2003-04 Budget Statement >>
Budget Paper No.2 Presented by the Honourable John Brumby MP Treasurer of the State of Victoria on the occasion of the Budget 2003-04
Budget Statement 2003-04
Presented by The Honourable John Brumby, M.P. Treasurer of the State of Victoria for the information of Honourable Members
Budget Paper No.2
TABLE OF CONTENTS
2003-04 Budget Highlights ...... 1 Chapter 1: Financial policy objectives and strategies ...... 9 Financial strategy, objectives and priorities ...... 9 Long-term fiscal issues ...... 22 Chapter 2: Budget position and outlook ...... 25 2003-04 Budget initiatives ...... 26 2003-04 Budget estimates and outlook ...... 31 Reconciliation of forward estimates to previously published estimates...... 37 Use of cash resources ...... 41 Chapter 3: Economic conditions and outlook ...... 45 Victorian economic projections ...... 45 Victorian economic conditions and outlook...... 46 World and Australian economic environment ...... 51 Recent economic issues in Victoria ...... 53 Chapter 4: Budget initiatives ...... 61 Growing Victoria Together ...... 62 Valuing and investing in lifelong education ...... 63 High quality accessible health and community services ...... 70 Safe streets, homes and workplaces...... 77 Growing and linking all of Victoria...... 80 More jobs and thriving, innovative industries across Victoria...... 84 Protecting the environment and promoting sustainable development...... 86 Building cohesive communities and reducing inequalities ...... 90 2006 Melbourne Commonwealth Games ...... 94 Government that listens and leads ...... 96 Promoting rights and respecting diversity ...... 97 Sound financial management ...... 98 Chapter 5: Commonwealth-State financial relations...... 101 Impact of national tax changes ...... 101 The need for reform to Commonwealth-State financial relations ...... 105 The 2004 review of State revenue sharing relativities ...... 109 Chapter 6: Balance sheet management and outlook ...... 111 Asset management strategy ...... 112 Liability management strategy ...... 116 Net assets...... 123 Chapter 7: Election commitments – Implementation report card ...... 125
i Table of Contents – continued
Chapter 8: Statement of risks ...... 137 Sensitivity of the budget to economic conditions...... 137 Economic risks ...... 138 Variability of economic indicators ...... 144 Fiscal risks ...... 145 Contingent liabilities ...... 149 Chapter 9: Estimated Financial Statements and Notes ...... 163 Introduction ...... 163 Estimated Financial Statements for the Victorian general government sector ...... 164 Notes to the Estimated Financial Statements...... 167 Department of Treasury and Finance statement in relation to the estimated Financial Statements...... 199 Appendix A: Output, asset investment and revenue initiatives...... 201 Output, savings and asset investment initiatives...... 201 Revenue initiatives ...... 259 Appendix B: Growing Victoria Infrastructure Reserve...... 263 Appendix C: Revised 2002-03 Budget outcome ...... 265 Revised 2002-03 Statement of financial performance...... 265 Revised 2002-03 Cash flow statement...... 272 Revised 2002-03 Statement of financial position ...... 275 Appendix D: Historical and forward estimates tables...... 277 Appendix E: Uniform presentation of Government Finance Statistics ....299 The accrual GFS presentation ...... 299 Institutional sectors...... 300 Appendix F: Tax expenditures...... 319 Appendix G: Growing Victoria Together progress report ...... 325 Introduction ...... 325 Valuing and investing in lifelong education...... 326 High quality, accessible health and community services...... 327 Sound financial management...... 330 Safe streets, homes and workplaces...... 331 Growing and linking all of Victoria ...... 332 Promoting sustainable development ...... 334 More jobs and thriving, innovative industries across Victoria ...... 335 Building cohesive communities and reducing inequalities...... 336 Protecting the environment for future generations ...... 338 Promoting rights and respecting diversity...... 342 Government that listens and leads...... 343 Appendix H: Requirements of the Financial Management Act 1994 ...... 345 Style Conventions...... 347
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2003-04 BUDGET HIGHLIGHTS
Building on Victoria’s strengths • Over the past three years, the Bracks Government has delivered significant improvements to health, education and community safety, and invested heavily in better infrastructure across the State, with an emphasis on improving transport linkages and rebuilding country Victoria. • The 2003-04 Budget delivers the Bracks Government’s 2002 election commitments within an ongoing framework of sound financial management and fiscal responsibility. • Strategic issues of importance for Victoria’s future, as identified in Growing Victoria Together, have guided output, investment and policy choices in this budget. Sound financial management • The Government remains committed to providing a sound and stable financial base to promote growth across the State, deliver improved services and secure Victoria’s long-term economic, social and environmental prosperity. • The 2003-04 Budget demonstrates the Government’s commitment to sound financial management, by delivering: – a substantial general government operating surplus of $245 million in 2003-04, and surpluses averaging $391 million per annum over the following three years; – a fall in general government net financial liabilities (excluding the Growing Victoria infrastructure reserve), as a share of GSP, from 8.6 per cent at June 2002 to 8.0 per cent in June 2007, signifying that the projected modest liability growth from $15.8 billion to $18.9 billion over the same period can be serviced by the growing Victorian economy;
Budget Statement 2003-04 Highlights 1 – continuing low net debt at just over 1 per cent of GSP, compared to 3 per cent of GSP in 1999 and 16 per cent in 1995; – new net output funding of $550 million in 2003-04, and an average of $654 million per annum over the following three years; – a significant ongoing infrastructure spending program, with $1.2 billion total estimated investment (TEI) in 2003-04; and – net infrastructure investment averaging $2.5 billion per annum over the four years to 2006-07, with a record high $2.6 billion in 2004-05. • The Government’s prudent financial management continues to be recognised, with the international ratings agencies Standard and Poor’s and Moody’s Investors Service recently affirming Victoria’s triple-A long-term credit rating. • The 2003-04 Budget also implements initiatives to improve efficiency in delivering services, totalling $141 million in 2003-04, and revenue measures totalling an additional $85 million in 2003-04, rising to $182 million in 2006-07. Victoria’s economy – growth amid uncertainty • The Victorian economy has performed strongly, with growth exceeding the national average by almost one percentage point per annum over the five years to 2001-02. • Despite the drought and a sluggish world economy, Victoria’s domestic demand remains strong, with solid business investment and housing construction. • Victorian employment continued to strengthen in 2002-03, with jobs forecast to grow at a high 2.25 per cent, and the unemployment rate falling to a 13-year low. • Reflecting a subdued global economy, together with the impact of the drought and bushfires, Victoria’s growth is expected to moderate in 2002-03 to 2.75 per cent. • Economic growth is forecast to rebound to 3.75 per cent in 2003-04, on the back of a global recovery and the ending of drought conditions. • Employment is forecast to grow by a further 1.0 per cent in 2003-04, with the unemployment rate anticipated to remain at low levels.
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Valuing and investing in lifelong education • A strong education system is vital to Victoria’s future. The Government is committed to delivering world-class learning environments that promote excellence to all Victorians and support an innovative and competitive economy. • The 2003-04 Budget commits $789 million over four years in output initiatives as well as $137 million TEI in asset investment to: – promote specialisation and excellence in learning, while providing a secure and supportive learning environment. This includes placing an additional 450 teachers in secondary schools and 256 student welfare officers in primary schools; – deliver world-class learning facilities that support excellence and innovation in education throughout the State, with new and upgraded schools across Victoria, and new state-of-the-art facilities and equipment in secondary schools and TAFEs; – refocus training programs to target specific needs in the Victorian workforce and assist young Victorians acquire skills and qualifications. This includes replacing the current payroll tax exemption for wages paid to trainees and apprentices with a new completion bonus scheme in order to promote higher completion levels and ensure the labour market is supplied with a highly skilled workforce; and – support non-government schools in greatest need and improve internet access to enhance innovative education delivery. High quality, accessible health and community services • The 2003-04 Budget continues the Government’s commitment to turning around Victoria’s health system and delivering high quality, accessible health and community services to all Victorians. • The Government, in this budget, is committing an additional $1.9 billion over four years in output initiatives in addition to $357 million TEI in asset investment to: – begin the next phase of the Hospital Demand Management Strategy allocating $464 million of the additional $890 million allocated to this strategy over four years. This will provide an additional 900 nurses and health care staff and treat an extra 35 000 patient admissions per year in public hospitals and 47 000 presentations per year at emergency departments;
Budget Statement 2003-04 Highlights 3 – deliver a more modern, technologically advanced and leading edge hospital environment, including upgrading and integrating ICT systems across public hospital and agencies, and improving radiotherapy facilities and equipment at the Monash Medical Centre and the Alfred and Austin hospitals; and – provide better community health care services to all Victorians, with a focus on senior Victorians, people with disabilities and children. Safe streets, homes and workplaces • The Government is continuing to emphasise crime prevention and community safety to ensure Victoria is the safest State in Australia, and commits $261 million over four years in output initiatives and $106 million TEI in asset investment to: – boost the effectiveness, responsiveness and visibility of Victoria’s police force through more police, additional police stations and improved technology; – strengthen Victoria’s much-needed emergency services including additional firefighters and better equipment; – enhance Victoria’s whole-of-government approach to managing security and emergencies in relation to counter-terrorism, including better equipment and additional resources for emergency services and improved emergency response coordination across government; and – improve safety for all road users, including pedestrians, with a goal to reduce Victoria’s road toll by 20 per cent over the next five years. Growing and linking all of Victoria • The Government is continuing to rebuild the State’s infrastructure, with a focus on delivering a more efficient, reliable and modern statewide transport system. • The 2003-04 Budget commits $278 million over four years in output initiatives and $273 million TEI in asset investment to: – improve links between Melbourne and all parts of Victoria, including bypasses around two country towns; – improve investment and industry development in regional Victoria, and provide better transport linkages, through renewing the $180 million Regional Infrastructure Development Fund;
4 Highlights Budget Statement 2003-04
– upgrade Melbourne’s suburban transport systems, particularly in the growth corridors, including constructing the Pakenham Bypass and Mitcham-Frankston Freeway, improving outer-metropolitan arterial roads, and enhancing Melbourne’s rail system; and – develop Victoria’s major ports to provide critical linkages with national and global economies. More jobs and thriving, innovative industries across Victoria • The Government is committed to building the foundations for a strong, thriving and innovative Victoria, which is creating more high-paid, high-skilled jobs for Victorians in sustainable and internationally competitive industries. • The Government, in this budget, commits $60 million over four years in output initiatives to: – assist Victorian businesses throughout the State and promote the growth of the tourism industry, with an emphasis on regional Victoria; and – improve the skills base for industry and business in regional areas through developing local strategic plans to identify and address skills shortages. • In addition, the Government announced funding of $310 million in October 2002 for a range of programs under the Innovation Statement: Victorians. Bright Ideas. Brilliant Future, including enhancing innovation in Victorian businesses, opening up new opportunities in regional industries, and boosting Victoria’s research and development infrastructure through continuing the Government’s competitive grants program. Protecting the environment and promoting sustainable development • The Government continues to position Victoria as a world leader in environmental sustainability through protecting Victoria’s natural heritage and making sure we use our natural resources wisely and sustainably. • The 2003-04 Budget commits $208 million over four years in output initiatives and $121 million TEI for asset investment to: – improve conservation of the State’s precious water resources, with a focus on upgrading irrigation systems and water supply in regional Victoria, enhancing the ecological health of Victoria’s rivers, and providing incentives to encourage water savings in the community;
Budget Statement 2003-04 Highlights 5 – better protect Victoria’s Otway Ranges, including creating a single national park extending from Anglesea to Cape Otway; – ensure national parks throughout the State are well maintained, with additional park rangers; – improve energy efficiency in government and the wider community; and – support community recovery and help restore the natural environment in bushfire affected areas. • As announced in the 2002-03 Budget Update, assistance is also provided to drought-affected farmers through a range of initiatives. Building cohesive communities and reducing inequalities • The Government is committing $316 million over four years in output initiatives to help support families, create job opportunities, and improve access to government and community services. This budget implements a range of initiatives to: – provide a number of new or retargeted employment programs to assist the long-term unemployed, young people, and other disadvantaged groups back into work or training; – make sport, recreation and the arts more accessible to the wider Victorian community, with a focus on providing new and upgraded sporting and community facilities across the State, and boosting arts programs; and – revitalise Melbourne’s middle and outer suburbs, develop eight new Transit Cities in metropolitan and regional centres, and continue to protect Victoria’s public heritage assets. Preparing for the 2006 Commonwealth Games • As part of preparing for the 2006 Melbourne Commonwealth Games, the 2003-04 Budget commits $56 million TEI in asset investment to: – upgrade key infrastructure, particularly transport, in the Yarra precinct; – construct a temporary athletics track at the MCG; and – build and upgrade major sporting facilities in Melbourne. Government that listens and leads • The Government, in the 2003-04 Budget, continues to provide strong leadership in its ICT uptake and modernisation of public and community service delivery, and implements a range of initiatives to:
6 Highlights Budget Statement 2003-04
– provide a modern, technically advanced and leading edge hospital environment through the Health ICT Strategy; – establish a Chief Information Officer to monitor and coordinate ICT investment as part of an eGovernment Implementation Plan; – introduce a new information management system for Victoria Police to link police IT systems; and – implement the Gateway initiative to achieve better capital investment outcomes across the Victorian budget sector through better management of high-risk projects. Promoting rights and respecting diversity • The Government is committed to promoting diversity, trust and tolerance within Victoria. • The 2003-04 Budget continues to increase grants funding to the Victorian Multicultural Commission to provide crucial support to the State’s culturally and linguistically diverse communities. In addition, this budget is providing new Koori maternity services. • The Government is also improving legal aid services to give all Victorians greater access to justice.
Budget Statement 2003-04 Highlights 7
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CHAPTER 1: FINANCIAL POLICY OBJECTIVES AND STRATEGIES
• The Government is committed to maintaining an operating surplus of at least $100 million in each year. The budget projections show that this target will be achieved over the budget and forward estimates period. • The Government is committed to delivering world-class infrastructure to enhance social, economic and environmental outcomes across the State. In line with this goal, the general government capital stock is projected to grow by 10.7 per cent in real terms over the four years to June 2007, more than double the projected population growth of 3.9 per cent. • The Government will improve quality, access and equity in service delivery to all Victorians through the implementation of its 2002 election commitments. • The Government is committed to providing a fair and efficient tax system to Victorian businesses and households that is competitive with other States. After allowing for known future tax policy changes in all States, Victoria’s taxes are set to be around the Australian average. • The Government will maintain state government net financial liabilities and net debt at prudent levels and retain Victoria’s triple-A credit rating.
FINANCIAL STRATEGY, OBJECTIVES AND PRIORITIES This chapter sets out the Government’s financial policy objectives and strategies as required by the Financial Management (Financial Responsibility) Act 2000. The Act includes a set of sound financial management principles. These are to:
• manage financial risks faced by the State prudently, having regard to economic circumstances;
• pursue spending and taxation policies that are consistent with a reasonable degree of stability and predictability in the level of the tax burden;
• maintain the integrity of the Victorian tax system;
Budget Statement 2003-04 Chapter 1 9 • ensure that government policy decisions have regard to their financial effects on future generations; and
• provide full, accurate and timely disclosure of financial information relating to the activities of the Government and its agencies. These financial management principles underpin the Government’s financial policy objectives and strategies. Since the 2002-03 Budget, the Government’s financial strategy, objectives and priorities have been modified to reflect its election policy statement Delivering Financial Responsibility. The broad strategic priority remains to provide a sound and stable financial basis from which growth can be promoted across the whole State. The Government will deliver world-class infrastructure to drive economic growth, and to improve quality, access and equity in key services to all Victorians, while maintaining a sound financial position. The Government’s financial responsibility legislation requires a statement of its short and long-term financial objectives in each budget. It is a key element supporting the financial management principle of providing full, accurate and timely disclosure of financial information relating to the activities of the Government and its agencies. The Government’s short and long-term financial objectives, as shown in Table 1.1, are consistent with Growing Victoria Together, which outlines the Government’s vision for balancing economic, social and environmental priorities in Victoria over the next decade.
Table 1.1: 2003-04 Financial objectives
Long-term Short-term Maintain a substantial budget operating Operating surplus of at least $100 million in surplus each year Deliver world-class infrastructure to maximise Implement strategic infrastructure projects, economic, social and environmental benefits including those funded from the Growing Victoria infrastructure reserve Provide improved service delivery to all Implement 2002 election commitments Victorians Provide a fair and efficient tax system that is Implement reforms to Victoria’s business competitive with other States taxation system Maintain state government net financial Maintain a triple-A credit rating liabilities at prudent levels
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Operating surplus The Government’s long-term objective remains to deliver a substantial budget operating surplus. In the short term, its objective is to maintain an operating surplus of at least $100 million in each year. This is the Government’s key financial measure. As shown in Chart 1.1, the outlook for the general government operating surplus is consistent with the Government’s short-term objective. Following an estimated surplus of $160 million in 2002-03, the operating surplus is forecast to be $245 million in 2003-04 and to average $391 million in the following three years. Given the continued uncertainties in the world economy (see Chapter 3, Economic Conditions and Outlook), the Government is maintaining a sufficient buffer above the $100 million minimum operating surplus target.
Chart 1.1: General government operating surplus (a)
750
500 $ million
250
0 2002-03 2003-04 2004-05 2005-06 2006-07
2003-04 Budget $100m minimum target
Source: Department of Treasury and Finance Note: (a) The general government sector operating surplus is equivalent to the ‘net result’ in the statement of financial performance in Chapter 9, Estimated Financial Statements and Notes.
The operating surplus objective and buffer accord with the financial management principle of pursuing expenditure and taxation policies that allow reasonable stability and predictability in tax burden levels. Thus, Victorians can have confidence that tax rates and the level of service delivery will not need to be adjusted markedly and unexpectedly at some future date to protect the State’s financial position.
Budget Statement 2003-04 Chapter 1 11 Application of the surplus Table 1.2 shows that the operating surplus, in addition to the Growing Victoria infrastructure reserve, is an important funding source for the Government’s strong capital investment program. In 2003-04, the net infrastructure investment of $2 594 million is funded from depreciation and other non-cash expenses ($1 723 million), as well as from the operating surplus ($245 million) and a drawdown in the Growing Victoria infrastructure reserve of $653 million. As a result there is little change in net debt (excluding Growing Victoria) in 2003-04. However, reflecting the continuing substantial size of the infrastructure program, net debt (excluding Growing Victoria) rises modestly over the forward estimates period.
Table 1.2: Application of cash resources ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Revised Budget Estimate Estimate Estimate Operating surplus 160 245 321 304 547 Plus: Depreciation expense 962 1 025 1 094 1 145 1 206 Plus: Other non-cash expenses (net) (a) 550 698 938 712 425 Plus: Net drawdown from Growing 648 653 57 5 .. Victoria infrastructure reserve Cash available for asset investment 2 320 2 620 2 410 2 166 2 178 Less: Net investment in fixed assets (b) 2 225 2 594 2 628 2 201 2 402 Less: Other investment activities (net) (c) - 4 - 6 - 4 444 11 Reduction in net debt excluding 100 32 - 214 - 479 - 235 Growing Victoria (d) Source: Department of Treasury and Finance Notes: (a) Includes increase in unfunded superannuation liability and increase in liability for employee entitlements. (b) Includes net contribution to other sectors of government. (c) The increase in 2005-06 reflects the statement of financial position impact flowing from the completion and handover to the State of the Spencer Street Station redevelopment project. (d) Growing Victoria investments are excluded as an offset to gross debt on the grounds that these investments are earmarked for infrastructure projects and are therefore not available to redeem gross debt.
Alternative measures of operating performance The Government currently headlines the operating surplus derived from the Australian Accounting Standard (AAS 31). An alternative presentation of the operating result, in addition to other measures of financial performance, is published under the Government Finance Statistics (GFS) framework used by the
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Australian Bureau of Statistics (see Appendix E, Uniform Reporting of Government Finance Statistics). Table 1.3 highlights these alternative GFS measures of financial performance in addition to the AAS 31 headline operating result. The GFS operating balance, as a measure of financial performance, is broadly similar in concept to the headline AAS 31 operating result, as both match revenue (including taxes and grants) earned in the year, to expenses incurred. The GFS operating balance, similarly to the headline AAS 31 result, is forecast to be in surplus over the outlook period. Net lending is equal to the GFS net operating balance less net capital formation. As net lending treats asset expenditure as an immediate expense, rather than over time (through depreciation), it is lower than the GFS net operating balance over the forward estimates due to the size of the infrastructure program. The GFS cash surplus is equal to net cash flows from operating activities less net investment in non-financial assets. Equivalently, the cash surplus is equal to net lending excluding non-cash expenses principally relating to superannuation and employee entitlements. As a result the cash surplus is generally higher than net lending but lower than the GFS net operating balance.
Table 1.3: AAS 31 and GFS budget measures (excluding Growing Victoria) ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Revised Budget Estimate Estimate Estimate Operating surplus (AAS 31) 160 245 321 304 547 Net operating balance (GFS) 1 277 423 369 364 594 GFS net lending (a) 963 37 - 886 -1 027 - 517 GFS cash surplus (a) (b) 459 557 11 - 396 - 154 Standardised operating surplus (c) 1 077 245 321 304 547 Source: Department of Treasury and Finance Notes: (a) The table shows GFS net lending (+) / borrowing (-) and GFS cash surplus (+) / deficit (-) excluding the impact of Growing Victoria. Growing Victoria investments are excluded as an offset to gross debt on the grounds that these investments are earmarked for infrastructure projects and are therefore not available to redeem gross debt. (b) The 2002-03 revised cash surplus has been reduced by the bring forward to 2002-03 of $750 million of state superannuation contributions from 2003-04 and the forward estimates period, which increases cash superannuation payments but not the superannuation expense in the operating statement. (c) Operating surplus (AAS 31) less the difference between the actual rate of return on superannuation fund and other financial assets and the expected long-term rate of return at the beginning of the financial period.
Budget Statement 2003-04 Chapter 1 13 Standardised operating surplus Table 1.3 also includes a further alternative measure of the operating surplus, a standardised operating surplus. The standardised operating surplus is equal to the AAS 31 operating surplus less the difference between the actual rate of return and the expected rate of return on superannuation fund and other financial assets. Superannuation fund assets include domestic and overseas equities, fixed interest investments and direct property holdings managed by the defined benefit superannuation schemes. For superannuation fund assets, the actuary calculates a long-term earnings rate assumption in accordance with the requirements of relevant Australian accounting standards. Other financial assets include cash, fixed term deposits and debt securities held in the general government sector. In this and previous budgets, the Government has targeted the AAS 31 operating surplus. While this measure is appropriate as a long-term objective, it has a shortcoming as a short-term objective as it is subject to significant volatility beyond the direct control of the Government, particularly due to the large swings that can occur in asset markets. In particular, within-year changes in the value of financial assets such as shares and fixed interest securities change the prices of the assets held by state superannuation funds and therefore have a direct impact on the general government sector superannuation liability. Changes in the superannuation liability are recorded as an expense in the statement of financial performance and thus impact on the net result. In years when actual returns are lower than expected, the standardised operating surplus will be higher than the AAS 31 operating surplus. This is the case in 2002-03. While the difference between actual and expected returns will not be available until 30 June 2003, based on returns to 31 March 2003, the standardised operating surplus is $917 million higher than the revised 2002-03 operating surplus of $160 million. Conversely, in other years, share and other financial asset market prices may grow at a rate above their long-term average, and the standardised operating surplus will be lower than the AAS 31 operating surplus. For example, in 1999-2000, a year in which there was strong equity price growth, returns on state superannuation fund assets were around $505 million higher than the expected return. The standardised operating surplus differs from the AAS 31 operating surplus only for the current and past financial years. It is identical to the AAS 31 operating surplus over the budget and forward estimates period (see Table 1.3). This is due to the budget and forward estimates assuming the expected return on financial assets will be achieved.
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The standardised operating surplus measure has been developed in order to increase understanding of the significant impact the volatility associated with swings in financial asset prices can have on the AAS 31 operating surplus. This alternative measure, therefore, allows a more complete analysis of the sustainability of the State’s financial position. Removing the effect of actual returns on financial assets relative to expected returns is also broadly consistent with the approach underlying the GFS framework of the Australian Bureau of Statistics. The GFS excludes from the calculation of net operating balance revaluations (holding gains or losses) arising from a change in market prices.
Infrastructure The Government is committed to delivering world-class infrastructure to enhance social, economic and environmental benefits across the State. In Growing Victoria Together the Government identified the following priority infrastructure actions:
• building fast, reliable and efficient transport and communication infrastructure;
• better linking Melbourne and regional ports to industry and agricultural centres across Victoria;
• connecting more Victorians to the internet and other new technologies; and
• rebuilding and modernising the State’s social infrastructure including schools, hospitals, prisons, police stations, community services and recreational and cultural resources – the foundations for a prosperous and equitable society. Building on the substantial infrastructure spending commitments made by the Government in the past three budgets, the 2003-04 Budget provides funding for the commencement of new infrastructure investment projects with a total estimated investment (TEI) of $1.2 billion (including $180 million announced in the 2002-03 Budget Update). Significant components of this program include $121 million for the construction of the Pakenham Bypass, $51 million for new technology and equipment for Victoria’s hospitals and health services, $139 million for centralised information and communications technology support across hospitals, $53 million to conserve water resources through the Victorian Water Trust, $107 million for new schools and upgrades across the State, and $56 million towards facilities for the 2006 Commonwealth Games.
Budget Statement 2003-04 Chapter 1 15 The Government’s commitment to delivering world-class infrastructure is reflected in Chart 1.2, which shows past actual yearly expenditure on net infrastructure investment by the general government sector, together with forward projections, and indicates the significant increase in infrastructure spending since 1999-2000. Chart 1.2 does not include private sector expenditure on the Mitcham-Frankston Freeway which, in April 2003, the Government announced would be funded through a toll.
Chart 1.2: General government sector net infrastructure investment (a)
3 000
2 500
2 000
1 500 $ million 1 000
500
0 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Base level Growing Victoria
Source: Department of Treasury and Finance Note: (a) Includes purchases of property, plant and equipment and net contribution to other sectors of government less proceeds from sale of property, plant and equipment.
Over the period 2003-04 to 2006-07 general government net infrastructure investment will average $2.5 billion per annum, with a record high of $2.6 billion in 2004-05. This level of expenditure well exceeds estimated depreciation of around $1.1 billion per annum, and results in growth of the real capital stock over the four years to June 2007 of 10.7 per cent compared to projected population growth of 3.9 per cent. The increase in the real capital stock is shown in Chart 1.3.
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Chart 1.3: Real capital stock per capita as at 30 June
8 800
8 600 )
8 400
8 200
8 000
$ per capita (2002-03 prices 7 800
7 600 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: Department of Treasury and Finance
The significant boost to Victoria’s infrastructure over the medium term has been made possible by Victoria’s strong financial position. The forecast operating surpluses over the next four years, together with the Growing Victoria infrastructure reserve, have enabled the Government to pursue its program of significantly upgrading and modernising infrastructure.
Service delivery The Government is continuing to improve quality, access and equity in service delivery to all Victorians through the implementation of the Government’s election commitments. Growing Victoria Together provides the framework that balances the Government’s economic, social and environmental goals and objectives for all Victorians. The 2003-04 Budget builds on these foundations focusing on jobs, communities, health, education and innovation. Since coming to office, the Government has increased Victoria’s spending to produce better outcomes in the areas of education, health and community safety. For example:
• class sizes in prep to year 2 have fallen from an average of 24.3 students in 1999 to 21.0 students in 2003;
• the percentage of 18-24 years olds with year 12 or equivalent qualifications has increased from 80 per cent in 1999 to 82.4 per cent in 2002;
Budget Statement 2003-04 Chapter 1 17 • since its introduction in 2001-02, the Hospital Demand Management Strategy has improved the quality and effectiveness of Victoria’s public health system with decreased hospital waiting lists and more patients treated; and
• Victoria is the safest State in Australia with crimes against the person per 100 000 people the lowest of all the States. The 2003-04 Budget provides additional funding for new output initiatives of $846 million in 2003-04 and an average of $999 million over the following three years. After allowing for a range of departmental-specific and government-wide savings initiatives and accounting for funding from existing forward estimates contingencies, the net budget impact of 2003-04 output initiatives is $550 million in 2003-04. This is in addition to the output initiatives announced in the 2002-03 Budget Update of $220 million in 2003-04. In education, the 2003-04 Budget commits $789 million over four years, as well as asset investment of $137 million TEI, to value and invest in lifelong education. The 2003-04 Budget continues the major improvements that have been made to Victoria’s health care system over the past three years with initiatives of $1.9 billion over four years, as well as asset investment of $357 million TEI, to ensure the provision of high quality, accessible health and community services. The 2003-04 Budget allocates $261 million over four years, as well as asset investment of $106 million TEI, to make streets, homes and workplaces safer. As part of the modernisation of government a new department funding system is to be introduced. The new system will be finalised and introduced for the 2004-05 Budget and will provide a strong incentive for departments and other stakeholders to achieve productivity gains through enterprise bargaining negotiations. Further details on the service delivery initiatives in the 2003-04 Budget are provided in Chapter 4, Budget Initiatives and Appendix A, Output, Asset Investment and Revenue Initiatives.
Taxation The Government’s long-term commitment is to ensure a fair and efficient tax system in Victoria that is competitive with other States and which provides the funds needed for meeting our social goals. In its first term of office, the Government announced business tax relief worth over $1 billion between 2001-02 and 2005-06. These taxation reforms ensure a competitive tax regime for Victorian businesses, providing an environment which promotes jobs and growth in Victoria. This budget sees the implementation of the
18 Chapter 1 Budget Statement 2003-04
Government’s last instalment of payroll tax initiatives announced in Building Tomorrow’s Businesses Today. From 1 July 2003 the payroll tax rate will be reduced from 5.35 per cent to 5.25 per cent. This represents an estimated 9 per cent reduction in the payroll tax rate, from 5.75 per cent to 5.25 per cent, over the past three years. The Government is also providing targeted relief through the tax system to families, land tax payers and the disabled. Measures include a payroll tax exemption for paid maternity and adoption leave, extension of the payment period for land tax liabilities, the provision of a full exemption from motor vehicle stamp duty for vehicles that transport incapacitated persons in wheelchairs, and the reduction of stamp duty where a vehicle is modified to enable a disabled person to operate the vehicle. There has been no increase in many fees and fines over the past ten years. To maintain equity within the tax system, partial catch-up increases will apply in this budget to fees and fines that have not increased for some time, such as the motor vehicle registration fee which has not increased since April 1994. In all cases, these increases will be less than the level of inflation since they were last increased. A policy of annual indexation of all fees and fines set by regulation will be introduced, commencing in 2003-04, to smooth out future increases in fees and fines. As part of the Government’s retargeting of Victoria’s employment, training and vocational education programs, the Government is removing the payroll exemption for wages paid to trainees and apprentices. The exemption will be removed for new enrolments in training or apprenticeship courses on or after 6 May 2003 (effective from 1 July 2003). Transitional arrangements will apply to existing approved courses and group apprenticeships and training schemes, which will remain eligible for the exemption until 31 December 2003. The payroll tax exemption will be replaced with a new completion bonus scheme, which will pay a bonus to employers when trainees and apprentices complete their qualifications. Commencing on 1 July 2003, employers with three or more new employee trainees and apprentices, who are under 25 years of age at commencement, will qualify for the bonus (excluding Commonwealth and state government employers). The new completion bonus scheme will ensure more effective targeting of resources to support apprenticeship and training courses. It will reward employers who take on trainees and apprentices in good faith and boost the level of completions of traineeships and apprenticeships. Combined, these revenue measures are forecast to generate additional revenue of $85 million in 2003-04, rising to $182 million in 2006-07. The increase in revenue from registration fees will be applied to investment in road infrastructure through the Better Roads Victoria Trust Fund. Budget Statement 2003-04 Chapter 1 19 The competitiveness of Victoria’s tax regime plays an important role in underpinning economic growth and investment. Consistent with the Government’s strategic priority of promoting growth across the whole of Victoria, the Government is aiming to ensure that Victoria’s taxes remain competitive with the Australian average. Victoria’s preferred measure of tax competitiveness is state taxation expressed as a share of nominal gross state product (GSP). This measure relates the level of taxation revenue to economic capacity. Taxation revenue as a share of nominal GSP for Victoria, New South Wales, Queensland and the Australian average is shown in Chart 1.4.
Chart 1.4: Taxation revenue as a share of nominal GSP(a)
5.25
5.00
4.75
4.50
4.25 per cent
4.00
3.75
3.50 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2001-02 adjusted NSW Victoria Australia Qld
Sources: Australian Bureau of Statistics, Department of Treasury and Finance, 2001-02 Annual Financial Reports of all jurisdictions. Note: (a) Taxation data have been recast to reflect only those taxes that remain after 1 July 2006. 2001-02 data have been further adjusted for Victorian tax changes announced in this budget, but assuming no further tax changes by other States in their 2003-04 budgets.
The increase in taxation as a share of GSP in 2001-02 in Victoria, New South Wales, Queensland and Australia on average reflects the buoyant economic activity in 2001-02, particularly in the property market. Using 2001-02 actual taxation data from all jurisdictions, and adjusting for all known future tax changes previously announced by all States as well as Victoria’s tax changes announced in this budget, Victoria’s taxation as a share of nominal GSP is set to be at the Australian average, but to remain a substantial 0.6 percentage points of GSP (or $1 060 million) below New South Wales.
20 Chapter 1 Budget Statement 2003-04
Net financial liabilities The Government is committed to maintaining the State’s net financial liabilities at prudent levels in order to achieve its short-term objective of maintaining Victoria’s triple-A credit rating. Victoria’s triple-A long-term local currency debt rating was affirmed by Standard & Poor’s on 7 October 2002 and by Moody’s on 29 October 2002. Both rating agencies cited Victoria’s low debt levels, strong fiscal position and strong financial performance in recent years as key reasons behind their affirmations. The 2003-04 Budget outlook reinforces these positive factors as:
• operating surpluses are projected for 2003-04 ($245 million) and for the remainder of the forward estimates period ($391 million per annum on average);
• general government net financial liabilities (excluding the Growing Victoria infrastructure reserve) are expected to increase from $15.8 billion as at June 2002 to $18.9 billion in June 2007. As a share of GSP these liabilities are projected to fall from 8.6 per cent to 8.0 per cent over the same period, signifying that the modest liability growth can be serviced by the growing Victorian economy (see Chart 1.5); and
• general government net debt (excluding Growing Victoria) is forecast to increase moderately from $2.4 billion in June 2002 to $3.2 billion by June 2007. At just over 1 per cent of GSP net debt remains low, compared to 3 per cent of GSP in 1999 and 16 per cent in 1995.
Budget Statement 2003-04 Chapter 1 21 Chart 1.5: General government net financial liabilities excluding Growing Victoria (a) (b)
20 20
15 15
10 10 $ billion per cent of GSP of per cent 5 5
0 0 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Net debt Unfunded superannuation Net financial liabilities (RHS)
Source: Department of Treasury and Finance Notes: (a) General government net financial liabilities are calculated as the sum of net debt and unfunded superannuation liabilities. (b) Net debt is calculated as gross debt less liquid financial assets. Growing Victoria investments are excluded as an offset to gross debt on the grounds that these investments are earmarked for infrastructure projects and are therefore not available to redeem gross debt.
LONG-TERM FISCAL ISSUES The capacity of governments and the wider community to manage risks and seize opportunities in the future will depend critically on the strength of the economy and government finances. In this term, the Bracks Government remains committed to delivering substantial budget surpluses of at least $100 million each year, and maintaining Victoria’s triple-A credit rating. This will ensure that successive Victorian governments have a strong and secure financial base to meet future challenges. In April 2003, the Treasurer launched a Department of Treasury and Finance discussion paper, Shaping a Prosperous Future. This paper examined some of the long-term economic and fiscal issues facing the State, and highlighted the importance of continuing strong productivity growth to help meet future challenges and opportunities.
Long-term fiscal pressures Along with the Commonwealth and other States, Victoria faces considerable fiscal pressure over coming decades. On a no policy change basis, Victoria’s
22 Chapter 1 Budget Statement 2003-04
emerging fiscal pressures are projected to equal around 4 per cent of GSP by 2041-42 or, in today’s dollars, around $15 billion per year (see Chart 1.6). Victoria is projected to experience greater fiscal pressure in the short to medium term than the Commonwealth.
Chart 1.6: Projection of fiscal pressures (a)
2
0
-2
-4 per cent of GSP/GDP
-6 2003-04 2007-08 2011-12 2015-16 2019-20 2023-24 2027-28 2031-32 2035-36 2039-40
Victoria Commonwealth (b)
Source: Department of Treasury and Finance Notes: (a) ‘Fiscal pressure’ is defined in terms of GFS net lending before net interest costs (as defined in the ABS Government Finance Statistics). This enables analysis of the pressures on the budget without the distorting effects of compounding interest costs, but is not directly comparable with the AAS 31 budget outcomes in this publication. (b) The Commonwealth figures are projections by the Department of Treasury and Finance, using similar assumptions as for Victoria about demographic change, productivity growth and health cost inflation. The latter assumes a more conservative figure than that used in the Commonwealth’s Intergenerational Report 2002-03.
These are long-term projections of fiscal pressures, not predictions of actual future outcomes. In particular, they represent growing pressures that governments will need to manage, rather than predictions of the fiscal position at any point in time. The projections assume a continuation of long-term demographic and economic trends and no further changes in government policy. As such, these projections should be distinguished from the short to medium-term forecasts contained in the budget, which incorporate much more detailed information on present economic conditions and, most importantly, adjust for policy changes. The major identified long-term fiscal pressures facing Victoria are rising health costs due to the introduction of new health technologies and other non-demographic factors (which will also deliver better health outcomes),
Budget Statement 2003-04 Chapter 1 23 Commonwealth grants (on current policy settings) not keeping up with economic growth, and demographic change, such as an ageing population. Other long-term risks to the budget include state taxes declining as a share of GSP, environmental change, changing infrastructure needs, lower than anticipated productivity growth and rising community expectations of government services.
Managing long-term fiscal pressures These projections merely provide a starting point for discussions about future policy options, rather than definitive forecasts of the budget over the next 40 years. Rather than being captive to such projections, governments, businesses and the wider community can take proactive steps to influence the future. Shaping a Prosperous Future sends a positive message that the more Victoria can grow its economy and increase productivity, the more choice Victorians will have about how to meet future challenges. Whatever challenges the future presents, strong and sustained economic growth, consistent with social equity and environmental sustainability, will produce positive outcomes – for individuals, businesses and governments. For example, a sustained increase in productivity growth of just 0.25 per cent per year above long-term trends, under some reasonable assumptions, could halve the impact of the projected fiscal pressures on the budget. The paper also underscores the key role that State and Territory governments can play in developing a more productive economy over the long term, thereby providing the means by which long-term fiscal pressures can be managed. As part of this role, the Bracks Government has a key strategic focus on building a more competitive, innovative and productive economy, investing in communities to link the whole State, and enhancing education and lifelong learning opportunities. Cooperation will also be required between all levels of government to manage the challenges and opportunities ahead. In particular, there needs to be a recognition that all governments face future fiscal pressures, and that dealing with these pressures will require closer cooperation between tiers of government. Furthermore, greater cooperation is needed in order to efficiently and effectively deliver services to meet changing community needs over time.
24 Chapter 1 Budget Statement 2003-04
CHAPTER 2: BUDGET POSITION AND OUTLOOK
• An operating surplus of $245 million is budgeted for 2003-04 and an annual average of $391 million over 2004-05 to 2006-07. • The net budget impact of output initiatives is $550 million in 2003-04, rising to $654 million on average over the following three years, including the cost of implementing the Government’s election commitments and after allowing for savings and accounting for funding from existing forward estimates demand contingencies. • Total operating expenses are expected to rise by only 0.2 per cent in 2003-04, with the impact of new output initiatives and underlying growth in expenses largely offset by a projected decline in superannuation expense. • Total operating revenue is budgeted to rise by 0.5 per cent in 2003-04. This reflects a variety of factors, including new revenue measures adding $85 million in 2003-04 rising to $182 million in 2006-07, offset by a decline in taxes derived from Victoria’s property market. • The budget includes new asset funding with a total estimated investment of $1 244 million.
This chapter provides details of the projected budget position for the period 2003-04 to 2006-07. The discussion of the budget and forward estimates focuses on trends in the aggregate budget position, as well as reconciliation of major variations in key budget aggregates since the 2002-03 Budget released in May 2002 and the 2002-03 Budget Update published in January 2003. The forward estimates outlined in this chapter are based on the economic projections outlined in Chapter 3, Economic Conditions and Outlook and reflect the detailed accounting policies and assumptions documented in Chapter 9, Estimated Financial Statements and Notes. The estimates take into account all announced policy commitments of the Victorian Government. The forward estimates presented in this chapter represent planning projections for future budgets based on an unchanged policy assumption.
Budget Statement 2003-04 Chapter 2 25 2003-04 BUDGET INITIATIVES The 2003-04 Budget includes new initiatives that will deliver improved services and promote growth across the whole State. The 2003-04 Budget makes substantial progress on delivering the Government’s election commitments as set out in Labor’s Financial Statement 2002 and detailed in Chapter 7, Election Commitments – Implementation Report Card. All of the output initiatives identified to start in 2003-04 have been funded.
Initiatives affecting operating expenses Table 2.1 shows that the 2003-04 Budget provides additional funding for new output initiatives of $846 million in 2003-04, increasing to $969 million in 2006-07. This is partly offset by a range of departmental-specific and government-wide initiatives to achieve savings of $141 million in 2003-04 and $162 million on average over the remainder of the forward estimates period, predominately through administrative efficiencies. The initiatives to improve efficiency and deliver savings implemented in this budget include:
• minimising duplication in Department of Sustainability and Environment grants programs and refocusing of existing resources ($14 million per annum);
• a refocus and reform of employment programs ($6 million in 2003-04 rising to $14 million by 2006-07); and
• across-the-board savings in departments of $104 million a year from 2003-04 onwards, to be delivered through efficiency improvements. For detail on these savings initiatives refer to Appendix A, Output, Asset Investment and Revenue Initiatives. After allowing for these savings and accounting for funding from existing forward estimates contingencies put aside for service delivery demand growth, the net budget impact of 2003-04 output initiatives is $550 million in the budget year, rising to $654 million on average over the following three years, including the cost of implementing the Government’s election commitments. As indicated in Table 2.1, this is in addition to $220 million in new 2003-04 output funding previously approved and announced in the 2002-03 Budget Update.
26 Chapter 2 Budget Statement 2003-04
Table 2.1: New output funding since 2002-03 Budget ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate 2003-04 Budget output initiatives 845.7 929.0 1100.0 969.2 Less: Demand contingency 154.2 182.6 183.4 183.3 Government-wide and departmental savings 141.3 155.8 163.1 167.4 2003-04 Budget net output funding 550.3 590.5 753.5 618.5 Add: 2002-03 Budget Update output initiatives 219.6 141.5 121.0 121.0 funding Net output funding since the 2002-03 Budget 769.8 732.1 874.6 739.5 Source: Department of Treasury and Finance
Table 2.2 shows the total value of funding provided for output initiatives by department in the 2003-04 Budget. Of the new output initiatives, $389 million in 2003-04 (rising to $516 million per annum on average over the next three years) relate to implementation of the Government’s Labor’s Financial Statement 2002 election commitments and $56 million relates to funding the Commonwealth Games ($98 million per annum on average over the next three years). The balance relates to unavoidable expenditures and initiatives in the key service areas identified in Growing Victoria Together, including:
• valuing and investing in lifelong education;
• high quality, accessible health and community services;
• safe streets, homes and workplaces;
• growing and linking all of Victoria;
• creating thriving and innovative industries across Victoria; and
• protecting the environment and promoting sustainable development. Chapter 4, Budget Initiatives provides more detailed information on the Government’s service delivery and strategy while Appendix A, Output, Asset Investment and Revenue Initiatives, provides a detailed list and description of all service delivery initiatives implemented in this budget.
Budget Statement 2003-04 Chapter 2 27 Table 2.2: 2003-04 Budget output initiatives funding by department ($ million) Department (a) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate Education and Training 145.7 191.6 220.8 230.8 Human Services 394.7 413.1 441.0 427.2 Infrastructure 51.6 41.5 35.5 39.8 Innovation, Industry and Regional Development 33.5 35.9 45.9 55.9 Justice 45.3 47.8 61.1 86.4 Premier and Cabinet 33.4 37.4 32.8 33.5 Primary Industries 2.2 5.9 4.4 4.4 Sustainability and Environment 31.7 37.1 35.4 33.6 Treasury and Finance 1.8 1.8 0.0 0.0 Victorian Communities 73.5 101.5 207.4 42.9 Parliament 3.5 2.0 1.8 1.9 Government-wide 28.8 13.4 13.9 12.9 Total 2003-04 Budget new output funding 845.7 929.0 1 100.0 969.2 Less: Demand contingency 154.2 182.6 183.4 183.3 Government-wide and departmental savings 141.3 155.8 163.1 167.4 2003-04 Budget net output funding 550.3 590.5 753.5 618.5 Source: Department of Treasury and Finance Note: (a) Excludes initiatives funded through internal reprioritisation or other existing fund sources and 2002-03 Budget Update output initiatives.
Asset investment initiatives The 2003-04 Budget provides funding for the commencement of new infrastructure investment projects with a total estimated investment (TEI) of $1 244 million (including $180 million announced in the 2002-03 Budget Update). This includes funding for the Government’s Labor’s Financial Statement 2002 election commitments with a TEI of $540 million. The scale of the 2003-04 infrastructure program and the scope and nature of projects approved demonstrate the Government’s commitment to promoting economic, social and environmental development across the whole State. Over the next two years expenditure on infrastructure investment is expected to total over $5.0 billion. Table 2.3 provides a summary of new infrastructure asset investment funding by department. Chapter 4, Budget Initiatives, Appendix A, Output, Asset Investment and Revenue Initiatives, and Appendix B, Growing Victoria Infrastructure Reserve provide more detailed information on the Government’s 2003-04 infrastructure investment initiatives.
28 Chapter 2 Budget Statement 2003-04
Table 2.3: New asset funding by department ($ million) Department 2003-04 TEI (a) Budget Education and Training 64.8 137.1 Human Services 87.4 356.7 Infrastructure 82.2 317.2 Innovation, Industry and Regional Development 0.0 57.2 Justice 19.6 101.7 Premier and Cabinet 10.3 10.3 Primary Industries .. .. Sustainability and Environment 18.5 84.5 Treasury and Finance 0.0 0.0 Victorian Communities 16.2 76.1 Parliament .. .. Other (b) 48.9 103.0 Total asset initiatives 348.0 1 243.7 Source: Department of Treasury and Finance Notes: (a) Total estimated investment. (b) Includes whole-of-government funding provided for counter-terrorism, bushfire suppression and recovery strategy and city office accommodation. Revenue initiatives The 2003-04 Budget provides for the continued implementation of tax cuts announced in the Government’s Building Tomorrow’s Businesses Today package, including a reduction in the payroll tax rate from 5.35 per cent to 5.25 per cent effective 1 July 2003. In the 2003-04 Budget the Government is providing further targeted assistance to families, land tax payers and the disabled by:
• providing a payroll tax exemption for paid maternity and adoption leave, from 1 January 2003, reinforcing the Government’s commitment to encouraging employers and employees to strike a better balance between family, work and community responsibilities; • extending the payment period for land tax liabilities from 8 to 15 weeks for lump sum payments, and from 12 to 26 weeks for instalment payments. This initiative starting with the 2003 land tax year will provide significant relief to all land tax payers in Victoria and potentially benefit tenants who are paying land tax passed onto them by landlords; and • providing a full exemption from motor vehicle stamp duty for vehicles that transport incapacitated persons in wheelchairs and reducing the stamp duty where a vehicle is modified to enable a disabled person to operate the vehicle from 1 July 2003. Budget Statement 2003-04 Chapter 2 29 There has been no increase in many fees and fines over the past ten years. To maintain equity within the tax system, partial catch-up increases will apply in this budget to fees and fines that have not increased for some time. In all cases, the increases are less than the level of inflation since they were last increased. For example, from 1 July 2003, there will be a one-off $17 increase in the base motor vehicle registration fee, from $140 to $157. This will be the first increase in this fee in nine years. The increase in revenue from motor registration fees will be applied to investment in road infrastructure through the Better Roads Victoria Trust Fund. To smooth out future increases in fees and fines, the Government will be introducing a policy of annual indexation of all fees and fines set by regulation, commencing in 2003-04. This is consistent with the approach already adopted by other state governments and is important to maintain and protect the equity of the State’s revenue base and minimise distortion across revenue measures. As part of the Government’s retargeting of Victoria’s employment, training and vocational education programs, the Government is removing the payroll exemption for wages paid to trainees and apprentices. The exemption will be removed for new enrolments in training or apprenticeship courses on or after 6 May 2003 (effective from 1 July 2003). The exemption will be replaced with a new completion bonus scheme, which will pay a bonus to employers when trainees and apprentices complete their qualifications. Commencing on 1 July 2003, employers with three or more new employee trainees and apprentices, who are under 25 years of age at commencement, will qualify for the bonus (excluding Commonwealth and state government employers). Transitional arrangements will apply to existing approved courses and group apprenticeships and training schemes, which will remain eligible for the exemption until 31 December 2003. The new completion bonus scheme will ensure more effective targeting of resources to support apprenticeship and training courses. It will reward employers who take on trainees and apprentices in good faith and boost the level of completions of traineeships and apprenticeships. Combined, these revenue measures are forecast to generate additional revenue of $85 million in 2003-04, rising to $182 million in 2006-07. Additional information is provided in Appendix A, Output, Asset Investment and Revenue Initiatives.
30 Chapter 2 Budget Statement 2003-04
Table 2.4: Revenue initiatives ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate Payroll tax – removal of exemption for apprentices and trainees 30.0 60.0 60.0 60.0 Motor vehicle registration fee increase and 46.0 57.0 69.0 81.0 indexation Motor vehicle duty – extension of concession -0.5 -0.5 -0.5 -0.5 Indexation of drivers’ licence fees 2.0 3.0 5.0 4.0 Indexation of fees and fines set by regulation 8.0 21.0 30.0 39.0 Total 2003-04 Budget revenue initiatives 85.5 140.5 163.5 183.5 Initiatives announced in 2002-03 Budget Update Payroll tax exemption for paid maternity leave -1.0 -1.1 -1.1 -1.2 Land tax payment extension (a) ...... Total revenue initiatives 84.5 139.4 162.4 182.3 Source: Department of Treasury and Finance Note: (a) This initiative provides taxpayers with additional time in which to pay their land tax, but does not impact on the amount of revenue collected.
2003-04 BUDGET ESTIMATES AND OUTLOOK Table 2.5 provides a summary of the statement of financial performance for the period 2002-03 to 2006-07. For a detailed discussion of the revised 2002-03 Budget outcome, including an explanation of the variation from the published 2002-03 Budget estimates, see Appendix C, Revised 2002-03 Budget Outcome. Chapter 9, Estimated Financial Statements and Notes provides a more detailed statement of financial performance for the forward estimates outlook period. The forward estimate projections take into account all announced policy initiatives.
Budget Statement 2003-04 Chapter 2 31 Table 2.5: Summary statement of financial performance 2003-04 to 2006-07 ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Revised Budget Estimate Estimate Estimate
Taxation 9 345.6 9 593.2 9 787.9 9 969.2 10 369.6 Investment income 1 231.0 895.9 921.6 996.8 1 113.3 Grants 11 958.5 12 248.0 12 722.5 13 411.8 13 825.7 Sales of goods and services 2 021.8 2 047.2 2 101.2 2 179.7 2 209.5 Other revenue (a) 1 907.0 1 814.1 1 847.2 1 861.8 1 866.6 Total revenue 26 463.8 26 598.4 27 380.4 28 419.4 29 384.6 per cent change 0.5% 2.9% 3.8% 3.4%
Superannuation 2 802.3 1 950.8 1 896.2 1 984.0 2 045.1 Depreciation 962.0 1 024.8 1 094.3 1 144.9 1 206.1 Borrowing costs 496.9 483.3 476.0 483.0 480.0 Employee benefits 9 263.1 9 597.7 9 977.4 10 347.3 10 690.0 Supplies and services 8 401.3 8 598.2 8 902.6 9 216.9 9 516.3 Other expenses (b) 4 378.2 4 699.1 4 712.9 4 938.8 4 899.8 Total expenses 26 303.9 26 353.9 27 059.4 28 114.9 28 837.4 per cent change 0.2% 2.7% 3.9% 2.6%
Operating surplus 159.9 244.5 321.0 304.4 547.3 Source: Department of Treasury and Finance Notes: (a) Comprises regulatory fees and fines, fair value of assets received free of charge, gains/losses on disposal of physical assets, capital asset charge revenues and other miscellaneous revenue. (b) Includes grants and transfer payments and amortisation expense.
