PARLIAMENT OF TASMANIA 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 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 1.1 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.