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Victorian Pre-Election Budget Update

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Victorian Pre-Election Budget Update Victorian Pre ‐ Election Budget Update – November 2010 Victorian Pre‐Election Budget Update Victorian Pre‐Election Budget Update www.dtf.vic.gov.au November 2010 The Secretary Department of Treasury and Finance 1 Treasury Place Melbourne Victoria 3002 Australia Tel: +61 3 9651 5111 Fax: +61 3 9651 5298 Website: www.dtf.vic.gov.au Printed by Stream Solutions, If you would like to receive this Level 3, 157 Spring Street, Melbourne, 3000. publication in an accessible format please telephone 9651 0909 or Published by the Department of Treasury and Finance email [email protected]. © Copyright State of Victoria 2010 This document is available in PDF format at www.dtf.vic.gov.au. This publication is copyright. No part may be reproduced by any process except in accordance with the provisions of the Copyright Act 1968. ISSN 1838‐5982 Published November 2010 Printed on recycled paper. Pre-Election Budget Update A report by the Secretary of the Department of Treasury and Finance November 2010 TABLE OF CONTENTS Foreword .................................................................................................................................. 1 Chapter 1 – Economic conditions and outlook........................................................................ 3 International economic conditions and outlook ....................................................................... 3 Australian economic conditions and outlook............................................................................ 4 Victorian economic conditions and outlook ............................................................................. 4 Risks to the outlook .................................................................................................................... 7 Chapter 2 – Budget position and outlook................................................................................. 9 Budget and forward estimates outlook ................................................................................... 10 Summary balance sheet......................................................................................................... 15 Cashflows ................................................................................................................................ 16 Net debt and net financial liabilities........................................................................................ 18 Fiscal risks................................................................................................................................. 24 Chapter 3 – Estimated financial statements and notes ......................................................... 29 Introduction ............................................................................................................................. 29 Estimated Financial Statements for the Victorian general government sector........................ 30 Notes to the financial statements............................................................................................ 36 Chapter 4 – Contingent assets and contingent liabilities..................................................... 115 Contingent assets.................................................................................................................. 115 Contingent liabilities .............................................................................................................. 116 Appendix A – Specific policy initiatives affecting budget position....................................... 125 Government-wide initiatives .................................................................................................. 125 Departmental Initiatives......................................................................................................... 156 Education and Early Childhood Development...................................................................... 156 Health .................................................................................................................................... 158 Human Services..................................................................................................................... 159 Innovation, Industry and Regional Development .................................................................. 161 Justice ................................................................................................................................... 163 Planning and Community Development .............................................................................. 165 Premier and Cabinet............................................................................................................. 169 Primary Industries ................................................................................................................... 170 Sustainability and Environment .............................................................................................. 171 Transport ................................................................................................................................ 173 Treasury and Finance ............................................................................................................ 175 Parliament ............................................................................................................................. 177 Revenue initiatives ................................................................................................................. 177 Appendix B – Sensitivity analysis table.................................................................................. 179 Introduction ........................................................................................................................... 179 Appendix C – Requirements of the Financial Management Act 1994 ................................. 185 Style conventions.................................................................................................................. 187 i ii FOREWORD This Pre-Election Budget Update is published by the Department of Treasury and Finance in accordance with reporting requirements under Part 5, Division 6 of the Financial Management Act 1994 (FMA). Appendix C, Requirements of the Financial Management Act 1994 details how these requirements have been met. The purpose of this Pre-Election Budget Update is to update information on the general government sector since the publication of the 2010-11 Budget in May 2010. Chapter 1, Economic conditions and outlook, provides an outline of the outlook for the international, Australian and Victorian economies, including risks to this outlook. Chapter 2, Budget position and outlook, provides an overview of the projected budget position for the period 2010-11 to 2013-14 and lists, and where possible quantifies, the fiscal risks which could materially alter these budget projections. Chapter 3, Estimated Financial Statements and Notes, provides the formal financial statements, and underpinning notes and assumptions, required by the FMA and prepared in accordance with applicable Australian Accounting Standards. Chapter 4, Contingent assets and contingent liabilities, outlines quantifiable and non-quantifiable contingent assets and contingent liabilities. Appendix A, Specific policy initiatives affecting budget position, outlines specific output and asset investment policy decisions since the 2010-11 Budget and Appendix B, Sensitivity analysis table, estimates the impact of selected economic and financial variables on income, expenses, the net result from transactions and the net result. This Pre-Election Budget Update is based on government decisions I was aware of on or before the issue of election writs on 2 November 2010. Government decisions are those policy decisions that have been endorsed by Cabinet. Grant Hehir Secretary Department of Treasury and Finance November 2010 Pre-Election Budget Update Foreword 1 2 Foreword Pre-Election Budget Update CHAPTER 1 – ECONOMIC CONDITIONS AND OUTLOOK • Since the 2010-11 Budget, economic growth in emerging Asia has been strong, while the recovery in some advanced economies has slowed. High unemployment continues to drag on growth in the United States (US) and some parts of the Euro area. • Compared with most other advanced economies, the Australian economy has performed well. The economic recovery has gathered momentum, supported by public investment and a sharp recovery in the terms of trade. National employment growth has been strong and the outlook for the labour market remains positive. • Victoria’s gross state product (GSP) is estimated to have grown by 2.5 per cent in 2009-10 and is forecast to grow by 3.5 per cent in 2010-11, before returning to trend growth of 3 per cent in the out-years. Economic growth is expected to be supported by above-trend growth in employment and firm domestic demand. • The economic outlook for Victoria is generally positive, although there are a number of short-term risks. These include a prolonged and uneven global economic recovery, rising inflationary pressures, a high Australian dollar and a high terms of trade. INTERNATIONAL ECONOMIC CONDITIONS AND OUTLOOK The global economic recovery continued in the first half of 2010, largely driven by growth in emerging economies. The International Monetary Fund’s (IMF) October 2010 World Economic Outlook forecast growth in the world economy of 4.8 per cent in 2010, up from 4.6 per cent forecast in July. However, significant downside risks to the outlook
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