Deficit), 2003-04 to 2012-13

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2003

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General Government Public Non-Financial CorporationsPublic Financial Corporations Total State


LOAN COUNCIL ALLOCATION Under Loan Council arrangements, every year the Australian Government and each State and Territory nominate a Loan Council Allocation (LCA). A jurisdiction's LCA incorporates:

• the estimated Cash Deficit/(Surplus) of the General Government and Public Non-Financial Corporations Sectors;

• net cash flows from investments in financial assets for policy purposes; and

• Memorandum Items, which are other financing transactions that are treated as borrowing equivalents for Loan Council purposes.

The Loan Council evaluates LCA nominations by referring to each jurisdiction's fiscal position and the macro-economic implications of the aggregate figure.

Table A1.18 compares Tasmania's 2009-10 LCA approved by the Loan Council in March 2009, with the revised LCA based on 2009-10 Budget estimates.

Table A1.18: Loan Council Allocation 2009-10 2009-10) 2009-10) ) Budget) Nomination) Estimate)

$m) $m) General Government Cash Deficit/(Surplus) (51) 429)

Public Non-Financial Corporations Sector Cash Deficit/(Surplus) 76) 158)

Non-Financial Public Sector Cash Deficit/(Surplus) 25) 587) Less Non-Financial Public Sector Net Cash Flows from Investments in Financial Assets for

Policy Purposes (4) (25)

Plus Memorandum Items1 49) 110)

Loan Council Allocation Deficit/(Surplus) 78) 722)

2009-10 Tolerance Limit2 128) 129)

Notes: 1. Memorandum items include borrowings by local government and the University of Tasmania. 2. The Tolerance Limit is equal to two per cent of Total Non-Financial Public Sector cash receipts from operating

activities, and applies from the time that the LCA is approved by the Loan Council until the budgeted LCA is released. The Tolerance Limit will change with each revision to the Budget. The tolerance band recognises that LCAs are nominated at early stages of the Budget process and that estimates are likely to change as a result.

If a jurisdiction is likely to exceed its Tolerance Limit, it must provide an explanation to Loan Council and make that explanation public. The 2009-10 revised Budget estimate is a deficit of $722 million, which exceeds the Tolerance Limit of $129 million estimated for Tasmania at Budget time.


The change of $644 million in the LCA between the 2009-10 nomination and 2009-10 Budget estimate is primarily due to:

• a revision in the General Government Cash Deficit/(Surplus) from a $51 million surplus to a $429 million deficit. The decline reflects the impact of the Global Financial Crisis which has resulted in a downturn in GST revenue, taxation revenue, investment income and returns from Government Businesses;

• a change in the Public Non-Financial Corporation Sector cash position from a $76 million deficit to a $158 million deficit, which is mainly due to increased capital expenditure; and

• an increase in memorandum items from $49 million to $110 million due to an increase in local government borrowings. The borrowings will primarily be used to fund the initial financing, operating and capital costs of the new Water and Sewerage Corporations.

The LCA Outcome for 2008-09 will be presented in the Treasurer's Annual Financial Report 2008-09.