As indicated in Table 2.5, the operating surplus is expected to increase from $160 million in 2002-03 to $245 million in 2003-04, an increase of $85 million. The operating surplus is expected to average $391 million over the remainder of the forward estimates period.
Operating expenses
2003-04 Budget estimates Total operating expenses are budgeted at $26 354 million in 2003-04, representing an increase of $50 million or 0.2 per cent on the revised estimate for 2002-03. The projected low growth in operating expenses reflects several factors.
32 Chapter 2 Budget Statement 2003-04
The impact of new policy funding of $550 million is offset by:
• the projected one-off impact of weak investment markets and actuarial revisions in boosting 2002-03 superannuation expense. In the budget and forward years investment returns to state superannuation funds are assumed to return to long-run actuarial rates, leading to a normal level of superannuation expenses and contributing to a decline in expenses of around $882 million in 2003-04;
• expected cessation or wind-down of various Commonwealth funded programs (around $160 million) including the First Home Owners’ Grant and New Home Owners’ Grant schemes ($63 million) and various health programs, including Blood Transfusion Services (to be funded directly by the Commonwealth Government from 2003-04) and the Fringe Benefits Tax – Doctors Transitional Allowance; and
• a range of other one-off costs which boosted expenses by around $358 million in 2002-03, including: - drought relief package expenditure of $85 million; - bushfire suppression and relief costs of around $139 million; - costs of around $44 million associated with settlement of the Seal Rocks dispute; and - asset write-offs of around $75 million, mainly relating to the wind-up of Latrobe Regional Hospital Pty Ltd. The balance of the growth in 2003-04 operating expenses ($857 million or 3.3 per cent) is broadly in line with expected wage and price inflation and Victorian population growth.
Forward estimates outlook Beyond 2003-04, total expenses are expected to increase by 3.0 per cent per annum on average. Modest growth in superannuation expense (averaging 1.6 per cent per annum) is partly offset by a decline in borrowing costs of 0.2 per cent per annum on average. Depreciation expense is expected to increase by an annual average 5.6 per cent over the period 2003-04 to 2005-06, reflecting growth in the capital stock as a result of the Government’s substantial infrastructure investment program. Other expenses (largely comprising employee benefits, supplies and services and grants) are expected, in aggregate, to increase by 3.1 per cent per annum on average over the period 2003-04 to 2006-07. This is broadly in line with expected wage and price inflation and Victorian population growth. Budget Statement 2003-04 Chapter 2 33 The within-period trend of expenditure growth over the forward estimates is affected by projected costs associated with staging the 2006 Commonwealth Games. This is reflected in a one-off boost in expenditure growth forecast for 2005-06, followed by more modest growth in operating expenses in 2006-07.
Operating revenue
2003-04 Budget estimates Total operating revenue amounts to $26 598 million in 2003-04, representing a $135 million or 0.5 per cent increase on the 2002-03 revised estimate. Revenue growth is essentially the result of increased payroll taxes and fees and fines, offset by a moderation in property taxes and Commonwealth grants, and declines in investment income and other revenue sources. The low growth in taxation revenue in 2003-04, of 2.6 per cent compared to the 2002-03 revised estimate, entirely reflects an expected moderation in property market activity in 2003-04. As detailed in the next section, conveyancing duty is projected to fall from $2.1 billion in 2002-03 to $1.9 billion in 2003-04. Other taxes grow in aggregate by 6.8 per cent in 2003-04, a little above nominal gross state product (GSP) growth of 5.5 per cent. Victoria’s largest source of tax revenue, payroll tax is forecast to increase by 3.9 per cent to $2.7 billion in 2003-04. This moderate growth reflects the combined impact of the Government’s Better Business Taxes and Building Tomorrow’s Businesses Today tax reform initiatives, including a reduction in the payroll tax rate from 5.35 per cent to 5.25 per cent from 1 July 2003, offset by the abolition of the payroll tax exemption for apprentices and trainees. Detailed projections on other major taxes are provided in Chapter 9, Estimated Financial Statements and Notes and in Budget Paper No.3, Budget Estimates. Overall, Commonwealth grants are expected to increase by $290 million or 2.4 per cent compared to 2002-03. General purpose grants rise by 3.4 per cent largely reflecting an increase in Victoria’s share of the pool for 2003-04. This increase was partly offset by lower payments for the First Home Owners’ Grant scheme ($30 million) and a $20 million adjustment to the 2002-03 GST transitional grants. Additional information is provided in Chapter 5, Commonwealth-State Financial Relations. Specific purpose payments are projected to increase by only 1.2 per cent. The modest growth largely reflects a reduction in capital specific purpose payments, mainly as a result of the completion of the Geelong Road project in 2002-03, and the wind-down of Commonwealth funding for a number of existing programs including Blood Transfusion Services (to be funded directly by the
34 Chapter 2 Budget Statement 2003-04
Commonwealth Government from 2003-04) and the Fringe Benefits Tax – Doctors Transitional Allowance. In relation to the Australian Health Care Agreement (AHCA), discussions with the Commonwealth commenced in 2002-03 on renegotiation of the current agreement, which is due to expire at the end of 2002-03. Pending the finalisation of a new five-year agreement, the forward estimates assume a continuation of funding arrangements under the existing agreement. Sales of goods and services revenue in 2003-04 is projected to increase by 1.3 per cent in 2003-04. The impact of this increase is offset by a similar increase in operating expenses related to the cost of goods and services sold. The decline in investment income of $335 million or 27 per cent compared to 2002-03 reflects lower distributions from public trading and financial corporations. This is mainly due to the:
• cessation of distributions from the gas sector ($67 million in 2002-03) following the introduction of full retail contestability in October 2002;
• completion of a series of special dividend payments by the Transport Accident Commission to fund the Accident Blackspot Program ($110 million in 2002-03); and
• lower distributions from the water sector, mainly reflecting one-off additional dividends of $100 million from certain water companies in 2002-03 to reinforce the commercial focus of the businesses and ensure appropriate financial ratios were maintained. The $93 million decline in other revenue in 2003-04 is mainly attributable to a one-off boost to revenue in 2002-03 of $135 million flowing from receipt of performance bonds from National Express, as a result of National Express no longer providing financial support to its three Victorian franchisees – V/Line Passenger, M>Tram and M>Train.
Land transfers In the 2002-03 Budget it was projected that a moderation in property market activity would lead to a reduction in conveyancing duty collections. However, while there has been a reduction in transaction volumes in 2002-03, this has been more than offset by continued growth in house prices with the result that conveyancing duty is now forecast to rise to $2.1 billion in 2002-03, some $0.5 billion above the original estimate. The resilience of the Victorian property market over recent years has reflected various factors, including low interest rates, continuing interstate migration to Victoria and strong population growth, a robust Victorian economy and labour
Budget Statement 2003-04 Chapter 2 35 market and the effect of the First Home Owners’ Grant. In addition, equity market instability and the recent conflict in Iraq may have further added to the relative attractiveness of property as an investment. However, some of these factors may become less intense as drivers of property market activity going forward. In recent years house price growth in Melbourne has been exceptionally strong with the result that the ratio of house price to income has reached record levels (see Chart 3.2, Chapter 3, Economic Conditions and Outlook). The resulting decline in housing affordability is expected to dampen both demand for housing and housing price growth in the immediate short term. Over the medium term, a moderation in house price growth is expected to improve Melbourne housing affordability. Chart 2.1 shows the level and share of GSP of conveyancing duty revenue, including estimates for the period 2002-03 to 2006-07. In 2003-04, conveyancing duty is expected to decline to $1.9 billion, reflecting slower growth in house prices combined with an expected reduction in the volume of property sales.
Chart 2.1: Conveyancing duty on land transfers
2400 2.4
2000 2.0
1600 1.6
1200 1.2 $ million
800 0.8 (%) nominal GSP of Share
400 0.4
0 - 1984-85 1986-87 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 Conveyancing duty (LHS) as a % of nominal GSP (RHS)
Source: Department of Treasury and Finance
By 2004-05, conveyancing duty is expected to be 16 per cent below the level recorded in 2002-03. Conveyancing duty is projected to decline as a share of GSP over the projection period, slowly approaching the long-term average of around 0.7 per cent of GSP.
36 Chapter 2 Budget Statement 2003-04
Forward estimates outlook Beyond 2003-04 total revenue is expected to increase by 3.4 per cent per annum over the forward estimates period. This reflects projected moderate growth in taxation revenue and Commonwealth grants. Most taxes are expected to grow in line with forecast growth in employment, wages and the Victorian economy. However, as noted above, land transfer duty is expected to further decline in 2004-05 before experiencing low growth in 2005-06 and 2006-07 as property market activity moves towards long-term levels. The overall tax forecast also reflects the abolition of mortgage duty from 1 July 2004 and debits tax from 1 July 2005. Excluding these three taxes, other Victorian taxes in aggregate are forecast to grow at an average annual rate of 5.25 per cent between 2003-04 and 2006-07, much the same as projected nominal GSP growth. Commonwealth grants are projected to grow at an annual average rate of 4.1 per cent between 2003-04 and 2006-07. This modest growth reflects the expectation that Victoria will not benefit from the GST until at least 2008-09. Until then a combination of GST and top-up payments from the Commonwealth will restrict grant payments to the low growth profile of the old tax and grant system. Investment income is expected to be largely unchanged in 2004-05, before increasing strongly in 2005-06 and 2006-07, in part reflecting increased distributions from the water and public financial corporations sectors as a result of higher profit forecasts and other prudential considerations.
RECONCILIATION OF FORWARD ESTIMATES TO PREVIOUSLY PUBLISHED ESTIMATES Table 2.6 compares the revised outlook for the operating surplus for the period 2003-04 to 2005-06 to the estimates published in the 2002-03 Budget. The projected 2003-04 Budget operating surplus is $245 million, a decline of $335 million from the result estimated at the time of the 2002-03 Budget. The average decline for 2004-05 and 2005-06 is similar at around $300 million.
Budget Statement 2003-04 Chapter 2 37 Table 2.6: Reconciliation of 2003-04 Budget estimates to 2002-03 Budget ($ million) 2003-04 2004-05 2005-06 Budget Estimate Estimate Operating surplus – 2002-03 Budget 580 517 712 Plus: Revenue variations in Budget Update 149 370 468 Less: Expense variations in Budget Update 412 372 496 Operating surplus – 2002-03 Budget Update 317 515 684 Plus: Revenue variations since Budget Update Economic/demographic effects Taxation revenue 393 293 272 Investment income - 14 - 52 - 114 Total economic/demographic variations 379 241 158 Policy decisions Taxation initiatives 77 120 133 Fines and regulatory fees 9 21 30 Total policy variations 86 141 164 Commonwealth funding revisions General purpose grants 27 49 97 Specific purpose payments 256 209 287 Total Commonwealth funding variations 283 258 385 Administrative variations Interest revenue - budget financing - 57 - 52 - 81 Forecast revision - fees & fines 77 66 60 Other miscellaneous variations - 7 - 22 93 Total administrative variations 14 - 8 73 Total variation in revenue since Budget Update 761 632 778 Less: Variations in operating expenses since Budget Update Policy decisions Net output funding 550 591 754 Less: Contingency provision - 173 - 179 - 208 Net budget impact 377 411 546 Commonwealth Funding revisions 208 218 256
Administrative variations Office of Housing funding reclassification - 88 - 82 - 81 Future Labor's Financial Statement contingency .. 37 54 Other administrative variations 336 241 384 Total administrative variations 247 196 357 Total variation in expenses since Budget 833 826 1 158 Update Operating surplus – 2003-04 Budget 245 321 304 Source: Department of Treasury and Finance
38 Chapter 2 Budget Statement 2003-04
Variations to total operating revenue Projected operating revenue is around $724 million higher on average over the forward estimates period 2003-04 to 2005-06 than forecast at the time of the 2002-03 Budget Update. Changes in economic and demographic conditions make a major contribution to this upward revision in projected revenue. In particular, taxation revenue has been revised up by $319 million per annum on average since the 2002-03 Budget Update, in large part reflecting continued growth in the Victorian property market with increases in house prices, offset by reductions in transaction volumes. This is in part offset by downward revisions to projected gambling taxes as a result of the impact of the introduction of a smoking ban in gaming venues. For example, since the 2002-03 Budget Update, estimates of gambling tax revenue have been reduced by $38 million in 2002-03 and $64 million in 2003-04 largely as a result of the impact of the smoking ban. Partly offsetting this increase in taxation revenue, economic factors have resulted in investment income being revised down since the 2002-03 Budget Update (by $14 million in 2003-04 rising to $114 million in 2005-06). This variation is due to the impact of the continued deterioration in national and international equity markets on projected dividends from public financial corporations, in particular from the Transport Accident Commission. Policy decisions are projected to increase revenue by $86 million in 2003-04 rising to $164 million by 2005-06, relative to the 2002-03 Budget Update estimates. Variations due to taxation policy decisions relate largely to motor vehicle registration fee increases and the removal of the payroll tax exemption for apprentices and trainees, as set out in Appendix A, Output, Asset Investment and Revenue Initiatives. It is projected these initiatives will increase taxation revenue by $77 million to $133 million between 2003-04 and 2005-06. The decision to apply partial catch-up increases and annual indexation to fees and fines has contributed to a further increase in projected revenue ($9 million in 2003-04, flowing through to an additional $30 million by 2005-06) since the 2002-03 Budget Update. As indicated in Table 2.6, since the 2002-03 Budget Update, Commonwealth funding has been revised up by $309 million on average between 2003-04 and 2005-06. The increases reflect a variety of factors including adjustments to Commonwealth general purpose grants as a result of a revised population growth estimates and additional specific purpose payments, in particular for the school, TAFE and health sectors. These increases are in part offset by the cessation of Commonwealth funding for the Mitcham-Frankston Freeway project (which will
Budget Statement 2003-04 Chapter 2 39 be reinstated when negotiations with the Commonwealth determine which other road projects will receive funding instead). A range of administrative and forecast variations account for the balance of the variation in projected revenue since the 2002-03 Budget Update. These include:
• a decline in interest revenue ($57 million in 2003-04 increasing to approximately $81 million in 2005-06) mainly reflecting a projected run-down in financial assets to finance the Government’s substantial infrastructure investment program over the forward estimates period; and
• upward revisions to forecast revenue from fees and fines of approximately $68 million per annum on average, due largely to revised speeding and traffic infringement revenues.
Variations to total operating expenses Projected operating expenses for 2003-04 have been revised up by $833 million since the 2002-03 Budget Update, with the increase over the following two years averaging $992 million. New output policy initiatives account for the bulk of this increase – $550 million in 2003-04 rising to $754 million in 2005-06. After deducting the contingency provision set aside in previous budgets for additional cost pressures, the net addition to total operating expenses as a result of policy decisions is $377 million in 2003-04, rising to $546 million in 2005-06. Details of these initiatives are set out in Appendix A, Output, Asset Investment and Revenue Initiatives. Revisions to Commonwealth specific purpose funding have also contributed to the increase in operating expenses over the 2003-04 to 2005-06 forward estimates period. Consistent with the revenue increases discussed above, the increase in expenditure predominately relates to the school, TAFE and health sectors. Administrative changes account for the balance of the variations since the 2002-03 Budget Update. These variations have increased operating expenses by $247 million in 2003-04 and $276 million on average over the following two years. The Office of Housing administrative variance reflects the reclassification of the Office of Housing funding consistent with new accounting standards introduced from 1 July 2002. Grants to the Office of Housing that fund increased housing stock or other assets are now recognised as capital contributions to other sectors of government, rather than as expenses. This reclassification has no impact on the overall budget of the Office of Housing.
40 Chapter 2 Budget Statement 2003-04
The creation of a contingency provision from 2004-05 for Labor’s Financial Statement 2002 election commitments also contributes to the upward revision in operating expenses since the 2002-03 Budget Update. This contingency recognises the impact of the balance of commitments in Labor’s Financial Statement 2002 to be funded in the 2004-05 Budget. There are a range of other administrative variances that contribute to a net increase in operating expenses relative to the 2002-03 Budget Update. These include:
• an increase in budget contingency provisions to provide for additional costs of operating the train and tram systems of around $1 billion over five years;
• an increase in superannuation expense in 2003-04 of around $86 million as a result of equity market movements and actuarial revisions. In 2004-05 and 2005-06, these movements are offset by projected increased returns from superannuation fund assets as a result of making, in 2002-03, $750 million of superannuation payments previously scheduled to be paid in the forward estimates period;
• an increase in expenses ($16 million in 2003-04 rising to $21 million in 2005-06) relating to growth in insurance claim liabilities. This follows compliance with a new accounting standard which resulted in the recognition, for the first time in 2002-03, of medical insurance claims incurred but not reported;
• revisions to the Community Support Fund expenditures (flowing mainly from revised projections of gaming taxes);
• increased operating expenses as a result of increased revenue from sales of goods and services (approximately $66 million between 2003-04 and 2005-06); and
• downward revisions to government borrowing and motor vehicle lease costs.
USE OF CASH RESOURCES Table 2.7 provides a summary of cash generated through the operations of Victorian government departments and other general government sector agencies and how that cash is applied to infrastructure investment and financing activities. The table also provides a reconciliation of the projected budget operating surplus to the projected change in general government net debt over the forward estimates period.
Budget Statement 2003-04 Chapter 2 41 Table 2.7 shows that the expected budget operating surplus for 2003-04 is $245 million. However, the operating result is affected by a number of expense and revenue items that do not require or provide cash resources during the year. These include depreciation, growth in unfunded superannuation liabilities and employee benefit liabilities. Adjusting for these non-cash items yields projected net cash inflow from operating activities for 2003-04 of $1 967 million, compared to a revised estimate of $1 672 million for 2002-03. Net expenditure on the purchase of infrastructure and other fixed assets is expected to increase to $2 594 million in 2003-04, compared to $2 225 million in 2002-03. The $1 967 million cash surplus from operating activities will be the main source of funding for the 2003-04 infrastructure program, with the balance sourced from a drawdown of Growing Victoria financial assets. The Growing Victoria infrastructure reserve funds were explicitly put aside over the last four years to provide a boost to future infrastructure spending (for further details on the Growing Victoria infrastructure program see Appendix B, Growing Victoria Infrastructure Reserve). In 2003-04 general government net debt is projected to decrease by approximately $32 million.
Table 2.7: Application of cash resources ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Revised Budget Estimate Estimate Estimate Budget operating surplus 159.9 244.5 321.0 304.4 547.3 Plus: Non-cash expenses (net) (a) 1 512.1 1 722.7 2 032.0 1 856.7 1 630.8 Net cash flow from operating activities 1 672.1 1 967.2 2 353.0 2 161.1 2 178.0 Plus: Net drawdown of Growing Victoria 648.3 653.3 56.9 4.5 .. infrastructure reserve Total cash available for asset 2 320.4 2 620.5 2 409.9 2 165.6 2 178.0 investment Less: Net investment in fixed assets (b) Expenditure on approved projects 2 300.9 2 660.8 2 047.4 1 237.7 1 040.3 Unallocated provision for future .. .. 640.3 1 016.4 1 406.3 allocation (c) Proceeds from asset sales - 76.1 - 66.7 - 59.9 - 53.2 - 44.2 Total net investment in fixed assets 2 224.8 2 594.1 2 627.8 2 200.9 2 402.4 Other investment activities (net) - 3.9 - 5.7 - 3.7 443.6 10.6 Decrease in net debt (excluding 99.5 32.1 - 214.3 - 478.9 - 235.0 Growing Victoria) Source: Department of Treasury and Finance Notes: (a) Includes depreciation and increase in unfunded superannuation liability and increase in liability for employee benefits. (b) Includes net contribution to other sectors of government. (c) Includes Better Roads Victoria funding not allocated to specific projects.
42 Chapter 2 Budget Statement 2003-04
With the Growing Victoria infrastructure reserve almost fully utilised by the end of 2003-04, infrastructure investments of $2 410 million per annum averaged over the 2004-05 to 2006-07 period are largely financed by cash flow from operating activities averaging $2 231 million over this period. The balance is financed by additional debt of a little over $150 million per annum. A larger $479 million increase in debt is recorded in 2005-06 reflecting the equivalent increase in assets and liabilities flowing from the completion and handover to the State of the Partnerships Victoria Spencer Street Station redevelopment project. Table 2.7 also sets out the provision for future capital investment projects through unallocated capital. This provision rises from $640 million in 2004-05 through to $1 406 million in 2006-07.
Budget Statement 2003-04 Chapter 2 43 44 Chapter 2 Budget Statement 2003-04
CHAPTER 3: ECONOMIC CONDITIONS AND OUTLOOK
• The Victorian economy has performed well, with growth exceeding the national average by almost one percentage point per annum over the five years to 2001-02. Growth in gross state product per capita over this period has been the strongest of all States. • Business investment has been particularly strong in Victoria, with the State attracting a record share of national investment over the past two years. • However, the drought and weak global economy are cutting Victorian exports. Coupled with robust import growth, this is expected to substantially reduce Victoria’s recorded growth rate in 2002-03, despite continued strength in business investment and housing. • Victorian economic growth is now estimated at 2.75 per cent in 2002-03. For 2003-04, growth is forecast to rebound to 3.75 per cent, underpinned by an assumed ending of the drought and gradual improvement in global conditions. • The Victorian labour market recorded strong gains in 2002-03, with the unemployment rate at a 13-year low. Leading indicators point to further gains in employment in 2003-04.
VICTORIAN ECONOMIC PROJECTIONS The economic projections used in the 2003-04 Budget are set out in Table 3.1. As usual, these have been prepared on a no policy change basis. This chapter contains a description of Victoria’s recent and prospective economic performance, the external economic environment and a discussion of key developments in the Victorian economy. The discussion covers the State’s recent labour market performance, population trends, the impact of the drought and, related to this, recent trends in Victorian exports. An assessment of the major risks to the economic projections is included in Chapter 8, Statement of Risks. Budget Statement 2003-04 Chapter 3 45 Table 3.1: Victorian economic projections(a) ($ million) 2001-02 2002-03 2003-04 Actual Forecast Forecast Real gross state product 4.9 2.75 3.75 Employment 1.1 2.25 1.00 Unemployment rate (b) 6.3 5.75 5.75 Consumer price index 2.8 3.00 2.25 Wage cost index (c) 3.5 3.75 3.50 Population (d) 1.4 1.20 1.10 Source: Australian Bureau of Statistics; Department of Treasury and Finance Notes: (a) Year-average per cent change on previous year unless otherwise indicated. All projections apart from population are rounded to the nearest 0.25 percentage point. (b) Year-average level, per cent. (c) Total hourly rate excluding bonuses. (d) June quarter, per cent change on previous June quarter. Based on ABS Series R projections.
VICTORIAN ECONOMIC CONDITIONS AND OUTLOOK The Victorian economy has continued its record of solid growth outcomes, with growth averaging 4.8 per cent per annum over the five years to 2001-02. This is well above the corresponding national average increase of 3.9 per cent. In per capita terms, growth in gross state product (GSP) has been the strongest of all the States (see Chart 3.1). Domestic demand has been the key factor behind this outperformance, with consumer spending, business investment and housing construction all contributing strongly to growth in recent years. The picture for 2002-03 is similar to recent years in that domestic demand will again make a strong contribution to growth. However, data for the year to date indicate a sizeable reduction in net exports which will substantially reduce Victoria’s recorded growth rate for the year. The drought and sluggish global growth are having a negative impact on Victoria’s exports, with robust import growth further reducing the State’s overall trade position. The drivers of demand growth in the current financial year have also changed somewhat, with emphasis shifting towards business investment and away from consumer spending.
46 Chapter 3 Budget Statement 2003-04
Chart 3.1: Economic growth rates, five-year averages(a)
6.0
5.0
4.0
3.0
2.0
1.0 Average annual growth (per cent)
0.0 NSW Vic Qld SA WA Tas Aust
GSP GSP per capita
Source: Australian Bureau of Statistics Note: (a) Average annual growth rate in the five years to 2001-02.
After several years of strong growth, a moderation in consumer activity was not unexpected, although it has occurred a little earlier than forecast. Retail turnover in Victoria slowed noticeably in the second half of 2002, due in part to a moderation in spending on household goods. This component of retail turnover experienced record growth in 2001-02, underpinned by a booming housing market, rising household wealth and low interest rates. Consumer spending will remain a contributor to growth over the coming year, although not as strongly as in recent years. Housing construction remains robust in Victoria and nationally. Most analysts originally expected construction to decline by mid 2002, as pent-up demand was met, the Commonwealth New Home Grant expired and (as forecast at the time) interest rates were gradually increased. However, dwelling investment rose further in the second half of 2002, pointing to another solid contribution to growth in 2002-03. Nevertheless, forward indicators of residential construction in Victoria suggest that the cycle has peaked, with a decline in dwelling investment anticipated in 2003-04. There is also some evidence that the strong gains in Melbourne house prices have begun to moderate. According to Real Estate Institute of Australia data, the median house price in Melbourne rose 6.0 per cent over the year to
Budget Statement 2003-04 Chapter 3 47 December 2002, well below the 28.6 per cent recorded in Sydney. After briefly approaching the Sydney median price in mid 2001, the gap between Sydney and Melbourne prices has widened again, increasing the relative affordability of property in Melbourne (see Chart 3.2).
Chart 3.2: Housing affordability(a)
10.0
9.0
8.0
7.0
6.0 number of years 5.0
4.0
3.0 Dec-87 Dec-90 Dec-93 Dec-96 Dec-99 Dec-02
Melbourne Sydney
Source: Real Estate Institute of Australia; Australian Bureau of Statistics Note: (a) Median house price expressed as a multiple of annual full-time average weekly ordinary time earnings.
Business investment has been a strong area for Victoria (see Chart 3.3), and data for the 2002-03 year to date indicate another solid performance. Victoria has attracted more than its share of capital, accounting for an average 27.0 per cent of national business investment over the past two years, a record high for the State. This is above Victoria’s population and economic share, particularly given the small representation of mining in the State’s industry base. Per capita business investment in Victoria has exceeded the national average in each of the past four years. There is a reasonable pipeline of non-residential and engineering construction work to be done in Victoria, providing a solid basis for continued growth in business investment. Public sector investment has also picked up and will remain at relatively high levels over the next few years.
48 Chapter 3 Budget Statement 2003-04
Chart 3.3: Comparative state business investment(a)
6000
5500 WA Vic 5000
Aust 4500
Qld SA $ per capita 4000
NSW 3500
3000 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Average annual growth (per cent)
Source: Australian Bureau of Statistics Note: (a) Business investment data are in trend, chain volume terms (2000-01 prices). Trend data abstract from major second-hand asset sales from the public to private sector. The per capita estimate is for calendar 2002, while the average growth rate is for the five years to 2002.
Partly offsetting this positive demand story is the weakness in Victoria’s net exports position. After holding up well in the first half of 2002, Victoria’s merchandise export volumes fell sharply in the second half of the year, with a decline of 3.6 per cent relative to the same period one year earlier. As discussed later in this chapter, this reflects both the impact of the drought and weak global economic conditions. Over the same half-year period, merchandise imports rose by 18.5 per cent. The strength of business investment is likely to have been a key factor behind the surge in imports. The result of these divergent trends is a noticeable deterioration in Victoria’s merchandise trade balance (see Chart 3.4). Based on financial year data to date, net exports could detract more than 3 percentage points from Victorian economic growth in 2002-03, which would be the largest negative trade contribution since at least 1989-90 (the start of comparable records). The return to normal seasonal conditions and an improvement in global growth, coupled with some moderation in demand growth, is expected to see net exports provide a solid contribution to growth in 2003-04.
Budget Statement 2003-04 Chapter 3 49 Chart 3.4: Merchandise trade volume balance(a)
0
-1
-2
-3
-4 $ billion per quarter
-5
-6 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02
Source: Australian Bureau of Statistics Note: (a) Quarterly data, seasonally adjusted chain volume measure (2000-01 prices). The graph shows the excess of imports over exports.
Overall, economic growth in Victoria is now expected to be 2.75 per cent in 2002-03, down from the January estimate of 3.25 per cent in the 2002-03 Budget Update. The main contributor to the downward revision has been the deterioration in the net exports position, although weak consumer spending in the first half of the year has also played a role. The forecast for 2003-04 is unchanged at 3.75 per cent, which is based on the assumption that the drought breaks and the global economy improves over the course of the year. The other major change to Budget Update forecasts has been to employment growth. Employment is now expected to grow by 2.25 per cent in year-average terms in 2002-03 (up from 1.5 per cent at Budget Update), while growth of 1.0 per cent is forecast for 2003-04 (down from 1.5 per cent). A more comprehensive discussion of the labour market is included later in this chapter.
50 Chapter 3 Budget Statement 2003-04
WORLD AND AUSTRALIAN ECONOMIC ENVIRONMENT The global economy experienced some improvement in calendar 2002, led by solid growth in non-Japan Asia. The major economies of the United States, the European Union and Japan generally continued to disappoint, and expectations for growth in 2003 have been progressively lowered. The US economy grew by 2.4 per cent in 2002 (0.3 per cent in 2001), supported by consumer spending, government expenditure and inventory accumulation. This was partly offset by negative contributions from net exports and business investment. After a solid September quarter, growth in the US economy slowed again in the December and March quarters. Activity in the European Union has been sluggish, particularly in Germany where the economy barely moved ahead in 2002. Key EU economic indicators weakened further in the December quarter, prompting the European Central Bank to reduce official interest rates in late 2002 and March 2003. The subdued start to 2003, the military conflict in Iraq and the severe acute respiratory syndrome (SARS) have heightened analysts’ concerns about the outlook for the global economy in the first half of 2003. Despite this, most forecasters still expect a somewhat stronger global economy in 2003 than the previous year. According to the April 2003 Consensus Economics survey, world economic growth is forecast to improve from 1.8 per cent in 2002 to 2.1 per cent in 2003, with a further step up to 3.0 per cent in the following year. The 2003 forecast has been lowered in recent months (from around 3 per cent over most of 2002), reflecting geopolitical concerns and some renewed weakness in global activity. The latest forecasts for Victoria’s major trading partners are shown in Chart 3.5. This suggests reasonable growth in most of Victoria’s key markets in 2003, with strong performances by China and South Korea. The rapid spread of the SARS has, however, prompted a downgrade to growth prospects for Hong Kong and Singapore, and is leading to a reassessment of the outlook for other East Asian economies. These global forecasts implicitly assume that the conflict in Iraq has been largely resolved. Aside from the impacts on business and consumer sentiment and financial markets, the oil price is another key factor in this assumption. The consensus estimates assume an oil price of US$26 per barrel by mid-2003 and around US$25 in early 2004. If the oil price again spikes higher, growth expectations for 2003 would likely be reassessed.
Budget Statement 2003-04 Chapter 3 51 Chart 3.5: Consensus growth forecasts for Victoria’s key trading partners(a)
10.0
8.0
6.0
per cent 4.0
2.0
0.0 United New Zealand Japan China South Korea Saudi World States Arabia
2002 2003 2004 Source: Consensus Economics, London Note: (a) The world growth forecast is a weighted average using 2000 GDP weights, converted at average 2000 exchange rates.
The Australian economy has again proved resilient in the face of global weakness, growing by 3.5 per cent in calendar 2002 (4.1 per cent excluding the farm sector). The strength of the economy is evident in domestic demand, with growth of 6.3 per cent in 2002 the strongest since 1989. As in Victoria, demand has been underpinned by consumer spending, business investment and housing construction, although Victorian consumers became more cautious than those in other States in the second half of 2002. The national outlook is also likely to be driven by much the same factors influencing Victoria – weakness in net exports in the near term, followed by a recovery as the drought breaks, moderated by a downturn in the housing cycle. Private sector estimates of national economic growth in 2002-03 are centred on 3.2 per cent, with the drought generally expected to reduce growth by around 1 percentage point. Estimates for 2003-04 are for growth in the order of 3.5 per cent. The Commonwealth Treasury, in its Mid-Year Economic and Fiscal Outlook (November 2002), forecast growth of 3.0 per cent in 2002-03 and 4.0 per cent in 2003-04.
52 Chapter 3 Budget Statement 2003-04
The Reserve Bank of Australia has left official interest rates unchanged since June 2002, at 4.75 per cent, following a brief 50 basis points tightening cycle. Financial market commentators generally expect interest rates to remain on hold for most of 2003, although a small number expect a return to lower interest rates in the second half of the year.
RECENT ECONOMIC ISSUES IN VICTORIA This section provides an overview of key aspects of Victoria’s recent economic performance. It includes a discussion on the impact of the drought, and the performance of exports more generally, as well as population trends and Victoria’s recent labour market performance.
The drought One of the key factors impacting on economic growth for the Victorian (and national) economy has been the current drought, which is one of the worst on record. Droughts have a direct negative impact on the agriculture industry, and negative ‘flow-on’ effects to other industries as farmers cut their spending. In February 2003, the Australian Bureau of Agricultural and Resource Economics (ABARE) assessed the likely direct impact of the drought on agricultural production to be: • a 61 per cent decline in national winter crop production, which includes the major crops of wheat, barley and canola, the smallest harvest since 1982-83; • a 62 per cent decline in national summer crop production, which includes production of sorghum, rice, cottonseed and maize (predominantly located in New South Wales and Queensland); and • declines in the production of wool and (particularly important in Victoria) milk over 2002-03. In terms of regional differences, the latest ABARE information suggests that the New South Wales and Victorian agricultural industries are the most adversely affected by the drought. This is in contrast to ABARE’s previous estimates in August-September 2002 when Victoria was expected to be one of the least affected States (see Table 3.2). ABARE’s February estimates show a further downward revision to estimates of crop production in Western Australia, South Australia and New South Wales. Victorian winter crop production is forecast to be around 1.72 million tonnes in 2002-03, 69 per cent below the previous year’s crop with all major crops (wheat, barely and canola) adversely affected. ABARE suggests all the major cropping
Budget Statement 2003-04 Chapter 3 53 areas of Victoria except the southwest regions are suffering from poor growing conditions.
Table 3.2: Estimated change in 2002-03 winter crop production, per cent(a) Date of estimate NSW Vic Qld SA WA Aust August 2002(b) -30 -14 -4 -33 -28 -28 September 2002 -56 -38 -18 -34 -38 -41 October 2002(b) -76 -68 -26 -50 -42 -57 December 2002 -72 -70 -38 -55 -41 -56 February 2003 -77 -69 -39 -58 -49 -61 Source: Australian Bureau of Agricultural and Resource Economics; Department of Treasury and Finance Notes: (a) Estimates are for 2002-03, per cent change from 2001-02 (volume of production). (b) Top three crops only (wheat, barley and canola). These three crops account for more than 85 per cent of Victorian winter crop production.
Estimates of the direct and indirect impact of the current drought on national economic growth generally imply a reduction in national growth in 2002-03 of between 0.75 and 1.75 percentage points. Applying the latest ABARE production forecasts to the Monash Multi-Regional Forecasting general equilibrium model, Victorian Treasury obtained estimates of the national impact at the upper end of this range, and a Victorian impact of 1.25 percentage points of GSP. The direct effect on Victoria (reflecting the decline in the output of the agriculture industry) is estimated to be a little over half of this impact, with the remaining decline in output due to indirect or flow-on effects for other industries (such as transport, trade and services). The latest reports from the Bureau of Meteorology state that most climatic indicators show that the El Niño is almost finished, with computer predictions pointing to neutral conditions in the Pacific Ocean by mid year.
Export growth One of the more obvious impacts of the drought has been the recent performance of Victoria’s merchandise exports. The overall export picture is fairly subdued, with pockets of strength in some commodities offset by weakness in many rural goods. Selected manufactured exports have also been negatively affected by the subdued global economy. The value of Victorian exports was $21.1 billion in 2002, a fall of 7.3 per cent on the previous year. All the major export groupings recorded a decline last year, although the largest falls were in elaborately transformed manufactures (ETMs) and food exports. As shown in Chart 3.6, the fall in food exports has been quite 54 Chapter 3 Budget Statement 2003-04
recent, while the annual value of ETM exports has been declining since around late 2001. Reflecting the impact of the drought on crop production, exports of cereals recorded the largest fall in the food category in 2002, down 36 per cent. With cereal prices rising, the volume impact is likely to have been even larger. Exports of dairy products and meat also declined in the past year. Wool has been one notable exception to the rural gloom, with the value of wool exports rising over the past year. The decline in ETM exports is indicative of the subdued global economy, with the value of most major ETM products falling in the past year. Of the major exports, road vehicles recorded the smallest decline last year and have remained at high levels. The value of road vehicle exports has risen almost 70 per cent in the past three years, compared to an increase of 21 per cent for total Victorian exports.
Chart 3.6: Value of exports by category(a)
7.0
6.0
5.0
4.0 $ billion 3.0
2.0
1.0 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02
ETMs Food STMs Other primary
Source: Australian Bureau of Statistics Note: (a) Annual data, current prices. ETMs refers to elaborately transformed manufactures and STMs refers to simply transformed manufactures.
By major destination, the largest fall in exports in 2002 was to the Middle East, reflecting the decline in rural production and lower road vehicle exports to this region, with exports to the United States also down in the year. In contrast, exports to New Zealand and China rose in 2002, the latter to record high levels.
Budget Statement 2003-04 Chapter 3 55 A return to normal seasonal conditions and gradual global recovery are expected to see a resumption of export growth over the coming year.
The labour market The Victorian labour market has performed strongly in 2002-03, a delayed response to the strength of demand over the past year or so (see Chart 3.7). However, the recent strength in employment is also partly a reflection of recent structural changes to the ABS series, following a re-basing of the population sample for the 2001 Census. Recent movements in employment therefore need to be treated with caution as the sample rotation is creating some volatility in the data. The introduction of the new sample has coincided with a large increase in measured employment across most States.
Chart 3.7: Number employed(a)
2450 9800
2400 9600
2350 9400
2300 9200
2250 9000 '000 persons 2200 8800
2150 8600
2100 8400 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03
Victoria (LHS) Australia (RHS)
Source: Australian Bureau of Statistics Note: (a) Monthly seasonally adjusted data.
Victorian employment grew by 1.3 per cent in the March quarter 2003 (seasonally adjusted), the second strongest quarterly increase since mid 1995. Employment in the 2002-03 year to date is currently 2.5 per cent above its level in the same period one year earlier. Overall, year-average employment growth is now expected to be 2.25 per cent in 2002-03, a sizeable upgrade from the 1.5 per cent expected in the January 2003 Budget Update. 56 Chapter 3 Budget Statement 2003-04
ABS industry data suggest that the strongest growth in Victorian employment over the past year or so has been in construction, retail trade, education, government administration and, to a lesser extent, property and business services. Employment in communication services, transport/storage and manufacturing has declined, while employment in the agriculture sector, not surprisingly, has fallen sharply since mid 2002. The strength in aggregate employment will see the Victorian unemployment rate fall to an average of 5.75 per cent in 2002-03, the lowest rate since 1989-90 (see Chart 3.8). The participation rate is set to average around 63.75 per cent, similar to the previous two years.
Chart 3.8: Unemployment rate(a)
8.5
8.0
7.5
7.0
per cent 6.5
6.0
5.5
5.0 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03
Victoria Australia
Source: Australian Bureau of Statistics Note: (a) Monthly seasonally adjusted data.
For 2003-04, only modest employment growth is expected in the early part of the year. Forward indicators, such as the ANZ job ads series, skilled vacancies and surveys of business sentiment, suggest a more cautious attitude to hiring intentions has emerged. With minimal growth expected in the early part of the 2003-04 financial year, Victorian employment growth is now expected to be 1.0 per cent in year-average terms, compared with 1.5 per cent in the Budget Update. With softer employment growth, the participation rate is expected to be slightly lower, leaving the unemployment rate unchanged at 5.75 per cent in year-average terms.
Budget Statement 2003-04 Chapter 3 57 Wages growth has remained subdued over the past year despite the solid growth in employment. The wage cost index (WCI) is expected to increase by 3.75 per cent in 2002-03, up slightly from 3.5 per cent at Budget Update but still relatively low by historical standards. For 2003-04, the WCI is expected to increase by 3.5 per cent.
Population trends As at 30 September 2002, Victoria’s total population was 4 888 234 persons. Over the past year, the population grew by 1.4 per cent (or 66 779 persons), above the national increase (1.3 per cent) and well above the State’s long-term average of around 1.0 per cent. While the largest contribution to growth has come from net overseas migration and natural increase, net interstate migration has been an important contributor to Victoria’s population growth in recent years.
Chart 3.9: Interstate migration flows(a)
100
80
60
40
20 '000s persons 0
-20
-40 Sep-90 Sep-92 Sep-94 Sep-96 Sep-98 Sep-00 Sep-02
Net interstate Arrivals Departures
Source: Australian Bureau of Statistics Note: (a) Annual original data.
The significant turnaround in Victoria’s net interstate migration position, as shown in Chart 3.9, has been both a contributor to, and a sign of, Victoria’s improving economy. Over the past three years, the annual net inflow from interstate has averaged almost 5 500 persons; in the three years to 1994-95, the peak of the outflow, net interstate departures averaged almost 26 000 per annum.
58 Chapter 3 Budget Statement 2003-04
The turnaround in net interstate migration reflects an increase in arrivals to Victoria as well as a reduced number of departures. Over the past three years, Victoria and Queensland were the only States or Territories to record a net interstate inflow (the Australian Capital Territory recorded a net inflow in 2000-01 only). The States experiencing the largest outflows in the past three years, in outright terms, were New South Wales and Western Australia. In relative terms, the Northern Territory and Tasmania recorded the largest outflows. ABS data show that in net terms, arrivals from New South Wales accounted for the largest share of Victoria’s migration gains over the past three years (see Chart 3.10). This was followed by South Australia, Western Australia and Tasmania. Victoria experienced a net outflow only to Queensland.
Chart 3.10: Net interstate migration to Victoria by State and Territory(a)
4,000
3,000
2,000
1,000
persons 0
-1,000
-2,000
-3,000 NSW Qld SA WA Tas NT ACT
1999-00 2000-01 2001-02
Source: Australian Bureau of Statistics Note: (a) Annual original data.
Interestingly, recent data suggest that the net inflow from some States may be easing. In the September quarter 2002, Victoria recorded its smallest net interstate migration gain in four years. It is unclear yet as to whether this is the beginning of a softer trend. The forward population estimates contained in Table 3.1 and elsewhere in this paper assume some easing in the rate of net interstate inflow as well as lower net overseas inflow and natural increase. The projections are based on the ABS Series R assumptions, although some minor adjustments have been made to
Budget Statement 2003-04 Chapter 3 59 allow for the fact this series is now almost three years old (updated ABS estimates are expected around August 2003). The Series R estimates assume net interstate migration eases to an annual gain of 2 000 persons in the next two years, down from current levels of around 5 000 persons. The economic factors that have supported the positive inflow into Victoria remain favourable, with solid economic and employment growth and an unemployment rate below the national average. On the negative side, high levels of Victorian metropolitan housing prices may encourage some movement to locations with relatively cheaper accommodation. That said, the median house price in Melbourne remains below that of Sydney (with the gap widening again after narrowing in 2001 – see Chart 3.2), and after several years of outperformance, house price gains in Melbourne over the past year were lower than in any other capital city. At this point, the Series R assumptions still appear reasonable regarding interstate migration over the forward estimates period. While below recent levels, a gain of 2 000 persons per annum would provide a small boost to population and economic growth over the forward estimates period.
60 Chapter 3 Budget Statement 2003-04
CHAPTER 4: BUDGET INITIATIVES
• The 2003-04 Budget delivers on the Government’s election commitments and builds on the Government’s record of achievements during its first term in office. • The Growing Victoria Together framework continues to underpin the Government’s endeavours to grow the whole State while balancing economic, social and environmental goals. • Key new initiatives of the 2003-04 Budget include: – $789 million over four years, as well as asset investment of $137 million TEI, to value and invest in lifelong education; – $1.9 billion over four years, as well as asset investment of $357 million TEI, to ensure the provision of high quality, accessible health and community services; – $261 million over four years, as well as asset investment of $106 million TEI, to make streets, homes and workplaces safe; – $278 million over four years, as well as asset investment of $273 million TEI, to grow and link all of Victoria through building effective road, rail, bus and port infrastructure; – $60 million over four years in output initiatives to create more jobs and thriving innovative industries across Victoria; – $208 million over four years, as well as asset investment of $121 million TEI, to promote sustainable development and protect the environment for future generations; – $316 million over four years towards building cohesive communities and reducing inequalities; and – administrative efficiencies across departments to achieve ongoing savings of over $140 million per year and revenue initiatives generating $85 million in 2003-04, rising to $182 million in 2006-07, as part of the commitment to sound financial management.
Budget Statement 2003-04 Chapter 4 61 GROWING VICTORIA TOGETHER The Government’s vision is that Victoria will be a place where:
• innovation leads to thriving and competitive industries, creating high quality jobs;
• protecting the environment for future generations is built into everything Victorians do;
• there are caring and safe communities with equitable opportunities; and
• all Victorians have access to the highest quality health and education services throughout their lives. Growing Victoria Together encapsulates the Government’s vision and identifies the key strategic areas that will lead and direct government decision-making. These key areas are:
• valuing and investing in lifelong education; • high quality, accessible health and community services; • safe streets, homes and workplaces; • growing and linking all of Victoria; • more jobs and thriving, innovative industries across Victoria; • protecting the environment for future generations and promoting sustainable development; • building cohesive communities and reducing inequalities; • government that listens and leads; • promoting rights and respecting diversity; and • sound financial management. Working together with Victorian communities and business, the Government has made considerable progress towards achieving its aims and objectives. The 2003-04 Budget builds on these foundations and continues to use the Growing Victoria Together framework to focus on jobs, communities, health, education and innovation. This chapter highlights the key budget proposals within the broader context of Growing Victoria Together and the Government’s efforts and achievements to date. In Chapter 7, Election Commitments – Implementation Report Card, the Government reports on its achievements in meeting its 2002 election commitments. In addition, the Government reports on its progress against the measures identified in Growing Victoria Together in Appendix G, Growing Victoria Together Progress Report.
62 Chapter 4 Budget Statement 2003-04
VALUING AND INVESTING IN LIFELONG EDUCATION A strong education system is vital to Victoria’s future. In its second term, education will continue to be the Government’s number one priority. Since coming to office, the Government has invested significantly to ensure that every Victorian has lifelong access to educational opportunities that provide them with the knowledge and skills to secure high quality jobs and reach their full potential.
Education goals and targets In 2000, the Government established three key targets to provide Victorians with a measure of how the education system is achieving results and providing quality education:
• by 2005, Victorian primary school children will be at or above national benchmark levels for reading, writing and numeracy;
• by 2005, the proportion of young people aged 15-19 years in rural and regional Victoria engaged in education and training will rise by 6 per cent; and
• by 2010, 90 per cent of young people in Victoria will successfully complete year 12 or its equivalent. Since coming to office, the Government has committed over $800 million total estimated investment (TEI) to asset investment, provided over 3 000 extra teachers and staff, and built 16 new schools and five replacement schools. Chart 4.1 shows the significant increase in funding for education and training since 2000-01.
Budget Statement 2003-04 Chapter 4 63 Chart 4.1: Education and training expenditure – outputs and assets
8 500 8 000 7 500 7 000 6 500 $ million 6 000 5 500 5 000 2000-01 2001-02 2002-03 2003-04
Operating expenditure Purchases of fixed assets
Source: Department of Treasury and Finance
As a result of this investment, the Government is making significant progress towards achieving its targets. Key achievements include:
• between 89.0 per cent and 94.7 per cent of years 3 and 5 Victorian primary school students achieving at or above national benchmarks in reading and numeracy in 2001;
• approximately 90 per cent participation in education and training by 15-19 year olds in rural and regional Victoria during 2001; and
• the percentage of 18-24 years olds with year 12 or equivalent qualifications increasing from 80 per cent in 1999 to 82.4 per cent in 2002. In addition, the Government has achieved its goal of reducing average prep to year 2 class sizes from 24.3 students in 1999 to 21.0 in 2003 (see Chart 4.2).
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Chart 4.2: Average class sizes – prep to year 2
25
24
23
22 average number of students number average
21
20 1999 2000 2001 2002 2003 Source: Department of Treasury and Finance
While progress toward the goals and targets to date is encouraging, the Government recognises the many challenges still facing Victoria’s education system. To address these challenges and to meet additional demand pressures, the Government will develop a comprehensive strategy commencing in 2003-04. The strategy will comprise five key elements: • a ministerial announcement in 2003 of an over-arching strategy for school education that reinforces the importance of excellence and innovation; • improved targeting of resources to make best use of funding currently allocated within the education and training system; • implementation of initiatives to improve educational outcomes in schools consistent with the Government’s strategy A Better Reporting and Accountability System for Schools released in October 2002; • improved resourcing and rigorous accountability mechanisms to support the Government’s objectives; and • implementation of a workforce strategy that focuses on quality and excellence to improve educational outcomes. To implement these reforms, the Government will ensure resources are best used to strengthen service delivery capacity and outcomes within the system to achieve the Government’s goals and targets.
Budget Statement 2003-04 Chapter 4 65 Implementation of the strategy will involve new funding of $414 million over four years ($82 million in 2003-04, rising to $116 million in 2006-07). This new funding is in addition to output funding of $375 million over four years and asset investment of $137 million TEI set out below, including election commitments commencing in 2003-04. Key strategies in education and training The 2003-04 Budget continues the Government’s commitment to making education and training its highest priority. The Government will spend an additional $375 million over four years in output funding and $137 million TEI in assets to implement an integrated strategy focusing on excellence and innovation in education, improving access and expanding opportunities, and better schools and community assets. Priority initiatives include:
• excellence and innovation in education: - $82 million over four years for 450 additional secondary teachers to support specialisation and excellence in schools; - $51 million over four years for a completion bonus for employers of apprentices and trainees, to ensure the labour market is supplied with a highly skilled workforce; - $10 million TEI for state-of-the-art facilities to cater for innovative teaching programs in secondary schools and to commence planning work for two rural learning campuses; - $12 million TEI for Technical and Further Education (TAFE) institutes to upgrade teaching equipment and to keep pace with new and emerging technological changes; and - $6 million over four years to boost programs for the teaching of languages other than English.
• improving access, expanding opportunities: - $50 million over four years for 256 student welfare coordinators in primary schools to support students at risk; - $70 million over four years to assist non-government schools in greatest need; and - $5.5 million TEI for the next stages of the Maryborough and Gippsland Education Precincts. • better schools and community assets: - $107 million TEI to modernise existing schools, build new schools in population growth areas, and rebuild schools damaged by fires. 66 Chapter 4 Budget Statement 2003-04
Excellence and innovation in education and training The Government has made significant progress in lifting participation rates and educational outcomes. The Government is determined to build on these achievements in its second term by ensuring Victorians have the opportunity to access quality education and training pathways that promote excellence and support an innovative and competitive economy. A key initiative aimed at developing excellence and innovation is Investing in Teachers to Support Excellence. The Government will commit $82 million over four years for 450 additional secondary school teachers to increase the participation of later-years students in specialist programs for excellence. These programs will enable schools to better identify and respond to community diversity, tailoring specialist areas of education to best meet community needs. Investing in Teachers to Support Excellence will be supported by asset investment of $10 million TEI to provide state-of-the-art facilities and equipment in secondary schools. Good leadership improves school performance and student outcomes. The Government is committing $2.3 million over four years to deliver professional development programs for school principals and provide guidance and support for school leaders. This builds on the Government’s establishment of the Victorian Institute of Teaching in 2001. A skilled workforce is vital for Victoria’s future economic growth. The Government is committed to ensuring that Victorians acquire the right skills and qualifications they need to secure high quality jobs. While working towards improving Victoria’s school retention rates, the Government is conscious of the need to provide a variety of pathways to encourage young Victorians to remain in education and training. The 2003-04 Budget directs $60 million over four years and $12 million TEI in asset investment into initiatives aimed at refocusing and retargeting Victoria’s training programs. The Government is removing the payroll tax exemption for wages paid to trainees and apprentices and replacing it with a new completion bonus scheme, which will pay a bonus to eligible employers when trainees and apprentices complete their qualifications. From 1 July 2003, employers with three or more new employee apprentices and trainees in training, who are aged under 25 years at commencement, will qualify for the bonus (excluding Commonwealth and State Government employers). Transitional arrangements will be put in place for existing trainees and apprentices.
