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Australian Federal and State Budgets – An Overview

1

1 INTRODUCTION

The global financial crisis has focused attention on public debt. Internationally, the issue has been highlighted by the budget deficit crisis in Greece.1 In Australia, the national government has moved from a position of budget surplus to budget deficit, raising some concerns about the level of sovereign debt.2 The aim of this paper is to present an overview of the budgetary positions of the Australian national and State governments.

2

DEFINING TERMS

In examining the position of government finances in Australia, this briefing paper makes reference to the following key terms:

Budget: A budget, according to Don Nicholls (former assistant secretary of the NSW Treasury), is a “financial plan generally limited to the inner budget of the public sector. . .[which] consists of estimates. . .[and] refers to a specific period of time usually 12 months.” 3

Net Operating Balance [Surplus/Deficit]: Since the International Monetary Fund (IMF) first produced its Manual on Government Finance Statistics (GFS)4, governments around the world have gradually adopted the IMF’s terms for components of government budgets. The aim of the IMF approach was to put the presentation of budgets on a more commercial basis. The GFS system is based on accrual accounting. As the Australian Treasury explained, “The principal difference between the accrual-based. . .balance and the cash balance is. . . accrual [accounting] captures forward commitments. . . [whereas] cash-based accounting captures payments and receipts as they occur.” 5

The term Net operating balance is now used rather than surplus or deficit and measures, according to the Senate Select Committee on State Government Financial Management, “the difference between actual GFS recurrent revenue and expenses”. 6

1

See Philip Pangalos, “Crisis Meeting as Greek Debt Hits $482 bn” in The Australian, 12 December 2009, p.32.

2

Barnaby Joyce, “Australia Has Partied Hard but now We Face the Debt Hangover” in The Australian, 25 February 2010, p.12.

3

Don Nicholls, Managing State Finance: the New South Wales Experience (NSW Treasury, Sydney, 1991), p.154. The “inner budget” sector, according to Nicholls, includes “all [government] departments and certain statutory authorities.” See ibid., p.313.

4

International Monetary Fund, A Manual on Government Finance Statistics (International Monetary Fund, Washington DC, 1986).

5

Australian Treasury, Budget 2009-10 (Australian Treasury, Canberra, 2009), Budget paper No.3, p.142.

6

Senate Select Committee on State Government Financial Management, Report (Australian Senate, Canberra, 2008), p.16.

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