Budget Statement 2003-04 Chapter 4 67 The new completion bonus scheme will reward employers who take on trainees and apprentices in good faith and boost the level of completions of traineeships and apprenticeships. Alongside the completion bonus scheme, the Government is providing additional funds to refocus employment, training and vocational education programs to target specific needs in the Victorian labour force, meet increased demand for alternative vocational education and training (VET) pathways in schools and improve opportunities for Victorians to acquire in-demand skills and qualifications. Specific training initiatives include:
• $3.5 million over four years to address the growing demand from young Victorians for alternative VET pathways and support the Government’s target of 90 per cent of young Victorians completing year 12 or its equivalent by 2010;
• $12 million TEI to upgrade obsolete equipment in TAFE institutes, to ensure Victorians have the opportunity to acquire skills relevant to priority emerging and established industries; and
• $5 million over four years for a new Skill-Up program to assist 4 200 redundant workers access training opportunities. These measures are part of a broader reform strategy, aimed at meeting the Government’s targets in education and training. Details of employment programs are outlined later in this chapter under Building Cohesive Communities and Reducing Inequalities. The Government believes curriculum diversity is a key pillar of a quality education system. The 2003-04 Budget provides $6 million over four years to support excellence in languages. The initiative will fund:
• three new Centres of Excellence in Languages in secondary schools;
• five additional Victorian School of Languages centres in regional Victoria;
• development of online teaching materials for language students in years 7 to 9;
• increased grants to after-hours ethnic schools; and
• opportunities for teachers in regional areas to retrain as language teachers. The Government will commit $4.8 million over four years to implement the On Track program. On Track will provide an integrated follow-up and assistance program for young people by tracking student progress six months after leaving school and assisting with career planning.
68 Chapter 4 Budget Statement 2003-04
Improving access, expanding opportunities The Government remains committed to reducing educational disadvantage and giving all Victorians the opportunity to achieve their personal best regardless of their circumstances or location. A key aspect of improving access to education is preventing the disengagement and alienation of students from the education system. The Government is committing $50 million over four years for 256 student welfare officers in primary schools to support students at risk by addressing behavioural problems, implementing learning and management strategies, and establishing partnerships with other community support services. This initiative complements the secondary school welfare coordinators introduced in 2000-01. The Government will provide an additional $5 million over four years to establish the Advance Youth Development Program, which will extend the Victorian Youth Development Program to all government secondary schools, increasing opportunities for students to be involved in activities that promote youth leadership, community participation and volunteerism. Further funding of $96 million over four years is also provided for the disabilities program, which supports government school students with special education needs. To improve access to education and training in rural Victoria, the 2003-04 Budget provides a further $3.5 million TEI to continue construction of the Maryborough Education Precinct, a specialised learning environment integrating primary and secondary schools and a TAFE college on one campus. In addition, $2 million TEI is also provided to complete the Gippsland Education Precinct. The Government recognises that the non-government school sector plays an integral role in Victoria’s education system. The 2003-04 Budget commits $70 million over four years to assist non-government schools in greatest need, including improving access to the Government’s VicONE internet portal.
Better schools and community assets Careful asset maintenance, including ongoing refurbishment and modernisation, is an essential feature of a world-class education system. The 2003-04 Budget provides a further $107 million TEI for the building, replacement, upgrade and modernisation of Victoria’s learning institutions including:
• $52 million TEI for the modernisation of 38 schools across the State;
• $30 million TEI for the completion of six new schools scheduled to open in 2005, including Mount Erin Secondary College (Somerville Campus), Caroline Springs Town Centre, Lynbrook Primary School, Roxburgh College, Roxburgh Park North Primary School and Strathaird Primary School;
Budget Statement 2003-04 Chapter 4 69 • $12 million TEI for schools that were damaged or destroyed by fire, including Boronia Primary School, Hurstbridge Primary School, Mount Waverley Secondary College and Wodonga High School Flying Fruit Fly Circus Campus;
• $8.1 million TEI to progress stage two construction of Bellarine Secondary College and Carrum Downs Secondary College; and
• $5.1 million TEI to replace Rockbank Primary School, Carron Bank School and Traralgon Secondary College.
HIGH QUALITY ACCESSIBLE HEALTH AND COMMUNITY SERVICES The Government is committed to delivering high quality, accessible health and community services to all Victorians. Over the past three years, the Government has committed significant funding to rebuild Victoria’s health system. This includes rebuilding hospitals and aged care facilities, recruiting an extra 3 300 nurses back into health care, opening 12 new ambulance stations, providing over 260 new paramedics, and implementing strategies to respond to growing demand for health services. However, many challenges remain. These include:
• the need for services for an ageing population;
• ensuring the health system attracts and retains well-trained staff across all specialisations;
• providing the latest technology and procedures to all Victorians; and
• recognising the complexity of need in aged care, mental health, disability and child protection. The 2003-04 Budget builds on the improvements over the past three years and prepares Victoria’s health system for the demands of the future. The Government will work to promote healthier lifestyles and develop alternative models of care. Resources will be targeted to the needs of an ageing population and illnesses that are most prevalent in our society. These policies will provide the basis for delivering high quality health care for all Victorians. Key initiatives include:
• $464 million of the additional $890 million allocated to deliver the first stage of the Government’s continuing commitment to the Hospital Demand Management Strategy over four years;
• $75 million over four years to enhance disability services and support for people with a disability and their carers;
70 Chapter 4 Budget Statement 2003-04
• $176 million over four years to continue the successful Victorian Drug Strategy;
• $139 million TEI for the health information and communications technology (ICT) strategy to provide an upgraded and integrated information management system across the Victorian public health system;
• $88 million over four years to implement Children First, which will expand, improve and better integrate a range of children’s services from preschools to early childhood intervention and child protection;
• $67 million TEI to provide new biomedical and radiotherapy services and equipment; and
• $10 million TEI for the Werribee Mercy Hospital and $9 million TEI for the Dandenong Hospital for redevelopment and expansion works.
Better management of hospital demand Over the past three years the Government has been rebuilding the capacity of the hospital system to enable the treatment of more patients while maintaining a high quality of service. As a result, both waiting lists and ambulance bypasses have decreased. The 2003-04 Budget begins the next phase of the Hospital Demand Management Strategy, allocating $464 million of the additional $890 million allocated to this strategy, over four years to:
• create capacity for hospitals to treat more patients, with more beds and nurses;
• direct patients to more appropriate community-based care – from acute beds to more appropriate support such as rehabilitation and interim support for aged patients; and
• prevent unnecessary hospital admissions by targeting patients most at risk of multiple presentations to emergency departments (for example, the development of comprehensive community-based care for older, frail and chronically ill people focusing on cardiovascular and pulmonary disease, cancer, diabetes, asthma and mental illness to avoid emergency department presentations). The strategy will result in:
• 35 000 extra patient admissions treated in public hospitals each year;
• 47 000 extra people assisted at emergency departments each year; and
• 900 additional nurses and health care staff.
Budget Statement 2003-04 Chapter 4 71 Since its introduction in 2001-02, the Hospital Demand Management Strategy has improved the quality and effectiveness of Victoria’s public health system. Hospital waiting lists have decreased, more patients are being treated (see Chart 4.3), ambulance bypasses have been cut, waiting times in emergency departments have fallen, and prevention initiatives have decreased unnecessary and inappropriate hospital admissions resulting in better patient outcomes. Funding of $20 million over four years is provided to reduce elective surgery waiting lists in rural Victoria, targeting orthopaedics, ophthalmology and general surgery. This will result in approximately 1 650 additional patients being treated each year.
Chart 4.3: Patients treated in Victorian public hospitals
1 200
1 150
1 100
1 050
1 000 '000
950
900
850
800 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 (a) (b)
Source: Department of Human Services Notes: (a) Expected 2002-03 result. (b) Target for 2003-04.
Improved health care facilities across Victoria The Government is committed to giving Victorians access to a high quality health system, no matter where they live. Over the past three years the Government has invested strongly in rural Victoria, rebuilding health facilities, increasing nurses, and expanding health and ambulance services and public health programs.
72 Chapter 4 Budget Statement 2003-04
A key priority of the Government’s program is to meet the future demand for more hospital beds in Melbourne’s growing suburbs. The 2003-04 Budget provides:
• $10 million TEI for the Werribee Mercy Hospital to expand the emergency department and construct a purpose built 10-bed palliative care unit;
• $9 million TEI to continue Stage 2 redevelopment and expand the Dandenong Hospital;
• $8.5 million TEI to redevelop and refurbish Nhill Hospital to provide a 35-bed multi-purpose ward and day procedure unit, improved operating theatre suites and emergency department, and facilities for a range of allied health and community services;
• $3 million TEI to expand operating theatre and ward facilities at Moorabbin Hospital to increase elective surgery; and
• $2 million over two years for the planning and design stages of the redevelopment of Box Hill Hospital. Consistent with the Government’s commitment to drive innovation, the 2003-04 Budget provides $139 million TEI for a health ICT strategy. This initiative aims to provide a modern, technically advanced and leading edge hospital environment, where public hospitals and health agencies are able to share IT systems and knowledge, and lay the foundation for the electronic health records systems. Over the past three years the Government has invested $178 million TEI to ensure hospitals are using medical equipment that is well maintained and complies with Australian safety standards. The 2003-04 Budget provides:
• a further $22 million TEI for biomedical equipment and $16 million TEI for critical infrastructure works; and
• $29 million TEI to improve radiotherapy facilities. A new radiotherapy bunker will be built at the Monash Medical Centre and outdated radiotherapy equipment will be replaced at the Alfred and Austin Hospitals. This investment in new equipment and technology will help reduce waiting lists and improve patient outcomes. In addition, $10 million TEI is provided to continue the Fire Risk Management Strategy to ensure all facilities that are the responsibility of the Department of Human Services attain an acceptable level of safety from the risk of fire.
Budget Statement 2003-04 Chapter 4 73 Healthier communities The Government is not only focused on rebuilding the hospital system but is also committed to improving the health and wellbeing of the Victorian community. The Government recognises that illness prevention and health promotion programs play an important role in preventing disease while keeping people healthy and active in their communities. The 2003-04 Budget will continue to strengthen community health services to give Victorians access to a range of services to keep them healthy, active and independent and to avoid unnecessary hospital admissions. Key initiatives include:
• $11 million over four years to expand breast cancer screening services, enabling an extra 96 000 women to be screened;
• $21 million over four years to train an additional 20 dental therapists and to ensure those receiving public dental treatment continue to be provided with low cost dentures;
• $6 million over four years to attract and retain doctors, nurses, physiotherapists and other allied health workers in rural Victoria;
• $7 million over four years to provide grants to bush nursing hospitals to modernise their medical equipment and improve facilities;
• $4 million over four years to improve maternity services in rural hospitals;
• $6 million over four years for the Victorian Women’s Health and Wellbeing Strategy to fund initiatives such as the expansion of home support for mothers with a mental illness and improved counselling for women through the community health platform;
• $10 million over four years for programs of prevention, early detection and intervention to reduce the impact of obesity and diabetes;
• $176 million over four years to continue the successful Victorian Drug Strategy. Prevention, treatment and rehabilitation programs will continue and the Drugs Court pilot will continue to 2004-05;
• $63 million over four years for mental health services. In conjunction with the Hospital Demand Management Strategy, the Mental Health Strategy will increase the number of acute mental health beds and provide alternative forms of community care for Victorians with mental health issues;
74 Chapter 4 Budget Statement 2003-04
• $7 million TEI for the Mental Health Services for Kids and Youth program to expand its child and adolescent mental health services incorporating education, day programs and clinical support; and
• $30 million over four years to boost Victorian ambulance services. New stations will be established in Keilor Downs and Tooronga/Burwood and an additional crew located in Broadmeadows. Regional services will be boosted with additional paramedics at Bendigo (Kangaroo Flat) and Geelong, and upgraded services in Ballan, Omeo, Mallacoota, Maryborough, Kyabram, Cobram, Mansfield and Portland. Community emergency response teams will be established in five locations across Victoria.
Improving disability services The Government will continue to expand and improve the quality of and access to services for children and adults with disabilities as well as for their families and carers, investing $75 million over four years. The Victorian State Disability Plan 2002-2012 aims to improve the independence of people with disabilities and build an inclusive society where all people are encouraged and supported to participate in community life. The 2003-04 Budget provides:
• $34 million over four years for the Home First program, which will support an extra 200 people with a disability to live in their own homes;
• $5 million over four years to expand the Making a Difference program, which will provide support to an extra 300 families of children with a disability;
• $10 million over four years for an Older Years and Carer Support program to provide support to 700 aged carers and older people with a disability;
• $2 million over four years to establish the MetroAccess program, which will provide assistance to help people with a disability access services;
• $13 million over four years to improve individual planning and support for people with a disability; and
• $11 million over four years to continue the Kew Residential Services redevelopment, with a further 60 residents to be relocated into new community residential units. Funding of $177 million over four years will be provided to increase support for disability services provided by agencies in the non-government sector.
Budget Statement 2003-04 Chapter 4 75 Improved services for senior Victorians The 2003-04 Budget continues to strengthen health services for senior Victorians, who have the greatest health needs and much to gain from maintaining healthy lifestyles, mobility and active engagement in community life. Initiatives totalling $71 million over four years will provide access to a range of services to keep senior Victorians healthy and avoid unnecessary hospital admissions. These include:
• additional funding of $69 million over four years to improve home and community care services targeted to meet the needs of Victoria’s ageing population, including programs targeted to culturally and linguistically diverse aged groups; and
• $1.9 million over four years to encourage senior Victorians to participate in sport, recreation and leisure activities. A further $26 million TEI is provided to continue the implementation of the residential aged care infrastructure strategy to upgrade existing aged care facilities. This will ensure facilities meet Commonwealth Government accreditation standards in 2008.
Children First The 2003-04 Budget provides initiatives to ensure that children and their families have access to the best possible services when they need them. Funding of $88 million over four years is committed to implementing the Children First strategy including:
• an additional $17 million over four years to upgrade maternal and child health centres and provide professional development for maternal and child health nurses;
• $8 million over three years for grants to integrate preschool and childcare resources into a single network of programs and specialist services such as speech therapy, nutritional advice and psychological therapy;
• $8 million over three years to establish new preschools in growth suburbs with an emphasis on linking them with extended childcare;
• $6 million over four years for additional early intervention services for autism, speech and behavioural problems to enable early detection and referral for assessment and treatment;
• $5 million in 2003-04 for the provision of computers and information technology in preschools;
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• $16 million over four years to boost payments to foster carers to ensure that children receive the best possible care and carers receive the best possible support; and
• $28 million over four years to trial innovative approaches to early intervention and prevention of child abuse and neglect.
Affordable housing The 2003-04 Budget commits $89 million over four years to ensure affordable housing for Victorians through:
• $70 million over four years to expand the supply of affordable housing in Victoria. The Government will develop strategic partnerships with not-for-profit non-government housing providers, local government and private industry, and establish affordable housing associations;
• $10 million over four years to improve existing public housing by continuing the Neighbourhood Renewal project. This approach brings together the resources and ideas of residents, government and local community groups to build stronger communities in areas with a high concentration of public housing; and
• $9 million over four years to tackle youth homelessness by expanding the Victorian Homelessness Strategy to develop better preventative and early intervention approaches and provide ongoing support to those leaving the program.
SAFE STREETS, HOMES AND WORKPLACES Since coming to office, the Bracks Government has committed $785 million in output funding and $646 million TEI to asset investment to ensure Victoria is the safest State in Australia. This commitment includes recruiting an additional 800 front-line police, building 65 new police facilities across Victoria, developing and implementing a long-term corrections infrastructure program, and significant investment in technology for the emergency services. The Government remains committed to keeping Victoria the safest State in Australia and making Victoria a place where all its citizens feel safe and confident. Initiatives contained in the 2003-04 Budget enhance police and emergency services capabilities and counter-terrorism responsiveness.
Budget Statement 2003-04 Chapter 4 77 More effective police and emergency services The Government continues to meet the needs of growing communities through more and better-resourced police on the streets, a tougher, smarter approach to crime prevention, and strengthening Victoria’s emergency services. The Government will provide $126 million over four years to increase total police numbers by an additional 600, further boosting the effectiveness, responsiveness and visibility of Victoria’s police force. This brings the total additional police funded by the Bracks Government to 1 400 and will increase the size of the force to 10 900 officers. Over the past three years the Government has provided $133 million TEI towards building 65 new police facilities across Victoria. The 2003-04 Budget continues this program, with $66 million TEI for new or replacement police stations in Bendigo, Brunswick, Bairnsdale, Caroline Springs, Pakenham (police and emergency services complex), Warragul and 10 rural towns (Bannockburn, Edenhope, Mitta Mitta, Mt Hotham, Myrtleford, Nyah, Robinvale, Swifts Creek, Tallangatta and Woods Point). The Government will also provide $21 million over five years for the Handgun Buyback Program, which will commence on 1 July 2003. The program will remove up to 9 500 handguns from the community and tighten handgun ownership laws, providing a greater sense of public safety but not penalising those people who legitimately own firearms. Funding of $2 million over four years is allocated to establish the Major Crimes Reward Fund. This will be managed by Victoria Police and will provide rewards for information leading to convictions of perpetrators of the most serious unsolved crimes. In addition, $6.6 million over four years is provided to expand the existing asset confiscation scheme. This will make it more difficult for criminals to benefit from the proceeds of crime. The Government continues to provide Victoria’s police with modern computing, communications and forensic resources. In addition to the Mobile Data Network announced in last year’s budget, which will equip police patrol vehicles and ambulances with computer terminals, the 2003-04 Budget provides $6 million TEI to build a new chemistry wing at the Victoria Forensic Science Centre and purchase additional analytical equipment for DNA, drug and audio analysis, and finger printing.
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The Government’s commitment to supporting emergency services is continued in the 2003-04 Budget with:
• $11 million over four years towards the funding of 219 additional firefighters (94 for the Metropolitan Fire and Emergency Services Board and 125 for the Country Fire Authority);
• $6 million over four years to VicSES to enhance its capacity to deal with flood and storm damage, search and rescue and road accident rescue; and
• $13 million over four years to better equip emergency services volunteer groups and implement volunteer recognition, recruitment and support programs.
Counter-terrorism The events of 11 September 2001 and the bombings in Bali heralded a new and more dangerous global security environment. To respond to potential terrorist threats, the Government announced in November 2002 a $38 million package over five years to combat terrorism including:
• a new Risk Assessment and Counter-Terrorism Coordination Group in Victoria Police and increased resources for the Special Operations Group; and
• a new State Crisis Centre to ensure strong coordination between police, emergency services and Commonwealth agencies. Effective counter-terrorism response requires close cooperation, not only between police and intelligence agencies, but also across all government agencies. The 2003-04 Budget provides a further $60 million over five years to enhance Victoria’s whole-of-government approach to managing security and emergencies including:
• $33 million over four years for additional search and rescue resources, protective equipment and training for the MFESB, CFA, VicSES, Victoria Police and the State Coroner;
• $11 million over five years for a new Emergency Services Coordination Unit and Chemical, Biological and Radiological Planning and Response Unit in the Department of Human Services; and
• $12 million over four years to ensure that the Victorian digital map database incorporating information from local governments, utility companies and private sector surveyors across Victoria is as up-to-date and accurate as possible.
Budget Statement 2003-04 Chapter 4 79 Road safety The Government is committed to providing the highest possible standards of safety for all road users, including pedestrians. The road safety strategy, arrive alive! is the Government’s blueprint to reduce deaths and serious injuries on Victoria’s roads by 20 per cent over the five years to 2007. Since coming to office, the Bracks Government has invested $273 million in road safety initiatives. Previous initiatives, including the installation of speed cameras, the reduction in the urban speed limit from 60km/h to 50km/h and the ‘Wipe Off 5’ campaign, contributed to an 11 per cent reduction in road deaths in 2002. The 2003-04 Budget contains several important initiatives to continue improvements in Victoria’s road safety:
• $23 million over two years to fund the arrive alive! School Speed Zones program for reduced speed limits around all primary and secondary schools in Victoria; • $11 million TEI to develop and implement a program of road infrastructure safety improvements (such as tactile edge tiles, shoulder sealing, crash barriers and roadside hazard removal) in the highest risk areas on Victoria’s arterial roads; and • $1.3 million TEI for 40 mobile radar devices to be deployed in rural areas with a high incidence of crashes, 20 engine reading devices to test for heavy vehicle speed limiter integrity, and a Crash Counter Measure Program to investigate the causes of crashes to ensure resources are best targeted.
GROWING AND LINKING ALL OF VICTORIA The Government is committed to building a statewide transport system that moves people and freight safely, efficiently and reliably. Since coming to office, the Government has committed over $5 billion to infrastructure projects across the whole of Victoria, including establishing its Linking Victoria program to upgrade the State’s road, rail, bus and ports systems. Projects include:
• the Geelong Road upgrade, completed in 2002; • reintroduction of country rail passenger services, commencing with the upgrade of the lines to Ararat and Bairnsdale; • Calder Highway duplication, with the Carlsruhe section opened in April 2003;
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• metropolitan tram and train extensions, including new train services to Keilor Plains and Watergardens and new tram services from Mont Albert to Box Hill; and • Spencer Street Station redevelopment. The 2003-04 Budget will continue these projects, make more improvements to Victoria’s public transport system and better integrate the State’s roads, rail, public transport and ports.
Linking the suburbs The 2003-04 Budget provides initiatives totalling $171 million to ensure that communities across outer Melbourne will benefit from road and public transport initiatives under the Government’s Linking the Suburbs program. These initiatives include:
• $121 million TEI for a new 20-kilometre bypass around the area of Pakenham, with matching funding to be sought from the Commonwealth Government;
• $28 million TEI for an outer-metropolitan arterial road program to upgrade roads in the suburbs of Greensborough, Frankston and Carrum Downs;
• $2.6 million TEI to introduce SmartBus technologies to south-eastern Melbourne;
• $11 million over four years to improve bus services across Melbourne; and
• $8 million over three years for new cycling paths across Victoria. In addition, the 2003-04 Budget commits:
• $7.2 million TEI to rehabilitate the Flinders Street Station concourse;
• $1 million TEI to investigate the separation of the rail and road grades at the rail level crossing at Middleborough Road, Box Hill;
• $8.4 million over four years to improve public transport safety;
• $3.9 million in 2003-04 for initial investigations into the development of an enhanced public transport ticketing system; and
• $4 million in 2003-04 to conduct planning studies focusing on congestion issues to improve train reliability in metropolitan Melbourne.
Budget Statement 2003-04 Chapter 4 81 Mitcham-Frankston Freeway The Government continues to progress the Scoresby Freeway and Eastern Freeway extension to create the Mitcham-Frankston Freeway, a new 40-kilometre link connecting Melbourne’s east and south-eastern suburbs. Located in a transport corridor with a population of over 1 million and over 40 per cent of Melbourne’s manufacturing jobs, this vital infrastructure project will deliver better links to ports, airports, major freight terminals and industrial precincts. The Mitcham-Frankston Freeway will provide enormous benefits to residents in south-eastern Melbourne, motorists and the Victorian freight industry through improved travel times and road safety. The Government is committed to completing the project in 2008. In April 2003, the Government announced that due to a significant increase in unavoidable pressures on the Victorian budget, a toll would be imposed to fund the Mitcham-Frankston Freeway. The Commonwealth Government has been requested to commit half of the $200 million of government funding required for this project.
Developing Victoria’s ports Building a seamless freight and logistics network that integrates Victoria’s transport modes and links Victoria with the national and global economy is essential to Victoria’s economic development. To support this objective, the Government is committed to increasing the proportion of the Victorian rail network that is standard gauge. The Government will continue to work with Freight Australia and other rail stakeholders to develop cooperative arrangements to progress standardisation, track access and other freight development issues. As part of the standardisation program, $29 million TEI is provided to construct:
• a road overpass at Cliff Street, Portland to improve transport linkages to the Port of Portland and avoid conflicts between rail and road operations; and
• a dual gauge independent goods line at the Port of Geelong. This will enable standard gauge rail freight to flow onto the Lascelles Wharf rail connection, Corio Quay and North Shore, reducing freight costs, increasing rail freight share and stimulating development of neighbouring warehousing and other port related infrastructure. In addition, $1 million over three years is provided to develop a detailed developmental plan for the Dynon Rail Precinct to integrate the Port of Melbourne with the Dynon rail terminals to create a single transport hub. This, in
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addition to undertaking a study into the deepening of the Port of Melbourne, is part of the Government’s commitment to ensure the Port of Melbourne’s continued status as Australia’s biggest container port. To assist small boat users, the 2003-04 Budget provides:
• $2.7 million over four years to establish new small community harbours;
• $0.8 million over four years to continue the 24-hour emergency coastal radio network; and
• $0.2 million over four years for a boating safety community education campaign.
Linking regional Victoria Improving links between Melbourne and all parts of Victoria is critical in enabling regional centres and communities to succeed as part of an economic network. Other regional transport initiatives include:
• $70 million TEI as part of the revised delivery strategy for the upgrade of the Calder Highway between Melbourne and Bendigo, including improvements between Kyneton and Malmsbury and between Fogarty's Gap Road and Ravenswood, and pre-construction activities such as land acquisitions;
• $4.1 million TEI to develop a plan for a new bypass around the western area of Geelong;
• $5 million TEI to build a new railway station at Grovedale, near Geelong; and
• $5 million TEI for a bypass around the town centre of Pyalong to improve road safety and to reduce travel time for freight and tourism between Melbourne, Echuca and southern New South Wales.
Regional Infrastructure Development Fund In addition to the $180 million invested over the past three years, the 2003-04 Budget provides a further $180 million over five years for the Regional Infrastructure Development Fund. This will be used to fund capital works infrastructure in regional Victoria to support economic and industry development, improve strategic transport linkages, and promote investment, employment and education opportunities. Specific initiatives include $70 million to extend the reticulation of natural gas to regional communities and $20 million to establish a Small Towns Development Fund. Budget Statement 2003-04 Chapter 4 83 MORE JOBS AND THRIVING, INNOVATIVE INDUSTRIES ACROSS VICTORIA The Government will continue to build the foundations for a strong, thriving and innovative Victoria, creating more high-paid, high-skilled jobs for Victorians in sustainable and internationally competitive industries.
Driving innovation The Government recognises that innovation is the key to driving long-term economic growth across Victoria. In October 2002, the Government released Victorians. Bright Ideas. Brilliant Future, which aims to position the State as a forward-looking and globally connected economy. This $310 million innovation program brings to over $900 million the Government’s total commitment to positioning Victoria as a global leader in innovation. Key initiatives over the Government’s first term include committing to the construction of a synchrotron facility, providing funding to develop Victoria’s biotechnology and medical research capacity, funding initiatives to encourage innovation in Victorian businesses, and boosting resources in Victorian schools and TAFEs to improve education in science and technology. Victorians. Bright Ideas. Brilliant Future will target five key strategic capabilities: ICT, biotechnology, new manufacturing technologies, design, and environment technologies. Initiatives include:
• $50 million over four years for a science and research program aimed at opening up new opportunities in regional industries and improving the quality of life in rural and regional communities;
• additional funding of $57 million over three years towards the $157 million that the State is contributing for the construction of a national synchrotron, Boomerang 20 – the most significant investment in Australia’s scientific infrastructure for decades;
• $25 million over four years for VicStart, which aims to encourage greater levels of investment in research and development, facilitate access to finance, and maximise the benefits to Victorian industry from access to public sector research;
• $5 million over four years to extend the School Innovation in Science program in secondary schools, aimed at improving teaching of physics, chemistry, IT-related mathematics, science and technology;
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• $4 million over four years to provide Victoria’s freight and logistics industry with an integrated information system, to reduce bottlenecks and improve efficiency;
• $2.9 million over three years to strengthen and develop clusters, with the initial focus in regional areas, building on existing strengths in food and agriculture, health, manufacturing, biotechnology and ICT; and
• $1 million in 2003-04 to examine current design capabilities and determine future design needs in a range of industries and help position Victoria as an international centre for design. In addition, flexible funding of $121 million over five years will be set aside under the Science, Technology and Innovation Second Generation program for competitive grants for research and innovation infrastructure.
Growing Victoria’s businesses In its first term the Government announced more than $1 billion in business tax cuts over 2001-02 to 2005-06, taking Victoria from having the highest number of business taxes in Australia to the equal lowest. The Building Tomorrow's Businesses Today business statement, released in April 2002, included a range of initiatives aimed at improving the way Victoria does business. The 2003-04 Budget will continue assisting Victorian businesses to grow. This budget sees the implementation of the Government’s last instalment of payroll tax initiatives announced in Building Tomorrow’s Businesses Today, with the payroll tax rate to be further reduced from 5.35 per cent to 5.25 per cent from 1 July 2003. This represents a total 9 per cent reduction in the payroll tax rate since the Bracks Government came to office. Stamp duty on mortgages will also be abolished from 1 July 2004. Funding of $10 million is provided over four years for the Community Regional Industry Skills program, which will support communities across regional Victoria to develop local strategic plans to identify and address skills and labour shortages. The Government is also aiming to maximise the benefits to Victorian businesses of hosting the 2006 Melbourne Commonwealth Games. Funding of $1.5 million over three years will be used to ensure Victorian manufacturers have as much opportunity as possible to secure Commonwealth Games work. The Government is committed to ensuring that every small business has the opportunity to grow and thrive in a fair, competitive and connected economy. The 2003-04 Budget provides $2 million over four years to the StreetLife program to support Victorian small businesses and $8 million over four years for the new
Budget Statement 2003-04 Chapter 4 85 Small Business Commissioner. The Commissioner will be a central point in government to mediate retail tenancy disputes, address bureaucratic practices that are not business-friendly, and promote a fair business environment.
Promoting tourism The Government recognises the growing strategic and economic importance of the tourism industry to the State, particularly in regional Victoria. The 2003-04 Budget contains a suite of programs to further promote the growth of tourism across the whole State. These include:
• $16 million over four years to promote Victoria as a tourist destination both nationally and internationally, including $5.6 million dedicated to regional Victoria;
• $4.4 million over four years to establish a new community-based approach to tourism and encourage tourism operators to work together to package tourism attractions in their regions as an overall experience;
• $2 million over four years to support new and existing regional tourism events;
• $15 million over three years to lift Victoria’s profile and strengthen our international competitiveness as a host of major events; and
• $3.6 million over two years to showcase Victoria’s tourism potential when Victoria hosts the world’s largest travel trade fair in 2003 and again in 2004.
PROTECTING THE ENVIRONMENT AND PROMOTING SUSTAINABLE DEVELOPMENT
The Government is committed to protecting Victoria’s natural heritage and assets and making sure we use our natural resources more wisely and sustainably. The Government has committed $1.0 billion over its first term to value and protect Victoria’s precious natural resources, including restoring the Snowy River environmental flows, establishing marine national parks and sanctuaries, and funding to address salinity and build the Wimmera-Mallee pipeline. In December 2002, the Government established the Department of Sustainability and Environment to coordinate the management of Victoria’s environment, deliver a more focused and strategic approach to sustainable development, and ensure the Government’s environmental goals are met. The 2003-04 Budget includes key initiatives designed to value and protect Victoria’s natural resources, particularly water, forests and biodiversity.
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Sustaining our resources – water The Government has established the Victorian Water Trust to enhance the health and sustainability of Victoria’s water resources, provide greater security of supply for water users, and encourage greater efficiencies in water useage across the State. As part of the Government’s $320 million commitment over ten years through the Victorian Water Trust, the 2003-04 Budget provides $40 million over the next four years and $53 million TEI to deliver water savings and improve the quality of water for both domestic and agricultural uses. Initiatives include:
• $10 million over four years for the Water Smart Homes and Gardens program, which will offer rebates for households who buy water-efficient devices, rainwater tanks and permanent grey water systems;
• $10 million over four years for the Smart Farms program to assist farmers to produce farm management plans, use more efficient on-farm irrigation systems and reuse dams to reduce the level of nutrients in Victoria’s waterways;
• $16 million over four years for the Healthy Rivers program, which builds on the $11 million Healthy Rivers and Environmental Flows program announced in the 2002-03 Budget. The program will deliver significant improvement to the ecological health of Victoria’s rivers by increasing environmental flows and undertaking riverbank works;
• $2 million over two years for the Pensioner Pilot program to assist pensioners replace inefficient water appliances with new efficient devices such as dual-flush toilets and AAA shower roses;
• $2 million over two years from 2004-05 for research into water conservation and recycling; and
• $53 million TEI to upgrade irrigation systems and water supply in regional Victoria. New infrastructure, such as pipeline systems, new technologies, such as the introduction of ‘smart’ control of water, and new irrigation practices will help stem the loss of water through seepage, spillage and evaporation. These improvements will also provide significant environmental benefits through increased use of recycled water, improved sewerage treatment and reduced occurrences of algal blooms.
Sustaining our resources – forests and parks The Government is committed to protecting Victoria’s forests and national parks for future generations to enjoy, while ensuring the sustainability of Victoria’s timber industry to provide jobs and investment in regional Victoria. Budget Statement 2003-04 Chapter 4 87 Building on the $80 million Our Forests, Our Future package announced in February 2002, which seeks to secure the long-term future of Victorian forests and regional communities, the 2003-04 Budget includes:
• A New Future for the Otways – a $14 million package over the next four years that will allow for an early reduction in logging and woodchipping in the Otway Ranges by at least 25 per cent and create a single national park extending from Anglesea to Cape Otway. It will also promote investment in sustainable nature-based tourism that will generate employment opportunities and deliver economic benefits to the region; and
• The Plantations Incentive Strategy – a $9 million initiative over the next four years to expand sawlog plantations on private land to replace sawlog harvesting in public native forests. This initiative will contribute to the Government’s target of trebling plantations by 2020 and will promote value-adding technologies to increase long-term processing opportunities for plantation timber products. It will improve the productivity and sustainability of forestry as a natural resource industry, enhancing opportunities in the emerging greenhouse carbon credit market, complementing existing salinity control programs, and improving both soil protection and waterway health. In addition, $1 million over two years is allocated to expand and expedite investigations conducted by the Victorian Environment Assessment Council, particularly in relation to the expanded Otway National Park and Wombat State Park. Funding of $16 million over four years is provided to employ 50 new park rangers. This will greatly improve the management of Victoria’s national parks and ensure that they are adequately maintained, pests and weeds are managed, and visitors enjoy an even better experience. A further $16 million over four years is allocated to improve public safety through risk mitigation works on Crown land including coasts, alpine resorts, historic plains, floodplains and Crown reserves.
Sustaining our resources – biosecurity and biodiversity Exotic animal and plant diseases, as well as pest incursions, represent major potential threats to both the state and national economies. It is crucial for Victoria’s agricultural and food industries that Victoria maintains a strong disease and pest management infrastructure. The 2003-04 Budget provides funding of $24 million over four years for the Enhanced Biosecurity and Market Assurance and Defending our Farm against Diseases initiatives to strengthen Victoria’s capacity to prevent, detect, manage and respond to emerging serious animal and plant pests and diseases.
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A further $24 million over four years is allocated to preserve Victoria’s native flora and fauna and reduce the damage caused by weeds and pests to farms and the natural environment. Major weed and pest control programs on both public and private land will deliver prevention and early intervention strategies and enhance enforcement and community partnerships with local government, private industry and the Victorian Farmers Federation.
Renewable energy The Government is committed to promoting sustainability by supporting innovation and trying new approaches that provide all Victorians with greater choice about how they can take action to help the environment. The Green Power for Government initiative ($3.5 million over four years) will build on the Government’s commitment to renewable energy and a reduction in greenhouse gas emissions. Through this initiative, the Government will increase its own purchase of green power from 5 per cent to 10 per cent of its overall consumption. While the Government is providing funding to decrease its own use of non-renewable energy, the 2003-04 Budget also includes a range of measures to encourage renewable energy use across the community:
• $3 million over four years to establish a solar energy retrofit scheme for schools, kindergartens, childcare centres and community centres;
• $3 million over four years to assist low-income Victorians to pay for energy efficient products and minor maintenance; and
• $3.5 million over four years to extend the solar hot water rebate scheme, to promote the adoption of solar hot water and to reduce greenhouse emissions and household energy bills.
Responding to bushfires and drought The Government is also addressing the consequences of recent extreme environmental conditions, namely bushfires and drought. A total of $201 million has been committed to fire suppression and recovery costs in the fire-affected areas. This comprises $115 million in fire suppression costs and $86 million to support community recovery, help restore the natural environment and rehabilitate infrastructure such as fire-damaged roads, bridges, park facilities, forests and water catchments. The strategy will assist fire-affected private landholders and businesses through measures such as fencing assistance, concessional loans and regional development grants.
Budget Statement 2003-04 Chapter 4 89 In 2002-03, the Government also announced a package worth more than $85 million to provide assistance for drought-affected farmers across 45 Victorian municipalities. The centrepiece of this package is a cash grants program that provides support of up to $20 000 per eligible farm. Funding is also provided for additional rural financial counsellors, more ground water bores, bill concessions for electricity, gas and municipal rates, and technical advice to farmers and rural communities.
BUILDING COHESIVE COMMUNITIES AND REDUCING INEQUALITIES Building and strengthening communities across Victoria is a major second term priority for the Government. In December 2002 the Government established the Department for Victorian Communities to help build strong, resilient and confident communities across the State. The Department brings together a range of government programs and agencies, including the Victorian Office of Multicultural Affairs, Aboriginal Affairs Victoria, Office of Women’s Policy, Office of Youth, Victorian Multicultural Commission (VMC), Employment Programs, local government and Sport and Recreation Victoria. The Department will ensure the Government meets its commitment to working together with communities to tackle their problems, improve services and secure their futures. It will also help ensure a strategic and collaborative approach to deliver better access to services and community infrastructure for all Victorians. The Government will continue to listen to local communities, enhancing existing links and associations and building new ones, while investing in services and infrastructure. The 2003-04 Budget provides:
• $10 million over four years for grants to local communities across Victoria to establish community facility centres supporting a range of social, economic and cultural activities;
• $4.6 million over four years to establish Regional Development Victoria, which will ensure there is a strong and coordinated focus on regional Victoria across all state government programs, services and resources;
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• $1 million over four years for grants to rural, regional and outer-metropolitan communities aimed at promoting the renewal of economic and social opportunities; and
• $1 million over four years to establish regional financial services facilities, which will enable regional communities to access specialist financial expertise.
Helping people get into the workforce Victoria’s unemployment rate has been below the national average for the past three years. Since the Government came to office in October 1999, employment has grown by more than 180 000 people, well above the national growth rate. In addition, the nature of the Victorian economy is changing, with new skills and qualifications required for Victorian business and industry to succeed in a highly competitive global marketplace. While the Commonwealth Government has responsibility for providing services to unemployed Australians, the Victorian Government wants to ensure state-based programs match Victoria’s current circumstances and meet the needs of a changing economy. The Government is introducing a new completion bonus scheme for trainees and apprentices and is refocusing and retargeting Victoria’s employment, training and vocational education programs to address specific gaps in the Victorian labour force, target the most disadvantaged groups, and improve opportunities for Victorians to acquire in-demand skills and qualifications. Details of the completion bonus scheme and vocational education and training programs are set out earlier in this chapter under Valuing and Investing in Lifelong Education. The Government is investing an additional $62 million over four years to new and retargeted employment programs aimed at assisting the long-term unemployed, young Victorians and other disadvantaged groups return to work. These include:
• $39 million over four years for the Community Jobs program, which assists the long-term unemployed back into work or training;
• $10 million over four years for a new Jobs for Young People program to create 1 100 new jobs and traineeships for young Victorians in local government authorities;
• $2 million over four years to assist young people investigate careers, further education courses and other employment-related matters; and
• $11 million over four years to provide grants to parents, primarily women, returning to work after an extended period out of the workforce looking after children.
Budget Statement 2003-04 Chapter 4 91 Melbourne 2030 The Government is committed to retaining Melbourne’s status as one of the world’s most liveable cities. In October 2002, the Government announced Melbourne 2030, the Government’s roadmap for growing Melbourne in a socially, economically and environmentally sustainable manner. Melbourne 2030 will revitalise the city’s middle and outer suburbs by creating 100 high quality activity centres, developed around existing transport infrastructure so as not to threaten the character of existing residential areas, where people can live, shop, work, socialise and access the services they need. The 2003-04 Budget provides $4 million over four years towards this project. A further $4 million is allocated over two years for the planning of the additional eight transit cities announced by the Government in the past 12 months. The program will develop activity hubs in key areas of metropolitan Melbourne and regional centres serviced by multiple transport modes. The Government is committed to maintaining Victoria’s position as a world leader in the preservation of public heritage. Funding of $8 million over two years is provided for grants to local government and community groups for the repair and adaptation of heritage assets in public use.
Arts The 2003-04 Budget provides $25 million over four years to encourage community involvement in arts programs across Victoria. Initiatives include:
• $9.2 million over four years to promote partnerships between the community, the arts and other industries;
• $6.4 million over four years to increase access to Victoria’s cultural facilities and collections, including regional galleries and museums;
• $5.4 million over four years to boost the Premier’s Literary Award and improve the quality of books in public libraries;
• $2 million over four years for a touring program for small or medium art companies; and
• $2.4 million over four years to encourage film production in Victoria. Further funding of $102 million over four years and $10 million TEI in asset investment is also provided to support the Museum of Victoria, the National Gallery of Victoria, the Australian Centre for the Moving Image and the Victorian Arts Centre Trust.
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Bringing sport and recreation to all Victorians The Government believes that active participation in sport and recreation is an important element in building strong, healthy and cohesive communities. The 2003-04 Budget provides $57 million over four years for a range of initiatives that will make sport and recreation more accessible to the community, including:
• $2 million over four years to build on the successful FReeZA program, which funds local government and not-for-profit organisations to assist youth communities organise and participate in music, entertainment and cultural events;
• $10 million over four years to support communities and local sport and recreation providers in tailoring physical activities to meet community needs;
• $11 million over four years to strengthen sporting organisations throughout Victoria;
• $14 million over four years to assist regional councils together with sporting bodies to upgrade and establish new sporting facilities; and
• $20 million over four years to boost suburban sports facilities, particularly in growth corridors and under-resourced suburbs. In addition to these programs, the 2003-04 Budget provides funding for specific projects such as:
• $14 million over three years to upgrade Kardinia Park to ensure the continuation of AFL games in Geelong, as well as providing a function centre, sports house and gymnasium;
• $3.6 million TEI for the compliance upgrades of five sport and recreation camps around the State (Anglesea, Camp Manyung, Howman's Gap, Lady Northcote and Mt Evelyn), which are used primarily by community and school groups;
• $3.8 million in 2003-04 to establish a new Australian racing museum in Federation Square to replace the existing facility at Caulfield Racecourse;
• $1.5 million over four years to continue the Living Country Racing program, which funds improved facilities at country racecourses; and
• $0.4 million in 2003-04 to undertake an expression of interest and business plan review for the construction of a national ice skating facility.
Budget Statement 2003-04 Chapter 4 93 The Government is also putting in place initiatives that will assist spectators and provide fair access to major sporting events. Funding of $0.2 million per year will be provided to implement the Major Events (Crowd Management) Bill. This legislation will help to control socially unacceptable behaviour at sporting events. A further $0.2 million per year will be provided to enforce the Sport Event Ticketing (Fair Access) Act 2002. This will ensure greater transparency and fairer access in the ticketing of major sports events in Victoria.
2006 MELBOURNE COMMONWEALTH GAMES The 2006 Melbourne Commonwealth Games will be the largest event ever staged in Victoria. It offers a unique opportunity to showcase Melbourne and Victoria to the rest of the world and further build on the State’s reputation for hosting world- class major events. The Government is committed to ensuring that the Games generate a positive legacy of long-term benefits for Victoria and that all Victorians have the opportunity to share in the Games experience. The Games will take place during 15-26 March 2006 and will include major arts and cultural events, alongside the Games program, which will reinforce Melbourne’s status as a multicultural community and a truly ‘global’ waterfront city, recognised for its arts, culture, parks and gardens, restaurants and sport. The Government will ensure that regional Victoria also benefits from the Games, with regional centres hosting a number of sporting events as part of the Games activities. The Games will deliver significant social, environmental and economic benefits for Melbourne and Victoria. In particular, Victoria will benefit from new and improved sporting facilities, and infrastructure upgrades. The Games Village will be one of Victoria’s ‘greenest’ large scale inner-urban residential developments, through the application of the principles of sustainable development and environmentally responsive planning and design. The Government will also contribute funding towards the construction of a wetlands area in adjacent Royal Park. Water-related initiatives at the Village will be linked with the wetlands, providing a green corridor between Moonee Ponds Creek and Royal Park. The organisation and training involved in running the Commonwealth Games will build on the State’s skill base among volunteers. Opportunities will be generated to develop new skills and experience in events related sectors and the broader community, improving Victoria’s chances of successfully bidding for and hosting future international events.
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The Games opening ceremony and athletics competition will be held at the Melbourne Cricket Ground, one of the world’s largest outdoor sporting grounds. The redevelopment of the MCG will increase seating capacity to approximately 100 000 spectators, boosting Melbourne’s reputation as Australia’s sporting capital and increasing Victoria’s capacity to host major sporting events. Overall expenditure on the Games will be $1.1 billion. This compares favourably with $1.2 billion (in 2002 dollars) spent by Manchester to host the 2002 Commonwealth Games. As Melbourne already has well-established infrastructure capable of handling major events, a relatively modest infrastructure program will be required to prepare for the Games. In March 2003, the Government announced that the State would make a total contribution of $474 million in operating costs and $223 million in asset investment to this important event. The difference between state funding and the overall cost will be funded through ticket sales, sponsorship, TV rights and a contribution from the Commonwealth Government. The Government previously announced $167 million of projects, including the Athletes Village, the MCG redevelopment, the Melbourne Sports and Aquatic Centre upgrade, and the State Lawn Bowls Centre. The 2003-04 Budget provides $56 million in asset investment funding for event venues and improvements to the Yarra precinct including: • $19 million TEI to construct an athletics track at the MCG to be used for the duration of the Games; • $3 million TEI to establish a state mountain bike facility; • $2.7 million TEI to replace the Olympic Park athletics track, which will be used as a warm-up track during the Games; • $0.8 million TEI to upgrade the hockey pitches at the State Netball and Hockey Centre; • $28 million TEI to build a pedestrian bridge linking Birrarung Marr and the MCG across Brunton Avenue, Jolimont rail reserve and Batman Avenue; • $2 million TEI to upgrade lighting within the Yarra precinct; and • $1.3 million TEI to improve Jolimont Station. In addition, the Commonwealth Games Industry Participation initiative, to be delivered by the Department for Victorian Communities, will ensure that opportunities for Victorian businesses are maximised across the full range of Games-related activities. The program will also promote the capabilities of Victorian industry as suppliers to the 2008 Beijing Olympics and other major international events.
Budget Statement 2003-04 Chapter 4 95 The 2006 Commonwealth Games represent a major investment by Victorians and the Government recognises that it is important for the wider community to receive substantial benefits in return. The Government will ensure that the State’s investment maximises the Games’ economic, social and environmental benefits for the people of Victoria and that Victorians continue to enjoy a positive legacy from the Games for many years to come.
GOVERNMENT THAT LISTENS AND LEADS The Government continues to listen to and consult with Victorians. During its second term, the Government will maintain its Community Cabinet program, ensuring community organisations, local councils and businesses have the opportunity to put their views and concerns to Ministers. The Government takes the view that while consultation may sometimes slow the decision-making process, Victorians are entitled to have their views heard, contribute their ideas to public policy and participate in the process of government.
Modernising government Victoria is providing strong leadership in its ICT uptake and modernisation of public and community service delivery. The 2003-04 Budget continues the Government’s investment to improve the ICT interface between government and the community so that knowledge and information flows freely and communication and consultation are optimised. Key initiatives include:
• $139 million TEI as the Government’s contribution towards the health ICT strategy, which aims to provide a modern, technically advanced and leading-edge hospital environment. In addition, a further $21 million TEI and $3 million in output funding will be provided to establish Australia’s first electronic prescribing program in key Victorian hospitals;
• $33 million over four years for an eGovernment Implementation Plan to improve ICT system integration and support better service delivery across government, including establishing a Chief Information Officer to monitor and coordinate ICT investment; and
• $5 million TEI for a new information management system for Victoria Police to link police IT systems, enabling better identification and management of emerging crime trends and more effective resource allocation.
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Gateway The Government is committed to achieving better capital investment outcomes across the Victorian budget sector by implementing the Gateway initiative. Gateway will ensure that independent reviews of higher risk asset investment projects are undertaken at key decision points to provide assurance that the project can progress successfully to the next development stage. Other components of the Gateway initiative include a multi-year investment strategy, enhanced monitoring of major projects and preparation of project life-cycle guidance material.
Proposed new department funding system The Government is considering the introduction of a new department funding system to drive productivity growth and to share the benefits of productivity with employees, to be implemented from the 2004-05 Budget. It is proposed to provide a strong incentive for departments and other stakeholders to link enterprise bargaining negotiations with the achievement of productivity improvements.
PROMOTING RIGHTS AND RESPECTING DIVERSITY The Government recognises the economic and social benefits that result from Victoria’s cultural diversity and will continue to promote the values of an inclusive, cohesive and tolerant Victorian community. Since coming to office, the Bracks Government has increased the Victorian Multicultural Commission’s (VMC) community grants program from $750 000 in 1999 to approximately $2.8 million in 2002-03. The 2003-04 Budget continues this support, increasing funding for the VMC grants program by $1.2 million over four years. The Commonwealth Games provides a unique opportunity to showcase Victoria’s diversity and funding is allocated to encourage extensive community participation in the Games, especially for disadvantaged members of the community. In addition, several new initiatives will be introduced in 2003-04 to improve access to services for culturally and linguistically diverse Victorians including: • $6 million over four years to increase migration to Victoria for skilled and business migrants, in particular to rural and regional Victoria; • $5 million TEI for a new purpose-built facility to provide specialist services to people who were the victims of torture and trauma in their country of origin;
Budget Statement 2003-04 Chapter 4 97 • $1.3 million over four years to provide new Koori maternity services within existing Aboriginal health cooperatives in Dandenong and Echuca; and • $0.4 million over four years to establish a multilingual ‘Crime Stoppers’ line in major community languages for reporting crime. The Government strongly believes in the values of respect, cooperation and the protection of all Victorians’ rights. The 2003-04 Budget includes: • increased funding of $14 million over four years for legal aid; • $6.2 million over four years to establish a Sentencing Advisory Council, an independent body that will enable informed community participation in the sentencing process; • $5.2 million over four years for the establishment of a Domestic Violence Division of the Magistrates Court; and • $2 million over four years to promote work-family balance, including funding for innovative pilot projects. In addition, $18 million TEI is provided to construct a new courthouse complex in the Moorabbin area. The new court is expected to take on 15 000 additional cases per year resulting in faster turnaround times and reduced pressures on the Dandenong and Frankston courts. The Government also recognises and values the importance of Victoria’s indigenous community as the original inhabitants of the State. As announced in the 2002-03 Budget Update, the Government has provided $2.5 million over five years to meet obligations arising from an in-principle agreement with the Wotjobaluk people and their native title claim in the Wimmera region. This is the first time that a claim has been agreed in-principle in Victoria and it represents a significant step forward in reconciliation with indigenous Victorians.
SOUND FINANCIAL MANAGEMENT The Government remains committed to providing a sound and stable financial base to promote growth across the State, deliver improved services and secure Victoria’s long-term economic, social and environmental prosperity. To ensure the ongoing economic health of Victoria, the Government is committed to maintaining an operating surplus of at least $100 million each year.
Efficiency savings initiatives As part of the Government’s commitment to sound financial management and improving service delivery to Victorians, all government spending is continuously reviewed to reduce duplication and to identify productivity and efficiency improvements. 98 Chapter 4 Budget Statement 2003-04
In 2003-04, the Government will introduce a range of administrative efficiencies across all departments, totalling $141 million (see Appendix A, Output, Asset Investment and Revenue Initiatives). The introduction of these savings initiatives will deliver ongoing efficiencies of $162 million on average over the remainder of the forward estimates period.
Revenue initiatives In 2003-04, the Government will provide targeted relief through the tax system to business, families, land tax payers and the disabled including:
• providing a payroll tax exemption for paid maternity and adoption leave, with effect from 1 January 2003, reinforcing the Government’s commitment to encouraging a better balance between family, work and community responsibilities;
• further reducing the payroll tax rate from 5.35 per cent to 5.25 per cent from 1 July 2003;
• extending the payment period for land tax liabilities, providing significant relief to all land tax payers in Victoria, with effect from the 2003 land tax year; and
• providing a full exemption from motor vehicle duty for vehicles that are converted, constructed or modified to transport at least one occupied wheelchair and reducing the stamp duty where a vehicle is modified or converted to enable a disabled person to drive it. Both of these measures aim to assist disabled people and their carers to be independent and mobile and will apply to vehicles acquired on or after 1 July 2003. To maintain equity within the tax system, partial catch-up increases will apply in this budget to fees and fines that have not been increased for some time. These increases will be less than the rate of inflation since the fees and fines were last adjusted. For example, the motor vehicle registration fee will increase from $140 to $157 from 1 July 2003, which represents only half of the increase in the consumer price index since the last increase in the fee in 1994. The increased revenue from motor vehicle registration fees will be invested in road infrastructure through the Better Roads Victoria Trust Fund. To smooth out any future adjustments, the Government will be introducing a policy of annual indexation of all fees and fines that are set by regulation, commencing in 2003-04. As part of the Government’s retargeting of Victoria’s employment, training and vocational education programs, the Government is removing the payroll tax exemption for wages paid to trainees and apprentices and replacing it with a new
Budget Statement 2003-04 Chapter 4 99 completion bonus scheme, which will pay a bonus to eligible employers when trainees and apprentices complete their qualifications. The existing exemption will be removed for new enrolments in training or apprenticeship courses on or after 6 May 2003 (effective from 1 July 2003). Commencing on 1 July 2003, employers with three or more new employee apprentices and trainees in training, who are under 25 years of age at commencement, will qualify for the bonus (excluding Commonwealth and State Government employers). Transitional arrangements will apply to existing approved courses and group apprenticeship and training schemes, which will remain eligible for the exemption until 31 December 2003. The new completion bonus scheme will ensure more effective targeting of resources to support apprenticeship and training courses. It will reward employers who take on trainees and apprentices in good faith and boost the level of completions of traineeships and apprenticeships. Further details of the new completion bonus scheme are set out earlier in this chapter under Valuing and Investing in Lifelong Education.
Ensuring compliance and tax integrity Currently, Victorian concession cardholders are fully exempt from motor vehicle registration fees. This concession is the most generous in Australia – most States and Territories only provide a 50 per cent concession. It is therefore important that the benefit of the exemption is restricted to those that are actually entitled to it. The 2003-04 Budget includes measures to enhance VicRoad’s monitoring of the appropriate application of the motor vehicle registration concession. The Government will also provide additional funding to the State Revenue Office to facilitate enhanced compliance in relation to land transfer stamp duty on high value conveyances (where the dutiable value is $1 million or more).
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CHAPTER 5: COMMONWEALTH-STATE FINANCIAL RELATIONS
• Victoria’s economic competitiveness and development, and the services that the Government is able to deliver to Victorians, are hindered by the current system of Commonwealth-State financial relations. This system distributes more than $50 billion annually, and sensible improvements would have a major impact on the competitiveness and productivity of both the Victorian and Australian economies. • Based on the recommendations of the Commonwealth Grants Commission in its 2003 Update, Victoria will subsidise other States by over $1 billion in 2003-04, the highest per capita fiscal subsidy of any State. For every $1 in GST collected from Victorians and paid to the Commonwealth, Victoria receives back only 83 cents. • Under the current Commonwealth-State financial arrangements Victoria does not start to benefit from the GST until at least 2008-09. Until then the Commonwealth will provide Victoria with budget balancing assistance to offset state taxes forgone and increased Victorian expenditures associated with the new tax system.
IMPACT OF NATIONAL TAX CHANGES Under the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations (Intergovernmental Agreement), signed by the Commonwealth and the States in June 1999, the States receive all goods and services tax (GST) revenue collected by the Commonwealth. Under this agreement the Commonwealth was no longer required to pay financial assistance grants and revenue replacement payments to the States from 1 July 2000. The Intergovernmental Agreement also required the States and Territories to:
• adjust gambling taxes to take account of the GST;
Budget Statement 2003-04 Chapter 5 101 • abolish financial institutions duty and stamp duty on quoted marketable securities from 1 July 2001;
• fund the First Home Owners’ Grant scheme; and
• pay the Australian Taxation Office costs associated with administering the GST.
Transitional arrangements Due to these state tax reductions and the guarantee that no State or Territory will be worse off as a result of the national tax changes, Victoria and the other States have been relying on transitional support from the Commonwealth. Each State is entitled to transitional funding from the Commonwealth (budget balancing assistance) to offset any shortfall between its GST revenue grants and the guaranteed minimum amount (GMA). The GMA is an estimate of the revenues that the State forgoes under the national tax changes, together with the net impact of changed expenditure responsibilities. The GMA is used to calculate a State’s need for GST transitional funding. The length of the transitional period is not specified in the Intergovernmental Agreement. Transitional payments will continue until GST revenues are sufficient to cover all revenue forgone and increased expenses of each State. Victoria does not expect to benefit from GST revenue until at least 2008-09, while Queensland, the Australian Capital Territory and the Northern Territory are expected to gain from the Intergovernmental Agreement from the 2003-04 budget year (see Chart 5.1). In fact, if the transitional arrangements were not in place, over the next four years Victoria would be nearly $1 billion worse off as a result of the new tax arrangements including the GST.
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Chart 5.1: Timeline of dependence on budget balancing assistance (a)
NT
ACT
Qld
Tas
WA
SA
Vic
NSW
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Financial Year ending 30 June
Source: Department of Treasury and Finance Note: (a) Based on parameters endorsed at the 28 March 2003 Ministerial Council for Commonwealth-State Financial Relations.
Net impact on the 2003-04 Budget In 2003-04, Victoria, New South Wales, Western Australia, South Australia and Tasmania will continue to receive payments from the Commonwealth in the form of budget balancing assistance. Victoria expects to receive budget balancing assistance of $288 million in 2003-04, compared with around $421 million in 2002-03. The net impact of all the GST-related measures on the State’s budget for the period 2002-03 to 2006-07 is summarised in Table 5.1. The budget balancing assistance estimates for 2002-03 and 2003-04 reflect the 2001-02 population estimates released by the Australian Bureau of Statistics on 20 March 2003. Although the Commonwealth did not take into account the latest 2001-02 population estimates in its March 2003 Statement of Estimated Payments, it has indicated that these estimates will be used to recalculate States’ budget balancing assistance at the end of 2002-03 and the States will receive their full entitlement.
Budget Statement 2003-04 Chapter 5 103 Table 5.1: Impact of the GST on the Victorian budget ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Revised Budget Estimate Estimate Estimate Change in revenue GST revenue 6126.6 6481.2 6833.1 7200.7 7583.2 Growth dividend (a) 49.9 64.0 79.3 96.2 113.9 Financial institutions duty (a) -386.7 -398.3 -410.2 -422.6 -435.4 Debits tax (b) -257.8 -283.9 Marketable securities (a) -234.4 -247.7 -264.1 -281.4 -296.6 Gambling taxes -380.3 -409.1 -440.9 -475.0 -516.1 Safety net revenues -1605.7 -1648.3 -1695.6 -1744.3 -1793.8 Off-road diesel rebate 56.6 57.6 58.5 59.5 60.3 WST equivalent payments from GBEs (a) -5.0 Financial assistance grants forgone (c) -3812.3 -3997.0 -4138.1 -4275.7 -4412.0 Total change in revenue -191.3 -97.6 22.0 -100.4 19.6 Change in expenditure First Home Owners' Grant 222.0 171.8 217.7 241.3242.6 Embedded tax savings (a) -115.0 -122.9 -131.5 -140.5 -154.2 Interest cost on changed Commonwealth 4.2 payments (a) Reimbursement of ATO administration 138.4 141.5 144.2 147.3 150.3 costs Total change in expenditure 249.6 190.4 230.4 248.1238.7 Adjustments (d) -20.2 Net budget impact prior to -420.6 -288.0 -158.5 -298.4 -169.1 Commonwealth transitional guarantee Net Commonwealth guarantee 420.6 288.0 158.5 298.4 169.1 payments (c) Source: Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations; Department of Treasury and Finance Notes: (a) These estimates have been agreed and will not be subject to further negotiation. (b) Under the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations, debits tax will cease to apply by 1 July 2005, subject to review by the Ministerial Council on Commonwealth-State Financial Relations. (c) The budget balancing assistance for 2002-03 and 2003-04 does not correspond to the estimates agreed at the March 2003 Treasurers’ Conference. These figures incorporate the latest Australian Bureau of Statistics population estimates for 2001-02. (d) This adjustment to the 2002-03 budget balancing assistance reflects an overpayment of the budget balancing assistance received by Victoria in 2001-02.
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THE NEED FOR REFORM TO COMMONWEALTH-STATE FINANCIAL RELATIONS Commonwealth payments to the States comprise two streams:
• GST revenue of over $30 billion per annum, which is shared between States on a basis determined by the Commonwealth Grants Commission (CGC). The CGC uses a horizontal fiscal equalisation formula that is very complex and consumes significant state resources. As described in the previous section of this chapter, the Commonwealth supplements GST payments with budget balancing assistance to offset any shortfall between GST revenue grants and the GMA.
• Specific purpose payments of almost $20 billion per annum, which are an important component of state funding for health, education, housing, community welfare and roads. Often these payments contain matching clauses, which force States to commit equivalent or more funds to specific projects or programs. In total these grant streams represent around $50 billion per annum, and so have an enormous impact on the Australian economy. A simple and transparent system of Commonwealth-State funding is fundamental to an effective and cooperative federal system; improvements will have a major impact on Australia’s competitiveness and productivity. In short, Commonwealth-State financial relations present a major microeconomic reform opportunity of similar significance as the following major economic and structural reforms undertaken in other areas of the economy over the past few decades:
• reduction of trade barriers and the expansion of Australia’s international trade;
• financial markets deregulation, including floating the exchange rate;
• increased labour market flexibility, including moving to enterprise bargaining;
• tax reform; and
• National Competition Policy.
Budget Statement 2003-04 Chapter 5 105 The current system of Commonwealth-State financial arrangements has developed from 1901 without a structured approach to adapting it to the various reforms and changes. Many of the features that are now part of the federal landscape arose in circumstances that have long since changed. New developments have had to be grafted onto the existing system. The need for reform of Commonwealth-State financial arrangements has been recognised by successive governments since the early 1970s, but no coordinated review has occurred and no systematic reform has been implemented. The GST-related tax reforms in 2000 had a substantial impact on the way that the Commonwealth delivered funding to the States. However, there was no reform of the mechanisms used to distribute funding between the States. The distribution of Commonwealth grants between the States and Territories is an issue of national importance, especially in light of the increased pressures of international competitiveness and continually increasing demand for public services. At present, Australia’s capacity to compete internationally is being limited by an inefficient and inequitable system of federal transfers. The existing Commonwealth-State financial arrangements are largely static and create perverse incentives and efficiency effects. The current system significantly reduces Victoria’s capacity to deliver services, provide additional infrastructure investment and reduce taxes. States such as Victoria see the benefits of their significant gains from efficient service delivery flowing to the subsidised States, which have no incentive to innovate and improve the efficiency of service delivery.
Unsustainable growth in the subsidy The share of Commonwealth general purpose grants redistributed away from Victoria under the current horizontal fiscal equalisation arrangements continues to increase. Table 5.2 shows the level of the cross-subsidies for each State and Territory for 2003-04 as a result of the CGC’s 2003 Update by comparing an equal per capita distribution with the distribution based on the recommendations of the CGC. Victoria’s cross-subsidy to the other States for 2003-04 is estimated at over $1 billion. In per capita terms, Victoria pays the highest cross-subsidy to the other States, at $220 per capita. This means that for every dollar of GST revenue raised from Victorians, only 83 cents is returned as revenue to Victoria.
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Table 5.2: Fiscal subsidy for 2003-04(a) Equal per capita CGC distribution (b) distribution (c) Subsidy Subsidy ($ million) ($ million) ($ million) ($ per capita) NSW 7 914.6 9 366.8 -1 452.2 - 216 Vic 5 811.8 6 901.7 -1 089.9 - 220 Qld 5 594.3 5 323.2 271.1 71 WA 2 526.1 2 737.2 - 211.1 - 107 SA 2 796.4 2 131.5 664.9 434 Tas 1 185.0 660.4 524.6 1 105 ACT 544.0 453.4 90.6 278 NT 1 478.1 276.1 1 201.9 6 053 Total 27 850.2 27 850.2 0.0 0 Source: Department of Treasury and Finance Notes: (a) The total 2003-04 notional pool of $27 850 million consists of $20 461 million in financial assistance grants forgone and $7 389.3 million in health care grants. (b) Relativities as recommended by the CGC Report on State Revenue Sharing Relativities 2003 Update and incorporate the correction of an error in the superannuation assessment. (c) Based on Australian Bureau of Statistics population projections Australian Demographic Statistics (2001 Census Edition – Final) September 2002 Quarter, Cat. No. 3101.0, 20 March 2003.
The cross-subsidy from Victoria, New South Wales and Western Australia has been growing steadily since the current CGC methods were introduced in 1999 and is projected to almost double to $3.1 billion between 2000-01 and 2006-07 (see Chart 5.2). Between 1999-2000 and 2003-04, Victoria’s per capita subsidy to other States has increased by 32 per cent or $53 per capita ($299 million in aggregate), compared with expected nominal GSP per capita growth of 21 per cent over the same period. This increasing burden on Victoria and the other subsidising States is unsustainable.
Budget Statement 2003-04 Chapter 5 107 Chart 5.2: Cross-subsidisation by Victoria, New South Wales and Western Australia
3500
3000
2500
2000
$ million 1500
1000
500
0 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Vic NSW WA
Source: Department of Treasury and Finance
The Review of Commonwealth-State Funding Victoria, New South Wales and Western Australia commissioned an independent review, undertaken by Professor Ross Garnaut and Dr Vince FitzGerald, into the methods for allocating Commonwealth grants to the States and Territories. The Review focused on assessing the efficiency, equity, simplicity and transparency of the current system. The Review’s Final Report, which was released in August 2002, concluded that the current system does not increase equity for individual Australians, despite this being a fundamental objective of the current arrangements. Instead, it imposes economic costs of up to $280 million each year, and is severely damaging Australia’s economic prospects. The unnecessary costs and inefficiencies are a result of duplication, cost shifting, lack of efficiency drivers and a lack of coordination. The Review also found the current system to be an incomprehensible ‘black box’ that obscures accountability. In particular, the Final Report concluded that the current system of Commonwealth-State funding arrangements:
• has deficiencies on all criteria: efficiency, equity, simplicity and transparency;
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• has a negligible, or even an adverse, effect on equity at the levels of individuals and households; and
• is complex, difficult to understand and diminishes the accountability of the Commonwealth. Further, the uncertainty about future specific purpose payment funding, and about responsibility for health and aged care in Commonwealth-State financial arrangements, is a barrier to governments better planning their financial futures. The Victorian Government will continue to pursue all opportunities for fundamental reform that will enable the continued delivery of high quality public services to all Victorians.
Specific purpose payments (SPPs) SPPs comprise approximately 40 per cent of Commonwealth grants to States. They form an important component of state funding for vital services such as health, education, housing and community welfare. The Commonwealth Government distributes SPPs with specific policy intentions. Under current equalisation arrangements, needs are separately and independently assessed for individual areas of service delivery. SPP arrangements are very complex. There are about 100 different SPPs, covering programs that vary considerably in size. SPPs impose considerable administrative costs on both the Commonwealth and the States. They also blur accountability between levels of government and Commonwealth input controls can reduce the flexibility of the States in meeting the needs of their populations. In 2003-04, Victoria is estimated to receive $3 782 million in SPPs to the State. According to the Commonwealth’s estimates, Victoria is expected to receive only 23.7 per cent of total SPPs to the States which is significantly below Victoria’s share of the national population (24.8 per cent). In 2003-04, Victoria is expected to receive over $180 million less than the State would receive if SPPs were distributed on an equal per capita basis.
THE 2004 REVIEW OF STATE REVENUE SHARING RELATIVITIES Every five years, the CGC reviews the methods it uses to determine the per capita relativities (or measures of relative need) used to distribute the GST revenue and the health care grants among the States.
Budget Statement 2003-04 Chapter 5 109 The CGC is currently undertaking the 2004 Review of State Revenue Sharing Relativities (2004 Review). The outcomes of the 2004 Review will apply from 2004-05 and will remain in place until 2009. Throughout the 2004 Review Victoria has emphasised its concerns about the CGC’s interpretation and application of horizontal fiscal equalisation. Victoria encourages the CGC to consider the broad range of alternative interpretations and approaches in order to ensure that the implementation of horizontal fiscal equalisation is consistent with the intended distributional goals. The financial impact of the 2004 Review is difficult to predict. For example, the 1999 Review resulted in a loss to Victoria in grant share of around $95 million, while the 1993 Review resulted in a gain to Victoria in grant share of around $11 million. The CGC will report its preliminary outcomes of the 2004 Review in July 2003 and the final outcome will be released in February 2004.
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CHAPTER 6: BALANCE SHEET MANAGEMENT AND OUTLOOK
• The growth in general government assets is expected to average 4.0 per cent per annum between June 2002 and June 2007. This includes growth in the real capital stock at more than double the rate of population growth over this period. • At present, Partnerships Victoria procurement processes are underway for seven infrastructure projects with a capital value of about $2.5 billion including the Mitcham-Frankston Freeway, two new prisons projects and several communication projects for the State’s emergency service organisations. • General government net financial liabilities (excluding the Growing Victoria infrastructure reserve) are expected to increase from $15.8 billion as at June 2002 to $18.9 billion in June 2007. As a share of GSP these liabilities are projected to fall from 8.6 per cent to 8.0 per cent over the same period, signifying that the modest liability growth can be serviced by the growing Victorian economy. • Unfunded superannuation liabilities, at an estimated $13.4 billion in June 2002, represent the State’s largest liability. The State has adopted a funding framework with the aim of achieving 100 per cent funding by 2035. • General government net debt (excluding the Growing Victoria infrastructure reserve) is forecast to increase from $2.4 billion in June 2002 to $3.2 billion by June 2007. At just over 1 per cent of GSP net debt remains low, compared to 3 per cent of GSP in 1999 and 16 per cent in 1995. • Moody’s and Standard and Poor’s have both cited Victoria’s low debt levels, high degree of financial flexibility, strong fiscal position and the Government’s commitment to financial responsibility as the key reasons for Victoria’s triple-A credit rating.
Budget Statement 2003-04 Chapter 6 111 ASSET MANAGEMENT STRATEGY The Government is committed to growing and maintaining a portfolio of assets that enable government services to be sustainably delivered to the community, and to provide a strong infrastructure foundation for economic growth across the whole State.
Capital stock As shown in Chart 6.1, the main component of general government assets is property, equipment and infrastructure (capital stock). Preserving this capital stock is broadly achieved by ensuring that investment in refurbishing and replacing assets is equivalent to the expected depreciation of the capital stock during the year. The Government also plans to pursue growth in the level of the capital stock in order to meet increased demand and to improve the quality of the government and infrastructure services provided to the whole community.
Chart 6.1: General government assets by category as at 30 June
50 45 40 35 30 25
$ billion $ 20 15 10 5 0 Financial assets Receivables, Property, equipment Growing Victoria prepayments, and infrastructure infrastructure reserve inventories and other
1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: Department of Treasury and Finance
Growth in the real capital stock of 10.7 per cent is more than double the projected rate of growth in the population over the four years to June 2007 (see Chart 6.2). This reflects the Government’s commitment to a major program of infrastructure investment expenditure over this period, with net infrastructure investment expected to average around $2.5 billion per annum between 2003-04 and 2006-07, well in excess of depreciation of around $1.1 billion per annum.
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Chart 6.2: Real capital stock per capita as at 30 June
8 800
8 600
8 400
8 200
8 000
7 800
$ per capita (2002-03 prices) 7 600
7 400 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: Department of Treasury and Finance
Chart 6.3: Capital stock projected for 30 June 2004
Roads and earthworks 36%
Land and buildings 49%
Plant and equipment 5% Infrastructure systems 10% Source: Department of Treasury and Finance Land and buildings are projected to account for the largest proportion of Victorian general government capital stock ($19.6 billion in June 2004), followed by roads and earthworks ($14.5 billion), infrastructure systems ($4.1 billion) and plant and equipment ($1.8 billion) (see Chart 6.3).
Budget Statement 2003-04 Chapter 6 113 Partnerships Victoria projects The Government is committed to maximising the value of infrastructure spending through the responsible use of resources of both public and private sectors. Partnerships Victoria, launched in June 2000, provides the policy for a whole-of-government approach to the provision of public infrastructure and related ancillary services through public-private partnerships. The policy focuses on whole-of-life costing and full consideration of the benefits of risk transfer to private parties. Where there is the potential to offer enhanced value for money compared to conventional procurement approaches, the Partnerships Victoria framework allows the Government to provide improved services at a lower cost. The potential for this is likely to occur in larger projects where there is scope for some or all of the following attributes:
• integration of design, construction, operation and maintenance over the life of an asset, within a single project package;
• innovation and significant transfer of risk to a private party; and
• appropriate third-party usage of facilities, either concurrently or ‘out-of-hours’, thereby reducing net cost to government. Under Partnerships Victoria, the Government retains direct control over those core services where it is in the public interest to do so (such as policing, teaching in government schools and judiciary functions). Value for money, rather than capital scarcity or balance sheet treatment, is the driver for use of a Partnerships Victoria approach. Full budget funding is set aside for non self-funding projects before market interest is formally sought, allowing a project to proceed in public ownership should private bidders not offer value for money. Over the past 12 months, contracts have been signed with private parties under the Partnerships Victoria framework for the following four projects – Spencer Street Station redevelopment, Film and Television Studios, Berwick Community Hospital, and Echuca/Rochester Wastewater Treatment Plant. Contracts for another two projects are expected to be executed shortly – Enviro Altona and Mobile Data Network.
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Some potential Partnerships Victoria projects mentioned in the 2002-03 Budget – Box Hill Hospital Carpark, Fibre Optic Cable and Westgate Container Terminal – will not be delivered as Partnerships Victoria projects as the value for money tests were not satisfied. The Box Hill Hospital Carpark and Fibre Optical Cable projects will be procured via the State’s traditional procurement process, while the Westgate Container Terminal project will not proceed at this time. At present, procurement processes are underway for about $2.5 billion of Partnerships Victoria projects across a range of industry sectors. Projects in the market include:
• Mitcham-Frankston Freeway – The project will be built by the private sector and funded by a toll. The freeway will join the Eastern Freeway at Mitcham to the Frankston Freeway at Seaford.
• Correctional Facilities – The project involves building, financing and maintaining two men’s prisons with the public sector providing custodial services and the private sector providing accommodation and ancillary services.
• Mobile Data Network – This project involves building a communications network infrastructure to carry data messages for the Victoria Police and the Metropolitan Ambulance Service in Melbourne. The project will form a building block for future communications projects that are part of the Statewide Integrated Public Safety and Communications Strategy. The project will facilitate the automation of incident dispatch processes and provide remote database access for field officers. By introducing electronic dispatch and on-screen vehicle tracking more efficient resource usage is expected.
• Enviro Altona – City West Water is proposing to redevelop the existing Altona Treatment Plant in order to meet new EPA licence conditions for discharge into Port Phillip Bay and to cater for significant salt loads due to infiltration in the reticulation system. The project scope also involves the establishment of effluent reuse systems.
• Central Highlands Water – North Ballarat Wastewater Plant and Reuse Project – The project involves upgrading the Ballarat North Treatment Plant to a tertiary treatment level to cater for full reuse of effluent, with the need to comply with stricter EPA wastewater discharge standards.
• Emergency Alerting Systems – The project is a multi-agency initiative to equip career and volunteer emergency services personnel throughout Victoria with alerting devices. The systems will enable the Country Fire Authority, the Victorian Statewide Emergency Services and Rural Ambulance Victoria to contact their career and volunteer staff and alert them to emergency situations.
Budget Statement 2003-04 Chapter 6 115 • Metropolitan Mobile Radio – The project proposes a complete replacement of metropolitan radio systems for Victoria Police, Metropolitan Fire and Emergency Services Board and the Metropolitan Ambulance Service with digital trunked radios. A similar number of projects are either being readied for the market or are under consideration. These projects span a range of sectors: tourism, health and human services, education, water and economic infrastructure, and include:
• Melbourne Convention Centre (Plenary Hall);
• Royal Melbourne Showgrounds Redevelopment;
• Royal Women’s Hospital Redevelopment;
• Kew Residential Services Redevelopment;
• Relocatable Classrooms;
• Eastern Treatment Plant Upgrade;
• Werribee Plains Vision;
• Barwon Water – Biosolids Black Rock Treatment Plant; and
• Melbourne Wholesale Fruit, Vegetable, Flower and Fish Markets Redevelopment.
LIABILITY MANAGEMENT STRATEGY The Government is committed to maintaining net financial liabilities at prudent levels and maintaining the State’s triple-A credit rating. Standard and Poor’s and Moody’s Investors Service rating agencies have both cited Victoria’s exceptionally low debt levels, high degree of financial flexibility, strong fiscal position and the Government’s commitment to financial responsibility as the key reasons for Victoria’s triple-A credit rating. As Chart 6.4 shows, the main components of general government liabilities are gross debt and unfunded superannuation associated with the defined benefit schemes of the State Superannuation Fund (SSF).
116 Chapter 6 Budget Statement 2003-04
Chart 6.4: General government sector liabilities by category as at 30 June
16 14
12 10
8
$ billion 6
4 2
0 Gross debt Superannuation Employee entitlements Payables and other
1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: Department of Treasury and Finance
Debt General government gross debt is expected to remain roughly steady at $7.1 billion in June 2007 compared with $6.8 billion at June 2002 and $7.4 billion at June 1999. Management of the general government debt portfolio continues to be based on the key objectives of achieving relative certainty of interest costs, while minimising borrowing costs and refinancing risk, and managing the financial and operational risks of the general government sector treasury operations in a prudent manner. The debt portfolio is primarily comprised of a fixed rate borrowing facility from Treasury Corporation of Victoria, with an evenly spread maturity profile. This ensures that a relatively small proportion of the debt portfolio is subject to repricing and hence uncertainty in any one period. The standard measure used to assess state government indebtedness is non-financial public sector net debt, as defined and reported in Appendix E, Uniform Presentation of Government Finance Statistics. Under this framework, net debt is determined by deducting liquid financial assets from gross borrowings. The rationale for deducting liquid financial assets is that in a period of financial difficulty they would be readily available to redeem debt. Following this logic, Growing Victoria financial assets are not deducted from net debt, as these financial assets have been earmarked and, in most cases, committed to infrastructure projects.
Budget Statement 2003-04 Chapter 6 117 General government sector net debt (excluding the Growing Victoria infrastructure reserve) is projected to rise from $2.4 billion (1.3 per cent of GSP) as at June 2002 to $3.2 billion (1.4 per cent of GSP) as at June 2007 (see Chart 6.5). These debt levels remain low when compared to $4.9 billion (3.3 per cent of GSP) in June 1999 and a peak of $19.7 billion (16.3 per cent of GSP) in June 1995. The general government debt-servicing ratio is projected to decline from 1.9 per cent in 2001-02 to 1.6 per cent in 2006-07, continuing a declining trend from June 1999 when the debt servicing ratio was 3.6 per cent (see Table 6.4). The reduction in the debt servicing ratio is influenced by refinancing into lower interest rate environments.
Table 6.1: General government and non-financial public sector net debt (excluding Growing Victoria) as at 30 June (a) 1999 2000 2001 2002 2003 2004 2005 2006 2007 Actual Actual Actual Actual Revised Budget Estimate Estimate Estimate ($ billion) General 4.9 3.9 3.3 2.4 2.3 2.3 2.5 3.0 3.2 government net debt Non-financial 6.1 5.2 4.6 3.5 3.4 3.4 3.6 4.1 4.3 public sector net debt (b) (per cent) General 3.3 2.5 1.9 1.3 1.2 1.1 1.2 1.3 1.4 government net debt to GSP Non-financial 4.0 3.2 2.7 1.9 1.7 1.7 1.7 1.8 1.8 public sector net debt to GSP (b) Source: Department of Treasury and Finance Notes: (a) The Growing Victoria infrastructure reserve is excluded as an offset to gross debt on the grounds that these investments are earmarked for infrastructure projects and are therefore not available to redeem gross debt. (b) Non-financial public sector net debt is the sum of general government net debt plus public non-financial corporations net debt, less inter-sector transactions. As public non-financial corporations data are not available for the years 2004-05 to 2006-07, the data for this sector have been assumed to be constant from the year 2003-04.
118 Chapter 6 Budget Statement 2003-04
Chart 6.5: General government and non-financial public sector net debt (excluding Growing Victoria) as at 30 June
7.0 5.0 6.0 4.0 5.0 4.0 3.0
3.0 2.0 $ billion per cent 2.0 1.0 1.0 0.0 0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007
General government net debt Non-financial public sector net debt General government net debt to GSP Non-financial public sector net debt to GSP
Source: Department of Treasury and Finance
Unfunded superannuation liabilities Unfunded superannuation is the most significant liability on the State’s balance sheet. At 30 June 2003, the State's unfunded superannuation liability is projected to be $13.6 billion, an increase of $256 million over the 30 June 2002 figure. The increase is largely attributable to lower than expected returns on superannuation fund assets during 2002-03 due to weakness in global equity markets. The actuarial recalculation of tax credits available to state superanuation schemes also contributed to the increase in the State's unfunded superannuation liabilities. These adverse impacts will be largely offset by the bringing forward to 2002-03 of $750 million of state superannuation contributions from 2003-04 and the forward estimates period. The earlier payment of these state contributions permits more efficient use of tax credits by the State Superannuation Fund and reduces the State’s superannuation expenses in subsequent years. The unfunded liability of the State’s superannuation schemes represents the present value of future benefits that members have already accrued that are not covered by fund assets. The prior service costs are being funded by an annual payment determined on the basis of actuarial advice that is consistent with the Government’s aim of 100 per cent funding of the State’s unfunded superannuation liabilities by 2035. The superannuation liabilities reported in the general government sector’s balance sheet exclude the Commonwealth’s share of unfunded superannuation liabilities reported by universities. (The Commonwealth is responsible for funding the majority of superannuation liabilities associated with universities.)
Budget Statement 2003-04 Chapter 6 119 The fund actuary estimates that the unfunded superannuation liability will grow to $15.7 billion on a nominal basis by June 2007 (6.6 per cent of GSP). This represents an average annual growth rate of 3.2 per cent per annum between June 2002 and June 2007. The level of unfunded superannuation liabilities is expected to peak at $15.8 billion in 2010. However, Chart 6.6 shows the level of unfunded superannuation liabilities, measured in real terms (June 2003 prices), is expected to fall from 2005-06 as the impact of previous policy changes takes effect.
Chart 6.6: General government sector unfunded superannuation liabilities – long-term projections (a)
18 16 14 12 10 8 $ billion 6 4 2 0 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035
Nominal Real (June 2003 prices)
Source: Department of Treasury and Finance Note: (a) Excludes constitutionally protected schemes.
Net financial liabilities The Government is committed to maintaining net financial liabilities (net debt and unfunded superannuation liabilities) at prudent levels in order to maintain the State’s triple-A credit rating. Table 6.2 shows projected general government net financial liabilities for the period between June 1999 and June 2007.
120 Chapter 6 Budget Statement 2003-04
Table 6.2: General government net financial liabilities as at 30 June(a) 1999 2000 2001 2002 2003 2004 2005 2006 2007 Actual Actual Actual Actual Revised Budget Estimate Estimate Estimate ($ billion) Financial assets Cash and deposits 0.7 0.9 0.9 1.7 1.7 1.8 1.8 1.9 1.9 Advances paid 0.5 0.4 0.3 0.2 0.2 0.2 0.2 0.2 0.2 Investments, loans 1.3 1.4 2.2 2.4 2.3 2.3 2.0 2.0 1.7 and placements Growing Victoria 0.0 1.0 1.1 1.4 0.7 0.1 0.0 0.0 0.0 Total 2.5 3.8 4.5 5.74.9 4.3 4.1 4.0 3.8 Financial liabilities Deposits held 0.2 0.2 0.3 0.4 0.5 0.5 0.5 0.5 0.5 Advances received 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Borrowings 7.1 6.4 6.4 6.46.1 6.1 6.1 6.6 6.6 Total 7.4 6.7 6.7 6.86.6 6.6 6.6 7.0 7.1
Net debt 4.9 2.9 2.2 1.1 1.6 2.2 2.5 3.0 3.2 Net debt (excl. 4.9 3.9 3.3 2.4 2.3 2.3 2.5 3.0 3.2 Growing Victoria) Unfunded 11.4 12.3 11.8 13.4 13.6 14.1 14.9 15.4 15.7 superannuation Net financial liabilities 16.3 15.2 14.0 14.5 15.3 16.4 17.4 18.4 18.9 Net financial 16.3 16.2 15.1 15.8 16.0 16.4 17.4 18.4 18.9 liabilities (excl. Growing Victoria) (per cent) Net financial liabilities 10.9 10.1 8.8 8.6 8.3 8.1 8.2 8.2 8.0 to GSP (excl. Growing Victoria) Source: Department of Treasury and Finance Note: (a) This table is based on Table E.4, General government sector balance sheet, in Appendix E. Totals may not add due to rounding.
General government net financial liabilities (excluding the Growing Victoria infrastructure reserve) are expected to increase from $15.8 billion as at June 2002 to $18.9 billion by June 2007. As a share of GSP liabilities are projected to fall from 8.6 per cent of GSP in June 2002 to 8.0 per cent of GSP in June 2007, signifying that this modest growth in liabilities can be serviced by the growing Victorian economy (see Chart 6.7).
Budget Statement 2003-04 Chapter 6 121 Chart 6.7: General government net financial liabilities as at 30 June
20 20
15 15
10 10 $ billion per cent 5 5
0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007
Unfunded superannuation Net debt (excl. Growing Victoria) Net financial liabilities to GSP (%) (RHS)
Source: Department of Treasury and Finance
Chart 6.8 shows that the ratio of Victoria’s net financial liabilities to GSP (as reported by the ABS) is in line with other triple-A rated States such as New South Wales and Western Australia.
Chart 6.8: Comparison of general government net financial liabilities to GSP as at 30 June and current Australian state ratings
25 Aa2 AA 20
15 Aa2 Aaa AA+ Aaa Aaa Aaa 10 AAA AAA AAA AAA per cent 5 Aaa AAA 0
-5 Tas SA WA Vic Vic NSW Qld 2002 2002 2002 2002 2007 2002 2002
Moody's Investors Service Standard and Poor's
Source: Department of Treasury and Finance
122 Chapter 6 Budget Statement 2003-04
NET ASSETS The estimated statement of financial position in Table 6.3 shows an increase in general government net assets from $21.8 billion as at June 2002 to $28.1 billion as at June 2007. The projected $6.3 billion growth in net assets over the period June 2002 to June 2007 mainly reflects the expected revaluation of non-current assets and to a lesser extent the deployment of accumulated operating surpluses of $1.6 billion.
Table 6.3: General government sector statement of financial position as at 30 June ($ billion) 1999 2000 2001 2002 2003 2004 2005 2006 2007 Actual Actual Actual Actual Revised Budget Estimate Estimate Estimate Assets Financial assets (a) 2.0 2.3 3.1 4.1 4.0 4.1 3.9 3.9 3.7 Receivables, 3.2 3.2 3.3 4.8 4.9 5.1 5.2 5.3 5.5 prepayments, inventories and other Property, equipment 30.5 32.5 33.7 36.2 37.8 39.9 42.3 44.9 47.3 and infrastructure Growing Victoria 0.0 1.0 1.1 1.4 0.7 0.1 0.0 0.0 0.0 infrastructure reserve(b) Total assets 35.7 39.0 41.2 46.5 47.4 49.1 51.4 54.1 56.5 Liabilities Borrowings 7.1 6.4 6.4 6.4 6.1 6.1 6.1 6.6 6.6 Superannuation 11.4 12.3 11.8 13.4 13.6 14.1 14.9 15.4 15.7 Other liabilities 3.6 3.8 4.4 4.9 5.3 5.5 5.7 6.0 6.1 Total liabilities 22.2 22.5 22.6 24.7 25.0 25.8 26.7 27.9 28.4
Net assets 13.5 16.5 18.6 21.8 22.4 23.3 24.7 26.2 28.1 Source: Department of Treasury and Finance Notes: (a) Financial assets include cash assets, and investments, loans and placements. It does not include the Growing Victoria infrastructure reserve, which is currently invested in financial assets. (b) Growing Victoria infrastructure reserve is earmarked for physical asset investment and therefore treated as non-financial.
Growth in total assets is expected to average 4.0 per cent per annum between June 2002 and June 2007, reflecting the Government’s much increased infrastructure program. Total liabilities are projected to increase from $24.7 billion at June 2002 to $28.4 billion at June 2007, averaging growth of 2.8 per cent per annum over the same period. As a percentage of total assets, total liabilities are projected to decline from 53.0 per cent as at June 2002 to 50.2 per cent by June 2007. Budget Statement 2003-04 Chapter 6 123 Gearing ratios (or indebtedness in terms of borrowings or liabilities to total assets or to GSP) of the general government sector are projected to decrease over the forward estimates period. (see Table 6.4). The ratios of total and long-term borrowings to total assets, and total borrowings to GSP, for the general government sector show a downward trend over the period June 2002 to June 2007.
Table 6.4: Indicators of financial condition – general government (per cent) 1998-99 1999-00 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Actual Actual Actual Revised Budget Estimate Estimate Estimate Gearing ratios Long-term borrowings to 18.3 16.0 13.4 12.7 12.3 11.8 12.0 11.6 total assets Total borrowings to total 21.1 16.3 13.7 12.9 12.5 11.9 12.1 11.7 assets Unfunded superannuation 32.0 31.5 28.8 28.7 28.8 29.0 28.4 27.7 liabilities to total assets Total liabilities to total 65.2 57.5 53.0 52.8 52.5 52.0 51.5 50.2 assets Long-term borrowings to 4.1 3.9 3.4 3.1 3.0 2.8 2.9 2.8 GSP Total borrowings to GSP 4.7 4.0 3.5 3.2 3.0 2.9 2.9 2.8 Unfunded superannuation 7.6 7.7 7.3 7.1 7.0 7.0 6.8 6.6 to GSP Total liabilities to GSP 14.7 14.0 13.4 13.0 12.7 12.5 12.4 12.0
Debt servicing ratios Borrowing costs to total 3.6 2.2 1.9 1.9 1.8 1.7 1.7 1.6 revenue Superannuation 6.7 10.0 10.2 10.6 7.3 6.9 7.0 7.0 expenses to total revenue Superannuation 9.7 12.2 12.1 12.5 9.2 8.7 8.7 8.6 expenses and borrowing costs to total revenue
Capital stock ratios Growth in non-current 6.4 4.2 7.3 4.5 5.5 6.1 6.1 5.2 physical assets Asset investment to 4.3 3.6 5.2 5.1 5.3 5.8 4.8 5.0 non-current physical assets Source: Department of Treasury and Finance
124 Chapter 6 Budget Statement 2003-04
CHAPTER 7: ELECTION COMMITMENTS – IMPLEMENTATION REPORT CARD
• The 2003-04 Budget makes substantial progress on delivering the Government’s election commitments detailed in Labor’s Financial Statement 2002. • Contingency and other provisions are sufficient to fund remaining election commitments in future budgets.
Labor’s Financial Statement 2002 – The second term of a Bracks Labor Government provides an overview of the Government’s election policy commitments and their budgetary impact. This chapter outlines progress to date in implementing these election commitments. In this budget, the Government considered the 118 output initiatives that required funding in 2003-04. These were all approved to commence with funding of $389 million provided in 2003-04, marginally above the $386 million detailed in Labor’s Financial Statement 2002 (see Table 7.1). Funding is being provided from a variety of sources including existing resources of departments, demand contingency allocations, dedicated sources of funding (such as the Community Support Fund), and new approved funding. The remaining output election commitments, with funding requirements of around $169 million in 2004-05 rising to $209 million in 2006-07, will be considered as part of the 2004-05 Budget process (see Table 7.2). Funding sources for these initiatives will include existing demand contingency allocations and a new output funding contingency that has been established in this budget to specifically fund these future Labor’s Financial Statement 2002 initiatives. Asset investment initiatives included in Labor’s Financial Statement 2002 cover upgrades of existing facilities and new construction projects that are targeted to maintain high quality and accessible services for communities. Labor’s Financial Statement 2002 estimated the cost of these initiatives at around $1 925 million TEI.
Budget Statement 2003-04 Chapter 7 125 In the 2003-04 Budget, the Government considered those asset initiatives that will begin in 2003-04, with TEI of $540 million approved (see Table 7.3). The remaining asset investment election commitments with a TEI of $1 364 million (see Table 7.4) will be delivered over future budgets. Unallocated capital capacity over the forward estimates period is substantially above the levels required to fund the rest of the program.
Table 7.1: Labor’s Financial Statement 2002 output initiatives approved in the 2003-04 Budget ($ million) Labor’s Financial Statement Funding approved costings Initiatives 03-04 04-05 05-06 06-07 03-04 04-05 05-06 06-07 Department of Education and Training Investing in teachers to 4.0 14.0 28.0 36.0 4.0 14.0 28.0 36.0 support excellence Primary school student 4.2 12.5 16.4 16.4 4.2 12.5 16.4 16.4 welfare officers Excellence in Languages 0.8 1.8 1.8 1.8 0.8 1.8 1.8 1.8 Non-government schools 11.0 14.0 17.0 20.0 11.0 14.0 17.0 20.0 Non-government school 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 internet access Principals professional 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 development On-Track 0.5 1.0 1.0 1.0 0.5 1.0 1.01.0 Boost to VET in schools 0.5 1.0 1.0 1.0 0.5 1.0 1.0 1.0 Skill-Up 0.8 1.4 1.4 1.4 0.8 1.4 1.41.4 Parents returning to work 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 Total Department of 27.1 51.0 71.9 82.9 27.1 51.0 71.9 82.9 Education and Training Department of Human Services Hospital Demand 116.0 116.0 116.0 116.0 116.0 116.0 116.0 116.0 Management Strategy Box Hill Hospital 1.0 1.0 0.0 0.0 1.0 1.0 0.0 0.0 redevelopment (planning for future Box Hill Hospital redevelopment) Rural patients elective 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 surgery waiting lists Rural Workforce Program 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 Associate Professor of 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Physiotherapy, Shepparton Ministerial Council on Cancer 0.5 1.0 1.3 1.3 0.5 1.0 1.3 1.3 HACC – growth and boost to 12.0 19.0 19.0 19.0 12.0 19.0 19.0 19.0 home and community care funding Expansion of dental health 3.0 6.0 6.0 6.0 2.5 6.5 6.0 6.0 services Mental Health Strategy 9.0 18.0 18.0 18.0 9.0 18.0 18.0 18.0 New ambulance services 6.0 8.0 8.0 8.0 6.0 8.0 8.0 8.0
126 Chapter 7 Budget Statement 2003-04
Table 7.1 (cont): Labor’s Financial Statement 2002 output initiatives approved in the 2003-04 Budget ($ million) Labor’s Financial Statement Funding approved costings Initiatives 03-04 04-05 05-06 06-07 03-04 04-05 05-06 06-07 Expansion of breast 1.5 3.0 3.0 3.0 1.5 3.0 3.0 3.0 screening services Prevention and early 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 intervention for obesity and diabetes Victorian Women's Health & 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 Wellbeing Strategy Healthy and Active Living 0.3 0.6 0.6 0.6 0.3 0.6 0.6 0.6 Increased funding – Problem 6.0 6.0 0.0 0.0 6.0 6.0 0.0 0.0 Gambling Programs (Package to address problem gambling) Older Years and Carer 1.5 2.0 3.0 3.5 1.5 2.0 3.0 3.5 Support Program Growth in disability services 6.0 10.5 12.0 12.0 6.0 10.5 12.0 12.0 Boost to maternal and child 2.0 4.5 4.5 5.0 2.0 4.5 4.5 5.0 health services Maternal health nurses – 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 professional development Improved maternity services 0.8 1.3 1.5 1.5 0.8 1.3 1.6 1.6 for rural hospitals (Improved rural and Koori maternity services) Boost to early intervention 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 services Boost to foster care 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 payments Child protection 4.0 8.0 8.0 8.0 4.0 8.0 8.0 8.0 Social Housing Innovations 10.0 20.0 20.0 20.0 10.0 20.0 20.0 20.0 Program (Affordable housing strategy growth) Neighbourhood Renewal 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Homelessness (Expansion of 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 Victorian homelessness strategy) Support for Bush Nursing 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 Hospitals (a) Pre school start-up fund (a) 1.0 3.5 3.5 0.0 1.0 3.5 3.5 0.0 Children's Centres (a) 1.0 3.5 3.5 0.0 1.0 3.5 3.5 0.0 Pre school IT (a) 5.0 0.0 0.0 0.0 5.0 0.0 0.0 0.0 Total Department of 209.4 254.7 250.7 244.7 208.9 255.2 250.7 244.7 Human Services
Budget Statement 2003-04 Chapter 7 127 Table 7.1 (cont): Labor’s Financial Statement 2002 output initiatives approved in the 2003-04 Budget ($ million) Labor’s Financial Statement Funding approved costings Initiatives 03-04 04-05 05-06 06-07 03-04 04-05 05-06 06-07 Department of Innovation, Industry and Regional Development VicStart 6.0 6.0 6.0 7.0 6.0 6.0 6.07.0 Small Business 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Commissioner Street life 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Better work and family 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 balance Renew Regional 20.0 25.0 35.0 50.0 20.0 25.0 35.0 50.0 Infrastructure Development Fund Innovation clusters 1.5 0.7 0.7 0.0 1.5 0.7 0.7 0.0 Community banking grants 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Community Development 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Grants Major Events 5.0 5.0 5.0 0.0 5.0 5.0 5.0 0.0 Marketing Victoria 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Regional Marketing 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 Regional Renewal 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 Australian Tourism 1.8 1.8 0.0 0.0 1.8 1.8 0.0 0.0 Exchange Regional Tourism Events 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Total Department of 42.3 46.5 54.7 65.0 42.3 46.5 54.7 65.0 Innovation, Industry and Regional Development Department of Infrastructure Smart bus services 1.0 1.0 1.0 1.0 0.3 1.1 1.1 1.2 Connecting bus services 1.5 1.5 0.0 0.0 1.7 1.7 0.0 0.0 Metropolitan bus services 1.0 1.0 1.0 1.0 0.9 1.0 1.0 1.1 Dynon rail precinct – 0.3 0.5 0.3 0.0 0.3 0.5 0.3 0.0 Masterplan arrive alive! School Safety 5.8 17.3 0.0 0.0 5.8 17.3 0.0 0.0 Program Community harbours 0.40 0.75 0.75 0.75 0.40 0.75 0.75 0.75 Courtesy Campaign 0.03 0.05 0.05 0.05 0.03 0.05 0.05 0.05 Marine communications 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 New cycling paths (a) 3.0 3.0 2.0 0.0 3.0 3.0 2.0 0.0 Total Department of 13.1 25.3 5.3 3.0 12.5 25.6 5.4 3.3 Infrastructure Department of Justice Increase to legal aid funding 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 Domestic Violence Division – 1.3 1.3 1.3 1.3 0.2 1.5 1.7 1.7 Magistrate's Court More resources for police 8.7 21.3 36.6 58.5 12.5 22.6 33.0 57.7 Emergency services funding 0.0 2.0 2.0 2.0 1.5 1.5 1.5 1.5 128 Chapter 7 Budget Statement 2003-04
Table 7.1 (cont): Labor’s Financial Statement 2002 output initiatives approved in the 2003-04 Budget ($ million) Labor’s Financial Statement Funding approved costings Initiatives 03-04 04-05 05-06 06-07 03-04 04-05 05-06 06-07 Community Safety 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Emergency Support Program Emergency Services 1.0 1.0 1.0 0.0 0.8 0.8 0.8 0.8 Volunteer Program Counter-terrorism response 4.7 4.4 4.3 4.2 4.7 4.4 4.3 4.2 Major Crimes Reward Fund 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Multilingual 'crime stoppers' 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 line Support for country racing 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 clubs Total Department of 22.6 37.0 52.2 73.0 26.6 37.8 48.3 72.9 Justice Department of Premier and Cabinet Boost for Premier's Literary 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Awards Funds to local libraries 0.0 1.5 1.8 1.8 0.0 1.5 1.8 1.8 Artists in Communities 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Innovation in Arts Practice 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Creative Companies 0.6 0.6 0.7 0.7 0.6 0.6 0.7 0.7 Cultural community building 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 Celebrate Victoria Program 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Access to Victoria's cultural 0.6 0.6 0.8 0.8 0.6 0.6 0.8 0.8 assets Access to regional galleries 0.8 0.8 1.0 1.0 0.8 0.8 1.0 1.0 and museums Sharing the Arts (Touring) 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Boost for film production 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 investment in Victoria Total Department of 4.9 6.4 7.1 7.1 4.9 6.4 7.1 7.1 Premier and Cabinet Department of Primary Industries Defending our farms against 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 disease Extension of aquaculture 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 initiative Naturally Victorian 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Tougher on fisheries 0.2 0.3 0.3 0.3 0.2 0.3 0.3 0.3 offences Concession standardisation 0.0 0.1 0.1 0.1 0.0 0.1 0.1 0.1 Total Department of 3.2 3.4 3.4 3.4 3.2 3.4 3.4 3.4 Primary Industries
Budget Statement 2003-04 Chapter 7 129 Table 7.1 (cont): Labor’s Financial Statement 2002 output initiatives approved in the 2003-04 Budget ($ million) Labor’s Financial Statement Funding approved costings Initiatives 03-04 04-05 05-06 06-07 03-04 04-05 05-06 06-07 Department of Sustainability and Environment Water Smart Gardens and 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Homes Smart Farms 1.0 2.0 3.0 4.0 2.0 3.0 3.0 2.0 Healthy Rivers 2.0 2.0 6.0 6.0 2.0 2.0 6.0 6.0 Pensioner pilot program 1.0 1.0 0.0 0.0 1.0 1.0 0.0 0.0 A New Future for the Otways 8.0 3.0 3.0 0.0 6.0 5.1 1.6 1.2 Plantations Incentives 0.0 3.0 3.0 3.0 1.0 2.8 2.5 2.8 strategy New park rangers 5.2 5.2 5.2 5.2 4.0 4.0 4.0 4.0 Weed and pest control on 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 public land, including national parks Boost to Victorian 0.5 0.5 0.0 0.0 0.5 0.5 0.0 0.0 Environmental Assessment Council Tackling weeds 1.0 3.0 3.0 3.0 1.0 3.0 3.0 3.0 Green Power for 0.9 0.9 0.9 0.9 1.5 1.0 0.5 0.5 Government Solar energy retrofit scheme 0.8 0.8 0.8 0.8 0.5 0.7 0.8 1.0 Energy efficient retrofit 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 Research in water 0.0 1.0 1.0 0.0 0.0 1.0 1.0 0.0 conservation and recycling Extension solar energy 0.9 0.9 0.9 0.9 1.0 1.0 0.8 0.7 rebate scheme Total Department of 28.0 30.0 33.5 30.5 27.2 31.8 30.0 27.9 Sustainability and Environment Department for Victorian Communities Commonwealth Games 0.5 0.5 0.5 0.0 0.5 0.5 0.5 0.0 industry participation Community Jobs Program 9.6 9.6 9.6 9.6 9.6 9.6 9.6 9.6 Jobs for young people 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 Youth Employment Link 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Community Regional 2.0 2.5 2.8 2.8 2.0 2.5 2.8 2.8 Industry Skills Program Skilled Migration Program 0.5 1.5 2.0 2.0 0.5 1.5 2.0 2.0 Victorian Multicultural 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Commission Grants Community centres 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Increasing participation in 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 sport Strengthening sporting clubs 2.5 2.5 3.0 3.0 2.5 2.5 3.0 3.0 Regional sporting facilities 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5
130 Chapter 7 Budget Statement 2003-04
Table 7.1 (cont): Labor’s Financial Statement 2002 output initiatives approved in the 2003-04 Budget ($ million) Labor’s Financial Statement Funding approved costings Initiatives 03-04 04-05 05-06 06-07 03-04 04-05 05-06 06-07 Suburban sports facilities 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Kardinia Park – Skilled 1.5 1.5 2.0 1.8 2.3 4.0 0.5 0.0 Stadium (b) FReeZACentral 0.5 0.5 0.50.5 0.5 0.5 0.5 0.5 Advance – Youth 1.0 1.2 1.3 1.5 1.0 1.2 1.3 1.5 Development Program National Ice Skating Centre (a) 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 Total Department for 35.0 36.7 38.6 38.0 36.2 39.2 37.1 36.3 Victorian Communities Total LFS initiatives 385.5 490.8 517.1 547.5 388.8 496.8 508.5 543.3 approved in 2003-04 Budget Source: Department of Treasury and Finance Note: (a) Listed in Labor's Financial Statement 2002 as an asset initiative.
Budget Statement 2003-04 Chapter 7 131 Table 7.2: Labor’s Financial Statement 2002 output initiatives scheduled to commence in 2004-05 ($ million) Labor’s Financial Statement costings Initiatives 2003-04 2004-05 2005-06 2006-07 Department of Education and Training Programs for students with a disability 0.0 5.0 5.0 5.0 Refresher courses 0.0 0.5 0.7 0.8 Rural teacher retraining 0.0 0.5 1.0 1.0 Extra resources for TAFE and training 0.0 10.0 20.0 30.0 A secure future for ACE 0.0 0.2 0.4 0.6 Total Department of Education and Training 0.0 16.2 27.1 37.4 Department of Human Services Hospital Demand Management Strategy 0.0 132.0 147.0 147.0 Recruitment of GPs 0.0 2.0 2.0 2.0 Positive ageing 0.0 0.5 1.5 1.5 Disability Housing Trust 0.0 0.0 5.0 5.0 Total Department of Human Services 0.0 134.5 155.5 155.5 Department of Innovation, Industry and Regional Development Victorian Business Master Key 0.0 2.0 2.0 2.0 Opening doors to international markets 0.0 1.0 1.0 1.0 Invest Victoria 0.0 0.3 0.3 0.3 Strengthening the Industrial Supplies Office 0.0 0.5 0.5 0.5 Regional Business Investor Ready Program 0.0 2.0 2.0 2.0 Total Department of Innovation, Industry and 0.0 5.8 5.8 5.8 Regional Development Department of Infrastructure Broadband network 0.0 5.0 5.0 5.0 Public transport 'red spots' programs 0.0 3.0 3.0 3.0 Total Department of Infrastructure 0.0 8.0 8.0 8.0 Department for Victorian Communities State Volleyball Centre 0.0 2.5 2.5 0.0 Koori business network 0.0 1.3 1.3 1.3 Community capacity building 0.0 1.0 1.0 1.0 Total Department for Victorian Communities 0.0 4.8 4.8 2.3 Gross cost of LFS initiatives to be considered 0.0 169.2 201.1 208.9 in future budgets Less: Funding from demand contingency 0.0 132.0 147.0 147.0 Less: Funding from future LFS initiatives 0.0 37.2 54.1 61.9 contingency LFS initiatives not provided for 0.0 0.0 0.0 0.0 Source: Department of Treasury and Finance
132 Chapter 7 Budget Statement 2003-04
Table 7.3: Labor’s Financial Statement 2002 asset investment funding approved for commencement in 2003-04 ($ million) Labor’s Funding approved Financial Statement Initiatives Total Program 2003-04 2004-05 2005-06 2006-07 TEI TEI
Whole-of-government Counter-terrorism response (a) 12.6 4.9 12.6 Total whole-of-government 12.6 4.9 0.0 0.0 0.0 12.6
Department of Education and Training Facilities for excellence 80.0 5.1 5.0 0.0 0.0 10.1 Building Better Schools – new schools 180.0 32.6 57.2 0.0 0.0 89.8 School replacement program 20.0 2.1 3.0 0.0 0.0 5.1 Community facilities fund 30.0 0.5 0.0 0.0 0.0 0.5 Total Department of Education and 310.0 40.2 65.3 0.0 0.0 105.5 Training
Department of Human Services Werribee Mercy Hospital 10.0 2.0 6.0 2.0 0.0 10.0 Dandenong Hospital 24.0 1.0 8.0 0.0 0.0 9.0 Nhill Hospital 8.5 2.0 6.5 0.0 0.0 8.5 New biomedical equipment 50.0 22.0 3.0 0.0 0.0 25.0 Replace aged & dated radiotherapy 78.0 4.0 21.0 4.0 0.0 29.0 equipment, including at Geelong, Moorabbin and Latrobe Valley Expand and upgrade ambulance stations 10.0 0.4 0.0 0.0 0.0 0.4 and equipment Rebuild rural nursing homes 70.0 4.5 18.0 3.0 0.0 25.5 Victorian Foundation for Survivors of 5.0 1.0 4.0 0.0 0.0 5.0 Torture Total Department of Human Services 255.5 36.9 66.5 9.0 0.0 112.4
Department of Sustainability and Environment Victorian Water Trust, comprising the 7.5 15.0 15.0 15.0 52.5 following: - Country Towns Water Supply and 30.0 Sewerage Program - Murray River (Sunraysia-Mildura) – 20.0 upgrading irrigation systems - Gippsland Lakes and Macalister River 20.0 – upgrading irrigation systems - Werribee Plains 10.0 Total Department of Sustainability and 80.0 7.5 15.0 15.0 15.0 52.5 Environment
Budget Statement 2003-04 Chapter 7 133 Table 7.3 (cont): Labor’s Financial Statement 2002 asset investment funding approved for commencement in 2003-04 ($ million) Labor’s Funding approved Financial Statement Initiatives Total Program 2003-04 2004-05 2005-06 2006-07 TEI TEI Department of Justice New Moorabbin Court complex 18.0 0.1 0.4 8.5 9.0 18.0 Police forensic laboratories 6.0 1.7 4.3 0.0 0.0 6.0 Continue police stations construction 114.0 4.7 20.6 34.4 0.0 59.7 program in Victoria New rural police stations 24.0 4.0 2.0 0.0 0.0 6.0 Total Department of Justice 162.0 10.5 27.3 42.9 9.089.7
Department of Infrastructure Metropolitan level crossing initiative (b) 45.0 1.0 0.0 0.0 0.0 1.0 Geelong Bypass (b) 190.0 4.1 0.0 0.0 0.0 4.1 Pakenham Bypass 121.0 20.0 25.0 30.0 40.0 121.2 Pyalong Bypass 5.0 0.4 4.4 0.2 0.0 5.0 Outer metropolitan road program 100.0 9.0 14.5 4.5 28.0 New station in Grovedale 3.0 4.0 1.0 0.0 0.0 5.0 Smart Bus capital upgrade 2.6 2.6 0.0 0.0 0.0 2.6 Total Department of Infrastructure 466.6 41.1 44.9 34.7 40.0 166.9
Total asset investment 1286.7 539.6 Source: Department of Treasury and Finance Notes: (a) $7.69 million of funding relates to 2002-03. (b) 2003-04 funding provided for pre-construction planning activities.
134 Chapter 7 Budget Statement 2003-04
Table 7.4: Labor’s Financial Statement 2002 asset investment funding to be considered in future budgets ($ million) Labor’s Financial Statement Initiatives TEI
Department of Education and Training Classroom replacement program 50.0 Schoolyard Blitz program 10.0 A secure future for ACE 1.0 Total Department of Education and Training 61.0
Department of Human Services Royal Women's Hospital redevelopment 190.0 Northern Hospital 23.0 Monash Medical Centre 10.0 Maroondah Hospital 10.0 Mornington Hospital 20.0 Maryborough District Health Service 9.0 Bairnsdale Hospital 2.8 Echuca Hospital – redevelopment of acute facilities stage one 7.0 Goulburn Valley Health Service – Shepparton 5.0 West Gippsland Hospital – Warragul 10.5 Geelong – new accident and emergency department 20.0 Latrobe Regional Hospital Mental Health 8.0 Knox – new sub-acute facilities 30.0 Public super clinics – Craigieburn, Melton and Lilydale 40.0 Elective Surgery Centre of Excellence –- Alfred 60.0 Bendigo Physiotherapy refurbishment 0.2 Aged care facilities –- Grace MacKellar 50.0 Community health centre upgrades 26.0 Dental health 3.0 Total Department of Human Services 524.5
Department of Sustainability and Environment Victorian Water Trust, comprising the following: - Goulburn and Broken Rivers – upgrading irrigation systems 40.0 Total Department of Sustainability and Environment 40.0
Department of Justice Mobile police facilities 2.5 Total Department of Justice 2.5
Department for Victorian Communities National Ice Skating Centre (a) 9.6 Commemorative Place 0.5 Total Department for Victorian Communities 10.1
Budget Statement 2003-04 Chapter 7 135 Table 7.4 (cont): Labor’s Financial Statement 2002 asset investment funding to be considered in future budgets ($ million) Labor’s Financial Statement Initiatives TEI
Total TEI for above projects 638.1 Remaining TEI from LFS programs commenced in 2003-04 747.3
Total asset investments to be considered in future budgets 1385.4
Unallocated capital provision across forward estimates period (b) 3063.0
Remaining unallocated capital provision across forward estimates 1677.6 Source: Department of Treasury and Finance Note: (a) Listed in Labor’s Financial Statement 2002 as an asset initiative, however, the project is likely to be constructed under a partnership agreement with government funds provided as a grant. Funding for a feasibility review has been provided in 2003-04 Budget (see Table 7.1). (b) Includes Better Roads Victoria funding not allocated to specific projects and a general budget unallocated capital provision.
136 Chapter 7 Budget Statement 2003-04
CHAPTER 8: STATEMENT OF RISKS
• The budget projections are sensitive to a number of upside and downside economic risks, fiscal risks and contingent liabilities. • The major economic risk is continuing weak exports. This is exacerbated by soft global markets, volatile oil prices and general uncertainty. Exports have also been hampered by a drought and bushfire-affected agricultural sector. • The budget operating surplus is also sensitive to economic conditions in a number of asset markets. Over the last couple of years big upside and downside impacts have been sourced from Victorian property and world stock markets, respectively. • Contingency provisions within the budget provide general protection against known fiscal risks, including increased demand for government services and award wage increases. An allowance has been made of around $1 billion over five years in anticipation of higher public transport costs. • A number of contingent liabilities have been identified.
SENSITIVITY OF THE BUDGET TO ECONOMIC CONDITIONS This chapter addresses possible upside and downside risks to the budget projections provided in this publication. Three classifications of risks are examined – economic risks, fiscal risks and contingent liabilities. Many of the addressed risks will not eventuate, and some will instead be replaced by other pressures. Despite this, it is important to identify and assess possible budget pressures in order to allow for appropriate risk management by public sector managers and to allow interested analysts, including ratings agencies, to assess the sensitivity of budget projections to both upside and downside surprises.
Budget Statement 2003-04 Chapter 8 137 ECONOMIC RISKS The main risks to the Victorian economic projections stem from overseas and national developments. There is also the possibility that Victorian population growth may vary due to unexpected changes in net interstate migration patterns, which could impact on medium-term economic growth. International uncertainty generated by US and allied military action against Iraq has heightened volatility in financial markets, despite expectations of stronger global growth in the coming year. Oil prices fluctuated widely prior to the conflict, exceeding $US35 before falling back below $US30 per barrel. With world oil supply low, any further disruption to oil supplies in Iraq or elsewhere could see upward pressure on oil prices again creating inflationary pressures and reducing demand for Victorian exports. However, by the end of April the conflict in Iraq had subsided and risks to oil supplies were receding. At the same time, the rapid spread of the severe acute respiratory syndrome (SARS) has raised uncertainty about growth prospects for many East Asian economies. International tourism activity in these countries is being affected, although the likely severity and duration of the economic impact from SARS is still unclear. East Asia (outside Japan) accounts for over one-third of Victorian merchandise exports. The performance of exports has also been affected by domestic events – drought and bushfire. These pressures have now started to ease, allowing the agricultural sector to begin the process of rebuilding. However, the rebuilding of crops and livestock will take some time during which agricultural exports, mainly dairy and cereals, could still exert downward pressure on general exports. Victoria has been gaining population from interstate in recent years. Since October 1999, there has been a net inflow of over 16 000 people to Victoria from other States. The budget projections assume some easing in the gains from interstate migration, from around 5 000 persons per annum at present to around 2 000 per annum. If recent rates of annual interstate migration are sustained, population and economic growth could be slightly higher than forecast. A slowing in Victoria’s population growth rate could have some impact on medium-term economic projections. The construction industry has been a key driver of economic growth over the past year, with strength in both residential and non-residential activity. Although leading indicators of construction activity appear to be slowing, they remain close to record levels. Nevertheless, the anticipated government investments associated with the Commonwealth Games could drive construction activity to be stronger than expected in the near term.
138 Chapter 8 Budget Statement 2003-04
Sensitivity analysis The sensitivity analysis estimates the impact on revenue, expenses and the operating surplus of an increase in selected economic and financial indicators, and in so doing, indicates the risk associated with the forecasts or projections of each variable. The major variables that affect Victoria’s operating surplus are economic growth, employment, prices, wages, interest rates and volatility in asset markets. To assess sensitivity to change, the level of each economic indicator is permanently increased by 1 per cent in the first year. The level of the economic indicator is then increased by the forecast growth rate. It is assumed during the analysis of each indicator that all others follow their forecast growth rates. Table 8.1 shows the estimated impact on the general government operating surplus over a four-year period, beginning 2003-04, of this 1 per cent increase in the level of each indicator.
Table 8.1: Impact on the general government operating surplus of a 1 percentage point increase in selected economic indicators in 2003-04(a) ($ million) 2003-04 2004-05 2005-06 2006-07 Estimate Estimate Estimate Estimate GSP Taxes, regulatory fees and fines 27 29 29 30 Other revenue(b) 18 22 24 26 Superannuation expenses ...... Other expenses .. 1 1 3 Operating surplus 46 51 52 53
Employment Taxes, regulatory fees and fines 27 28 30 31 Other revenue(b) 124 6 Superannuation expenses ...... Other expenses ...... 1 Operating surplus 27 30 34 36
Consumer prices Taxes, regulatory fees and fines 33 35 35 37 Other revenue(b) 122 129 139 151 Superannuation expenses 120 ...... Other expenses 58 59 59 61 Operating surplus -23 105 115 126
Budget Statement 2003-04 Chapter 8 139 Table 8.1 (cont): Impact on the general government operating surplus of a 1 percentage point increase in selected economic indicators in 2003-04(a) ($ million) 2003-04 2004-05 2005-06 2006-07 estimate estimate estimate estimate Average weekly earnings (c) Taxes, regulatory fees and fines 26 27 29 30 Other revenue(b) -16 -21 -13 -18 Superannuation expenses 109 9 9 9 Other expenses 92 95 99 100 Operating surplus -191 -98 -92 -97 Domestic share prices Taxes, regulatory fees and fines ...... Other revenue(b) 45 1 1 Superannuation expenses -36 -3 -3 -3 Other expenses ...... 1 Operating surplus 40 7 3 2 Overseas share prices Taxes, regulatory fees and fines ...... Other revenue(b) 45 2 2 Superannuation expenses -24 -2 -2 -2 Other expenses ...... 1 Operating surplus 28 7 4 3 Property prices Taxes, regulatory fees and fines 23 22 39 42 Other revenue(b) 23 5 9 Superannuation expenses -10 -1 -1 -1 Other expenses -0 -0 .. 1 Operating surplus 35 26 44 50
Property volumes Taxes, regulatory fees and fines 17 16 17 18 Other revenue(b) .. 1 2 4 Superannuation expenses ...... Other expenses ...... 1 Operating surplus 17 17 19 21
140 Chapter 8 Budget Statement 2003-04
Table 8.1 (cont): Impact on the general government operating surplus of a 1 percentage point increase in selected economic indicators in 2003-04(a) ($ million) 2003-04 2004-05 2005-06 2006-07 estimate estimate estimate estimate Interest rates (d) Taxes, regulatory fees and fines ...... Other revenue(b) 77 80 43 45 Superannuation expenses 61 4 4 4 Other expenses 3 7 12 18 Operating surplus 13 69 26 23 Source: Department of Treasury and Finance Notes: (a) A positive number for taxes, regulatory fees and fines, and other revenue denotes an increase in revenue. A positive number for superannuation expenses and other expenses denotes an increase in expenses (and hence a reduction in the operating surplus). A positive number for the operating surplus denotes an improvement in the operating surplus. Numbers may not balance due to rounding. (b) Other revenue includes changes in dividends and income tax equivalent payments from public authorities. These revenues are based on an estimated dividend payout ratio. However, dividends paid by government business enterprises are determined by the Treasurer having regard to relevant commercial considerations including reported profit/loss, operating cash flow, gearing and interest cover, capital requirements and the views of the Board and the portfolio Minister. Therefore, the actual impact on this revenue source is dependent on the current circumstance of the relevant public authority. (c) Assumes wages of Victorian Government employees also increase by 1 per cent above what was expected. (d) Assumes a 1 percentage point increase in the interest rate over the entire period.
Sensitivity to economic growth A 1 per cent increase in GSP is estimated to increase the operating surplus by $46 million in 2003-04, increasing to $53 million in 2006-07. This increase is predominantly generated through increased taxes, fines and duties as a result of the higher economic activity. There is little impact on the combined level of GST grants and transitional assistance during this period as any resulting increase in GST grants to Victoria would be largely offset by a reduction in transitional assistance (as the estimated level of revenue forgone is not increased by variations in GSP).
Budget Statement 2003-04 Chapter 8 141 Sensitivity to employment growth An increase in forecast employment of 1 per cent is estimated to increase the operating surplus by $27 million in 2003-04, rising to $36 million in 2006-07. Employment growth directly affects the operating surplus through its impact on payroll tax revenue.
Sensitivity of prices A 1 per cent rise in the level of consumer prices is estimated to reduce the operating surplus by $23 million in 2003-04. This reflects an increase in the unfunded superannuation liability flowing from the impact that a higher CPI has on the present value of deferred pensions and benefits. Following this immediate impact, however, the CPI rise will have a positive influence on the budget position. This is because a number of revenue sources (including some taxes, regulatory fees and fines, grants and sales of goods and services) are sensitive to inflation, while expenditure in the budget year is relatively insensitive. This reflects the fact that budget appropriations are not changed as a result of (post-budget) parameter changes. Combined GST grants and transitional assistance will be raised by an increase in prices, as several components of estimated forgone revenue (principally financial assistance grants and safety net revenues) are raised by inflation.
Sensitivity to wages As with an increase in prices, a 1 per cent rise in the level of wages has a substantial one-off impact on the net unfunded superannuation liability. Moreover, wage increases have an ongoing negative impact on the operating surplus as a rise in departmental salary and superannuation expenses is only partly offset by an increase in payroll tax receipts.
Sensitivity to domestic and overseas share prices A 1 per cent rise in domestic share prices is estimated to improve the operating result by $40 million in 2003-04, with the benefit falling to $2 million by the fourth year. The primary benefit reflects a reduction in superannuation expenses of $36 million in 2003-04 falling to $3 million in the forward years. A 1 per cent rise in overseas share prices is estimated to improve the operating result by $28 million in 2003-04, with the benefit falling to $3 million by the fourth year. The initial fall in 2003-04 is due primarily to a reduction in superannuation expenses of $24 million.
142 Chapter 8 Budget Statement 2003-04
In Budget Statement 2002-03, no distinction between domestic and overseas shares was made in applying the 1 per cent shock. To enable comparison to the previously published budget sensitivities, combining the separate domestic and overseas sensitivities shown above, a 1 per cent rise in share prices (domestic and overseas) is estimated to reduce the operating result by $68 million in 2003-04 (compared with an estimated $49 million in Budget Statement 2002-03). The increased sensitivity of the operating result to changes in share prices is mainly a result of the inclusion of around $3.2 billion in assets of the Emergency Services Superannuation Scheme (ESSS) in the analysis. Under Australian Accounting Standards, when the fund is in surplus, changes in the value of the assets (or liabilities) have no impact on superannuation expenses. Due to the adverse performance of global equity markets, ESSS has moved from a net surplus to a deficit position and therefore changes in asset returns will have an associated impact on superannuation expenses until the fund returns to a net surplus position.
Sensitivity to property prices Increasing property prices by 1 per cent in the first year results in a $35 million gain to the operating surplus, which falls away in the second year, before rising to $50 million in 2006-07. The impact on the operating surplus is composed predominantly of revenue from increased taxes, regulatory fees and fines. However, the 2003-04 increase also includes a one-off $10 million decrease in superannuation expenses due to rising property assets value. A lag in the valuation determinations of property for land tax assessments results in delayed land tax receipts boosting revenue from 2005-06 onwards.
Sensitivity to property volumes Holding prices steady, a change in volumes of 1 per cent is estimated to increase the operating surplus by $17 million in 2003-04, rising to $21 million in 2006-07. The operating surplus is less sensitive to a change in property volumes than prices due to a combination of volumes having no impact on superannuation expenses or land tax receipts (assuming no compositional change).
Sensitivity to interest rates An assumed 1 per cent increase of the forecast interest rates is estimated to increase the operating result by $13 million in 2003-04. In the second year the increase rises to $69 million. Compared to the 2002-03 Budget Update, the returns in the first two years are less. This is due to reduced public authority dividends over this period. Budget Statement 2003-04 Chapter 8 143 VARIABILITY OF ECONOMIC INDICATORS In interpreting the estimates in Table 8.1, it is worth noting that historically, some of the economic indicators listed have been more volatile than others. In particular, although variations in GSP and employment growth, wage and consumer price inflation, and interest rates have been broadly similar since the mid-1980s, property and share markets have been considerably more volatile (see Chart 8.1).
Chart 8.1: Comparison of volatility of economic parameters(a)
35
30
25
20
15
10 per cent per 5
0
-5
-10 1991-92 1993-94 1995-96 1997-98 1999-00 2001-02
GSP All ordinaries share price index ABS established house price index
Source: Department of Treasury and Finance Note: (a) Annual percentage growth on preceding year.
In combination with the outcomes of the sensitivity analysis, these results suggest:
• share prices are potentially more volatile in the short term due to the current global conditions, and are likely to be a major source of variation in the budget operating position in the year in which fluctuations occur;
• property prices, like share prices, are relatively volatile and have grown strongly in recent years. Property prices have a substantial ongoing impact on the budget operating position while the initial impact is smaller than that of share prices;
• interest rates are less variable and have a smaller ongoing impact on the operating position than other parameters;
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• fluctuations in economic activity (GSP and employment) and wages are also likely to be a major source of variation in the budget operating position, over the entire forward estimates period, not just in the first year; and
• variations in inflation rates are likely to have a significant impact on the operating surplus after the first year, although they are not volatile and pose little risk to the outlook.
FISCAL RISKS
Expenditure risks There are several general risks, such as unforeseen changes in the size and structure of the Victorian population, which can impact on the expenditure and revenue outlook. These risks can be classified into those that affect all government departments and those that are department specific. Examples of a government-wide factor that would have potential to increase general expenditures above those allowed for in the forward estimates are unplanned increases in award wage costs. The main risks to specific departmental expenditures relate to growth in demand for key services, the modernisation of assets and government responses to unforeseen events. Examples of these types of impacts could include pressures related to the maintenance of assets such as government schools and TAFE institutes and funding required in relation to natural disaster relief. The 2003-04 Budget and forward estimates include a contingency provision to allow for the likelihood that some of these department-specific and government-wide expenditure risks will be realised during the budget year or over the course of the outlook period. The contingency provision includes a general allowance for:
• the impact of planned award wage increases, consistent with government policy, on departmental operating costs;
• growth in Victoria’s population, and from it, derived demand for government services; and
• other expenditure risks which are unforeseen or not able to be quantified at the time of construction of the budget estimates.
Budget Statement 2003-04 Chapter 8 145 The inclusion of an operating contingency provision in the budget estimates mitigates the potential impact of expenditure risks on the overall budget position. Realised expenditure risks will only impact on total expenditure and the annual budget position to the extent that they cannot be accommodated within the contingency provision built into the budget estimates. In addition to the operating contingency, the budget estimates include an unallocated capital provision to provide capacity for future asset investment funding requirements. With a capital program the size of that funded by the Government there are always likely to be variations in actual costs for individual asset investment projects against budget. However, the forward estimates assume that capital cost pressures are managed within the existing forward estimates with no budget impact. Management of capital cost pressures may occur in one of three ways:
• the reallocation of resourcing within departments’ global capital budgets (reflecting the likelihood that cost over-runs will be offset by cost under-runs on other projects);
• re-scoping a project to fit within funding parameters (subject to government approval); and
• funding from the unallocated capital funding set aside in the forward estimates (subject to government approval). Significant events that could represent a call on the operating contingency or unallocated capital funding and/or impact on the total budget expenditure forecasts are detailed below.
Public transport franchise arrangements In February 2002, the Government and the rail franchisees commenced negotiations to bring a level of certainty and stability to Victoria’s rail businesses. The Government established a task force to undertake a comprehensive review of the provision of passenger train and tram services in Victoria and to advise the Government what changes, if any, should be made to the existing arrangements. In December 2002, two of the three franchise operators signed Interim Operator Agreements (IOA), which guaranteed services over the next 12 months while the franchises are restructured. As part of the IOA, these two franchisees will receive $47 million to ensure the continued operation of public transport without disruption.
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Following advice from National Express on 16 December 2002 that it would no longer provide financial support to its three Victorian franchisees – V/Line Passenger, M>Tram and M>Train – the Government appointed receivers and managers to operate these businesses from 22 December 2002. Work undertaken since the withdrawal of National Express confirmed that the viability of the public transport system depended on an increase in the Government subsidies over the next five years for train and tram services. In this context the Government is continuing to work towards its preferred model of one metropolitan train operator and one tram operator.
Roads Roads of National Importance are funded on a 50:50 basis between state and Commonwealth governments. Depending on the size and timing of announcements made by the Commonwealth, the Victorian Government may be required to provide matching funding for road construction and operating expenditure.
Gascor Pty Ltd put options As part of reforms of the gas industry completed in 1999 the State required Victoria’s gas retailers to grant the State the right to require the retailers to purchase the shares in Gascor Pty Ltd (put options). The put options were exercised by the Treasurer in December 2002 and the State is in the process of completing transfer of Gascor Pty Ltd to the retailers Origin Energy (Vic) Pty Ltd, AGL Victoria Pty Ltd and TXU Pty Ltd. The retailers have raised potential claims which may require resolution.
Insurance exposures Over the past year, governments in Australia have been subject to sustained pressure to compensate for the absence of private sector insurance in areas as diverse as medical indemnity, professional indemnity cover for medical research, and public liability for religious institutions, adventure tourism, historic railways and public transport operations. To date, last resort insurance arrangements in Victoria have been entered into under strict conditions with known, limited potential exposure. In response to certain instances of sharp rises in insurance premiums, the Government has also taken on risk that was previously held by the private sector. An example is the absorption of the medical indemnity exposures of bush nursing hospitals into the insurance programs of the Department of Human Services.
Budget Statement 2003-04 Chapter 8 147 Events such as the collapse of medical indemnity provider United Medical Protection and revised accounting standards designed to enhance the recording of longtail insurance scheme liabilities may impact on the State. Although it is not possible to assess these impacts, pressures on private medical indemnity premiums may result in the State assuming larger numbers of high risk medical procedures. Any such movement, together with the impact of claims that arise from the current levels of public medical services, means that there is a continuing need to monitor closely the State’s medical indemnity liabilities and expenses.
Revenue risks
Muir Electrical Co v Commissioner of State Revenue [2002] VSC 224 Payroll tax is the most significant tax levied by the Victorian Government, worth approximately $2.7 billion in 2002-03. The Pay-roll Tax Act 1971 (the Act) includes provisions to prevent the avoidance or minimisation of payroll tax liability by the splitting up of businesses. In calculating the total taxable wages subject to payroll tax, businesses may be ‘grouped’ where they share common employees and/or the same person(s) have a controlling interest. These provisions have been in place since 1987 and in recent times have come under the scrutiny of the Supreme Court of Victoria. Muir Electrical Co (MEC) and 18 retailers were ‘grouped’ for the purposes of calculating the total level of taxable wages. In a challenge to this decision, the Court of Appeal found that during the assessable period, the retailers could not be grouped under one of the common employee tests outlined in the grouping provisions. The matter was referred back to the Victorian Civil and Administrative Tribunal where it was found that another test applied to group MEC and the retailers. This finding was subsequently overturned in the Supreme Court and an appeal is now listed for hearing in the Court of Appeal during June 2003. The Court reserved for subsequent consideration the grouping of MEC and six retailers on the grounds that MEC had a controlling interest in these retailers. Further litigation is required to resolve this question and it is difficult to estimate the level of risk this case represents to current revenue. The Government intends to introduce legislation in the Autumn 2003 session of Parliament to rectify problems with the grouping provisions identified in the case.
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Royal & Sun Alliance Insurance Australia Limited v Commissioner of State Revenue Taxes are levied on a range of transactions, including transactions involving insurance products, under the Duties Act 2000 (previously the Stamps Act 1958). The Duties Act 2000 imposes duty on the premium paid for general insurance policies at the rate of 10 per cent. Following the introduction of the GST on 1 July 2000, stamp duty has been payable on total insurance premiums inclusive of the GST. This is consistent with the pre-GST situation where the duty was payable on the total value of transactions, including Commonwealth indirect taxes. In August 2002, following litigation brought by Royal & Sun Alliance Insurance Australia Limited against the Commissioner of State Revenue, the Supreme Court held that the GST component of the amount payable by the insured was not part of the insurer’s gross premiums and therefore was not dutiable where this was separately identified in insurance policies. The Commissioner’s appeal against the Supreme Court’s decision was heard between 24 and 26 February 2003, but a decision has not yet been handed down. In order to limit possible risks to revenue in the event of an unfavourable appeal outcome to the State, the Government announced on 3 September 2002 that it would immediately draft legislation to confirm and clarify existing arrangements to ensure that the entire premium remains subject to duty. It is anticipated that this legislation will be introduced into Parliament in Autumn 2003 and will take effect from the date the Duties Act 2000 came into force (1 July 2001).
CONTINGENT LIABILITIES Contingent liabilities represent possible liabilities that arise from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. A contingent liability can also represent a liability that is not recognised in the balance sheet because it is not probable that a future sacrifice of economic benefits will be required or the amount of the liability cannot be measured reliably. Quantifiable contingent liabilities are summarised in Table 8.2.
Budget Statement 2003-04 Chapter 8 149 Quantifiable contingent liabilities
Table 8.2: General government quantifiable contingent liabilities at 30 June ($ million) 2001 2002 Guarantees and indemnities 218.8 167.3 Potential early termination of contractual arrangements 717.6 787.3 Legal proceedings and disputes 166.5 289.8 Other 4.7 6.5 Non-general government debt 2 638.7 2 650.0 Total contingent liabilities 3 746.3 3 900.9 Source: Department of Treasury and Finance The movement in guarantees and indemnities is mainly due to a reduction of $23.4 million in the outstanding balance for cooperative housing societies guarantees and indemnities because loans were paid out during the period, and a reduction of $31.1 million in the amount outstanding for loans under statute due to the repayment of the principal component of a major loan. The State has the option to re-tender the contractual agreement for the cost of correctional services beyond an initial five-year contract period. The contingent liability for this arrangement reduced by $57 million over the period to 30 June 2002. On termination of the public transport franchise agreements by expiry or otherwise, there is a liability for termination value payments in respect of designated rolling stock improvements and capital projects. The estimated contingent liability increased by $12.6 million over the period. The increase in legal proceedings and disputes mainly relates to claims by construction contractors with VicRoads. Since 30 June 2002, around 50 per cent of these claims have been reviewed resulting in accepted contract variations of only $650,000.
Non-quantifiable contingent liabilities A number of potential obligations, which are non-quantifiable at this time, have been made by the Government arising from:
• indemnities provided in relation to transactions, including financial arrangements and consultancy services, as well as for directors and administrators; • performance guarantees, warranties, letters of comfort, and the like; • deeds in respect of certain obligations of the Docklands Authority;
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• unclaimed moneys, which may be subject to future claims by the general public against the State; and • potential exposures associated with the sale of a number of assets and services where the purchaser was provided with various indemnities and warranties.
2006 Commonwealth Games In winning the bid to host the 2006 Commonwealth Games in Melbourne, the State entered into two contracts:
• Endorsement Contract with the Australian Commonwealth Games Association; and
• Host City Contract with the Commonwealth Games Federation. Subsequent to winning the rights to host the Games, the Government established Melbourne 2006 Commonwealth Games Pty Ltd (M2006) as the Organising Committee for the Games, with the Premier as the sole shareholder. An agreement between the State and the company provides the basis for funding the company from 2001 to 2007. Under the Endorsement Contract, the State is obliged to underwrite any shortfall between revenue and expenditure of M2006 for the organisation of the Games. Also under this contract, any remaining surplus resulting from the Games, after the Organising Committee has discharged all financial commitments and other obligations, is to be transferred to the Association. This surplus is, in turn, required to be paid to the State to be used for the benefit of sport in Victoria. The Host City Contract specifies the rights and obligations of the Organising Committee in relation to organising the Games. The contract includes the commitment the State gave in its bid document to offer travel grants to competitors and team officials attending the Games. M2006 has an agreement with Nine Network Australia Pty Ltd in relation to broadcast rights to the Games for Australia and Papua New Guinea. The agreement includes certain force majeure and major change provisions, which may be invoked in certain circumstances. M2006 has obtained insurance against the risk of these circumstances arising and resulting in payments becoming refundable to the Nine Network.
Automated ticketing In May 1994, the Public Transport Corporation (PTC) entered into contracts with the OneLink Consortium to provide automated ticketing and fare collection services to the PTC for its metropolitan public transport services over a period of ten years ending in 2007. Service payments under the Automated Ticketing Budget Statement 2003-04 Chapter 8 151 Service Contract will be in the order of $300 million over the term of the contract, on a performance basis. This amount does not include any additional payments relating to variations to the system which have been, or may be, implemented under this contract. The Treasurer has guaranteed the payment obligations of the PTC under the terms of the Service Contract. As a result of the restructuring of public transport, it is envisaged that the rights and obligations of the PTC under the Service Contract are to be transferred to the Revenue Clearing House Pty Ltd (RCH) which is a corporation with the shareholders being the franchisees of the passenger transport businesses and the Secretary of the Department of Infrastructure, on behalf of the private bus operators. On 23 December 2002, receivers and managers were appointed by the State to manage companies formerly operated by the National Express Group being M>Train, Bayside Train Maintenance, M>Tram and V/Line Passenger Services as a result of the decision by National Express to withdraw from the franchises. The National Express businesses in receivership continue to be shareholders in RCH. Contract assignment from the PTC to RCH has not yet occurred. However, RCH currently manages the Service Contract on behalf of the PTC under an interim arrangement. In the event of assignment, it is proposed that the Treasurer will guarantee the payment obligations of RCH under the Service Contract. In April 2000, OneLink Transit Systems Pty Ltd (OLT) lodged a claim under the Consolidated Service Contract claiming that the scope of the automatic ticketing project had been increased. Following extensive negotiations, in May 2002 a staged settlement of all outstanding claims was reached. It was agreed that OLT would receive up to $65 million in stage payments contingent upon OLT meeting an improved performance regime with associated incentives and penalties. OLT would also be entitled to up to $17.5 million in performance payments over the remaining five years of the contract relating to vandalism risk management and revenue growth. Following successful completion of the improved performance trial period in 2002-03 (the final Qualifying Event was successfully completed on 15 February 2003), all payments due by the State to OLT under the settlement claim have now been made or included in the agreed quarterly payment schedule for the remainder of the contract. OLT has also acknowledged in favour of the State final release and settlement of the scope creep claim.
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Land remediation — environmental concerns A number of properties have been identified as potentially contaminated sites. The State does not admit any liability in respect of these sites. However, expenditure for remediation may be incurred to restore the sites to an acceptable environmental standard in the event of future developments taking place.
Melbourne City Link The key arrangements for Melbourne City Link are set out in the Concession Deed, which has effect from 20 October 1995. Under the arrangements as set out in the Concession Deed and the legislation, the State is responsible for acquiring and paying for the land necessary for the project to proceed, paying for certain state works and general project costs. It is also subject to certain compensation claims in the event that it can be shown that Transurban’s revenue has been adversely affected by State actions. While all land has been acquired, the final compensation payable is subject to resolution in some instances. There is currently an outstanding claim from Transurban relating to an alleged ‘Appendix Event’ and leading to a Material Adverse Effect claim from Transurban in relation to the construction of Wurundjeri Way and widening of the Westgate Freeway. This claim is currently being handled by the documented dispute resolution processes and the Department of Infrastructure is managing the claim for the State. In the first phase of this process, an independent expert has found in favour of the State. However, Transurban has invoked the appeal process leading to the documented arbitration procedures. At the date of this report, the outcome is still outstanding. As regards to compensation for land acquisitions, some matters remain in the negotiation/determination phase in an effort to agree the ultimate level of compensation for the acquisitions. In accordance with the Melbourne City Link (Miscellaneous Amendments) Act 2000, the Melbourne City Link Authority was abolished on 28 February 2002 and all responsibilities and functions were transferred to the Department of Infrastructure.
Budget Statement 2003-04 Chapter 8 153 Public Transport Corporation lease arrangements Under various transport lease arrangements made by the Public Transport Corporation, the State of Victoria indemnified the lessors against adverse tax rulings and third party personal injury claims, where the third party is injured by the operation of the equipment during the period of the lease. The last of these lease arrangements was terminated by June 1998. The normal statute of limitations is five years for tax claims and six years for personal injury claims.
Public transport rail franchise agreements During 1999-2000 the Director of Public Transport, on behalf of the Crown, entered into contractual arrangements with franchisees to operate passenger rail transport services in the State. The following summarises the major contingent liabilities arising from those arrangements.
Contingent liabilities on early termination or expiry of franchise agreements New rolling stock lease direct agreements As part of the franchising arrangements, the franchisee of each passenger rail business has undertaken to provide new rolling stock. Each franchisee is expected to enter into a lease with a third party lessor with respect to this rolling stock. In addition, the Director is expected to enter into rolling stock direct agreements with the respective lessors to protect the State’s interest in the rolling stock. In the event of expiry or on early termination of the franchises, the Director can either exercise a right to acquire the new rolling stock at predetermined values or the lease payment obligations are transferred to the Director or a successor franchisee. All five required rolling stock direct agreements have now been entered into. The contingent liability of the Director to take over the lease payments only commences upon delivery of the units of new rolling stock. A total of 48 units of new rolling stock have been delivered as at 31 March 2003. As mentioned earlier the Government has appointed receivers and managers to the National Express train and tram franchises, in order to protect Government interests and to ensure continuation of services. Despite there being a termination event for National Express, the Director has not yet terminated the franchise agreements with National Express. The Director intends to terminate the franchise agreements with National Express upon appointment of successor operators for the businesses concerned. Until the franchise is terminated the rolling stock leases remain the responsibility of the National Express franchises under receivership.
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Other direct agreements The Director is also party to a number of other direct agreements with the providers of key services to franchisees in respect of carrying out their operations. The intention of these agreements is that in the event of a ‘Step-in Event’ occurring or on early termination or expiry of a franchise that the key services will be (at the option of the Director), continued by the providers for the Director or his nominee under the same terms and conditions as the original contract where the Director or his nominee assumes the rights and obligations of the original franchisee. Payments on termination On termination of the franchise agreements by expiry or otherwise the Director will have a liability:
• to pay for certain assets and liabilities on the basis set out in the agreements. If on termination there is a net liability, then franchisees will pay the Director; and
• for termination value payments in respect of designated rolling stock improvements and capital projects.
Contingent liability offsets on early termination of franchise agreements Under the original Franchise Agreements, if the franchises were terminated due to default, then the franchisee was liable to indemnify the Director for all costs incurred by the Director arising from early termination. The Director had the right to draw on the franchisee’s performance bonds for the amount of those losses, damages or costs. The original amounts of the bonds were $105 million for all five franchises. Under Settlement Agreements dated March 2002 the bonds were increased to $235 million (including $20 million in relation to a rolling stock guarantee with Connex) as at 30 June 2002 for all five franchises. The performance bonds were then to revert to their original 1999 value of $105 million after 30 June 2003. The Director also has fixed and floating charges over the franchisee assets as security for amounts payable by the franchisees. Connex and Yarra Trams signed Interim Operator Agreements (IOAs) in December 2002. The bonds provided by Yarra Trams ($30 million) and Connex ($50 million) under the Settlement Agreement dated March 2002 have been extended to the earlier of 31 December 2003 and termination of their IOA. After the earlier of 31 December 2003 and termination of the IOAs, these bonds will reduce to $15 million for Yarra Trams and $25 million for Connex.
Budget Statement 2003-04 Chapter 8 155 If on refranchise a new franchisee becomes the successor operator, the outgoing franchisee must comply with its obligations to ensure transition to the successor. Where there is default, the Director will have access to the performance bonds of Yarra Trams and Connex until refranchise. National Express did not sign an IOA for M>Train, M>Tram and V/Line Passenger and therefore any refranchise will be governed by the Franchise Agreements. Under the Transition Agreement referred to earlier, the parent company of National Express is paying the State $135 million in return for its bank guarantees. Payment of the full amount must occur by 30 June 2003.
Contingent liabilities/offsets arising from Interim Operator Agreements There are a number of contingent liabilities arising from the Interim Operator Agreements between the Director of Public Transport and Connex and Yarra Trams which were signed in December 2002. These possible liabilities refer to payments to be made by the Director of Public Transport to Connex and Yarra under certain scenarios. These include: Funding requirements Under the IOAs the Director has agreed to pay specified monthly amounts to the franchisees to assist them in meeting their funding requirements. These specified amounts are based on the forecast funding requirements of the franchisees. If the forecast funding requirements differs to the actual funding requirements then an adjustment is made between the parties to reflect the actual funding requirements of the franchisee. Insurance If the actual insurance premiums for a quarter are greater than the forecast insurance premiums for that quarter, then the Director must reimburse the franchisee an amount as calculated per the formula in the IOA. The IOAs make provision for the reimbursement to the franchisees with respect to insurance claims where there is a difference between the deductible payable under the original insurance policy and the current insurance policy. The Director will pay 50 per cent of the difference between the new deductible and the original deductible. Revenue risk sharing The Director must pay to the franchisee an amount calculated by a formula in the IOA representing lower then expected revenue.
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Capital investment On the termination of the franchise agreement as a result of a termination event the Director must pay or procure the payment to the franchisee the early termination values in accordance with the capital projects listed in the IOA. Offsets In relation to the above the Director will be entitled to payments from the franchisees if the funding requirements and insurance costs are lower than expected and where revenue is greater than expected.
Other contingent liabilities arising from National Express withdrawal from train and tram franchises In relation to the former PTC employees associated with the National Express franchises an assurance has been provided by the Government that all accrued entitlements (including annual leave, sick leave, long service leave and public holidays) and existing conditions (including superannuation) of the staff of each business will be protected and that all existing Enterprise Agreements, Awards and other agreements (including agreements on staffing levels) will be honoured. The National Express franchisees each granted to the Director charges over the company's property. The Director appointed receivers to the National Express franchisees and by the Receivership Deed of Indemnity, the Treasurer has agreed to indemnify the receivers for debts properly incurred by them in the course of the receivership and costs arising from the appointment or course of the receivership. The Treasurer also agreed to remunerate the receivers in accordance with the rates set out in the deed.
Contingent liabilities arising from potential changes to existing conditions Change in Victorian law Franchisees may make a claim against the Director for any net losses incurred as a result of a change in Victorian law, which directly relates to the franchise business. Latent defects If a latent defect is identified in any part of the infrastructure which has been leased to the franchisees, and the cost of rectifying the defect is in excess of a threshold amount, then the Director will indemnify the franchisee for the amount by which the cost of the works to rectify the defect exceeds the threshold amount.
Budget Statement 2003-04 Chapter 8 157 Pre-existing contamination The Director has indemnified franchisees from and against all losses, damages, liabilities, actions, suits, claims, demands, costs and expenses of every kind arising from a failure by the Director to clean up the land as defined in the infrastructure leases entered into with franchisees. Native title The Director is liable for payments of any valid compensation claim to native title holders made under the Native Title Act 1993 or other laws relating to native and aboriginal title in respect of the land as defined in the infrastructure leases entered into with franchisees. Net gain and net loss provisions On the occurrence of certain events specified in the franchise agreements, including the undertaking of infrastructure works by the State, the franchisees may make a claim against the Director if the franchisee incurs a net loss as a result of those events. The Director also has the right to claim against the franchisees any net gain as a result of those events.
Contingent liabilities relating to the Department of Infrastructure as bus industry representative The Secretary of the Department of Infrastructure is a shareholder in the Revenue Clearing House Pty Ltd (RCH) and VicTrip Pty Ltd as the appointed representative of route bus operators with whom the Department has a bus service contract. The RCH Shareholders Agreement and the VicTrip Shareholders Agreement contain several clauses that mean that the State (along with the franchisees) will become liable for additional capital requirements for the RCH and VicTrip to remain solvent and any losses suffered by the RCH and VicTrip. The MetCard Management Agreement with the RCH contains several clauses in the agreement, which means that the State (along with the franchisees) will become liable for any shortfalls suffered by the RCH in specific circumstances.
Native title A number of claims have been filed with the Federal Court under the Native Title Act 1993 that affect Victoria. While many such claims are being processed through the legal system, the Government has committed to resolving claims through mediation, where possible. It is not feasible at this time to quantify any future liability.
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Victorian Managed Insurance Authority (VMIA) VMIA was established in 1996 as a captive insurer for departments and participating bodies (predominantly general government sector). VMIA provides its client bodies with a range of insurance cover, including for property, public and products liability, professional indemnity and contract works. VMIA reinsures in the private market for losses above $50 million arising out of any one event, up to a maximum for each type of cover (i.e. $1 250 million for property and $750 million for public liability). The risk of losses above these reinsured levels is borne by the State.
Gas supply incident The State, and a number of its instrumentalities, have been named as parties in a class action before the Supreme Court arising from the explosion and fire in September 1998 at Esso’s gas processing plant at Longford.
Transmission of business under Section 149 and 170MB of the Workplace Relations Act 1996 Contractors now performing functions previously performed by government have sometimes engaged staff on lesser rates and conditions than those that previously applied under awards or agreements for public sector employees. One matter specifically involved hospital employees who took legal action against the State and the Hospital Network. Following an appeal by the State of Victoria and the Hospital Network to the High Court a settlement was subsequently made and the appeal withdrawn. While the hospital case has been settled, the broader financial implications remain unclear. Court decisions have indicated that previous rates and conditions may apply to the contractor’s employees with outsourcing. The application of this principle requires transfer of the whole or part of the business (of the Government) and a test that is generally applied is whether there is a ‘substantial identity’ between the activities before and after the outsourcing. If applicable, the principle would generally cause increases in employment costs for the contractor if the prior existing rates and conditions are more beneficial to the employees. The principle may also apply to circumstances where a ‘business’ is taken back by the State from a contractor. Accordingly, in some circumstances, the State may have a liability in respect of the terms and conditions of employment applying to the staff employed by the contractor.
Budget Statement 2003-04 Chapter 8 159 HIH Insurance The State’s quantifiable direct exposures arising from the collapse of the HIH Insurance Group are included in the liabilities shown in the financial statements of the agencies directly responsible for them (such as the Victorian WorkCover Authority and VMIA), and are consolidated in the financial statements of the State. The State’s obligations in respect of its builders’ warranty insurance rescue package are direct liabilities of the State itself. They do not form part of the liabilities of Housing Guarantee Fund Limited, which manages claims on behalf of the State. The State also retains some unquantifiable contingent exposures arising from the collapse. These contingent exposures arise primarily through the possibility that the State may be involved in litigation in which it would be entitled to recover damages from third parties. If these third parties were insured by HIH, recovery in full may not be possible.
Builders’ warranty The builders’ warranty insurance market, like other insurance markets, has been affected by the 11 September 2001 terrorist attacks in the United States and adverse claims experience. In mid April 2002, the State agreed to provide temporary (to 30 June 2002) reinsurance support to builders’ warranty insurance provider Dexta Corporation following the withdrawal of some of its commercial reinsurance support. This support was subsequently extended to 30 September 2002. The Government determined that there would be no further extension. The State receives reinsurance premiums for this participation and will be required to contribute to payment of reinsured claims, as well as paying management fees. The precise timing and value of these receipts and payments is uncertain, as claims may be made by home owners for up to 6½ years after the arrangement ceases. Receipts and payments will be contingent on the volume of insurance underwritten and reinsured by 30 June 2002. Based on Dexta’s previous levels of activity, the central estimate of the State’s gross exposure (i.e. before premium receipts) is not more than $6 million. Although the State expects, like the commercial reinsurers that are party to the agreement, to at least break even on these arrangements, the State retains an unquantifiable contingent liability that claims may exceed the central estimate.
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On 13 March 2002, Victoria and New South Wales jointly announced a series of reforms to builders' warranty insurance arrangements. This announcement included a commitment to provide a catastrophe fund capable of supporting claims above $10 million. Since builders' warranty insurance commenced there have been no losses by an insurer to any one builder exceeding this amount. To meet this commitment, the two States offered reinsurance arrangements to all builders' warranty insurers covering claims in respect of any one builder exceeding $10 million, with each of the two States reinsuring claims relating to properties in that State. A reinsurance agreement giving effect to these arrangements was concluded in December 2002 (effective from 1 January 2003) with one insurer. This agreement requires the insurer to pay the two States reinsurance premiums that are estimated to be sufficient for the States to at least break even on these arrangements. However, the State retains an unquantifiable contingent liability for additional claims.
Gambling/gaming licences In 1994, the State sold TABCORP Holdings Limited (TABCORP) a wagering and gambling licence for $597 million. The Gaming and Betting Act 1994 requires the State to provide in 2012 a refund to TABCORP of an amount equal to the licence value of the former licences or the premium payment paid by the new licensee, whichever is the lesser. While this creates an obligation on the State to refund the licence value to TABCORP, it will be offset by the premium payment from the issue of any new licences. In 1992, a gaming operator’s licence was issued to the Trustees of the Will and Estate of the late George Adams (the licensee). The Gaming Machine Control Act 1991 entitles the licensee to be paid, at the end of its current licence period in 2012, an amount equal to the value of its current licence or the premium payment paid by the new licensee, whichever is the lesser. This entitlement is contingent on the licensee not being granted a new licence. Melbourne Cricket Ground redevelopment On 15 August 2002, in addition to quantifiable commitments of $77 million towards the capital cost of the redevelopment and a guarantee of up to $360 million in respect of a Treasury Corporation of Victoria Loan Facility to the Melbourne Cricket Club (MCC), the State entered into agreements to support the redevelopment of the Melbourne Cricket Ground (MCG) for the 2006 Commonwealth Games, specifically:
• indemnities to the MCG Trust and the MCC in the event that there are insufficient trading surpluses to meet scheduled debt servicing and repayments, or if the total project construction cost exceeds $450 million;
Budget Statement 2003-04 Chapter 8 161 • agreement for compensation to the Australian Football League as a result of the holding of the Commonwealth Games in 2006. The amount of compensation will be finalised following the completion of the 2006 AFL draw. All compensation claims will be calculated in accordance with an agreed compensation formula;
• an offer has been made to the AFL for compensation for lost seating capacity for grand finals in 2003, 2004 and 2005. All compensation claims will be calculated in accordance with an agreed compensation formula. If capacity targets are unable to be met, agreement has been reached to provide additional compensation as a pro rata amount in accordance with the compensation formula. The amount cannot be reliably estimated at this time; and
• the State has previously provided indemnities to the MCC and MCG Trust in the context of the 1990 Great Southern Stand development, which have been re-incorporated into the contractual arrangements of the Northern Stand redevelopment, under greater accountability and responsibility of the MCC to the MCG Trust.
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CHAPTER 9: ESTIMATED FINANCIAL STATEMENTS AND NOTES
INTRODUCTION The Estimated Financial Statements in this chapter have been prepared in accordance with the provisions in the Financial Management Act 1994. This Act requires the Estimated Financial Statements to be based on generally accepted accounting principles (GAAP) and to be consistent with the Financial Policy Objectives and Strategies Statement (see Chapter 1, Financial Policy Objectives and Strategies). The purpose of the Estimated Financial Statements is to set out the forecast financial results for the Victorian budget sector, referred to in these statements as the general government sector. Because of the prospective nature of these statements they reflect a number of professional judgements about the most likely operating and financial conditions for the Victorian general government sector. International developments and other risks to the national economy, from which Victoria would not be immune, may cause the general government actual result to differ from the projected result. The accompanying notes to the Estimated Financial Statements provide details of material economic and other assumptions used and the specific forecast assumptions underlying material items in the financial statements. A number of these assumptions are subject to inherent uncertainties, which are outside the control of the Government.
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ESTIMATED FINANCIAL STATEMENTS FOR THE VICTORIAN GENERAL GOVERNMENT SECTOR
Table 9.1: Estimated statement of financial performance for the year ending 30 June ($ million) Note 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate Revenue from ordinary activities .. Taxation 2 9 593.2 9 787.9 9 969.2 10 369.6 Fines and regulatory fees 637.2 663.5 677.3 687.2 Investment revenue 3 895.9 921.6 996.8 1 113.3 Grants 4 12 248.0 12 722.5 13 411.8 13 825.7 Sale of goods and services 2 047.2 2 101.2 2 179.7 2 209.5 Gain (loss) on the disposal of physical .. ( 7.3) ( 6.6) ( 7.9) ( 7.9) assets Fair value of assets received free of .. .. 7.5 .. .. charge or for nominal consideration Inter sector capital asset charge 514.0 514.0 514.0 514.0 Other revenue 670.1 668.9 678.5 673.2 Total revenue .. 26 598.4 27 380.4 28 419.4 29 384.6 Expenses from ordinary activities .. Employee benefits .. 9 597.7 9 977.4 10 347.3 10 690.0 Superannuation 1 950.81 896.2 1 984.0 2 045.1 Depreciation 5 1 024.8 1 094.3 1 144.9 1 206.1 Amortisation 6 67.9 67.2 68.8 69.2 Borrowing costs 7 483.3 476.0 483.0 480.0 Grants and transfer payments 8 4 537.2 4 549.2 4 775.6 4 740.1 Supplies and services 8 598.2 8 902.6 9 216.9 9 516.3 Other expenses 94.0 96.5 94.5 90.5 Total expenses 9 26 353.9 27 059.4 28 114.9 28 837.4 Net result 244.5 321.0 304.4 547.3 Movements in asset revaluation reserve .. 1 194.5 1 261.5 1 348.3 1 394.0 Total changes in equity other than .. 1 439.0 1 582.5 1 652.7 1 941.3 contributions to other sectors by the State in its capacity as owner The accompanying notes form part of these Estimated Financial Statements.
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Table 9.2: Estimated statement of financial position as at 30 June ($ million) Note 2004 2005 2006 2007 Budget Estimate Estimate Estimate Current assets Cash assets 1 779.7 1 834.4 1 890.4 1 950.2 Other financial assets 1 182.8 1 213.7 1 246.5 1 273.3 Receivables 1 263.2 1 310.9 1 363.5 1 406.2 Prepayments 42.7 42.8 42.8 42.8 Inventories 129.5 129.6 129.6 129.8 Other assets 13 ...... Total current assets 4 398.0 4 531.4 4 672.9 4 802.4 Non-current assets Other financial assets 1 168.6 839.9 740.4 461.3 Receivables 370.9 385.7 404.5 425.2 Inventories 38.7 38.7 38.7 38.7 Property, plant and equipment 10 25 439.1 26 883.4 28 525.6 29 923.6 Roads and earthworks 11 14 452.2 15 440.9 16 393.8 17 353.0 Other assets 13 3 212.0 3 288.2 3 368.2 3 447.8 Total non-current assets 44 681.6 46 876.9 49 471.3 51 649.6 Total assets 49 079.5 51 408.3 54 144.2 56 452.0 Current liabilities Payables 1 563.9 1 566.9 1 577.6 1 589.4 Interest bearing liabilities 74.0 55.7 50.9 50.6 Employee benefits 14 860.3 834.6 810.7 787.3 Superannuation 15 176.8 522.4 748.4 948.5 Outstanding insurance claims 10.3 9.9 9.4 8.9 Other liabilities 376.5 364.4 370.9 377.2 Total current liabilities 3 061.8 3 353.9 3 567.8 3 762.0 Non-current liabilities Payables 121.9 121.9 121.9 121.9 Interest bearing liabilities 6 042.3 6 063.6 6 516.4 6 531.8 Employee benefits 14 2 067.4 2 301.3 2 537.1 2 686.0 Superannuation 15 13 959.6 14 375.4 14 631.2 14 714.4 Outstanding insurance claims 229.4 243.9 261.0 280.8 Other liabilities 278.4 273.6 265.8 254.1 Total non-current liabilities 22 699.1 23 379.7 24 333.5 24 589.0 Total liabilities 25 760.9 26 733.6 27 901.4 28 351.0 Net assets 23 318.6 24 674.7 26 242.9 28 101.1 The accompanying notes form part of these Estimated Financial Statements.
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Table 9.3: Estimated statement of cash flows for the year ending 30 June ($ million) Note 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate Cash flows from operating activities .. Receipts .. Taxation .. 9 546.8 9 751.4 9 929.5 10 326.3 Fines and regulatory fees .. 510.0 533.4 550.6 560.5 Grants .. 12 247.5 12 722.0 13 411.8 13 825.8 Sale of goods and services .. 2 041.7 2 098.3 2 176.7 2 206.0 Interest received .. 287.1 286.7 279.4 300.4 Dividends received .. 273.1 288.9 336.5 421.9 Capital assets charge received .. 514.0 514.0 514.0 514.0 Other receipts 999.8 987.4 1 024.1 1 036.4 Total receipts .. 26 420.0 27 182.0 28 222.5 29 191.3 Payments Employee benefits .. (9 394.3) (9 769.3) (10 135.2) (10 564.6) Superannuation .. (1 453.2) (1 134.8) (1 502.2) (1 761.8) Grants and transfer payments .. (4 535.5) (4 547.5) (4 773.8) (4 738.3) Supplies and services .. (8 581.6) (8 896.4) (9 173.3) (9 477.7) Interest paid .. ( 488.2) ( 481.1) ( 476.9) ( 470.9) Total payments .. (24 452.8) (24 829.1) (26 061.4) (27 013.3) Net cash flows from operating 17 1 967.2 2 353.0 2 161.1 2 178.0 activities Cash flows from investing activities .. Net customer loans (granted) repaid .. 20.1 20.0 20.0 22.4 Net contribution to other sectors of .. ( 530.1) ( 228.4) ( 86.9) ( 85.0) government Proceeds from sale of property, plant .. 66.7 59.9 53.2 44.2 and equipment Purchase of property, plant and .. (2 130.7) (2 459.3) (2 167.2) (2 361.6) equipment Net disposal of investments .. 644.0 297.8 66.5 252.1 Net cash flows from investing .. (1 930.0) (2 310.0) (2 114.3) (2 128.0) activities Cash flows from financing activities .. Net borrowings .. 17.8 12.3 10.3 9.9 Net cash flows from financing .. 17.8 12.3 10.3 9.9 activities Net increase in cash and deposits .. 55.0 55.3 57.0 59.9 held Cash at beginning of reporting period .. 1 723.0 1 778.0 1 833.3 1 890.3 Cash and deposits at end of 16 1 778.0 1 833.3 1 890.3 1 950.2 reporting period The accompanying notes form part of these Estimated Financial Statements.
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NOTES TO THE ESTIMATED FINANCIAL STATEMENTS Due to the possibility that circumstances or events outlined in the Estimated Financial Statements may not occur as expected, actual results may differ from those forecast and the difference may be material. Accordingly, no guarantee is given that the financial results will be achieved. However, the best professional judgement has been applied in preparing the Estimated Financial Statements.
Table of contents Assumptions ...... 168 Note 1: Statement of significant accounting policies and forecast assumptions ...... 170 Note 2: Taxation...... 187 Note 3: Investment revenue...... 187 Note 4: Grants revenue...... 187 Note 5: Depreciation ...... 188 Note 6: Amortisation ...... 188 Note 7: Borrowing costs...... 188 Note 8: Grants and transfer payments...... 189 Note 9: Total expenses from ordinary activities by department ...... 189 Note 10: Property, plant and equipment ...... 190 Note 11: Roads and earthworks ...... 190 Note 12: Reconciliation of movements in fixed assets ...... 190 Note 13: Other assets...... 191 Note 14: Employee benefits...... 191 Note 15: Superannuation ...... 191 Note 16: Reconciliation of cash ...... 192 Note 17: Reconciliation of net cash flows from operating activities...... 193 Note 18: General government sector entities...... 194
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Assumptions The Estimated Financial Statements have been prepared using the material economic and other assumptions listed below.
Material economic and other assumptions (a) (per cent) 2003-04 2004-05 2005-06 2006-07 Gross state product 3.75 3.50 3.50 3.50 Employment 1.00 1.50 1.50 1.50 Consumer price index 2.25 2.25 2.25 2.25 Wage cost index (b) 3.50 3.50 3.50 3.50 Population (c) 1.1 1.0 0.9 0.9 Source: Australian Bureau of Statistics, Department of Treasury and Finance Notes: (a) Year-average per cent change on previous year unless otherwise indicated. All projections apart from population are rounded to the nearest 0.25 percentage point. (b) Total hourly rate excluding bonuses. (c) June quarter, per cent change on previous June quarter. Based on ABS Series R projections.
Economic risks The material economic and other assumptions underlying the material items in the Estimated Financial Statements are subject to uncertainties, all of which are beyond the control of the Government. The Department of Treasury and Finance has identified a number of risks to the Victorian economic outlook. Major identified risks to the economic outlook, both upside and downside, include: • stronger than expected construction activity. Relevant forward indicators are yet to show much evidence of the anticipated slowdown in this sector; • a continuation of the drought into the next season, exacerbated by the lingering effects of the recent bushfires, which would hamper export production and exacerbate downward pressure on farm incomes with indirect effects on the rest of the economy; • the impact of US and allied military action against Iraq on oil prices, consumer and financial market confidence, economic growth, and trade relations; • the potential impact of severe acute respiratory syndrome (SARS) on many East Asian economies; and
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• a slowing of population growth, currently assumed to be around 1.0 per cent per annum. High levels of Victorian (and New South Wales) housing prices may encourage population movement to locations with relatively cheaper accommodation. If Victoria’s population growth rate moderates, as occurred during the 1980s, the economic growth rate projections could be affected.
Key financial measure The Government has set out its key financial measure in the Financial Policy Objectives and Strategies Statement. The key financial measure of a substantial budget operating surplus is expected to be achieved throughout the forecast period. Fiscal target Key financial measure Target Maintain a substantial budget sector operating surplus. At least $100 million
Sensitivity analysis The estimates of revenue, expenses and the net result have been subject to sensitivity analysis by the Department of Treasury and Finance. The Department’s analysis shows that if there was a 1 per cent rise in each of the following key economic variables, the budget’s net result over the forward estimates period would change as follows:
Impact of a 1 percentage point increase in the economic variable on the budget net result (a) ($ million) 2003-04 2004-05 2005-06 2006-07 Gross state product 46 51 52 53 Employment 27 30 34 36 Consumer prices -23 105 115 126 Average weekly earnings -191 -98 -92 -97 Share prices 68 14 7 5 Property prices 35 26 44 50 Property volumes 17 17 19 21 Interest rates 13 69 26 23 Source: Department of Treasury and Finance Note: (a) A positive number denotes an improvement in the net result.
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Note 1: Statement of significant accounting policies and forecast assumptions The following summary presents the significant accounting policies and forecast assumptions which have been adopted in preparing and presenting the Estimated Financial Statements for the forecast period (which includes the budget year and the estimates for the three subsequent years).
A. Compliance framework These Estimated Financial Statements have been prepared in accordance with sections 23H–23N of the Financial Management Act 1994 (the FMA), applicable pronouncements issued by the Australian Accounting Standards Board (AASB) and abstracts of the Urgent Issues Group, and are based on Australian generally accepted accounting principles (GAAP). Their presentation is based on New Zealand Financial Reporting Standard Prospective Financial Information (FRS 29) as there are no specific Australian authoritative pronouncements which prescribe the preparation and presentation of prospective financial statements. The information presented in the Estimated Financial Statements takes into account Government decisions and other circumstances that may have a material effect on the statements. The requirements of FRS 29 have been modified to achieve consistency in the presentation of the Estimated Financial Statements with AASB 1018 Statement of Financial Performance, AAS 36 Statement of Financial Position and AAS 37 Financial Report Presentation and Disclosures. Future reporting basis Future Estimated Financial Statements are expected to be prepared on a consistent basis, except for any changes in reporting required by new or revised Australian Accounting Standards. The effect of the intended adoption in Australia of International Accounting Standards from 1 January 2005 is as yet uncertain, and no adjustment has been made for any consequent effect.
B. Basis of accounting and measurement The accrual basis of accounting has been employed in the preparation of the Estimated Financial Statements whereby assets, liabilities, equity, revenues and expenses are recognised in the reporting period in which they were incurred, regardless of when cash is received or paid.
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The opening balances of 1 July 2003 represent the actual audited values as at 30 June 2002, adjusted for the revised estimated movements for 2002-03 and are based on either a cost or fair value basis. Those items measured at valuation include:
• non-current physical assets, other than plant, equipment and vehicles, are measured at their fair value; • investments and productive trees in commercial native forests which are recognised at their net market value; and • certain liabilities (e.g. unfunded superannuation) which are calculated with regard to actuarial assessment. The estimated impact of future revaluations of non-current physical assets is included in the forecasts at the total general government level. Liabilities other than those actuarially determined do not include the impact of revaluations due to the inherent difficulties in identifying and forecasting these amounts.
C. Basis of consolidation The Estimated Financial Statements include all reporting entities in the Victorian general government sector which is a sector of the State of Victoria reporting entity. Details of the entities included in the general government sector are shown in Note 18. In the process of reporting on the general government sector as a single economic entity, all material transactions and balances within the sector are eliminated. In addition, all capital transactions between the general government sector and the public non-financial corporations and public financial corporations sectors are eliminated in the Estimated Statement of Financial Position. Future franchising arrangements Due to the combination of the National Express franchises being in receivership and the commencement of a number of regional rail projects over the next few years, the State plans to move V/Line Passenger into government for the duration of these projects. This will ensure that the impacts of the complex regional rail projects on the operations of VLine Passenger during this time can be closely managed.
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In terms of the other National Express franchises of M>Tram and M>Train, the government is currently reviewing options for future franchising arrangements. Given its intention to re-franchise these operations, no changes have been made to accounting treatments for related items in the estimated financial statements. Any impact of future changes in the franchising arrangements on the budget sector will be determined over the coming year. Prior to the franchising of V/Line Passenger and other public rail transport operations to the private sector, these were classified in the ABS sectoral classification system as Public Non Financial Corporations and therefore not included in the budget sector. Any rail operations resumed by government will be classified consistent with previous treatment.
D. Forecast reporting periods The reporting period for the general government sector and most reporting entities in this sector is the year ending 30 June. However, for those entities with a reporting period other than the year ending 30 June, the latest audited financial statements are used as the basis of the opening balance for 1 July 2003. For example, TAFE institutes have reporting periods ending 31 December.
E. Revenues
Taxation Accounting policy General government sector taxation and fee revenue is recognised upon the earlier of either the receipt by the State of a taxpayer’s self-assessment or the time the taxpayer’s obligation to pay arises, pursuant to the issue of an assessment. The types of revenue included in the estimates are as follows:
• payroll tax; • land tax; • stamp duties levied on conveyancing, land transfers, mortgages and rental business; • bank accounts’ debit tax; • gambling taxes levied on private lotteries, electronic gaming machines, casino and racing; • insurance duty relating to compulsory third party, life and non-life policies; and • motor vehicle taxes, including registration fees, stamp duty and drivers’ licence fees. 172 Chapter 9 Budget Statement 2003-04
Forecast assumption The State’s tax revenues are forecast by a process, which involves:
• assessment of economic and other factors influencing the tax bases from which taxes are sourced (e.g. in the case of payroll tax, assessment of employment and wages outlooks; in the case of motor vehicle fees, assessment of the outlook for demand for cars reflecting long-term underlying demand factors and cyclical demand factors);
• analysis of historical information and relationships using econometric and other statistical methods;
• application of the Department of Treasury and Finance’s economic forecasts where there is a relationship between taxation revenue and economic variables; and
• consultation with private sector economists, industry associations, and relevant government authorities (e.g. State Revenue Office, Roads Corporation, Office of Gambling Regulation). Some state taxes are sourced from tax bases, which are particularly volatile, hence, tax revenue from these sources is subject to substantial annual variation. Stamp duty on land transfers and mortgages are examples of such volatility.
Fines and regulatory fees Accounting policy Revenue is recognised at the time the fine or regulatory fee is issued. Forecast assumption The forecasts of regulatory fees and fines are prepared by those government agencies which collect them. Some of the components may be based on contractual obligations, while the prediction of fines involves assessment of the behaviour of people on the roads and elsewhere. The estimation of the many small, miscellaneous fees is based on an assessment of recent experience in each of the markets.
Investment revenue Accounting policy This revenue category includes interest, dividends, income tax and rate equivalent revenue and other revenue earned during the financial year from bank term deposits, shares and other investments. Interest revenue is recognised on an accrual basis and dividend income is recognised when dividends are determined. Net realised and unrealised gains/losses on the revaluation of investments form part of investment revenue. Budget Statement 2003-04 Chapter 9 173
Forecast assumption As part of the budget process, government business enterprises provide their best available estimates of these future payments for the forecast period. In determining the forecast dividend payments the following two general benchmarks are used:
• 50 per cent of net profit after tax; or
• dividends and income tax equivalent paid or payable of 65 per cent of pre-tax profit. Other commercial factors which are considered and will affect the dividend forecasts include the views of the board of directors, the liquidity, operating cash flow and forecast cash requirements of each government business enterprise (including planned capital works), gearing and interest cover of the business, retained earnings and any other specific commercial factors relating to individual businesses. Dividend and income tax equivalent forecasts can be significantly influenced by a number of factors including the volatility of the financial markets and climatic conditions impacting on the water authorities. The National Tax Equivalent Regime (NTER), administered by the Australian Taxation Office, has effectively replaced the Victorian Income Tax Equivalent Regime. Thirty five government business enterprises are currently subject to the NTER. Revenue raised under the NTER will remain with the State. Forecast interest revenue is based on projected cash budget surpluses being invested.
Grants Accounting policy Grants comprise mainly of funds provided by the Commonwealth to assist the State in meeting general or specific service delivery obligations (primarily for the purpose of aiding in the financing of the operations of the recipient, capital purposes and/or for on-passing). This revenue category also includes grants from other jurisdictions. Revenue is recognised when the State obtains control over these funds.
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Forecast assumption The forecast receipt of financial assistance from the Commonwealth is determined on the latest available advice from the Commonwealth at the time of preparation of the Estimated Financial Statements, taking into account the payment schedules and escalation factors relevant to each type of grant. The payment schedules for some financial assistance from the Commonwealth are on a monthly, quarterly or annual basis, while others are on an irregular basis such as on a project-progress basis.
Sale of goods and services Accounting policy Revenue from sale of goods is recognised when control of goods has passed to the buyer and the revenue can be reliably measured. Revenue for rendering of services is recognised on a stage of completion basis and measured by reference to labour hours or percentage of total services to be performed. Forecast assumption Revenues arising from the sale of goods and rendering of services are forecast by taking into account all known factors, such as proposed fee increases in line with the Guidelines for Setting Fees and Charges Imposed by Departments and Budget Sector Agencies issued by the Department of Treasury and Finance, and projected variations in activities. Unless government policy states otherwise, fees will be set to recover the full costs of the goods or services provided.
F. Expenses Expenses are recognised when they are incurred.
Employee benefits Accounting policy This expense category includes all costs related to employment, other than superannuation, which is accounted for separately. Expenses for employee benefits include wages and salaries, fringe benefits tax, leave entitlements, redundancy payments, work-cover levy and payroll tax. Forecast assumption Employee benefits are forecast on the basis of staffing profiles and current salaries and conditions. For the forecast period employee benefits are adjusted for approved wage agreements with allowance made for further changes in the future.
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Superannuation Accounting policy Superannuation expense is determined on the following basis:
• funded schemes: the expense reflects the superannuation contribution payable by entities within the general government sector; and
• unfunded schemes: the expense includes the superannuation contributions payable by public sector employers, the net movement in the unfunded superannuation liability during each period and the annual payments by the State. Forecast assumption The net movement in the unfunded superannuation liability becomes more sensitive to investment earnings as fund assets increase. The budget assumes a standard fund earning rate across the budget and forward estimates period consistent with long-term actuarial assumptions. However in any year, the actual fund earnings can vary significantly from assumed earnings producing a large variance in the actual result compared to budget. For the forecast period, superannuation expense for unfunded schemes has been estimated by the Department of Treasury and Finance and is consistent with projections provided by various actuaries of each superannuation fund (Refer to Note 15).
Depreciation Accounting policy All infrastructure assets, buildings, plant and equipment and other non-current physical assets (excluding leased items) that have a limited useful life are depreciated. Depreciation is generally calculated on a straight-line basis at a rate that allocates the asset’s value, less any residual value, over its estimated useful life. The following are typical estimated useful lives for the different asset classes used by the general government sector entities: Asset class Useful life Dwellings 40 to 50 years Other buildings 30 to 60 years Other infrastructure 10 to 32 years Road pavement 60 years Bridges 90 years Plant, equipment and vehicles 3 to 10 years Cultural assets 100 years
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Land and earthworks associated with the declared road network and core cultural assets, which are considered to have an indefinite life, are not depreciated. Depreciation is not recognised in respect of these assets as their service potential will not, in any material sense, be consumed during the reporting period. Forecast assumption Depreciation is forecast on the basis of known asset profiles, asset sales programs and approved new asset investment programs. The expense is based on the assumption that there will be no change in depreciation rates over the forecast period. The estimated impact of future revaluation of assets on depreciation is also included in the expense.
Borrowing costs Accounting policy Borrowing costs, other than those capitalised in relation to qualifying assets, are recognised as expenses in the period in which they are forecast to be incurred. Borrowing costs include:
• interest on outstanding borrowings; • amortisation of discounts or premiums relating to borrowings; • amortisation of ancillary costs incurred in connection with the arrangement of borrowings; • indexation of principal outstanding for capital indexed securities and indexed annuities in line with movements in the Consumer Price Index (CPI); • capital gains/losses incurred on debt retirement or debt portfolio restructuring; and • finance lease charges.
Forecast assumption Estimates for borrowing costs are based on the forecast level of outstanding general government sector debt. This is expected to mainly comprise a fixed rate facility, indexed-linked securities from the Treasury Corporation of Victoria and a motor vehicle finance lease facility. All maturities in the forecast period are assumed to be refinanced at forward interest rates. The indexed securities are adjusted in line with movements in the CPI and any movements in the principal outstanding is recognised as a finance cost.
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Grants and transfer payments Accounting policy Grants and transfer payments to third parties are recognised as an expense during the financial year in which they are paid or payable. These payments include transactions such as grants, subsidies and other transfer payments made to local government, non-government schools, community groups, public non-financial corporations and public financial corporations. Forecast assumption Grants and transfer payments are forecast on the basis of known activity and adjusted by the appropriate economic parameters. Where payments are tied to third party revenue, such as Commonwealth grants for on-passing, forecasts are in line with estimated receipts.
Supplies and services (including maintenance) Accounting policy Supplies and services generally represent the day-to-day running costs incurred in the normal operation of general government sector entities. These items are recognised as an expense in the financial period in which they are incurred. Forecast assumption Supplies and services are forecast on the basis of known activity changes including the application of government policy such as savings strategies, changes in the method of service delivery and the application of the appropriate economic parameters. An allowance is made for emerging demand that may arise over the forecast period.
G. Assets The 1 July 2003 opening balance of assets represents the audited value as at 30 June 2002, revised for estimated movements for 2002-03.
Cash assets Accounting policy Cash assets comprise cash on hand, cash at bank, deposits at call and highly liquid investments with short periods to maturity, which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value.
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Forecast assumption Cash assets are assumed to be held at levels sufficient to cover operating requirements over the forecast period.
Prepayments Accounting policy Prepayments represent payments in advance of receipt of goods or services or an expenditure made in one accounting period covering a term extending into the next accounting period. Forecast assumption Unless otherwise stated prepayments for expenditure extending into the next accounting period are assumed to apply only to minor contractual obligations for goods and services.
Other financial assets Accounting policy Other financial assets comprise marketable securities (less provision for diminution) and deposits that are valued at net market value, except for long-term investments. Long-term investments, such as international bonds, are investments that are expected to be held for greater than 12 months. Long-term investments are recognised using the cost method of valuation, being the cost at the date of acquisition. Any discount or premium is amortised over the life of the investments and gains or losses arising from the investments prior to maturity are recognised in the estimated statement of financial performance. Forecast assumption All surplus cash resources for the period 2003-04 to 2006-07 are assumed to be held as financial assets (investments) to preserve budget decision-making flexibility.
Receivables Accounting policy Receivables include debtors in relation to goods and services, taxes and fines, accrued investment income and the GST input tax credits recoverable. Receivables are recognised at the nominal amounts due, less any provision for bad and doubtful debts. Forecast assumption Receivables are forecast on the basis of revenue activity levels.
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Inventories Accounting policy Inventories include goods, other property and services, held for sale in the ordinary course of business. It includes land held for resale and excludes depreciable assets. The opening balance of inventories is valued at the lower of cost and net realisable value. The methods used to assign costs to inventories, other than land held for resale, are based on either purchase cost, weighted average cost, or cost on a ‘first-in first-out’ basis. Land held for resale is valued at the lower of cost and net realisable value. Forecast assumption Inventories forecast to be purchased are valued at the forecast cost.
Non-current physical assets Accounting policy Non-current physical assets include land and buildings, infrastructure assets, national parks, state forests and other Crown land, cultural assets and plant, equipment and vehicles. In general, all non-current physical assets with a value over $1 000 are capitalised. Non-current physical assets, other than plant, equipment and vehicles, are measured at fair value. Fair value is determined on the following basis:
• Land and buildings are measured at the amounts for which the assets could be exchanged between knowledgeable willing parties in an arm’s length transaction.
• Infrastructure assets consists of road pavements and bridges, earthworks and are measured by reference to the assets’ written down replacement cost.
• National parks, state forests and other Crown land are determined by reference to the estimated current market-buying price of adjacent land, discounted to adjust for the restricted nature of current use. This valuation methodology does not take into account the intrinsic value of these assets to the community. Other Crown land in rural areas has been recognised at values determined by applying an average valuation for broad area rural improved land (cropping and grazing) and unimproved land (bushland) for all parishes and townships in the State.
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• Cultural assets and collections, including heritage assets, are those assets that the State intends to preserve because of their unique historical, cultural or environmental attributes. These assets include items such as the Royal Botanical Gardens, Herbarium, State Library, Government House, Parliament House, historic houses, monuments, certain museum exhibits, art collections, archival collections and other items of cultural significance. Heritage assets and collections that generate substantial revenues are valued at the greater of current market buying price and net present value. Natural heritage assets and collections are valued at estimated realisable value or net present value, whichever is the higher. All other heritage assets and collections are valued at estimated written-down replacement cost. Plant, equipment and vehicles comprise of furniture and fittings, office equipment, general library collections, information technology systems and computer equipment, machinery, motor vehicles, musical equipment, and sporting equipment and are measured at cost. Revaluations are made with sufficient regularity to ensure that the carrying amount of each asset does not differ materially from its value by independent assessments, but at least every three years. Revaluation increments are credited directly to the asset revaluation reserve, except that, to the extent that an increment reverses a revaluation decrement in respect of that class of asset previously recognised as an expense in net result, the increment is recognised immediately as revenue in determining the net result. Revaluation decrements are recognised immediately as expenses in the net result, except that, to the extent that a credit balance exists in the asset revaluation reserve in respect of the same class of assets, they are debited directly to the asset revaluation reserve. Revaluation increments and decrements are offset against one another within a class of non-current assets. Restrictive nature of cultural and heritage assets, Crown land and infrastructure Agencies in the Victorian general government sector hold cultural assets, heritage assets, Crown land and infrastructure. Such assets are deemed worthy of preservation because of the social rather than financial benefits they provide to the community. The nature of these assets means that there are certain limitations and restrictions imposed on their use and/or disposal.
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Forecast assumption The value of non-current physical assets will change during the forecast period to account for acquisitions, disposals and the impact of depreciation and revaluation. New investments in assets are valued at the forecast purchase price or, where appropriate, recognised progressively over the estimated construction period. The forward estimates now include the estimated impact of revaluations of non-current physical assets. These estimates have been derived based on examination and extrapolation of historical trends in asset revaluations by major asset class. These estimates have been included in the forward estimates at a total general government level.
Other non-current physical assets
Land under roads Accounting policy Land under roads and road reserves have not been recognised.
Natural resources The majority of natural resource assets comprise of commercial native forests. Accounting policy The opening value of commercial native forests is measured at their net market value. The net market value is determined as the difference between the net present value of cash flows expected to be generated by the commercial native forests (discounted at a risk adjusted interest rate) less the net market value of the land on which the commercial native forests are growing. The net market value of the land has been determined in accordance with an independent valuation. Forecast assumption The value of natural resources will change during the forecast period to account for acquisitions, disposals and the impact of revaluations.
Partnerships Victoria projects Budget funded infrastructure projects approved in-principle by the Government for possible delivery under the Partnerships Victoria model are initially reflected in the estimated financial statements as non-current physical assets (with associated financing and depreciation costs).
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A final decision on whether to proceed with a Partnerships Victoria delivery approach will be made following evaluation of bids arising from the tender process for the project and will be based on a value for money assessment. If, at the conclusion of the tender process, a decision is made to proceed with a Partnerships Victoria delivery approach and in those cases where it is an operating arrangement, the financial statements will be adjusted as required, to convert the budgeted asset investment, depreciation and financing flows to an appropriate stream of service payments to the private sector. In relation to the Mitcham-Frankston freeway project, the State government has committed $100 million over 2 years for initial works and this amount has been included in the estimated financial statements. The government has announced that a toll will be applied to motorists to fund this project. Once the project financing arrangements are finalised, the future estimated financial statements will be adjusted as required to take account of those arrangements.
Leases Accounting policy A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incident to ownership of the leased assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits. Finance leases are recognised as assets and liabilities at the present value of the minimum lease payments. The lease asset is amortised over the shorter of the estimated useful life of the asset or the term of the lease. Minimum lease payments are allocated between the principal component of the lease liability and the interest expense calculated using the interest rate implicit in the lease and charged directly to the estimated statement of financial performance. Operating lease payments are recognised as an expense on a straight-line basis in the estimated statement of financial performance in the periods in which they are incurred. Any lease incentive liability in relation to a non-cancellable operating lease is reduced on an imputed interest basis over the lease term at the rate implicit in the lease. Contingent rentals are recognised as an expense in the financial year in which they are incurred. The cost of leasehold improvements is capitalised as an asset and amortised over the remaining term of the lease or the estimated useful life of the improvements, whichever is the shorter.
Budget Statement 2003-04 Chapter 9 183
Forecast assumption Unless otherwise stated existing leases are assumed to be replaced by leases with similar terms and conditions.
H. Liabilities The 1 July 2003 opening balance of liabilities represents the audited value as at 30 June 2002, revised for estimated movements for 2002-03.
Payables Accounting policy Payables consist predominantly of creditors and other sundry liabilities and are recognised at the nominal amounts to be paid in the future for goods and services received, whether or not billed as at the end of each reporting period to the economic entity. Forecast assumption For the forecast period payables are based on known movements in contractual arrangements and other outstanding payables.
Interest-bearing liabilities Accounting policy The interest bearing liabilities of the State represent funds raised from the following sources: • public borrowings mainly through the Treasury Corporation of Victoria; • the residual amount outstanding for loans raised in previous years by the Commonwealth government on behalf of the State; and • the motor vehicle finance lease. Forecast assumption For forecasting, budget sector debt is valued at its historical cost including unamortised premiums/discounts.
Employee benefits Accounting policy An estimate of the provision is made in the Estimated Financial Statements for benefits not taken at the end of each forecast reporting date in respect of wages and salaries, annual leave and long service leave. The provisions are measured at their nominal amounts except for long service leave, which is estimated at the present value of the estimated future cash outflows to be made in respect of services provided by employees up to each reporting date. 184 Chapter 9 Budget Statement 2003-04
Forecast assumption Employee benefits are forecast on the basis of staffing profiles and current salaries and conditions. For the forecast period, employee benefits are adjusted for approved wage agreements with allowance made for future movements.
Superannuation Accounting policy The opening balance of the State’s superannuation obligations is based on the latest actuarial assessment of the members’ benefits, net of scheme assets, and represents the audited value as at 30 June 2002 revised for estimated movements in 2002-03, in respect of the contributory service of current and past government employees. The valuation is determined by discounting to present value the gross benefit payments at a current, actuarially determined, risk-adjusted discount rate appropriate to the respective plans. Forecast assumption For the forecast period the superannuation liability has been estimated by the Department of Treasury and Finance and is consistent with projections provided by the various fund actuaries (refer to Note 15).
Outstanding insurance claims Accounting policy The outstanding insurance claims mostly comprise the claims liability, which is independently assessed by actuaries, cover claims reported but not yet paid, claims incurred but not reported and the anticipated direct and indirect costs of settling those claims. The actuaries take into account projected inflation and other factors to arrive at expected future payments. These are then discounted at the reporting date using a market determined, risk adjusted discount rate. Forecast assumption The level of outstanding insurance claims liability at the end of each forecast year is based on historical trends and existing actuarial valuations and projections adjusted for forecast activity levels.
Other liabilities Accounting policy Other liabilities consist of income tax equivalent, dividends payable, deferred tax liability, unearned/prepaid income, GST and FBT payables, and are recognised at the estimated amounts payable in each reporting period.
Budget Statement 2003-04 Chapter 9 185
I. Accounting for the goods and services tax (GST) Accounting policy Revenues, expenses and assets are recognised net of GST except where the amount of GST incurred is not recoverable, in which case it is recognised as part of the cost of acquisition of an asset or part of an item of expense. GST receivable from and payable to the Australian Taxation Office is included in the statement of financial position.
J. Estimated statement of cash flows
Cash Accounting policy For the purposes of the estimated statement of cash flows, cash comprises cash on hand, cash at bank, bank overdrafts and deposits at call, and highly liquid investments with short periods to maturity, which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value.
K. Rounding Accounting policy All amounts in the Estimated Financial Statements have been rounded to the nearest hundred thousand dollars unless otherwise stated. Figures in the estimated financial statements may not add due to rounding.
186 Chapter 9 Budget Statement 2003-04
Note 2: Taxation ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate Payroll tax 2 730.0 2 895.1 3 037.4 3 186.9 Taxes on immovable property 876.1 906.4 933.4 921.6 Financial and capital transactions (a) 2 348.2 2 129.4 1 903.5 1 923.7 Gambling 1 420.1 1 524.1 1 637.1 1 775.5 Insurance 950.6 1 011.3 1 076.7 1 145.6 Motor vehicles 1 204.1 1 250.6 1 302.2 1 332.9 Other licences and levies 64.1 71.0 78.8 83.4 Total taxation 9 593.2 9 787.9 9 969.2 10 369.6 Note: (a) Financial and capital transactions include stamp duty on land transfers, debits tax and other property stamp duty.
Note 3: Investment revenue ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate Dividends 273.1 288.9 336.5 421.9 Income tax and rate equivalent revenue 148.7 161.0 194.1 202.8 Interest 287.7 287.4 280.1 300.9 Royalties 44.9 40.3 40.7 40.8 Rents 15.3 15.6 15.6 15.6 Other 126.1 128.4 129.9 131.2 Total investment revenue 895.9 921.6 996.8 1 113.3
Note 4: Grants revenue ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate Operating grants General purpose grants 6 957.2 7 185.2 7 697.2 7 954.9 Specific purpose grants for on-passing 1 387.5 1 430.3 1 473.9 1 510.0 Other specific purpose grants 3 443.6 3 537.0 3 722.6 3 862.8 Total operating grants 11 788.2 12 152.5 12 893.7 13 327.6 Capital grants Specific purpose grants for on-passing 121.6 125.4 129.1 129.7 Other specific purpose grants 338.2 444.6 389.0 368.4 Total capital grants 459.8 570.0 518.1 498.1 Total grants 12 248.0 12 722.5 13 411.8 13 825.7
Budget Statement 2003-04 Chapter 9 187
Note 5: Depreciation ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate Plant and equipment 448.3 464.3 472.3 488.1 Infrastructure 25.3 37.9 39.6 33.9 Buildings (a) 279.2 303.8 337.0 381.0 Roads 258.0 273.3 286.9 296.0 Other assets 14.0 15.0 9.1 7.2 Total depreciation 1 024.8 1 094.3 1 144.9 1 206.1 Note: (a) Includes estimated depreciation on amounts not yet allocated to projects in 2004-05 to 2006-07.
Note 6: Amortisation ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate Leased plant and equipment 44.7 46.4 48.0 49.6 Leasehold buildings 11.0 11.0 11.0 11.1 Intangible assets 12.1 9.8 9.8 8.6 Total amortisation 67.9 67.2 68.8 69.2
Note 7: Borrowing costs ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate Interest on long-term interest bearing liabilities 424.7 416.9 409.8 402.3 Interest in short-term interest bearing liabilities 11.8 12.4 12.7 12.7 Finance charges on finance leases 11.7 11.7 27.1 32.5 Other borrowing costs 35.1 35.0 33.4 32.6 Total borrowing costs 483.3 476.0 483.0 480.0
188 Chapter 9 Budget Statement 2003-04
Note 8: Grants and transfer payments ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate Commonwealth 1.5 1.5 1.5 1.5 Local government 509.4 490.9 447.0 447.8 Private sector 3 133.5 3 136.2 3 306.5 3 489.7 Grants within Victorian Government 892.3 920.2 1 020.1 800.6 Other 0.5 0.5 0.5 0.5 Total grants and transfer payments 4 537.2 4 549.2 4 775.6 4 740.1
Note 9: Total expenses from ordinary activities by department ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate Expenses from ordinary activities (a) Education and Training 7 752.4 7 835.9 7 874.8 7 859.4 Human Services 9 502.5 9 766.6 9 893.7 10 003.8 Infrastructure 2 612.2 2 596.5 2 712.8 2 752.9 Innovation, Industry and Regional Development 379.8 281.8 256.9 275.7 Justice 2 353.3 2 419.5 2 497.3 2 567.2 Parliament 116.0 112.2 96.9 97.3 Premier and Cabinet 387.6 389.8 378.9 376.2 Primary Industries 297.5 274.2 271.8 270.2 Sustainability and Environment 924.0 815.1 798.2 791.8 Treasury and Finance 2 144.6 2 091.0 2 170.9 2 192.3 Victorian Communities 847.7 789.7 836.4 660.5 Contingencies not allocated to departments (b) 488.1 1 117.0 1 704.7 2 364.5 Regulatory bodies and other part budget funded 922.6 958.6 1 015.4 1 051.5 agencies (c) Total 28 728.2 29 447.9 30 508.6 31 263.4 Less eliminations (d) (2 374.3) (2 388.5) (2 393.6) (2 426.0) Total expenses from ordinary expenses 26 353.9 27 059.4 28 114.9 28 837.4 Notes: (a) This note has been prepared on a departmental allocation basis consistent with the recently announced changes to the machinery of government. (b) Departmental expenses will be supplemented for certain costs that are provided for in contingencies. (c) Other general government sector agencies, which receive less than 50 per cent of their revenue from appropriations and therefore are not allocated to departments. (d) Comprised of payroll tax, capital assets charge and inter-departmental transfers.
Budget Statement 2003-04 Chapter 9 189
Note 10: Property, plant and equipment ($ million) 2004 2005 2006 2007 Budget Estimate Estimate Estimate Land, national parks and other land only 8 330.1 8 636.4 8 964.2 9 297.6 holdings Buildings (a) 12 330.5 13 751.6 14 993.3 16 469.4 Less: Accumulated depreciation (1 086.6) (1 400.3) (1 738.3) (2 064.6) Buildings (written down value) 11 243.9 12 351.3 13 255.0 14 404.7 Infrastructure systems 5 365.7 5 498.6 6 022.9 6 064.4 Less: Accumulated depreciation (1 287.0) (1 308.0) (1 328.1) (1 348.4) Infrastructure systems (written down value) 4 078.7 4 190.6 4 694.8 4 716.0 Plant, equipment and vehicles 4 246.8 4 622.6 5 004.2 5 384.9 Less: Accumulated depreciation (2 671.7) (3 130.5) (3 605.7) (4 091.1) Plant, equipment and vehicles (written down 1 575.0 1 492.1 1 398.5 1 293.8 value) Leased plant, equipment and vehicles 292.3 302.3 312.3 322.3 Less: Accumulated depreciation ( 80.9) ( 89.3) ( 99.3) ( 110.9) Leased plant, equipment and vehicles 211.4 213.0 213.0 211.4 (written down value) Total property, plant and equipment 25 439.1 26 883.4 28 525.6 29 923.6 Note: (a) Includes amounts not yet allocated to projects in 2004-05 to 2006-07. Note 11: Roads and earthworks ($ million) 2004 2005 2006 2007 Budget Estimate Estimate Estimate Roads and earthworks 18 515.6 19 777.2 21 016.3 22 270.5 Less: Accumulated depreciation on roads (4 063.4) (4 336.3) (4 622.5) (4 917.5) Total roads and earthworks 14 452.2 15 440.9 16 393.8 17 353.0
Note 12: Reconciliation of movements in fixed assets (a) ($ million) 2004 2005 2006 2007 Budget Estimate Estimate Estimate Carrying amount at the start of the year 37 814.7 39 891.3 42 324.3 44 919.5 Additions (b) 2 093.6 2 440.6 2 589.8 2 353.3 Disposals at written down value ( 74.0) ( 66.5) ( 61.1) ( 52.1) Revaluations increments 1 123.5 1 188.1 1 272.4 1 315.5 Assets transferred ( 0.0) 7.5 ( 11.0) ( 0.0) Depreciation/amortisation expense (1 066.5) (1 136.7) (1 194.9) (1 259.6) Carrying amount at the end of the year 39 891.3 42 324.3 44 919.5 47 276.6 Notes: (a) Fixed assets comprise land and buildings, infrastructure systems, plant, equipment, vehicles, roads and earthworks. Excludes movements in other non-current assets in Note 13 below. (b) Includes assets acquired under finance lease arrangements. 190 Chapter 9 Budget Statement 2003-04
Note 13: Other assets ($ million) 2004 2005 2006 2007 Budget Estimate Estimate Estimate Current Other assets ...... Total current assets ...... Non-current Natural resources reserves at valuation 297.1 305.5 313.9 322.3 Other assets - including works of art, museum 3 039.4 3 127.8 3 216.4 3 307.6 collection, rare book collections and intangibles Less: Accumulated depreciation/amortisation ( 124.5) ( 145.2) ( 162.2) ( 182.1) Total non-current assets 3 212.0 3 288.2 3 368.2 3 447.8 Total other assets 3 212.0 3 288.2 3 368.2 3 447.8
Note 14: Employee benefits ($ million) 2004 2005 2006 2007 Budget Estimate Estimate Estimate Current Accrued salaries and wages (a) 696.9 718.3 739.6 762.1 Long service leave 163.4 116.2 71.1 25.2 Total current employee benefits 860.3 834.6 810.7 787.3 Non-current Accrued salaries and wages 8.0 8.0 8.0 8.0 Other employee entitlements 2 059.4 2 293.3 2 529.2 2 678.0 Total non-current employee benefits 2 067.4 2 301.3 2 537.1 2 686.0 Total employee benefits 2 927.7 3 135.8 3 347.9 3 473.3 Note: (a) Includes accrued annual leave, payroll tax and other similar on-costs.
Note 15: Superannuation The liability for employee superannuation benefits is the responsibility of the State’s public sector superannuation funds. These funds are not consolidated in the Estimated Financial Statements as they are not controlled by the State. However, the major proportion of unfunded superannuation liabilities are the responsibility of the State and are recognised accordingly. For 2003-04 to 2006-07, the weighted average discount rate used by the actuary is 7 per cent per annum and the assumed weighted average rate of salary increases is 4 per cent per annum (excluding promotions). For 2003-04, the CPI is assumed to increase by 2.25 per cent, and for 2004-05 and beyond, a long-term inflation rate of 3 per cent per annum is assumed.
Budget Statement 2003-04 Chapter 9 191
The long-term assumptions adopted by the actuary can differ from other economic assumptions that are listed at the start of the Notes to the Financial Statements. The general government’s share of the unfunded superannuation liability based on Department of Treasury and Finance estimates is as follows: ($ million) 2004 2005 2006 2007 Budget Estimate Estimate Estimate State Superannuation Fund 13 560.1 14 309.2 14 783.8 15 069.0 Other funds 576.3 588.6 595.8 593.9 Total unfunded superannuation liability 14 136.4 14 897.8 15 379.6 15 662.9 Current liability 176.8 522.4 748.4 948.5 Non-current liability 13 959.6 14 375.4 14 631.2 14 714.4 Total liability 14 136.4 14 897.8 15 379.6 15 662.9
Note 16: Reconciliation of cash ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate
Cash 320.0 351.8 384.2 420.2 Deposits at call 1 459.8 1 482.6 1 506.2 1 530.1 Bank overdraft ( 1.8) ( 1.2) ( 0.1) .. Cash held as at 30 June 1 778.0 1 833.3 1 890.3 1 950.2
192 Chapter 9 Budget Statement 2003-04
Note 17: Reconciliation of net cash flows from operating activities ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate
Net result 244.5 321.0 304.4 547.3
Non-cash movements Depreciation 1 024.8 1 094.3 1 144.9 1 206.1 Amortisation 67.9 67.2 68.8 69.2 Revaluation of investments 0.1 0.1 0.1 0.1 Assets received /given free of charge .. ( 7.5) 11.0 .. Revaluation of assets ( 8.4) ( 8.4) ( 8.4) ( 8.4) Discount /premium on other financial 11.7 11.6 9.9 9.1 assets/interest bearing liabilities Write down of liabilities ( 1.6) ( 1.6) ( 1.7) ( 1.7) Movements included in investing and financing activities Net revenue from sale of property, plant & 7.3 6.6 7.9 7.9 equipment
Movements in assets and liabilities Increase in provision of doubtful debts 93.6 95.9 93.9 89.9 Decrease in payables ( 6.8) ( 14.2) 6.4 11.6 Increase in employee benefits 207.9 212.5 216.5 129.9 Increase in superannuation 497.6 761.3 481.8 283.2 Increase in insurance claims liabilities 10.7 14.0 16.6 19.3 Decrease in other liabilities ( 14.5) ( 21.2) ( 5.8) ( 9.9) Decrease in receivables ( 167.8) ( 178.5) ( 185.4) ( 175.7) Increase (decrease) in other current assets 0.3 ( 0.2) 0.0 ( 0.1) Net cash flows from operating activities 1 967.2 2 353.0 2 161.1 2 178.0
Budget Statement 2003-04 Chapter 9 193
Note 18: General government sector entities The following is a list of entities, which have been consolidated for the purposes of the Estimated Financial Statements. For further details on consolidation policy see Note 1 C, Basis of Consolidation. Public non-financial and public financial corporations do not form part of the general government sector and are therefore not included in this list of controlled entities. For a complete listing of all government entities, please refer to the 2001-02 Financial Report for the State of Victoria.
General government sector entities Department of Education and Training Adult, Community and Further Education Board Adult Multicultural Education Services Centre for Adult Education TAFEs including: Bendigo Regional Institute of TAFE Box Hill Institute of TAFE Central Gippsland Institute of TAFE Chisholm Institute of TAFE Driver Education Centre of Australia Ltd East Gippsland Institute of TAFE Gordon Institute of TAFE Goulburn Ovens Institute of TAFE Holmesglen Institute of TAFE Institute of Land and Food Resources (TAFE Division) International Fibre Centre Limited Kangan Batman Institute of TAFE Northern Melbourne Institute of TAFE Royal Melbourne Institute of Technology (TAFE Division) South West Institute of TAFE Sunraysia Institute of TAFE Swinburne University of Technology (TAFE Division) University of Ballarat (TAFE Division) Victoria University of Technology (TAFE Division) William Angliss Institute of TAFE Wodonga Institute of TAFE Victorian Curriculum and Assessment Authority Victorian Institute of Teaching Victorian Learning and Employment Skills Commission Victorian Qualifications Authority
194 Chapter 9 Budget Statement 2003-04
General government sector entities (continued) Department of Human Services Hospitals, Health Services and Ambulance Services including: Alexandra and District Ambulance Service Alexandra District Hospital Alpine Health Ambulance Service Victoria Metropolitan Region Austin and Repatriation Medical Centre Bairnsdale Regional Health Service Ballarat Health Services Barwon Health Bayside Health Beaufort and Skipton Health Service Beechworth Health Service Benalla and District Memorial Hospital Bendigo Health Care Group Boort District Hospital Casterton Memorial Hospital Central Gippsland Health Service Cobram District Hospital Cohuna District Hospital Colac Community Health Services Coleraine and District Health Services Dental Health Services Victoria Djerriwarrh Health Services Dunmunkle Health Services East Grampians Health Service East Wimmera Health Service Eastern Health Echuca Regional Health Edenhope and District Memorial Hospital Gippsland Southern Health Service Goulburn Valley Health Health Purchasing Victoria Hepburn Health Service Hesse Rural Health Service Heywood Rural Health (formerly Heywood and District Memorial Hospital) Infertility Treatment Authority Inglewood and District Health Service Kerang and District Hospital Kilmore and District Hospital, The Kooweerup Regional Health Service Kyabram and District Health Services Kyneton District Health Service Latrobe Regional Hospital Lorne Community Hospital Maldon Hospital Mallee Track Health and Community Services Manangatang and District Hospital Mansfield District Hospital
Budget Statement 2003-04 Chapter 9 195
General government sector entities (continued) Maryborough District Health Service McIvor Health and Community Services Melbourne Health Mildura Base Hospital Moyne Health Services Mt Alexander Hospital Nathalia District Hospital Northern Health Numurkah District Health Service Omeo District Hospital Orbost Regional Health Otway Health and Community Services, The Peninsula Health Peter MacCallum Cancer Institute Portland and District Hospital Queen Elizabeth Centre, The Robinvale District Health Services Rochester and Elmore District Health Service Royal Victorian Eye and Ear Hospital Rural Ambulance Victoria Rural Northwest Health Seymour District Memorial Hospital South Gippsland Hospital South West Healthcare Southern Health Stawell Regional Health Swan Hill District Hospital Tallangatta Health Service Terang and Mortlake Health Service Timboon and District Health Care Service Tweddle Child and Family Health Service Upper Murray Health and Community Services Wangaratta District Base Hospital West Gippsland Health Care Group Victorian Institute of Forensic Mental Health West Wimmera Health Service Western District Health Service Western Health Wimmera Health Care Group Wodonga Regional Health Service Women's and Children's Health Wonthaggi and District Hospital Yarram and District Health Service Yarrawonga District Health Service Yea and District Memorial Hospital Other DHS GG Boards including: Chinese Medicine Registration Board of Victoria Chiropractors Registration Board of Victoria Dental Practice Board of Victoria
196 Chapter 9 Budget Statement 2003-04
General government sector entities (continued) Medical Practitioners Board of Victoria Mental Health Review Board Nurses Board of Victoria Optometrists Registration Board of Victoria Osteopaths Registration Board of Victoria Pharmacy Board of Victoria Physiotherapists Registration Board of Victoria Podiatrists Registration Board of Victoria Psychologists Registration Board of Victoria Psychosurgery Review Board Victorian Health Promotion Foundation Victorian Relief Committee (formerly listed under Department of Premier and Cabinet)
Department of Infrastructure Roads Corporation Spencer Street Station Authority Office of Gas Safety (formerly listed under Department of Natural Resources and Environment) Office of the Chief Electrical Inspector (formerly listed under Department of Natural Resources and Environment)
Department of Innovation, Industry and Regional Development Liquor Licensing Panel Prince Henry's Institute of Medical Research (formerly listed under Department of Human Services) Tourism Victoria (formerly Department of Tourism, Sport and the Commonwealth Games)
Department of Justice Country Fire Authority Domestic Building (HIH) Indemnity Fund Emergency Communications Victoria Equal Opportunity Commission Gambling Research Panel (formerly listed under Department of Treasury and Finance) Legal Practice Board Metropolitan Fire and Emergency Services Board Office of the Legal Ombudsman Office of Public Prosecutions Office of the Public Advocate Victoria Legal Aid Victoria Police (Office of the Chief Commissioner of Police) Victorian Electoral Commission Victorian Institute of Forensic Medicine Victorian Law Reform Commission Victorian Casino and Gaming Authority (formerly listed under Department of Treasury and Finance)
Budget Statement 2003-04 Chapter 9 197
General government sector entities Department of Premier and Cabinet Australian Centre for the Moving Image Film Victoria Library Board of Victoria Museums Board of Victoria National Gallery of Victoria, Council of Trustees Office of Public Employment Office of the Ombudsman
Department of Primary Industries Veterinary Practitioners Registration Board of Victoria
Department of Sustainability and Environment Architects Registration Board of Victoria (formerly listed under Department of Infrastructure) Building Commission (formerly listed under Department of Infrastructure) Catchment Management Authorities including: Corangamite Catchment Management Authority East Gippsland Catchment Management Authority Glenelg-Hopkins Catchment Management Authority Goulburn-Broken Catchment Management Authority Mallee Catchment Management Authority North Central Catchment Management Authority North East Catchment Management Authority West Gippsland Catchment Management Authority Wimmera Catchment Management Authority Environment Protection Authority EcoRecycle Victoria Heritage Council (formerly listed under Department of Infrastructure) Parks Victoria Plumbing Industry Commission (formerly listed under Department of Infrastructure) Royal Botanic Gardens Board Shrine of Remembrance Trustees Surveyors Board Trust for Nature (Victoria)
Department of Treasury and Finance Essential Services Commission
Department of Victorian Communities Victorian Institute of Sport Ltd Victoria (formerly listed under Department of Tourism, Sport and the Commonwealth Games) Victorian Institute of Sport Trust Victoria (formerly listed under Department of Tourism, Sport and the Commonwealth Games)
Parliament of Victoria Victorian Auditor-General's Office
198 Chapter 9 Budget Statement 2003-04
DEPARTMENT OF TREASURY AND FINANCE STATEMENT IN RELATION TO THE ESTIMATED FINANCIAL STATEMENTS
The Estimated Financial Statements for the Victorian general government sector have been prepared on the basis of the economic and fiscal information available to the Department of Treasury and Finance. Given the prospective nature of the Estimated Financial Statements, it has been necessary to apply the best professional judgment in preparing the Estimated Financial Statements. In my opinion, the Estimated Financial Statements have been properly prepared for the purposes of sections 23H – 23K of the Financial Management Act 1994 and take into account government decisions and other circumstances that have a material effect.
Ian Little Secretary
Department of Treasury and Finance 1 May 2003
Budget Statement 2003-04 Chapter 9 199
AUDITOR-GENERAL’S REPORT To the Members of the Parliament of Victoria Scope of Review I have reviewed the accompanying estimated financial statements of the Victorian General Government Sector, as defined in note 18 to the statements, for the financial year ended 30 June 2004 and the three forward financial years ended 30 June 2005, 2006 and 2007. The statements comprise an estimated statement of financial performance, an estimated statement of financial position, an estimated statement of cash flows and accompanying notes. The remaining parts of the Budget Papers have not been subject to my review. The Treasurer of Victoria is responsible for the preparation and presentation of the estimated financial statements and the information they contain. The estimated financial statements have been prepared for inclusion in the Budget Papers which are presented to the Parliament. Any assumption of responsibility for any reliance on this report or on the estimated financial statements of the Victorian General Government Sector to which this report relates is disclaimed to any person other than the Members of the Parliament of Victoria. My review of the estimated financial statements has been conducted under section 16B of the Audit Act 1994 which requires me to state whether anything has come to my attention that would cause me to not believe that the statements have been prepared on a basis consistent with the accounting policies on which they are stated to be based, are consistent with the target established for the key financial measure specified in the accompanying notes to the statements and have been properly prepared on the basis of the economic assumptions stated in the accompanying notes to the statements, and the methodologies used to determine those assumptions were reasonable. The review has been conducted in accordance with Australian Auditing Standards applicable to review engagements, and has been limited primarily to inquiries of relevant personnel and assessments of the reasonableness of the key methodologies and processes followed to determine the assumptions and data upon which the estimated financial statements are based, and appropriate analytical procedures. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than that which would be given in an audit. Accordingly, an audit has not been performed and an audit opinion is not expressed. Prospective financial information relates to events and actions that have not yet occurred and may not occur. While evidence may be available to support the assumptions and underlying data upon which prospective financial information is based, such evidence is generally future oriented and therefore less certain in nature. As a result, I am not in a position to obtain the level of assurance necessary to express a positive opinion on those assumptions and the accompanying forecast information included in the estimated financial statements. Accordingly, an opinion is not expressed on whether the forecasts will be achieved. Review Statement Based on my review, which is not an audit, nothing has come to my attention that causes me to not believe that: • the estimated financial statements have been prepared on a basis consistent with the accounting policies on which they are stated to be based; • the estimated financial statements are consistent with the target established for the key financial measure specified in the accompanying notes to the statements; • the estimated financial statements have been properly prepared on the basis of the economic assumptions stated in the accompanying notes to the statements; and • the methodologies used to determine those assumptions were reasonable. Actual results achieved by the Victorian General Government Sector are likely to be different from those forecast in the estimated financial statements since anticipated results frequently do not occur as expected and the variation may be material. Accordingly, I express no opinion as to whether the forecasts will be achieved.
Victorian Auditor-General's Office Level 34, 140 William Street, Melbourne Victoria 3000 Telephone (03) 8601 7000 Facsimile (03) 8601 7010 Email comments @audit.vic.go.au Website www.audit.vic.gov.au.
–––––––––––––––––––––––––––––––– Auditing in the Public Interest
200 Chapter 9 Budget Statement 2003-04
APPENDIX A: OUTPUT, ASSET INVESTMENT AND REVENUE INITIATIVES
This appendix outlines output, asset investment, revenue and savings initiatives since the 2002-03 Budget.
OUTPUT, SAVINGS AND ASSET INVESTMENT INITIATIVES The following tables provide details of output, savings and asset investment initiatives for each department. Except where specified, figures indicate the total cost of initiatives. Funding from reprioritisation and existing fund sources has not been deducted from the total cost of the initiative. The Budget also achieves savings of $141 million in 2003-04 rising to $167 million in 2006-07. Most of the savings will be achieved through general efficiencies in government administration that will be affected through a series of initiatives including the rationalisation of procedures for recruitment advertising and the reduction in core government advertising. Government-wide initiatives The following tables provide details of the total cost of government-wide output and asset investment initiatives. The figures included are the total cost of initiatives. Funding from reprioritisation and existing fund sources has not been deducted from the total cost of the initiative. Output initiatives
Table A1: Output initiatives – Government-wide ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Bushfire suppression and recovery 138.9 24.5 0.8 1.2 .. strategy Victorian drugs strategy .. 44.0 44.0 44.0 44.0 Counter-terrorism 4.7 19.9 18.8 18.9 19.1 Wotjobaluk native title in-principle .. 0.6 0.9 0.5 0.3 agreement Total output initiatives 143.6 89.0 64.5 64.6 63.4 Source: Department of Treasury and Finance Budget Statement 2003-04 Appendix A 201
Bushfire suppression and recovery strategy The bushfire season of 2002-03, in particular the fires in north-east Victoria and East Gippsland, stand with Ash Wednesday in 1983 and Black Friday in 1939 as the largest bushfires in Victoria’s recorded history. This affected land is vital for healthy water catchments and rivers and underpins tourism, recreation, forests and associated industries. Funding is provided for a range of output initiatives in several departments and for grants to individuals and organisations to meet fire suppression expenses and assist with fire recovery. Victorian drugs strategy Funding will ensure the continuation of the Government’s successful whole-of-government drug programs. Programs include prevention, treatment and rehabilitation, and law enforcement initiatives. The Victorian Drugs Court pilot will continue into 2004-05. Counter-terrorism Funding is provided to establish a new Counter-Terrorism Coordination Unit within Victoria Police, and an Emergency Services Coordination Unit and Chemical, Biological and Radiological (CBR) Planning and Response Unit in the Department of Human Services. The funding will provide additional specialist training to enhance the Government’s planning and response capabilities. Additional funding is provided for fire emergency services, search and rescue resources and protective equipment, as well as increased scientific personnel. Funding is also provided for preliminary planning work to develop a Geospatial Emergency Information Network. The network will establish a centralised information hub to coordinate emergency information across agencies and across the State to facilitate rapid and strategic response in the event of an emergency. To support this project immediate funding is provided to ensure that Vicmap datasets are maintained. Vicmap is the whole-of-government digital map database incorporating information from local governments, utility companies and private sector surveyors. Wotjobaluk native title in-principle agreement Funding has been provided to meet obligations under an in-principle agreement that has been reached with the Wotjobaluk people to settle their native title claim in the Wimmera region. The in-principle agreement is consistent with the Government's Native Title Policy and Guidelines. The Wotjobaluk native title claim is the first claim to be agreed in-principle in Victoria. The in-principle agreement recognises the cultural connection and ancestral affiliation of the Wotjobaluk people to a core area in Victoria.
202 Appendix A Budget Statement 2003-04
Asset investment initiatives
Table A2: Asset investment initiatives – Government-wide ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 TEI Bushfire suppression and recovery 6.1 23.7 3.8 3.2 .. 36.8 strategy Counter-terrorism 7.3 8.9 ...... 16.2 City office accommodation 0.3 16.3 16.3 11.3 5.8 50.0 Total asset investment initiatives 13.7 48.9 20.1 14.5 5.8 103.0 Source: Department of Treasury and Finance Bushfire suppression and recovery strategy The bushfires in north-west and eastern Victoria burnt significant areas of public land. This land is vital for healthy water catchments and rivers and underpins tourism, recreation, forests and associated industries. Funding is provided to assist with urgent work that is required to remediate fire containment lines and to stabilise soil that is at risk of eroding when the winter rains set in following this year’s bushfires. Funding is also provided for additional work that is required to repair and replace infrastructure assets in parks, forests and alpine resorts and fire damaged roads and bridges. Counter-terrorism Funding is provided to build a new State Crisis Centre linking Victoria Police, emergency service organisations and key federal agencies, and to purchase specialist technical, rescue and protective equipment for Victoria Police, CBR response, VicSES and forensic analysis. City office accommodation Parts of the Departments of Innovation, Industry and Regional Development, Justice and Treasury (State Revenue Office) will be relocated when the redevelopment of the former Southern Cross Hotel site at the corner of Bourke and Exhibition Streets is completed in 2006-07. Funding is provided to meet fit-out costs which will occur progressively across the completion of the project. This will ensure early occupation of the building.
Budget Statement 2003-04 Appendix A 203
Education and Training
Table A3: Output initiatives – Department of Education and Training ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Investing in teachers to support .. 4.0 14.0 28.0 36.0 excellence Primary school student welfare officers .. 4.2 12.5 16.4 16.4 Excellence in languages .. 0.8 1.8 1.8 1.8 Non-government schools in need .. 11.0 14.0 17.0 20.0 Non-government schools internet .. 2.0 2.0 2.0 2.0 access Principals professional development .. 0.6 0.6 0.6 0.6 On Track .. 1.2 1.2 1.2 1.2 Boost to vocational education and .. 0.5 1.0 1.0 1.0 training in schools Parents returning to work .. 2.8 2.8 2.8 2.8 Skill-Up .. 0.8 1.4 1.4 1.4 Apprentice/trainee completion bonus .. 6.4 13.1 15.0 16.9 Innovation in teaching science .. 1.0 1.5 1.5 1.0 Reform and demand strategy .. 81.5 102.5 113.9 116.0 Disabilities program 26.0 31.5 26.5 21.5 16.5 Total – Education and Training 26.0 148.2 194.8 224.0 233.5 Less: General efficiencies in government .. 31.0 31.0 31.0 31.0 administration Phasing out of the private sector .. .. 0.6 4.4 5.8 skills development program Net output initiatives – Education 26.0 117.2 163.2 188.6 196.7 and Training Source: Department of Treasury and Finance
Output initiatives Investing in teachers to support excellence Funding is provided to appoint an additional 450 secondary school teachers over four years to enable schools to develop areas of specialisation, and to support education and training that is relevant to the needs of students and their communities. Primary school student welfare officers The program builds on a previous government initiative that provided student welfare officers to secondary schools. Funding is provided to appoint 256 student welfare coordinators to support primary school students at risk, address behavioural problems, implement learning and management strategies and establish effective partnerships between schools and other community support services. 204 Appendix A Budget Statement 2003-04
Excellence in languages Funding is provided to establish three Centres of Excellence in Languages in secondary schools and five additional Victorian School of Languages centres in regional areas of Victoria. Funding is also provided to develop online teaching materials for language students in the years 7 to 9, increase grants to after-hours ethnic schools and provide opportunities for teachers in regional areas to retrain as language teachers. Non-government schools in need Funding is provided to assist non-government schools offset the rising costs of school education. Funding will be targeted to non-government schools identified in greatest need. Non-government schools internet access The program builds on a previous government initiative and improves non-government schools access to the Government’s VicONE internet portal. Principals professional development Funding is provided to develop, promote and deliver professional development programs for primary and secondary school principals. The program will focus on educational leadership to improve school and student outcomes. On Track Funding is provided to develop an integrated follow-up and assistance program for young people attending government schools by tracking student progress six months after leaving school and assisting with career development planning. The program is aimed at improving information relating to the movement of post- compulsory students between education, training and employment. Boost to vocational education and training in schools Additional funding is provided for programs to address increased demand of secondary school students pursuing various pathways through years 10 to 12 in government schools. Parents returning to work Funding is provided to assist parents’ transition back into employment after at least two years out of the workforce. Skill-Up Funding is provided to workers recently made redundant with a rapid response retraining program to assist their return to work.
Budget Statement 2003-04 Appendix A 205
Apprentice/trainee completion bonus Funding is provided for a completion bonus to encourage employers to increase the number of young apprentices and trainees complete their qualification. Commencing on 1 July 2003, employers with three or more new employee apprentices and trainees who are under the age of 25 years at commencement will qualify for the bonus (excluding Commonwealth and State Government employers). Transitional arrangements will be in place for existing apprentices and trainees. Innovation in teaching science Funding is provided to extend the School Innovation in Science program in secondary schools with a focus on teaching of physics, chemistry, IT-related mathematics, science and technology. Reform and demand strategy Funding is provided for additional demand pressures and for an integrated approach of improved targeting of resources, better reporting and accountability arrangements and an improved workforce strategy that focuses on quality and excellence to meet educational outcomes. Disabilities program Funding is provided to meet revised demand growth since December 2002 for support services provided to government school students with special education needs under the Disabilities and Impairments program.
Savings initiatives General efficiencies in government administration The Department of Education and Training will achieve general efficiencies in administration worth $31 million a year from 2003-04. Phasing out of the private sector skills development program To improve targeting of funding for training of apprentices and trainees, the Government will introduce a new completion bonus scheme to increase apprentice and trainee completion rates. Funding for the new scheme will be provided through phasing out of the private sector skills development program by 2006-07. The phase out of the private sector skills development program will occur over four years to enable existing commitments to be funded and to cater for specific needs in the Victorian labour force.
206 Appendix A Budget Statement 2003-04
Asset investment initiatives
Table A4: Asset investment initiatives – Department of Education and Training ($ million) 2003-04 2004-05 2005-06 2006-07 TEI Building better schools – new schools 15.5 22.6 .. .. 38.1 Facilities for excellence 5.1 5.0 .. .. 10.1 Community facilities fund 0.5 ...... 0.5 Building better schools – replacement 2.1 3.0 .. .. 5.1 schools Project planning funding 2.0 ...... 2.0 Fire reinstatement program 8.8 3.3 .. .. 12.1 Building better schools –modernisation of 17.1 34.6 .. .. 51.8 schools TAFE teaching equipment –maintaining 12.0 ...... 12.0 and upgrading Precincts development 1.8 3.7 .. .. 5.5 Total asset investment initiatives 64.8 72.3 .. .. 137.1 Source: Department of Treasury and Finance Building better schools – new schools Funding is provided for the construction of six new primary and secondary schools over two years including Roxburgh Park North Primary School, Strathaird Primary School, Caroline Springs Town Centre prep to year 8, Lynbrook Primary School, Roxburgh College and Mount Erin Secondary College. The funding also allows for the final stages of construction for Bellarine and Carrum Downs Secondary Colleges. Facilities for excellence Funding is provided for the development of new specialist facilities in four secondary schools (Ballarat High School, Lilydale High School, Rochester Secondary College and Vermont Secondary College) to support the delivery of innovative education and training programs in key learning areas including science and technology, arts, design, music, languages and sport. Community facilities fund Funding is provided to establish a community facilities fund for new school facilities for use by community groups and individuals. The program is aimed at enhancing community access to school facilities including libraries, computer laboratories and sports facilities.
Budget Statement 2003-04 Appendix A 207
Building better schools – replacement schools Funding is provided to replace three existing schools (Rockbank Primary School, Carronbank School and Traralgon Secondary School) that have outgrown existing facilities due to enrolment increases, obsolescence, or where facilities are located in areas that no longer support the infrastructure. Project planning funding Funding is provided for planning and development work for asset initiatives and future capital proposals. This planning will focus on the modernisation of schools and new schools and development of two new rural learning campuses. Fire reinstatement program Funding is provided for the reinstatement of four school facilities due to destruction or structural damage caused by fire. Reinstatement funding is provided for facilities at Boronia Primary School, Hurstbridge Primary School, Mount Waverley Secondary College and Wodonga High School Flying Fruit Fly Circus Campus. Building better schools – modernisation of schools Funding is provided to modernise 38 schools across the State. This will include fixed infrastructure and related facilities. TAFE teaching equipment – maintaining and upgrading Funding is provided to replace and upgrade obsolete equipment at TAFE institutes, particularly in priority industry training areas. Precincts development Funding is provided for the continued construction of the Maryborough Education Precinct, a specialised learning environment integrating primary and secondary schools and a TAFE college on one campus. Funding is also provided towards the completion of the Gippsland Education Precinct. The education precinct will also provide a level of infrastructure support to leading edge skill development in local enterprises.
208 Appendix A Budget Statement 2003-04
Human Services
Table A5: Output initiatives – Department of Human Services ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Hospital Demand Management Strategy .. 116.0 116.0 116.0 116.0 Mental health strategy .. 9.0 18.0 18.0 18.0 New ambulance services .. 6.0 8.0 8.0 8.0 Rural elective surgery waiting lists .. 5.0 5.0 5.0 5.0 Expansion of dental health services .. 2.5 6.5 6.0 6.0 Prevention and early detection for .. 2.5 2.5 2.5 2.5 obesity and diabetes Boost to maternal and child health .. 2.3 4.8 4.8 5.3 services Support for bush nursing hospitals .. 1.8 1.8 1.8 1.8 Expansion of breast screening services .. 1.5 3.0 3.0 3.0 Rural workforce program .. 1.5 1.5 1.5 1.5 Victorian Women's Health and Wellbeing .. 1.5 1.5 1.5 1.5 Strategy Planning for future Box Hill Hospital .. 1.0 1.0 .. .. redevelopment Electronic prescribing in key Victorian .. 1.0 1.0 1.0 .. hospitals Improved rural and Koori maternity .. 0.8 1.3 1.6 1.6 services Drought social recovery strategy 1.9 0.7 ...... Ministerial Council on Cancer .. 0.5 1.0 1.3 1.3 Healthy and active living .. 0.3 0.6 0.6 0.6 Associate Professor of Physiotherapy .. 0.2 0.2 0.2 0.2 Growth and boost to Home and .. 12.0 19.0 19.0 19.0 Community Care Program Package to address problem gambling .. 6.0 6.0 .. .. IT support for preschools .. 5.0 ...... Child protection .. 4.0 8.0 8.0 8.0 Improved resources for foster carers .. 4.0 4.0 4.0 4.0 Kew Residential Services redevelopment .. 2.0 3.1 3.1 3.1 Financial counselling .. 1.9 1.9 1.9 1.9 Boost to early childhood intervention .. 1.5 1.5 1.5 1.5 services Children’s centres .. 1.0 3.5 3.5 .. Preschool start-up fund .. 1.0 3.5 3.5 .. Support for preschools .. 1.0 ...... Expansion of disability services .. 6.0 10.5 12.0 12.0 Future planning for the provision of .. 3.4 3.4 3.4 3.4 disability services Older years and carer support program .. 1.5 2.0 3.0 3.5 Affordable housing growth .. 10.0 20.0 20.0 20.0 Neighbourhood renewal .. 2.5 2.5 2.5 2.5
Budget Statement 2003-04 Appendix A 209
Table A5 (cont): Output initiatives – Department of Human Services ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Expansion of Victorian Homelessness 2.2 2.2 2.2 2.2 Strategy .. Support for non-government sector 51.3 68.6 68.6 68.6 68.6 Support for public hospitals .. 32.0 ...... Human services industrial relations 79.1 88.6 96.0 122.2 114.1 issues(a) Total – Human Services 132.3 408.1 429.2 450.9 435.8 Less: General efficiencies in government .. 36.4 36.4 36.4 36.4 administration Establish high interest bank accounts .. 1.2 1.2 1.2 1.2 for rural hospitals Reduction in non-direct disability .. 1.4 1.9 1.9 1.9 service provision and update disability shared supported accommodation charges Discontinue supplementary subsidy to .. 1.4 3.0 3.0 3.0 childcare services Wider adoption of call centre .. .. 2.0 2.0 2.0 technology Better targeting grants for service .. 1.0 1.0 1.0 1.0 development Net output initiatives – Human Services 132.3 366.7 383.8 405.5 390.4 Source: Department of Treasury and Finance Note: (a) Figures are net of wage contingency funding.
Output initiatives Hospital Demand Management Strategy Funding is provided to extend and continue implementation of the Hospital Demand Management Strategy that commenced in 2001-02. The strategy will provide capacity to treat additional patients and continue to work with clinicians and hospital management to implement preventative measures. The capacity of public hospitals will be increased with the first of two years funding, to treat an additional 35 000 admitted patients each year and manage an additional 47 000 presentations at emergency departments. An additional 900 nurses and health staff will also be employed in 2003-04. Preventative measures will continue to divert patients from acute beds to more appropriate support such as rehabilitation and interim support for aged patients, which will prevent unnecessary hospital admissions. 210 Appendix A Budget Statement 2003-04
Mental health strategy Additional funding will be provided to continue the implementation of the Government’s mental health strategy. This will allow significant expansion and improvement in mental health services, including increased acute mental health beds, alternative forms of residential care and supported accommodation and early intervention programs. The capacity of the mental health system will be increased with funding to treat an additional 700 patients. New ambulance services Funding will support new metropolitan and rural ambulance services. This will include new metropolitan stations in Keilor Downs and the Tooronga/Burwood area and an additional crew in Broadmeadows. Rural ambulance services will be improved with permanent professional staffing in Bendigo (Kangaroo Flat) and Geelong, and an upgrading of the Ballan volunteer branch to professional status. In addition, permanent professional services will be established in Omeo and Mallacoota, services will be upgraded in Maryborough, Kyabram, Cobram, Mansfield and Portland, and community emergency response teams will be established in five small rural towns. Rural elective surgery waiting lists Funding is provided to reduce elective surgery waiting lists in rural and regional hospitals in targeted areas including orthopaedics, ophthalmology and general surgery. This will increase regional and rural hospital capacity to provide elective surgery to an extra 1 650 patients each year who are on the semi-urgent or non- urgent elective surgery waiting lists, or who face long waits for medical treatment. Expansion of dental health services Funding will be used to expand service provision in public dental health agencies across Victoria. This initiative will help improve the accessibility of dental services for people in the most vulnerable groups in the community and promote oral health in preschools. Prevention and early detection for obesity and diabetes Obesity is associated with substantial risks of disease and death and is a major risk factor for the development of diabetes. Funding through community-based organisations will be used to encourage healthy eating and physical activity in the community to help reduce the impact of obesity and diabetes as well as support programs to increase early detection of pre-diabetes. Boost to maternal and child health services Funding is provided to enhance and expand the maternal and child health service and enhance the delivery of children’s services by improving the integration of maternal and child health services into other state and local government activities.
Budget Statement 2003-04 Appendix A 211
Support for bush nursing hospitals Funding is provided to allow bush nursing hospitals and centres to modernise their medical equipment and redevelop or improve facilities. This will ensure that rural communities have continuing access to appropriate and quality health care services. Expansion of breast screening services Funding is provided to improve the health outcomes of women at risk of breast cancer by enhancing the breast screening program. The new funds will be used to further promote the importance of breast screening and increase the number of women being screened by 96 000 over the next four years. Rural workforce program Funding is provided to attract and retain health professionals, including doctors, nurses, physiotherapists and other allied health workers, in rural and regional areas. Victorian Women's Health and Wellbeing Strategy Funding is provided to promote the health and wellbeing of Victorian women. This will support a number of initiatives including an expansion of mental health services for women, increase access to specialist support services for women and better equity of access to breast screening through public hospitals. The strategy will also encourage women to participate more fully on boards and committees for management of health networks and services. Planning for future Box Hill Hospital redevelopment Funding is provided to commence master planning and schematic design for the development of the Box Hill Hospital. Electronic prescribing in key Victorian hospitals Funding is provided to establish Australia’s first electronic prescribing program in key Victorian hospitals. This will save lives by improving the accuracy and quality of prescribing medications. Improved rural and Koori maternity access Funding is provided to improve maternity services in rural hospitals by developing new models of care with an increased emphasis on continuity of care for women during pregnancy, childbirth and the postnatal period. The Koori maternity services program will also be extended with new services in Dandenong and Echuca.
212 Appendix A Budget Statement 2003-04
Drought social recovery strategy Funding will be used to implement the drought social recovery strategy that will provide support to drought-affected individuals and communities, to assist them in managing the impacts of the drought. The strategy will provide additional counselling services and local support initiatives. Ministerial Council on Cancer Funding will establish a Ministerial Council on Cancer to improve the coordination of treatment and provide leadership to inform the future of cancer care, services and research in Victoria. The Council will consider options for the creation of a comprehensive cancer centre and strengthen cancer data collections and the Victorian cancer registry. Healthy and active living Funding will expand the range of sport, recreation and leisure activities available to senior Victorians. Initiatives will aim to raise the awareness of the benefits of physical activities and increase the capacity of professional organisations and local community groups to provide appropriate, accessible and attractive activity programs for senior Victorians. Associate Professor of Physiotherapy This initiative will provide funding to establish a position of Associate Professor of Physiotherapy in Shepparton. The role will assist in attracting practitioners to the region and provide professional support and advice to enable existing practitioners to maintain their skills and have access to the latest research. Growth and boost to Home and Community Care Program To continue to meet the needs of the more vulnerable in our community, funding is provided to further expand the Home and Community Care Program (HACC). This program provides a range of services to assist the aged and disabled live independently in the community and plays an important role in deferring and avoiding premature hospital and residential aged care entry. Package to address problem gambling This funding forms part of an integrated strategy for individuals, families and communities to address the incidence of problem gambling in Victoria. Additional initiatives include an additional after-hours service, a major communications campaign and programs targeting culturally and linguistically diverse Victorians.
Budget Statement 2003-04 Appendix A 213
IT support for preschools As part of the Government’s Children First policy, funding will be provided to upgrade computers and information technology support for preschools. This will involve the purchase of computer equipment, the provision of information technology training and support for preschool teachers, and the linking of services via the internet. Child protection Funding is provided to trial innovative approaches to early intervention and prevention of child abuse and neglect, and to provide a mentoring program for young persons leaving residential care, to assist them in the transition from care to living independently. Improved resources for foster carers Funding is provided to boost payments to foster, kinship and permanent carers. This initiative will significantly improve Victoria’s home-based care program for children in need of care and protection. Kew Residential Services redevelopment Funding is provided to continue the Kew Residential Services redevelopment and relocate a further 60 Kew residents to new community residential units in 2003-04. Financial counselling Financial counselling services include general counselling, budget strategies and advice on income and concessional entitlements. Funding in this budget will guarantee services continue across the State. Boost to early childhood intervention services Funding is provided for additional early intervention services for autism, speech and behavioural problems. This funding will assist approximately 300 additional children over the next four years. Children's centres Funding is provided for seeding grants of up to $250 000 to establish up to 30 children’s centres. Fully integrated programs and specialist services such as speech therapy, nutritionists and psychologists will be co-located with other services such as childcare, preschool or kindergarten facilities. Preschool start-up fund Funding is provided for start-up capital grants for the establishment of new kindergartens and preschools in growth suburbs, with an emphasis on linking these to other services such as extended childcare.
214 Appendix A Budget Statement 2003-04
Support for preschools Support is provided to preschools to continue the government reforms to Victoria’s pre-schools. This builds on the funding approved in the 2002-03 budget. Expansion of disability services Funding will expand and improve the quality and access of services provided to children and adults with a disability and their families. Housing and living options for people with disabilities will be enhanced, providing an additional 100 HomeFirst places in 2003-04. Funding will also target improved community awareness and community inclusion programs. Future planning for the provision of disability services Funding will be provided to allow the Government to better plan for the future provision of disability services through better coordination of case management. Older years and carers support program Funding will establish an older years and carers support program. The initiative will provide increased respite and support for ageing carers to assist them to care for family members with a disability. Affordable housing growth Affordable housing growth will further expand and improve the stock of affordable long-term housing in Victoria. This will include establishing affordable housing associations to provide services to clients with specialised housing needs, including older Victorians, people with disabilities and Victorians in areas of identifiable need. Neighbourhood renewal Additional funding will be provided to support and expand the neighbourhood renewal project. Neighbourhood renewal brings together the resources and ideas of residents, governments, local communities, businesses and community groups to build stronger communities in areas with high public housing concentration. Expansion of Victorian Homelessness Strategy Expansion of the Victorian Homelessness Strategy will include the development and implementation of a youth homelessness action plan to provide independent living skills for young people at risk of homelessness. Other initiatives will expand services in family reconciliation and target employment and training programs to young people with high needs and a long-term history of difficulties in education, employment or accommodation. Support for the non-government sector Funding will increase support for non-government sector human services providers, particularly in disability services and community care. Budget Statement 2003-04 Appendix A 215
Support for public hospitals The Government is working in partnership with Victoria’s public hospitals to ensure the financial sustainability of the hospital system. Funding will be provided in 2003-04 to strengthen the capacity of public hospitals to improve their financial sustainability. Further work will be undertaken during the year with public hospitals to improve governance and sustainability into the future. Human services industrial relations issues Funding is provided to fund wage rises, staffing increases and improved conditions resulting from Australian Industrial Relations Commission decisions and enterprise bargaining outcomes for medical, public hospital support and public dental staff.
Savings initiatives General efficiencies in government administration The Department of Human Services will achieve general efficiencies in administration worth $36 million a year from 2003-04. Establish high interest bank accounts for rural hospitals High yield investment accounts will be established to pool the funds of 70 small hospitals into one central account for financial efficiency gains. This is consistent with the cash management approach recently employed by the Department of Education and Training in 1 636 schools and 18 TAFE institutes. Reduction in non-direct disability service provision and update disability shared supported accommodation charges Disability Services Head Office overheads will be reduced and a range of non-direct care grants rationalised. The accommodation support fee will be restored over the next two years to a level that represents 21 per cent of disability pension. Discontinue supplementary subsidy to childcare services The Commonwealth took full responsibility for childcare in 1997 and at that time Victoria agreed to fund the Commonwealth for school aged childcare services at an annual cost of $1.5 million. This initiative discontinues a number of supplementary subsidies, while retaining the occasional childcare component. Wider adoption of call centre technology More efficient utilisation of telephone information, counselling and referral services funded by the Department of Human Service, capitalising on the opportunities provided through the wider adoption of call centre technology.
216 Appendix A Budget Statement 2003-04
Better targeting grants for service development This initiative rationalises non-recurrent grant funding to agencies undertaking service development activities in metropolitan and rural health, disability services, and community care.
Asset investment initiatives
Table A6: Asset investment initiatives – Department of Human Services ($ million) 2003-04 2004-05 2005-06 2006-07 TEI Rebuilding residential aged care facilities 4.5 18.0 3.0 .. 25.5 Werribee Mercy Hospital 2.0 6.0 2.0 .. 10.0 Monash Medical Centre (Moorabbin 3.0 12.0 4.0 .. 19.0 Hospital) radiotherapy service Radiotherapy machine replacement 1.0 9.0 .. .. 10.0 Nhill Hospital upgrade 2.0 6.5 .. .. 8.5 Moorabbin Hospital elective surgery 2.0 1.0 .. .. 3.0 service New biomedical equipment 20.0 2.0 .. .. 22.0 Rural Ambulance Victoria service 0.4...... 0.4 expansion and communication upgrade Health ICT strategy 18.5 38.0 40.5 41.5 138.5 Infrastructure upgrade program 16.0 ...... 16.0 Fire risk management strategy 10.0 ...... 10.0 Victorian Foundation for Survivors of 1.0 4.0 .. .. 5.0 Torture and Trauma Mental Health – Services for Kids and 2.0 5.0 .. .. 7.0 Youth Stage 2 Dandenong Hospital Stage 2 1.0 8.0 .. .. 9.0 Electronic prescribing in key Victorian 4.0 10.0 7.0 .. 21.0 hospitals(a) Departmental accommodation .. 51.8 .. .. 51.8 Total asset investment initiatives 87.4 171.3 56.5 41.5 356.7 Source: Department of Treasury and Finance Note: (a) Refer to output initiatives for the description of this initiative.
Rebuilding residential aged care facilities Funding is provided to continue to redevelop and upgrade public sector residential aged care facilities across Victoria. Work will be undertaken at the Red Cliff Nursing Home (Red Cliffs), Baala House Nursing Home (Numurkah), Darlingford Upper Goulbourn (Eildon), and Andrews House (Trafalgar). Funding is also provided for a range of minor certification works, feasibility and design work for future facility developments.
Budget Statement 2003-04 Appendix A 217
Werribee Mercy Hospital The Werribee Mercy Hospital will benefit from an upgraded emergency department, expanded theatre suite and development of a purpose built 10-bed palliative care unit. Monash Medical Centre (Moorabbin Hospital) radiotherapy service The project will reduce waiting times and improve patient outcomes by providing two new radiotherapy bunkers in addition to the existing cancer and radiotherapy facilities, at Moorabbin Hospital. Radiotherapy machine replacement Funding is provided for the replacement of outdated radiotherapy machines and associated equipment at the Alfred Hospital and the Austin and Repatriation Medical Centre. Nhill Hospital upgrade Redevelopment funding will provide for a 35-bed multi-purpose ward and day procedure unit, improved theatre suite and emergency department, and facilities for a range of allied health and community services. Moorabbin Hospital elective surgery service Funding has been provided to expand operating theatre and ward facilities at Moorabbin to enable an increase in the number of elective surgery patients able to be treated. New biomedical equipment Funding is provided for the biomedical equipment program that provides state of-the-art technology and medical equipment to meet health services, dental health and aged care needs. Rural Ambulance Victoria service expansion and communication upgrade Ambulance services in Omeo and Mallacoota will be upgraded with the purchase of new equipment and vehicles. Health ICT strategy The four-year program will bring ICT across the Victorian public health system to a level capable of reliably and effectively supporting hospitals to meet current and future service delivery. The strategy will commence in 2003-04 and includes three major initiatives: removal of the significant risks and constraints associated with dependence on outdated core systems, the development of a more centralised ICT delivery model to increase efficiency, reliability and capability, and implementation of systems that will support the transformation of health care delivery and facilitate the implementation of electronic health records across the State.
218 Appendix A Budget Statement 2003-04
Infrastructure upgrade program This program builds on ongoing government investment to upgrade systems and components that support health service activities. The program is delivering more reliable health infrastructure and improving the quality of health service. Fire risk management strategy Funding is provided to continue the upgrade of acute and aged facilities to meet fire safety requirements. Victorian Foundation for Survivors of Torture and Trauma The Victorian Foundation for Survivors of Torture and Trauma provides specialist services to people in Victoria who were tortured or traumatised in their country of origin or while fleeing those countries. Funding is provided to relocate the centre from its present site in Parkville to a new purpose built facility. Mental Health – Services for Kids and Youth Stage 2 Stage 2 of the MH – SKY (Mental Health Services for Kids and Youth) on the Footscray campus of Western Hospital will incorporate education, day programs, clinical support, case management and clinical research services. This will enable the inpatient unit (completed as part of stage 1) to function efficiently and effectively. Dandenong Hospital Stage 2 This development will provide for the construction completion of the new four level Stage 2 Ward Block and the fit out of a 20 bed rehabilitation ward at level two. The funding builds on the redevelopment and expansion of the Dandenong Hospital announced in the 2002-03 Budget. Departmental accommodation The Department will consolidate its city accommodation from four city locations to a new single building to be constructed at 50 Lonsdale Street Melbourne. Funding is provided for the fit-out costs required for planned occupation of the new premises in late 2005.
Budget Statement 2003-04 Appendix A 219
Infrastructure
Table A7: Output initiatives – Department of Infrastructure ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 arrive alive! – school safety speed zones .. 5.8 17.3 .. .. SmartBus .. 0.3 1.1 1.1 1.2 Metropolitan bus service improvements .. 1.0 1.0 1.0 1.1 Connecting bus services .. 1.6 1.7 .. .. New bus service – Sunshine and ...... 2.1 1.5 Laverton train stations Master plan implementation Dynon Rail .. 0.3 0.5 0.3 .. Precinct Cycling paths .. 3.0 3.0 2.0 .. Bus contracts – indexation of costs 15.8 15.3 6.7 21.6 30.2 Spencer Street Station Authority .. 5.0 3.5 2.5 .. operating costs Interstate train services 2.8 3.9 2.0 2.2 2.3 Multi-purpose taxi program 2.0 6.0 ...... Rail services public liability 1.2 1.6 1.6 1.7 1.7 Public transport safety management .. 2.0 2.1 2.1 2.2 Public transport ticketing design works 0.8 3.9 ...... Flinders Street West precinct urban .. 13.1 4.0 .. .. development project Franchise interim operating agreements 19.9 26.5 ...... Metropolitan rail network design works .. 4.0 ...... Electricity network tariff rebate scheme 8.0 49.0 ...... Smart Freight .. 1.0 0.5 0.3 0.3 Community harbours .. 0.4 0.8 0.8 0.8 Safety education campaign .. 0.0 0.1 0.1 0.1 Marine communications .. 0.2 0.2 0.2 0.2 Total - Infrastructure 50.5 143.8 45.9 37.9 41.5 Less: General efficiencies in government .. 13.3 13.3 13.3 13.3 administration VicRoads workforce strategy .. 2.0 4.0 4.0 .. Rationalisation of external contractors .. 1.0 1.0 1.0 1.0 Net output initiatives - 50.5 127.6 27.7 19.6 27.2 Infrastructure Source: Department of Treasury and Finance
220 Appendix A Budget Statement 2003-04
Output initiatives arrive alive! – school safety speed zones In delivering the Government’s arrive alive! road safety strategy, reduced speed zones will be installed outside primary and secondary schools in Victoria over the next two years. The program will deploy a combination of fixed static and variable electronic speed limit signs to assist in achieving the Government’s commitment of a 20 per cent reduction in deaths and serious injuries on Victorian roads by 2007. SmartBus The SmartBus project involves the development of a cross-town network of premium bus routes by improving the frequency, travel times and standard of customer information on several existing bus services. This initiative involves operating and upgrading to SmartBus standards the existing 700 Bus Route from Mordialloc to Box Hill via Warrigal Road. This will complement existing SmartBus services on Springvale and Blackburn Roads. Metropolitan bus service improvements As part of the Government’s Linking the Suburbs program, the upgrade of bus service levels are to be increased in outer metropolitan Melbourne (Eltham, Research, Warrandyte and Endeavour Hills) to meet community needs and recognise demographic changes, particularly in areas of recent population growth. Connecting bus services Two pilot programs of high frequency ‘loop’ bus services are being provided in residential growth corridors (Cranbourne/East Cranbourne and Epping/South Morang) to meet arriving and departing trains, and provide improved connections between stations, shops, and other key activity centres. New bus service – Sunshine and Laverton train stations A new bus service will be provided between Sunshine and Laverton train stations via the Western Highway and Palmer Road. It includes the provision of new bus stops and the upgrading of part of Palmers Road. The new service will also connect to the proposed remand centre in Ravenhall and existing prisons located at Deer Park and Truganina. Master plan implementation Dynon Rail Precinct The Government plans to integrate the Port of Melbourne and the Dynon rail terminals to form a single transport hub that caters for the seamless movement of freight between transport modes and freight terminals. Funding will be provided to prepare a detailed development plan for the Dynon Rail Precinct.
Budget Statement 2003-04 Appendix A 221
Cycling paths Funding is allocated to construct new cycling paths in regional Victoria and metropolitan Melbourne. These cycling paths will increase active transport and recreational transport activities thereby reducing car travel and increasing community health and welfare. Bus contracts – indexation of costs Cost pressures experienced by bus operators have been addressed in accordance with the Government’s contractual commitments. These cost pressures are primarily related to forecasted increases in labour costs, fuel related costs and other price increments. Spencer Street Station Authority operating costs Funding is provided to allow the Spencer Street Station Authority to continue its operations throughout the period of the Station’s redevelopment into a world-class transport interchange facility. Interstate train services CountryLink provides interstate rail services between Melbourne and Sydney for the Victorian and New South Wales Governments. Additional funding is provided to CountryLink to cover the increasing cost of service provision and the upgrade of the XPT trains, and to Great Southern Railways, which operates the Ghan and Overland trains. Multi-purpose taxi program The multi-purpose taxi program provides concessions on the metered taxi fares for people with eligible disabilities. Additional funding has been provided to maintain service delivery levels. Rail services public liability Funding is provided to meet the higher public liability insurance coverage costs under contractual obligations between the Office of the Director of Public Transport and franchise transport providers. Public transport safety management The Government is committed to maintaining the highest possible standards of safety in public transport operations. Additional resources will be provided for monitoring and enforcement activities and to assist rail operators in complying with regulatory standards, consistent with the national rail reform agenda. Public transport ticketing design works An efficient and effective public transport ticketing system is a critical element in the reform of the public transport system. Additional funding has been allocated to complete a business case on options for a new ticketing system or possible enhancements for the current system from 2007. 222 Appendix A Budget Statement 2003-04
Flinders Street West precinct urban development project Funding is provided to remove the Flinders Street overpass, construct a new intersection, undertake tram works and to relocate the Council’s tow-away facility. This project will be delivered in cooperation with the Melbourne City Council. Franchise interim operating agreements Connex and Yarra Trams have signed interim operating agreements with the Government to operate services until 31 December 2003, while the public transport system is being restructured. Yarra Trams will receive $20 million and Connex $27 million as part of an agreement reached in December 2002 that the State and the operators would share losses during this interim period. Metropolitan rail network design works Funding is provided to develop long-term options for increasing the operational capacity of the metropolitan rail system to meet demand in future years. Electricity network tariff rebate scheme Funding is allocated to underwrite the electricity network tariff rebate scheme. This scheme will replace the special power payment scheme and address the structural cost disadvantage faced by rural domestic and small business electricity customers for the 12-month period commencing 1 April 2003. Smart Freight As part of the Innovation statement Victorians. Bright Ideas. Brilliant Future, the Government is provided funding for the Smart Freight project, which involves providing Victoria’s freight and logistics industry with a common integrated information system, generating major efficiency gains and reducing freight congestion in and out of Melbourne Port. Community harbours This initiative will establish new small community harbours in areas that bring maximum economic benefit to Victoria and encourage further development of boating as a recreational activity. Safety education campaign A community education campaign will be established to encourage courteous behaviour among boat users and promote boating safety through responsible personal watercraft use. Marine communications Funding is provided to continue the twenty-four hour emergency coastal radio network, providing effective communication to Victoria’s boating community.
Budget Statement 2003-04 Appendix A 223
Savings initiatives General efficiencies in government administration The Department of Infrastructure will achieve general efficiencies in administration worth $13 million a year from 2003-04. VicRoads workforce strategy VicRoads has developed a number of programs designed to improve workforce efficiency. These programs include measures to identify and prioritise road maintenance processes, better management of contracted works and continuous improvement through quality systems. Rationalisation of external contractors Savings will be achieved through the more efficient deployment of contractors and internal departmental resources. Asset investment initiatives
Table A8: Asset investment initiatives – Department of Infrastructure ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 TEI Outer metropolitan arterial road .. 9.0 14.5 4.5 .. 28.0 program Pakenham Bypass .. 20.0 25.0 30.0 40.0 121.2 Geelong Western Bypass – .. 4.1 ...... 4.1 design works Pyalong Bypass .. 0.4 4.4 0.2 .. 5.0 Calder Highway duplication, 22.6 10.2 21.1 14.8 1.3 70.0 north of Kyneton Middleborough Road Box Hill .. 1.0 ...... 1.0 grade separation – design works SmartBus .. 2.6 ...... 2.6 Flinders Street Station concourse 0.6 6.6 ...... 7.2 – deck rehabilitation Stage 1 arrive alive! – road safety .. 11.5 ...... 11.5 infrastructure improvements Regional freight links 1.5 5.5 16.5 5.0 .. 28.5 Grovedale Railway Station .. 4.0 1.0 .. .. 5.0 Jolimont Station improvements .. 0.9 0.4 .. .. 1.3 Birrarung Marr pedestrian bridge .. 6.2 21.6 .. .. 27.8 Yarra precinct lighting works .. 0.3 1.0 0.8 .. 2.0 Smart Freight(a) .. .. 0.5 1.0 0.5 2.0 Total asset investment 24.7 82.2 106.0 56.3 41.8 317.2 initiatives Source: Department of Treasury and Finance Note: (a) Refer to output initiatives for the description of this initiative. 224 Appendix A Budget Statement 2003-04
Outer metropolitan arterial road program This program will provide new road infrastructure in the growth corridors and metropolitan Melbourne, as part of the Government’s Linking the Suburbs initiative. Key projects include widening of the Moorooduc Highway (Frankston), Thompsons Road (Carrum Downs) and the Greensborough Highway and Plenty River Bridge (Greensborough). Pakenham Bypass A 20 kilometre four-lane freeway bypass will be constructed to divert the Princes Highway around Pakenham. The project will also provide for future widening of the freeway to six lanes and immediate grade separations at Healesville- Kooweerup Road and the Gippsland railway line, overpasses at Officer South Road, McGregor Road and Bald Hill Road and a major crossing of the Cardinia Creek and floodplain. This is a Road of National Importance to be jointly funded with the Commonwealth Government. Geelong Western Bypass – design works Funding is allocated for planning, project design and environmental assessment activities for the proposed Geelong Western Bypass. Pyalong Bypass As part of the Government’s commitment to provide effective transport infrastructure, a bypass will be constructed to divert the Northern Highway around Pyalong. This is expected to reduce current congestion in this area. Calder Highway duplication, north of Kyneton The Statement Government committed $70 million in the 2002-03 Budget for the duplication of the Calder Highway between Kyneton and Faraday. Victoria is still awaiting the Commonwealth Government to provide matching funding consistent with its Road of National Importance obligations. In the meanwhile, the delivery strategy for the upgrading of the Calder Highway between Melbourne and Bendigo has been revised. The revised strategy entails construction of a four-lane divided highway between Kyneton and Malmsbury (three-kilometre section), the construction of a four-lane divided highway between Fogarty’s Gap Road and Ravenswood (six-kilometre section) and pre-construction activities of land acquisition and services relocation. The State is seeking matching funding commitment from the Commonwealth Government for the Calder duplication project, and will proceed with these works in the interim. Middleborough Road Box Hill grade separation – design works Funding has been allocated for planning and development activity for the proposed grade separation of the Box Hill rail line and Middleborough Road, west of Laburnum station.
Budget Statement 2003-04 Appendix A 225
SmartBus Asset funding is provided to implement SmartBus technology from Mordialloc to Box Hill and to improve disability access to services on this route. The SmartBus technology includes the installation of real time signage. Flinders Street Station concourse – deck rehabilitation Stage 1 The first stage of the Flinders Street Station concourse – deck rehabilitation project will commence the remediation of the concourse structure, in order to ensure its structural integrity to meet Australian Design standards. The rehabilitation will enable more extensive use of the concourse by rail operators and commuters. arrive alive! – road safety infrastructure improvements Funding has been provided for initiatives aimed at improving road safety with a focus on regional Victoria. Initiatives will include tactile road edges, shoulder sealing, crash barrier sand roadside hazard removal in country Victoria and a crash counter measure program to better understand causes of crashes and implement mitigation strategies. Regional freight links An overpass will be constructed at Cliff Street in Portland to improve transport linkages to the Port of Portland and avoid conflicts between rail and road operations. As part of the Government’s rail gauge standardisation program, a standard gauge independent goods line is to be constructed at the Port of Geelong. This will enable standard gauge rail freight onto the Lascelles Wharf rail connection, Corio Quay and North Shore thereby reducing freight costs, increasing rail freight share and stimulating the development of neighbouring warehouses and other port related infrastructure. Grovedale Railway Station A new station will be constructed at Grovedale, south of Geelong on the main Geelong-Warrnambool rail line to provide direct access to rail services for residents of the Surf Coast. Jolimont Station improvements Funding is provided for the widening of platforms, construction of a ramp to the northern platform to improve disability access and other improvements for station access to both platforms.
226 Appendix A Budget Statement 2003-04
Birrarung Marr pedestrian bridge Funding is allocated for a pedestrian bridge across the Jolimont rail corridor and City Link connecting Yarra Park near the Melbourne Cricket Ground (MCG) to the middle terrace of Birrarung Marr. Connections to paths accessible from Melbourne and Olympic Parks are also included. It will connect the MCG directly to Flinders Street Station and north/south tram services along St Kilda Road/Swanston Street, thus relieving pressure on Richmond Station. Yarra precinct lighting works This involves the upgrading of lighting in the areas adjacent and approaches to the MCG, Melbourne and Olympic Parks, the Domain, Alexandra Gardens. This will increase public safety following late night events in the precinct.
Innovation, Industry and Regional Development
Table A9: Output initiatives – Department of Innovation, Industry and Regional Development ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Biotechnology Centre of Excellence 5.0 ...... Innovation statement – Victorians. .. 5.5 13.3 29.0 39.0 Bright Ideas. Brilliant Futures. Small Business Commissioner(a) 0.7 2.0 2.0 2.0 2.0 VicStart .. 6.0 6.0 6.0 7.0 Innovation clusters .. 1.5 0.7 0.7 .. Community banking grants .. 0.3 0.3 0.3 0.3 Regional tourism events .. 0.5 0.5 0.5 0.5 Community development grants .. 0.3 0.3 0.3 0.3 StreetLife Program .. 0.5 0.5 0.5 0.5 Major events strategy .. 5.0 5.0 5.0 .. Marketing Victoria .. 2.5 2.5 2.5 2.5 Renewal of the Regional Infrastructure .. 20.0 25.0 35.0 50.0 Development Fund(b) Government industrial relations .. 2.3 1.6 1.6 1.6 legislation agenda – implementation Regional Development Victoria .. 3.1 0.5 0.5 0.5 Regional marketing .. 1.4 1.4 1.4 1.4 Regional renewal .. 1.1 1.1 1.1 1.1 Australian Tourism Exchange .. 1.8 1.8 .. .. Better work and family balance .. 0.5 0.5 0.5 0.5 Building design capability .. 1.0 ...... Total – Innovation, Industry and 5.7 55.2 62.9 86.8 107.1 Regional Development
Budget Statement 2003-04 Appendix A 227
Table A9 (cont): Output initiatives – Department of Innovation, Industry and Regional Development ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Less: General efficiencies in government .. 2.7 2.7 2.7 2.7 administration Rationalisation and refocusing of .. 3.4 3.4 3.4 3.4 programs Net output initiatives – Innovation, 5.7 49.1 56.8 80.7 101.0 Industry and Regional Development Source: Department of Treasury and Finance Note: (a) This initiative includes funding of $0.7 million in 2002-03 to establish the Retail Industry Commissioner. (b) Total funding for this initiative is $180 million, including $50 million in 2007-08.
Output initiatives Biotechnology Centre of Excellence Funding of $10 million has been committed towards the establishment of a Biotechnology Centre of Excellence at Monash University. Of the $10 million being provided by the Government, $5 million will be met in 2002-03 from existing funding for the Science, Technology and innovation (STI) grants program. Innovation statement – Victorians. Bright Ideas. Brilliant Futures. The Government has committed output funding of around $230 million over five years, which will be targeted to innovation projects across a number of departments. The funding will target five strategic capabilities – information and communications technology (ICT), biotechnology, new manufacturing technologies, design and environment technologies. Small Business Commissioner The Small Business Commissioner will be a central point within government to mediate retail tenancy disputes between landlords and tenants, address bureaucratic practices that are not business friendly, and promote a fair business environment. It will ensure that all Victorian businesses have the capacity to compete in a fair marketplace. The Small Business Commissioner is an extension of the role of the Retail Industry Commissioner.
228 Appendix A Budget Statement 2003-04
VicStart Funding is provided from the STI Second Generation Innovation Fund to extend the Technology Commercialisation Program, which assists in the commercialisation of new ideas. It will develop the next phase of the commercialisation initiative. Innovation clusters Funding is provided from the STI Second Generation Innovation Fund to strengthen and develop innovation clusters. The initial focus will be in regional areas, building on the existing strengths in the key industry sectors of food and agriculture, health, manufacturing, biotechnology and ICT. Community banking grants This initiative will provide grants of up to $20 000 through the Living Regions, Living Suburbs Fund to establish regional financial services facilities. The funding will enable regional communities to access specialist financial expertise. Regional tourism events Funding will be allocated from the Living Regions, Living Suburbs Fund to support regional tourism events, including the following existing events: Queenscliff Music Festival, Ballarat Begonia Festival, Mildura Country Music Festival, Stawell Gift and Yarra Valley Cellar Doors at Montsalvat. Community development grants This initiative is being funded from the Living Regions, Living Suburbs Fund to support community initiatives that foster sustainable economic growth and development of rural and regional Victoria, in particular Victoria’s nine interface councils. Projects under this initiative include community plans, retention of environment and heritage, and projects that address economic and population growth. StreetLife Program Funding is provided to continue StreetLife, a development program that works with local communities to promote their economic and employment growth. It will encourage new growth opportunities for small business by promoting the growth of vibrant industry clusters and business networks through government industry cooperative development programs. Major events strategy Additional funding is provided to the Government’s major events strategy to help lift Victoria’s profile in key tourism markets and strengthen our international competitiveness. This initiative will allow the Victorian Major Events Company to gain new events, review existing tourism marketing conducted in conjunction with events, and provide cooperative marketing for the Australian Open Tennis.
Budget Statement 2003-04 Appendix A 229
Marketing Victoria Funding is provided to enhance the current international marketing strategy in order to increase national and international visitors to Victoria. This includes cooperative marketing with airlines to attract additional air services and maximise the marketing of new services in key markets, brand advertising overseas, and further development of international backpacker marketing activities. Renewal of the Regional Infrastructure Development Fund Funding is provided to assist in developing economic, tourism and community infrastructure in regional Victoria by extending the Regional Infrastructure Development Fund (RIDF). This funding will include specific initiatives to extend the reticulation of natural gas to regional communities and the establishment of a Small Towns Development Fund. Government industrial relations legislation agenda – implementation Funding is provided to enable the implementation of legislation to apply federal award terms and conditions by common rule to all Victorian non-award employees, provide improved protection for outworkers in the clothing industry, and substantially reform laws regulating the employment of children under the age of 15. Regional Development Victoria Funding is provided for the establishment of Regional Development Victoria, which will be responsible for ensuring there is a strong and coordinated focus on regional Victoria across all state government programs, services and resources, in relation to administering ongoing regional programs. Regional marketing This initiative is being funded from the Community Support Fund to double the existing regional marketing budget in order to boost tourism in areas with growth potential. The marketing will focus on encouraging more Victorians to tour their own State and attracting interstate visitors. Regional renewal Funding is provided from the Community Support Fund to establish a new community-based approach to developing tourism opportunities by encouraging tourism operators to work together to package tourism attractions in their region as an overall experience. Marketing will encourage more Victorians to tour their own State and attract visitors from interstate.
230 Appendix A Budget Statement 2003-04
Australian Tourism Exchange With funding from the Community Support Fund, Victoria will host the third largest industry travel trade show in the world in 2003 and 2004, the Australian Tourism Exchange Expo. This initiative will raise Victoria’s international profile, showcase the State’s tourism potential and boost Victoria’s profile as a desirable tourist destination. Better work and family balance Funding is provided to encourage family-friendly work arrangements by building on current initiatives and developing new initiatives in partnership with employers. Building design capability Funding is provided to TAFE for an independent examination of current design capabilities and future design needs across a range of industries and regions to position Victoria as an international centre for design. Funding for this initiative will be provided from the STI Second Generation Innovation Fund.
Savings initiatives General efficiencies in government administration The Department of Innovation, Industry and Regional Development will achieve general efficiencies in administration worth $2.7 million a year from 2003-04. Rationalisation and refocusing of programs To minimise duplication, the Government will consolidate and rationalise some of the existing functions of the Department of Innovation, Industry and Regional Development as well as streamlining the administration of programs.
Asset investment initiatives
Table A10: Asset investment initiatives – Department of Innovation, Industry and Regional Development ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 TEI Innovation statement – .. .. 25.0 26.0 6.2 57.2 Victorians. Bright Ideas. Brilliant Futures. Total asset investment .. .. 25.0 26.0 6.2 57.2 initiatives Source: Department of Treasury and Finance
Budget Statement 2003-04 Appendix A 231
Innovation statement – Victorians. Bright Ideas. Brilliant Futures Funding has been committed to enable the outer-building construction of a Synchrotron which will be twice as powerful as originally proposed. Funding of an additional $57 million will be drawn from the allocation for the Government's new innovation policy, Victorians. Bright Ideas. Brilliant Future bringing the State’s total contribution to $157 million of the $206 million project. The updated design, known as Boomerang 20, represents the most significant investment in Australia's scientific infrastructure for many years, and will ensure that Australian researchers have access to world-class synchrotron technology. Additional funding required will be sourced from third parties such as other governments, universities and research institutions.
Justice
Table A11: Output initiatives – Department of Justice ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Consumer Affairs Victoria online 0.7 ...... transactions Metropolitan Strategy 0.5 0.5 ...... Victorian Civil and Administrative 1.0 1.0 1.0 1.0 1.0 Tribunal remuneration structure Consumer Utilities Advocacy Centre .. 0.5 0.5 0.5 0.5 Establishment of a terrorism and 1.2 0.5 ...... multi-jurisdictional crime unit Metropolitan Fire and Emergency Services Board and Country Fire Authority enterprise bargaining agreement: Net impact to Government .. 3.4 4.1 4.1 4.1 comprising: (a) Increased EBA costs 9.4 23.7 30.4 30.4 30.4 Increased revenue from insurance -9.4 -20.3 -26.3 -26.3 -26.3 contributions and local government Increase to legal aid funding .. 3.5 3.5 3.5 3.5 Domestic Violence Division of the .. 0.2 1.5 1.7 1.7 Magistrates Court Emergency services volunteer funding .. 1.5 1.5 1.5 1.5 Multilingual Crime Stoppers line .. 0.1 0.1 0.1 0.1 Living country racing program .. 0.4 0.4 0.4 0.4 More resources for police .. 12.5 22.6 33.0 57.7 Major Crimes Reward Fund .. 0.5 0.5 0.5 0.5 Enhanced asset confiscation scheme .. 2.3 1.4 1.4 1.4 Community safety emergency support .. 2.5 2.5 2.5 2.5 program
232 Appendix A Budget Statement 2003-04
Table A11 (cont): Output initiatives – Department of Justice ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Valuing volunteer emergency services .. 0.8 0.8 0.8 0.8 workers Establishment of a Sentencing .. 1.9 1.4 1.5 1.4 Advisory Council Additional firefighters(a) Net impact to Government, .. 1.4 2.9 3.3 3.4 comprising: Increased EBA costs .. 7.3 15.3 18.1 18.8 Increased revenue from insurance .. -5.9 -12.4 -14.8 -15.4 contributions and local government New firearms regulatory framework 0.7 11.7 0.6 0.6 0.6 and handgun buyback scheme Australian Racing Museum at .. 3.8 ...... Federation Square Volunteer lifesaving .. 2.5 ...... Total – Justice 4.1 51.4 45.2 56.3 81.1 Less: General efficiencies in government .. 11.7 11.7 11.7 11.7 administration Administrative efficiencies .. 1.8 5.4 5.5 8.5 Net output initiatives – Justice 4.1 37.9 28.1 39.1 60.8 Source: Department of Treasury and Finance Note: (a) Funding is net of wage contingency.
Output initiatives Consumer Affairs Victoria online transactions Funding is provided to enable transactions related to the Estate Agents Act 1980 to be conducted via the internet. Metropolitan Strategy Additional funding is provided to the Victorian Civil and Administrative Tribunal to implement part of the Metropolitan Strategy. The Department of Sustainability and Environment has also been funded to implement other parts of this strategy (Table A16). Victorian Civil and Administrative Tribunal (VCAT) remuneration structure In accordance with a review of VCAT remuneration, additional funding is provided for new remuneration arrangements for non-judicial members of VCAT.
Budget Statement 2003-04 Appendix A 233
Consumer Utilities Advocacy Centre The Consumer Utilities Advocacy Centre will deliver effective consumer input to regulatory processes for gas, electricity and water utilities; provide a centre of excellence in consumer advocacy research and information and dissemination; and respond to consumer groups’ concerns that they do not have the resources to promote informed and effective representation. Establishment of a terrorism and multi-jurisdictional crime unit Victoria has primary responsibility for developing model legislation and coordinating reforms across the States and Territories in relation to terrorism offences and transnational crime. The unit will be responsible for the concurrent drafting of up to eight model bills in relation to transnational crime. Metropolitan Fire and Emergency Services Board (MFESB) and Country Fire Authority (CFA) enterprise bargaining agreement A wage agreement has been entered into regarding MFESB and CFA operational staff. The agreement extends to 1 August 2005 and provides wage certainty over that period. The agreement also adjusts the career structure for MFESB firefighters. The MFESB and CFA are only part-funded by the State Government. The total cost of this agreement will be funded by insurance companies, local government and the State Government. Increase to legal aid funding This initiative supports the provision of high quality, professional legal advice and representation for all Victorians by allocating additional funding for Victoria Legal Aid. In particular, funding will be spent on community legal centres, a new Wimmera-Mallee regional office in Horsham, and support for legal practitioners. Domestic Violence Division of the Magistrates Court Funding is provided to improve the criminal justice and associated service response to domestic violence. This initiative will establish a Domestic Violence Division of the Magistrates Court to bring together specialist expertise and targeted resources. Emergency services volunteer funding Increased ongoing funding for the Victorian State Emergency Service (VICSES) will enhance the service’s volunteer capacity to perform incident response roles, such as flood and storm damage, search and rescue, and road accident rescue. The funding will provide for personal protective equipment, vital emergency response equipment and volunteer training. Multilingual Crime Stoppers line The existing ‘Crime Stoppers’ program will be enhanced to include a multilingual facility.
234 Appendix A Budget Statement 2003-04
Living country racing program This initiative will assist in funding facility improvements at country racecourses with a particular emphasis on developing facilities that enjoy wide community use. More resources for police An additional 600 police will be recruited over the next four years, further boosting the effectiveness, responsiveness and visibility of Victoria’s police force. Major Crimes Reward Fund A Major Crimes Reward Fund will be established to enable Victoria Police to offer rewards to members of the public for information leading to the conviction of perpetrators of serious unsolved crimes. Enhanced asset confiscation scheme Additional funding is provided to strengthen Victoria’s existing asset confiscation scheme. Community safety emergency support program Funding is provided to continue and expand the community safety emergency support program, which assists volunteer organisations with the purchase of vehicles, buildings, rescue boats and other ancillary equipment. Valuing volunteer emergency services workers This initiative will implement emergency services volunteer recognition, recruitment and support programs. These programs will develop volunteer charters, establish links with community groups for succession planning and provide training and leadership programs. Establishment of a Sentencing Advisory Council The Sentencing Advisory Council will be an independent body that will enable informed community participation in the sentencing process. It will provide submissions to the Court of Appeal on guideline judgements, provide statistical information on sentencing to members of the judiciary, monitor public opinion on sentencing, and stimulate informed public debate on sentencing issues. Additional firefighters The Metropolitan Fire and Emergency Services Board will recruit an additional 94 firefighters and the Country Fire Authority will recruit an additional 125 firefighters. These additional firefighters will enhance the response capacity of both organisations.
Budget Statement 2003-04 Appendix A 235
New firearms regulatory framework and handgun buyback scheme To ensure a safer community for all Victorians, legislation will be implemented to strengthen the existing firearm regulatory framework. Funding is being provided for the administration of the new regulations. In addition, funding is also provided to administer Victoria’s handgun buyback scheme, an initiative being undertaken by all States and Territories. Australian Racing Museum at Federation Square Funding will be provided to Racing Victoria for the establishment of a new Australian Racing Museum at Federation Square. The new museum will display the cultural, social, artistic and historic aspects of racing, currently located at Caulfield. The Government will provide $3.8 million towards the project, with funding from unclaimed dividends. The remaining funds will be provided by Racing Victoria. Volunteer lifesaving Following the Government's commitment, volunteer lifesaving bodies have been brought together with the State’s emergency services management framework. Funding is being provided to continue the water safety programs provided by the Government.
Savings initiatives General efficiencies in government administration The Department of Justice will achieve general efficiencies in administration worth $12 million a year from 2003-04. Administrative efficiencies Savings will be achieved through implementation of administrative efficiencies throughout the Department.
236 Appendix A Budget Statement 2003-04
Asset investment initiatives
Table A12: Asset investment initiatives – Department of Justice ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 TEI New police stations .. 4.7 20.6 34.4 .. 59.7 Rural police station replacement .. 4.0 2.0 .. .. 6.0 program stage 6 Police forensic laboratories .. 1.7 4.3 .. .. 6.0 Police information management .. 5.0 ...... 5.0 system New Moorabbin Court complex .. 0.1 0.4 8.5 9.0 18.0 New firearms regulatory 2.8 3.6 ...... 6.5 framework and handgun buyback scheme Road safety .. 0.5 ...... 0.5 Total asset investment 2.8 19.6 27.3 42.9 9.0 101.7 initiatives Source: Department of Treasury and Finance New police stations Funding is provided for new police stations in Bairnsdale, Bendigo, Brunswick, Caroline Springs, Pakenham (Emergency Services Complex) and Warragul. These projects will improve the local management and delivery of Victoria Police services to support community safety. Rural police station replacement program stage 6 Funding is provided to replace existing 8-hour and 16-hour police stations in Bannockburn, Edenhope, Mitta Mitta, Mt Hotham, Myrtleford, Nyah, Robinvale, Swifts Creek, Tallangatta and Woods Point. Police forensic laboratories The chemistry wing of the Victorian Forensic Science Centre will be upgraded and technical equipment used for DNA analysis, drug analysis, radio analysis and finger printing will also be purchased. Police information management system The police information management system will provide an integrated repository of data, together with appropriate end user query and analysis tools, to support decision making analysis and management and performance reporting. The new system will facilitate proactive policing strategies that will enable Victoria Police to better identify and manage emerging crime trends and allocate resources more efficiently and effectively.
Budget Statement 2003-04 Appendix A 237
New Moorabbin Court complex A new courthouse complex will be constructed in the Moorabbin area. The new courthouse will include six new courtrooms and will alleviate pressure on existing courts in Dandenong and Frankston. New firearms regulatory framework and handgun buyback scheme To ensure a safer community for all Victorians, legislation will be implemented to strengthen the existing firearm regulatory framework. Funding is being provided for the administration of the new regulations. In addition, funding is also provided to administer Victoria’s handgun buyback scheme, an initiative being undertaken by all States and Territories. Road safety As part of the Government’s ongoing commitment to improving road safety, 40 mobile radar devices are to be deployed across Victoria, with a particular emphasis on rural areas with a high frequency of traffic incidents. In addition, 20 engine reading devices to test for heavy vehicle speed limiter integrity are to commence operation. Premier and Cabinet
Table A13: Output initiatives – Department of Premier and Cabinet ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Arts for all Victorians: Boost for Premier’s Literary Award .. 0.1 0.1 0.1 0.1 Funds for local libraries .. .. 1.5 1.8 1.8 Artists in communities .. 0.5 0.5 0.5 0.5 Innovation in arts practice .. 0.2 0.2 0.2 0.2 Creative companies .. 0.6 0.6 0.7 0.7 Cultural community building .. 0.8 0.8 0.8 0.8 Celebrate Victoria program .. 0.3 0.3 0.3 0.3 Access to Victoria’s cultural assets .. 0.6 0.6 0.8 0.8 Access to regional galleries and .. 0.8 0.8 1.0 1.0 museums Sharing the Arts (Touring) .. 0.5 0.5 0.5 0.5 Boost for film production investment in .. 0.6 0.6 0.6 0.6 Victoria CIO eGovt (eGovt implementation plan) .. 6.8 8.6 8.9 9.1 National Gallery of Victoria .. 13.4 16.1 16.0 16.4 Australian Centre of the Moving Image 1.7 5.0 5.0 .. .. National Gallery of Victoria and 1.4 2.2 2.2 2.2 2.2 Australian Centre of the Moving Image – operating costs Museum Victoria 1.6 8.7 7.2 7.2 7.2 Department of Premier and Cabinet – 0.5 1.0 0.5 0.5 0.5 operating costs Total – Premier and Cabinet 5.2 41.9 45.9 41.8 42.5 238 Appendix A Budget Statement 2003-04
Table A13 (cont): Output initiatives – Department of Premier and Cabinet ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Less: General efficiencies in government .. 1.1 1.1 1.1 1.1 administration Administrative and other efficiency .. 1.5 2.0 3.0 3.5 savings Net output initiatives – Premier and 5.2 39.3 42.8 37.7 37.9 Cabinet Source: Department of Treasury and Finance
Output initiatives Arts for all Victorians The following funding initiatives deliver on the Government’s arts election commitments:
• Boost for Premier’s Literary Award – Funding is designed to provide financial support for new and established writers. The awards are to include a children’s fiction award judged by children.
• Funds for local libraries – Funding in the form of grants to councils is provided to boost the quality of book stock in public libraries across Victoria.
• Artists in communities – Funding is provided to enable professional artists to work in community environments to create new contemporary art. The program covers categories such as literary, performance and new media.
• Innovation in arts practice – Funding is provided for the development of a new program to build links between the arts and other industries and to support the development of innovative ideas linked to market demand.
• Creative companies – Funding is provided in support of Victoria’s small and medium arts organisations, which provide access to diverse programs to a broad range of communities.
• Cultural community building – Funding is provided for the promotion of partnerships between arts and other community sectors for small to medium companies. The focus will be on outer metropolitan and rural parts of the State, with particular attention to education. The aim of this initiative is to enhance community and personal identity, reduce social isolation and improve intercultural understanding.
• Celebrate Victoria program – Funding is provided to introduce a new program to support professionals with unique and original ideas with the aim of facilitating immediate solutions to emerging opportunities and ideas. Budget Statement 2003-04 Appendix A 239
• Access to Victoria’s cultural assets – Funding is provided to facilitate access to all of Victoria’s cultural facilities and collections. Access to the cultural facilities and collections will be through the Cultural Broadband Network. This includes assistance to build digital content for collections so that they can be available online.
• Access to regional galleries and museums – Funding is provided to give Victorians increased access to opportunities for engagement and participation in arts. The funding is aimed at regional and outer metropolitan galleries and museums.
• Sharing the Arts (Touring) – Funding is provided to extend the successful Sharing the Arts program, which is a program for small or medium art companies to develop touring, co-productions and other types of creative collaboration. It is anticipated that the audiences will be in outer-metropolitan, regional and rural Victoria.
• Boost for film production investment in Victoria – Funding is provided for innovative film and television script and production ideas that should attract market interests from Victorian products and services. A grant will also be provided to the Victorian College of Arts School of Film and Television for producer training in business and management skills. CIO eGovt (eGovt Implementation Plan) The CIO eGovt (eGovt Implementation Plan) initiative includes the establishment of a Chief Information Officer position to oversee the standardisation of ICT infrastructure in Government. This initiative will contain growing ICT costs and increase integration of systems and processes across Government to support more integrated, citizen-centric service delivery. National Gallery of Victoria Funding is provided for the expansion of services delivered through the National Gallery of Victoria since the opening of the Ian Potter Centre at Federation Square and for the forthcoming opening of the St Kilda Road redevelopment in late 2003. Australian Centre of the Moving Image Funding is provided to the Australian Centre of the Moving Image to assist cover transitional costs associated with the move to a new and bigger facility at Federation Square. National Gallery of Victoria and Australian Centre of the Moving Image – operating costs Funding is provided to cover administrative and operating costs associated with the maintenance of non-public spaces and office infrastructure at Federation Square.
240 Appendix A Budget Statement 2003-04
Museum Victoria To ensure Museum Victoria’s viability as a major cultural attraction, funding is provided to develop and implement strategies to improve public access, enhance return attendance and attract new visitors. Department of Premier and Cabinet – operating costs Funding is provided to meet additional operating costs for the Department of Premier and Cabinet.
Savings initiatives General efficiencies in government administration The Department of Premier and Cabinet will achieve general efficiencies in administration worth $1.1 million a year from 2003-04. Administrative and other efficiency savings Savings will be achieved from the establishment of a shared services model for administration functions for agencies and through more effective targeting of programs.
Asset investment initiatives
Table A14: Asset investment initiatives – Department of Premier and Cabinet ($ million) 2003-04 2004-05 2005-06 2006-07 TEI Museum Victoria exhibition renewal 2.6 ...... 2.6 Victorian Arts Centre Trust – asset 2.5...... 2.5 renewal National Gallery of Victoria – Public 1.1...... 1.1 Records Office of Victoria re-fit National Gallery of Victoria – St Kilda 4.2...... 4.2 Road redevelopment Total asset investment initiatives 10.3 ...... 10.3 Source: Department of Treasury and Finance Museum Victoria exhibition renewal Funding is provided to redevelop, refresh and replace exhibitions at the Melbourne Museum and the Immigration Museum. Victorian Arts Centre Trust – asset renewal Funding will be used to complete works at the site and to restore the facility to benchmark standards.
Budget Statement 2003-04 Appendix A 241
National Gallery of Victoria – Public Records Office of Victoria re-fit The reading room at the Victorian Archives Building in North Melbourne is currently occupied by staff of the National Gallery of Victoria pending relocation to their St Kilda Road premises. Funding is provided to refurbish level three of the Victorian Archives Building to accommodate the transfer of the temporary Public Records Office of Victoria reading room (currently located in Casselden Place, Melbourne) to the Victorian Archives Building upon relocation of the National Gallery of Victoria staff. National Gallery of Victoria – St Kilda Road redevelopment Funding is provided to cover costs associated with changes to occupational health and safety statutory requirements and structural enhancements.
Primary Industries
Table A15: Output initiatives – Department of Primary Industries ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Drought assistance 82.5 ...... Drought – Exceptional Circumstances 0.7 2.2 1.5 .. .. Victorian matching contribution Imported red fire ants eradication 5.4 ...... Defending our farms against disease .. 0.5 0.5 0.5 0.5 Extension of the Naturally Victorian .. 2.0 2.0 2.0 2.0 initiative Extension of the aquaculture initiative .. 0.5 0.5 0.5 0.5 Tougher on fisheries offences .. 0.2 0.3 0.3 0.3 Recreational fishing licence .. .. 0.1 0.1 0.1 concession standardisation Our Rural Landscape .. 12.5 12.5 12.5 12.5 Enhanced biosecurity and market .. 7.1 4.5 5.0 5.5 assurance Total – Primary Industries 88.6 25.0 21.9 20.9 21.4 Less: General efficiencies in government .. 1.2 1.2 1.2 1.2 administration Efficient delivery of research and .. 2.0 2.0 2.0 2.0 development Net output initiatives – Primary 88.6 21.8 18.7 17.6 18.1 Industries Source: Department of Treasury and Finance
242 Appendix A Budget Statement 2003-04
Output initiatives Drought assistance These initiatives provide assistance for farmers experiencing drought, through cash grants, rural financial counselling, community support activities, and new and maintained community water bores. The cash grants are available to farmers in drought declared municipalities and are to a maximum of $20 000 per farm. The grants are dependent on meeting specific criteria, which relate to the financial viability and impact of additional expenses and losses incurred due to the drought. Farmers only receive the full cash grant if they can demonstrate that they had undertaken in advance appropriate drought management practices. Drought – Exceptional Circumstances Victorian matching contribution Funding is provided to match the Commonwealth Government’s contribution for the Business Support component (interest subsidy) under the Exceptional Circumstances arrangements for drought-affected farmers in the Goulbourn Irrigation Area. Imported red fire ants eradication The Government has committed funds under a national campaign to eradicate red fire ants. The eradication program involves the baiting of ants and extensive monitoring and surveillance. Funding provided in 2002-03 represents Victoria’s matching contribution to the national red fire ant eradication program. This follows on from funding provided in 2001-02, as a program evaluation reported a high level of effectiveness. Defending our farms against disease Funding is allocated to strengthen Victoria’s capacity to respond to plant and animal pests and diseases. This initiative will assist the development and implementation of plant biosecurity policy, the introduction of a grower registration scheme and the development of training programs for private veterinary practitioners. Extension of the Naturally Victorian initiative The extension of the Naturally Victorian initiative allocates funding to promote Victoria’s Clean Green agricultural produce image nationally and internationally. Research projects will be commissioned to demonstrated the Clean Green status of Victoria’s produce and regional marketing staff will assist regional producer groups to organise industry development committees to fund their own research, development and extension.
Budget Statement 2003-04 Appendix A 243
Extension of the aquaculture initiative Funding is allocated to promote and assist the development of aquaculture in Victoria, particularly in regional areas. This initiative will also provide additional resources to strengthen existing aquaculture priority program areas, such as promoting new marine aquaculture opportunities and facilitating training opportunities. Tougher on fisheries offences This initiative will improve enforcement operations to reduce illegal fishing. Funding is allocated to revise and update the current method for reporting suspected illegal fishing activities and to expand the system to cover the whole of Victoria. Recreational fishing licence concession standardisation Funding is provided to extend the licence fee exemption to all pension concession cardholders and thereby standardise the concession arrangements that apply to recreational fishing licences. Our Rural Landscape As part of the Government’s Innovation Statement Victorians. Bright Ideas. Brilliant Future, the Department will implement Our Rural Landscape. This initiative will assist to develop an agri-food sector which drives dramatic improvements in natural resource use efficiency through technological innovation. This will enable the use of new technologies to reduce adverse environmental impacts and increase amenity value to the community, while stimulating rural economies and employment through new and efficient food production systems. Enhanced biosecurity and market assurance This initiative will strengthen the Government’s capacity to respond to animal health and associated disease and pest outbreaks. The initiative provides increased resources for higher level surveillance and response, to improve traceback in cattle, sheep and pigs, to perform additional compliance auditing for contaminants in stockfoods, to expand diagnostic capability, and to increase industry awareness and preparedness during an outbreak of emergency animal diseases.
Savings initiatives General efficiencies in government administration The Department of Primary Industries will achieve general efficiencies in administration worth $1.2 million a year from 2003-04.
244 Appendix A Budget Statement 2003-04
Efficient delivery of research and development Over the past few years, the Department of Primary Industries has significantly redeveloped and upgraded many of its research institutes and business processes. These efficiencies result in a $2 million saving per year while maintaining the delivery of high quality, priority research and development effort.
Sustainability and Environment
Table A16: Output initiatives – Department of Sustainability and Environment ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Water smart gardens and homes 1.3 2.5 2.5 2.5 2.5 Smart Farms .. 2.0 3.0 3.0 2.0 Healthy rivers .. 2.0 2.0 6.0 6.0 Research in water conservation and .. .. 1.0 1.0 .. recycling Pensioner pilot program .. 1.0 1.0 .. .. A New Future for the Otways .. 6.0 5.1 1.6 1.2 Plantations incentive strategy .. 1.0 2.8 2.5 2.8 Boost to Victorian Environmental .. 0.5 0.5 .. .. Assessment Council Tackling weeds on private farmland .. 1.0 3.0 3.0 3.0 Solar energy retrofit scheme .. 0.5 0.7 0.8 1.0 Energy efficient retrofit .. 0.8 0.8 0.8 0.8 Extension of solar energy rebate .. 1.0 1.0 0.8 0.7 scheme Green Power for Government .. 1.5 1.0 0.5 0.5 New park rangers .. 4.0 4.0 4.0 4.0 Weed and pest control on public land .. 3.5 3.5 3.5 3.5 including national parks Titles registration demand 2.5 2.8 3.1 3.4 3.8 management Land valuation quality improvement .. 1.0 0.9 0.7 0.6 Improving public safety on public land .. 4.0 4.0 4.0 4.0 – project works Establish Water Sector Development .. 2.0 2.0 2.0 2.0 Group Sustainability strategy .. 1.5 ...... Melbourne 2030 – Planning for .. 1.0 1.0 1.0 1.0 Sustainable Growth Melbourne 2030 – local government 0.9 3.6 1.1 .. .. grants Transit cities .. 2.0 2.0 .. .. Victorian heritage program .. 4.0 4.0 .. .. Total – Sustainability and 4.7 49.1 49.9 41.1 39.3 Environment
Budget Statement 2003-04 Appendix A 245
Table A16 (cont): Output initiatives – Department of Sustainability and Environment ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Less: General efficiencies in government .. 3.9 3.9 3.9 3.9 administration Minimising duplication in grant .. 14.0 14.0 14.0 14.0 programs and refocusing of existing resources Net output initiatives – 4.7 31.2 32.0 23.2 21.3 Sustainability and Environment Source: Department of Treasury and Finance
Output initiatives Water smart gardens and homes Funding is allocated to provide eligible Victorian households with a one-off rebate on their quarterly water bill to encourage them to contribute to water savings. Eligible customers will be provided with a rebate of $20 for purchases of more than $100 in mulching, diverters, efficient watering systems, flow restriction devices and timers. A one-off cash back rebate of $150 per household will also be provided for purchases of rainwater tanks and greywater systems by eligible customers. Smart Farms The Smart Farms initiative will reduce salinity on farmland by providing improvements to the water management practices of farmers. Funding will assist farmers to develop farm water management plans and provide incentives for the introduction of more efficient on-farm irrigation systems and reuse dams to save water and reduce nutrients in waterways. Healthy rivers This initiative will safeguard agricultural industries and town water supplies dependent on healthy rivers and further encourage more efficient water use and sustainable water resource management. This initiative will also set priorities for river restoration and establish linkages between flood and habitat restoration activities within Victoria’s ten water catchments. Research in water conservation and recycling Funding is allocated to encourage Victorian universities, cooperative research centres and water authorities to facilitate research and development of new technology and water use processes aimed at water conservation and recycling.
246 Appendix A Budget Statement 2003-04
Pensioner pilot program This initiative will specifically encourage pensioners to contribute to water savings. A pilot program, in partnership with water entities and municipalities, will assist pensioners to replace inefficient water fittings with basic water saving devices, such as dual flush toilets and AAA shower roses. A New Future for the Otways A New Future for the Otways will reduce logging and woodchipping in the Otway Ranges by 25 per cent. The initiative will also create a single national park extending from Anglesea to Cape Otway and promote investment in tourism development that will provide economic benefits and create employment opportunities in the region. Plantations incentive strategy Funding is allocated to expand sawlog plantations on private land. This will enable sawlog harvesting in public native forests to be replaced with plantation sawlogs as well as establish significant demonstration hardwood plantations. Resources will also be allocated to increase long-term processing opportunities for plantation timber products. Boost to Victorian Environmental Assessment Council This initiative will fund the Victorian Environmental Assessment Council to conduct investigations relating to the protection and ecologically sustainable management of the Wombat State Park, river red gums and an expanded Otway National Park. Tackling weeds on private farmland As part of the Victorian Weed Management Strategy, funding is allocated to assist land managers tackle weed problems on private farmland. This initiative will build effective partnerships with local councils, VicRoads, catchment management authorities, Landcare groups and private landholders to better coordinate the management and eradication of weeds. A particular focus will be given to prevention and early intervention activities as well as enhanced enforcement. Solar energy retrofit scheme The solar energy retrofit scheme provides grants to schools, kindergartens, childcare centres and community/health centres as an incentive to adopt solar technologies, cut their operational bills and reduce greenhouse gas emissions. This initiative will extend and complement the solar hot water rebate scheme (schools) and the Commonwealth Government’s photovoltaic rebate program (community buildings).
Budget Statement 2003-04 Appendix A 247
Energy efficient retrofit Funding is allocated to assist in the purchase of materials (such as insulation) to improve the energy efficiency of households occupied by low-income earners. This pilot program will reduce energy bills, improve the comfort of low-income households and reduce greenhouse gas emissions. Extension of solar energy rebate scheme Extending the solar hot water rebate scheme will further promote a higher level of adoption of solar hot water technologies by homes, thereby reducing greenhouse gas emissions and energy bills. This initiative continues to provide rebates of up to $1500 to buyers of solar hot water heaters. Green Power for Government The Green Power for Government initiative builds on the Government’s commitment to renewable energy and a reduction in greenhouse gases by increasing the Government’s own purchase of green power from 5 per cent to 10 per cent. New park rangers The Government has allocated funding to employ 50 new national park rangers throughout regional Victoria to better maintain national parks and conservation reserves, tackle pests and weeds, and give park visitors a better experience. Weed and pest control on public land including national parks Funding is allocated to begin a major weed and pest control program in national parks, state forests and other public land, involving local job creation schemes and cooperative programs with volunteers and community groups. This will upgrade the Department of Sustainability and Environment’s weeds and pests control services on public land and water. Titles registration demand management This initiative provides funding to the Land Titles Office to improve its titles registration services to ensure that lodgement processing is kept to a manageable level and the system has the capacity to cope with the trend growth in lodgements. Land valuation quality improvement Funding is allocated to improve the quality of municipal valuations on which land tax is based. This initiative will supplement the Valuation Best Practice initiative, which introduced a state-wide standardisation of residential property data, by providing the Valuer General with additional monitoring and audit valuation resources.
248 Appendix A Budget Statement 2003-04
Improving public safety on public land – project works This initiative will improve public safety through risk mitigation works on Crown land including coasts, alpine resorts, historic plains, floodplains and Crown reserves. Establish Water Sector Development Group The Government will establish a Water Sector Development Group to deliver on its Water for the Future policy commitments with greater coordination and efficiency. Sustainability strategy Funding is allocated to develop and implement an overarching sustainability strategy that will enable the delivery of best practice environmental management techniques across a range of industry sectors including water, energy, urban development and land management. This initiative will supplement existing sustainability strategy outputs, including Melbourne 2030 (urban development and land management) and the Victorian Greenhouse Strategy. Melbourne 2030 – Planning for Sustainable Growth Melbourne 2030 – Planning for Sustainable Growth is a 30-year plan to manage growth and change across metropolitan Melbourne and the surrounding region. This initiative will complete structure planning and planning system improvements, growth area plans, and green wedge protection management plans. Melbourne 2030 – local government grants Grants are being provided to local government to assist them with the implementation of Melbourne 2030. Additional funding is also provided to the Victorian Civil and Administrative Tribunal to address anticipated workload increases. Transit cities This initiative provides for the planning of the additional eight transit cities announced by the Government in the past 12 months. The transit cities program aims to restructure parts of metropolitan Melbourne and the regional centres serviced by fast rail by focusing on higher-density, mixed use and sustainable development around these key transport nodes. Victorian heritage program Funding is provided to maintain Victoria’s position as a world leader in the preservation of public heritage. This program provides grants to local government and community groups for the repair and adaptation of heritage assets in public use.
Budget Statement 2003-04 Appendix A 249
Savings initiatives General efficiencies in government administration The Department of Sustainability and Environment will achieve general efficiencies in administration worth $3.9 million a year from 2003-04. Minimising duplication in grants programs and refocusing of existing resources By minimising duplication in grant programs and refocusing some of the activities undertaken by the Department of Sustainability and Environment, $14 million per year ongoing will be returned to the budget while maintaining the services provided to the community.
Asset investment initiatives
Table A17: Asset investment initiatives – Department of Sustainability and Environment ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 TEI Long-term zoo strategy .. 11.0 11.0 10.0 .. 32.0 Victorian Water Trust .. 7.5 15.0 15.0 15.0 52.5 Total asset investment .. 18.5 26.0 25.0 15.0 84.5 initiatives Source: Department of Treasury and Finance Long-term zoo strategy This initiative provides $32 million to fund a range of projects that will assist in transforming the State’s three zoos into more innovative and interactive organisations. The projects will focus on a changed relationship between animals and visitors through interactive experiences, free of bars and walls. The transformed zoos will become centres of wildlife experience, conservation, education and research. Victorian Water Trust Funding of $53 million is provided for a number of asset investments from the Victorian Water Trust. Projects include major river restoration works, upgrading of irrigation assets and infrastructure, and upgrades of pipelines and water supplies and sewerage works. Projects will be undertaken throughout the State.
250 Appendix A Budget Statement 2003-04
Treasury and Finance
Table A18: Output initiatives – Treasury and Finance ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 State Revenue Office compliance activity .. 1.8 1.8 .. .. Total – Treasury and Finance .. 1.8 1.8 .. .. Less: General efficiencies in government .. 1.0 1.0 1.0 1.0 administration Efficiency gains in revenue management .. 0.6 0.6 1.2 1.8 Net output initiatives – Treasury and .. 0.2 0.2 -2.2 -2.8 Finance Source: Department of Treasury and Finance
Output initiatives State Revenue Office compliance activity Funding is provided to set up a specialist team within the State Revenue Office (SRO) to assist with the protection and recouping of revenue and closing loopholes in relation to the collection of duties arising from high-value conveyancing transactions. This team will work with other jurisdictions to address anomalies in this area of taxation administration.
Savings initiatives General efficiencies in government administration The Department of Treasury and Finance will achieve general efficiencies in administration worth $1.0 million a year from 2003-04. Efficiency gains in revenue management Savings will be generated by SRO as a result of efficiencies derived from the use of new information technology.
Budget Statement 2003-04 Appendix A 251
Victorian Communities
Table A19: Output initiatives – Department for Victorian Communities ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Melbourne Cricket Ground .. 38.5 38.5 .. .. redevelopment contribution Australian Grand Prix safety 5.9 ...... improvements Commonwealth Games Athletes Village 8.0 20.0 24.0 35.0 22.0 Office of Commonwealth Games 1.8 ...... Coordination Melbourne 2006 Commonwealth Games .. 56.0 83.0 188.0 24.0 Commonwealth Games industry .. 0.5 0.5 0.5 .. participation Community jobs program .. 9.6 9.6 9.6 9.6 Jobs for young people .. 2.6 2.6 2.6 2.6 Youth employment link .. 0.5 0.5 0.5 0.5 Community regional industry skills .. 2.0 2.5 2.8 2.8 program Skilled migration program .. 0.5 1.5 2.0 2.0 Victorian Multicultural Commission .. 0.3 0.3 0.3 0.3 grants FReeZACentral .. 0.5 0.5 0.5 0.5 National Ice Skating Centre .. 0.4 ...... Rights for sports spectators .. 0.2 0.2 0.2 0.2 Sports event ticketing legislation .. 0.2 0.2 0.2 0.2 Advance – youth development program .. 1.0 1.2 1.3 1.5 Increasing participation in sport and .. 2.5 2.5 2.5 2.5 physical activity Strengthening sporting organisations .. 2.5 2.5 3.0 3.0 Regional sporting facilities .. 3.5 3.5 3.5 3.5 Suburban sporting facilities .. 5.0 5.0 5.0 5.0 Kardinia Park redevelopment .. 4.5 8.0 1.0 .. Community centres .. 2.5 2.5 2.5 2.5 Sport and recreation camps .. 0.2 ...... Enhancement of policy and risk 7.0 13.1 13.1 13.6 12.6 management capacity Total – Victorian Communities 22.7 166.6 202.2 274.6 95.3 Less: General efficiencies in government .. 1.2 1.2 1.2 1.2 administration Refocus and reform of employment .. 6.1 9.9 11.6 14.5 and associated training programs Net output initiatives – Victorian 22.7 159.3 191.1 261.7 79.6 Communities Source: Department of Treasury and Finance
252 Appendix A Budget Statement 2003-04
Output initiatives Melbourne Cricket Ground redevelopment contribution The State Government has contributed funding towards the redevelopment of the Northern Stand of the Melbourne Cricket Ground. This project will contribute to increasing and maximising the seating capacity for the Commonwealth Games in 2006, as well as other events. Australian Grand Prix safety improvements Funding has been provided to increase the height of the fencing at the Australian Grand Prix, in order to improve safety for spectators and officials. Commonwealth Games Athletes Village The Government has committed $109 million in new funding for the development of an athletes village at Parkville for the 2006 Commonwealth Games. Office of Commonwealth Games Coordination Additional funding was provided in 2002-03 for the Office of Commonwealth Games Coordination to continue managing the Government’s role during the preparations for the Melbourne 2006 Commonwealth Games. Melbourne 2006 Commonwealth Games Funding is provided for the whole-of-government Commonwealth Games operating budget for the period 2003-04 to 2006-07, which includes funding for Melbourne 2006 Commonwealth Games Pty Ltd (organising company), the Office of Commonwealth Games Coordination and other Victorian departments providing services for the Games. Commonwealth Games industry participation Funding is provided to ensure that maximum benefit associated with the Commonwealth Games goes to Victorian businesses. The program will utilise Melbourne’s preparations for the 2006 Games to showcase Victorian industry to the world and demonstrate the capabilities of Victorian suppliers to provide goods and services to the Beijing Olympics in 2008. Community jobs program Funding is provided to enhance the employment prospects of long-term unemployed people and those at risk of long-term unemployment by providing paid employment and nationally accredited training.
Budget Statement 2003-04 Appendix A 253
Jobs for young people Funding is provided to create 1 100 new jobs and traineeships in local government authorities for young Victorians through providing a wage incentive to encourage the creation of trainee and apprenticeship opportunities for young people aged between 15 and 24. Youth employment link Funding is provided to assist young people investigate careers, further education courses and other employment-related matters through an online database. Community regional industry skills program (CRISP) Funding is provided to address gaps or skill mismatches within local labour markets through the supply of various levels of skilled labour at an industry specific level. CRISP will tackle skill shortages and support the development of sustainable industries and jobs across country Victoria. Skilled migration program Funding is provided to increase Victoria’s share of Australia’s skilled and business migrants by 2006-07 and boost the population of regional Victoria by attracting skilled migrants to regions with skill needs. Victorian Multicultural Commission grants Funding is provided to expand the Victorian Multicultural Commission’s community grants program to support ethnic and community-based organisations to more adequately resource the State’s culturally and linguistically diverse (CALD) communities, particularly smaller and newly emerging communities, women’s support groups and regional CALD communities. FReeZACentral FReeZACentral provides opportunities for young people to obtain practical, high-level music industry experience as well as training in music industry management. Funding is allocated to strengthen the youth development program that funds local government and not-for-profit organisations in local communities to establish youth communities that implement music, entertainment and cultural events. National Ice Skating Centre Funding is provided to undertake an expression of interest and review of business cases for an international standard ice-sports facility in Melbourne, including two international standard rinks, recreational ice arenas and associated amenities and infrastructure.
254 Appendix A Budget Statement 2003-04
Rights for sports spectators Funding is provided to assist with the implementation of the Major Events (Crowd Management) Bill, which is aimed at ensuring crowd safety by deterring socially unacceptable behaviour at sporting events. Sports event ticketing legislation Funding is provided to implement, manage and enforce the Sports Event Ticketing (Fair Access) Act 2002, which aims to deliver greater transparency and fairer access in the ticket purchase process for major sporting events in Victoria, including the AFL Grand Final. Advance – youth development program The advance – youth development program builds upon and expands the existing Victorian youth development program. It is a community based initiative run in government secondary colleges to provide students with a range of opportunities that promote youth leadership, community participation and volunteerism. Increasing participation in sport and physical activity This initiative, funded from the Community Support Fund, aims to encourage increased participation in physical activity for people of all ages and backgrounds including targeted activity programs for disadvantaged groups. Strengthening sporting organisations Funding is provided from the Community Support Fund to strengthen the capacity of sporting clubs and organisations throughout Victoria to deliver programs and sports to the broader community. Regional sporting facilities This initiative will assist regional councils and sporting bodies in country Victoria to upgrade and/or establish new country sporting facilities. The Community Support Fund will provide funding to ensure that major regional centres have quality venues capable of attracting high-level sports events. Suburban sporting facilities This initiative is being funded through the Community Support Fund to provide grants to build new and improve existing suburban sporting facilities in growth corridors and under-resourced suburbs. Kardinia Park redevelopment The upgrade of and provision for increased football club amenities including new community-oriented facilities at Kardinia Park (also known as Skilled Stadium) is being funded from the Community Support Fund and Regional Infrastructure Development Fund.
Budget Statement 2003-04 Appendix A 255
Community centres This initiative provides grants from the Community Support Fund to local communities across Victoria to establish facilities supporting a range of social, economic and cultural activities. These projects are to be implemented through local community group and organisations to maximise local community priorities and knowledge. Sport and recreation camps Funding is provided for project management services associated with the upgrade of the sport and recreation camps located at Falls Creek, Anglesea, Mt Evelyn, Mt Eliza and Bacchus Marsh. Enhancement of policy and risk management capacity Additional funding is provided to enable the new Department to enhance its service delivery capabilities to the Victorian community, including policy development and risk management functions.
Savings initiatives General efficiencies in government administration The Department for Victorian Communities will achieve general efficiencies in administration worth $1.2 million a year from 2003-04. Refocus and reform of employment and associated training programs While the Commonwealth Government has primary responsibility for providing services to unemployed Australians, Victoria’s employment programs deliver appropriate services to meet specific needs in the labour market. This initiative is part of a broader package of education and employment reforms that seeks to refocus service delivery in these areas (see Chapter 4, Budget Initiatives).
256 Appendix A Budget Statement 2003-04
Asset investment initiatives
Table A20: Asset investment initiatives – Department for Victorian Communities ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 TEI Athletics track – Melbourne .. 2.0 9.5 7.0 .. 18.5 Cricket Ground State Mountain Bike facility .. 0.3 2.2 0.5 .. 3.0 development State Netball and Hockey .. 0.1 0.7 .. .. 0.8 Centre pitch replacement Olympic Park athletics track .. 0.2 2.5 .. .. 2.7 replacement Commonwealth Games .. 9.0 9.0 .. .. 35.1 Athletes Village Sport and recreation camps .. 3.6 ...... 3.6 Enhancement of policy and risk 11.4 1.0 ...... 12.4 management capacity Total asset investment 11.4 16.2 23.9 7.5 .. 76.1 initiatives Source: Department of Treasury and Finance
Athletics track – Melbourne Cricket Ground The Melbourne Cricket Ground has been identified as the most feasible venue for the location of the athletics track for the Commonwealth Games. Funding is provided for the installation of a temporary athletics track and associated arena and stand works. State Mountain Bike facility development An international standard mountain bike course with appropriate amenities for the Commonwealth Games is to be constructed. This will take pressure off high value conservation areas in several metropolitan parks. State Netball and Hockey Centre pitch replacement The two State Netball and Hockey Centre pitches will be near the end of their design life by 2006 when they will be utilised for the Commonwealth Games. Both pitches will need to be replaced to meet International Hockey Federation guidelines. Olympic Park athletics track replacement Olympic Park has been designated as the warm-up facility for the 2006 Commonwealth Games. Funding is provided for replacement of the athletics track to ensure that it meets the International Amateur Athletic Federation’s requirements. Budget Statement 2003-04 Appendix A 257
Commonwealth Games Athletes Village The Government is committed to providing 200 social housing households as part of the Commonwealth Games Athletes Village. Capital funding of $35 million will be provided, of which $18 million is within the current forward estimates period. Sport and recreation camps Funding is provided to complete the upgrade of the sport and recreation camps located at Falls Creek, Anglesea, Mt Evelyn, Mt Eliza and Bacchus Marsh. The upgrade will ensure that the camps are compliant with all regulatory and legislative requirements and can continue to provide benefits to community and school groups. Enhancement of policy and risk management capacity The Government has committed $12 million for the new Department for Victorian Communities to enhance the policy and risk operations of the department.
Parliament
Table A21: Output initiatives – Parliament ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 150th anniversary of democratic .. 0.1 0.1 .. .. government in Victoria Establishment of additional Parliamentary .. 1.2 1.2 1.2 1.2 Committees Parliament operating costs .. 0.7 0.4 0.4 0.5 Speaker’s rulings database .. 0.1 ...... Electorate offices – .. 1.4 0.3 0.3 0.3 relocation/refurbishment Total – Parliament .. 3.5 2.0 1.8 2.0 Less: General efficiencies in government .. 0.5 0.5 0.5 0.5 administration Net output initiatives – Parliament .. 3.0 1.5 1.3 1.5 Source: Department of Treasury and Finance
Output initiatives 150th anniversary of democratic government in Victoria From November 2005, Victoria will be celebrating 150 years of democratic government in our State. Funding is provided to establish a planning office for the celebrations.
258 Appendix A Budget Statement 2003-04
Establishment of additional Parliamentary Committees Following reform of the Parliamentary Committee system, funding is provided to establish the Rural and Regional Services and Development Committee, Outer Suburban/Interface Services and Development Committee and the Education and Training Committee. Parliament operating costs Funding is provided to meet operating costs for Parliament. Speaker’s rulings database Funding is allocated to develop a database of rulings to ensure consistency in the interpretation of Standing Orders of the Legislative Assembly and Council and the provisions of the Constitution Act 1975. Members of the public will also be able to access the database. Electorate offices – relocation/refurbishment Funding is provided to cover costs for the relocation of six electorate offices, for costs of the refurbishment of three offices to avoid relocation, and for increased operating costs associated with an overall increase in constituents.
Savings initiatives General efficiencies in government administration Parliament will achieve general efficiencies in administration worth $0.5 million a year from 2003-04.
REVENUE INITIATIVES Table A22: Revenue initiatives ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Payroll tax – exemption for paid -0.4 -1.0 -1.1 -1.1 -1.2 maternity leave Payroll tax – removal of exemption for .. 30.0 60.0 60.0 60.0 apprentices and trainees Land tax – payment extension ...... Motor vehicle registration fee – .. 46.0 57.0 69.0 81.0 increase in the base fee and annual indexation Motor vehicle duty concession – for .. -0.5 -0.5 -0.5 -0.5 incapacitated and disabled persons Drivers’ licence fees – annual indexation .. 2.0 3.0 5.0 4.0 Fees and fines set by regulation – .. 8.0 21.0 30.0 39.0 specific increases and ongoing indexation Total revenue initiatives -0.4 84.5 139.4 162.4 182.3 Source: Department of Treasury and Finance Budget Statement 2003-04 Appendix A 259
Payroll tax – exemption for paid maternity leave The Government introduced an exemption for employers from payroll tax, with effect from 1 January 2003, in respect of wages paid to workers taking maternity or adoption leave. The payroll tax exemption applies to all employed women taking maternity leave of up to 14 weeks. The exemption also includes adoption leave for a period of up to 14 weeks for both women and men. It applies to leave taken either before or after the birth or adoption and there is no specified minimum period of prior employment and no maximum wage restriction. Fringe benefits are excluded from the exemption to eliminate added complexity caused by employers having to apportion the fringe benefits component of wages over a 14-week period. This measure reinforces the Government’s commitment to encouraging employers and employees to strike a better balance in their lives between family, work and community responsibilities. Payroll tax – removal of exemption for apprentices and trainees The payroll tax exemption for apprentices and trainees will be removed for wages paid or payable on or after 1 July 2003. This exemption will no longer apply for new apprenticeship and training courses commencing on or after 6 May 2003. The wages of apprentices and trainees currently enrolled in approved courses and group apprenticeship and traineeship schemes will continue to be exempt from payroll tax until 31 December 2003. This measure is part of the Government’s retargeting of Victoria’s employment, training and vocational education programs. The exemption will be replaced with a new completion bonus scheme, which will pay a bonus to employers when apprentices and trainees complete their qualifications. Commencing on 1 July 2003, employers with three or more new employee trainees and apprentices, who are under 25 years of age at commencement, will qualify for the bonus (excluding Commonwealth and State Government employers). The new completion bonus scheme will ensure more effective targeting of resources to support apprenticeship and training courses. It will reward employers who take on trainees and apprentices in good faith and boost the level of completions of traineeships and apprenticeships. Land tax – payment extension This measure extends the payment period for land tax liabilities from the 2003 land tax year from eight to 15 weeks for lump sum payments, and from 12 to 26 weeks for instalment payments. The payment period extension provides significant relief to all land tax payers in Victoria. The payment period extension also potentially benefits tenants who are paying land tax passed onto them by landlords.
260 Appendix A Budget Statement 2003-04
Motor vehicle registration fee – increase in the base fee and annual indexation The Victorian Government has not increased motor vehicle registration fees since April 1994. The initial increase this year will improve equity in the overall government revenue mix. Under this measure, the base motor vehicle registration fee will increase from $140 to $157 from 1 July 2003. This represents only half of the increase in the consumer price index since the last increase in the fee in 1994. The other States and Territories have had a policy of ongoing annual indexation of motor vehicle registration fees for many years, so even after this increase Victoria’s fees remain the lowest in Australia for a standard family car. Ongoing indexation will be applied to the base motor vehicle registration fee, bringing Victoria’s policy into line with the other States and Territories. The increase in revenue from motor vehicle registration fees will be applied to investment in road infrastructure through the Better Roads Victoria Trust Fund. The change to the base motor vehicle registration fee will also impact the fee level for other vehicle categories such as motor cycles, primary producer vehicles and trailers. The new fees relevant to all vehicle categories will be announced by VicRoads. Motor vehicle duty concession – for incapacitated and disabled persons The current motor vehicle duty exemption for incapacitated persons will be expanded to include vehicles that are specially converted, constructed or modified to allow transportation of at least one occupied wheelchair. It currently only applies to vehicles designed solely for incapacitated persons. The new category will cover vehicles registered by incapacitated persons, their guardians, government bodies, municipalities or charitable organisations. This measure will apply to vehicles acquired on or after 1 July 2003. The Government has also decided to reduce the duty payable on the registration of a vehicle by a disabled person where the vehicle is modified or converted to enable the disabled person to drive the vehicle. For vehicles acquired on or after 1 July 2003, the duty normally payable will be reduced by the cost of the modification or conversion and the benefit of the concession cannot exceed the duty otherwise payable. Both of these measures aim to assist disabled people and their carers to be independent or mobile by reducing their cost of motor vehicle transportation.
Budget Statement 2003-04 Appendix A 261
Drivers’ licence fees – annual indexation This measure provides for the ongoing annual indexation of drivers’ licence fees. Ongoing indexation already applies in all other States and Territories. Victoria’s drivers’ licence fees will remain among the lowest of all the States and Territories. This measure results in small increases to the current drivers’ licence fees. The 10-year licence fee will increase by $4 to $137 and the 3-year licence fee will increase by $1 to $40. Fees and fines set by regulation – specific increases and ongoing annual indexation The Victorian Government will be adopting a policy of ongoing indexation of fees and fines set by regulation. This policy will be adopted commencing in 2003-04 with some fees and fines set by the Department of Infrastructure, the Department of Sustainability and Environment, the Department of Primary Industries and the Department of Justice. The fees and fines to be indexed from 2003-04 in these departments are in the areas of marine-related activities, plumbing, transfer of land and vehicles, courts and road safety. There has been no increase in many fees and fines over the past ten years. A general policy of ongoing automatic annual indexation will deliver a more equitable taxation policy, and avoid the need for large one-off increases. Implementation of an indexation policy framework for fees and fines will commence in 2003-04.
262 Appendix A Budget Statement 2003-04
APPENDIX B: GROWING VICTORIA INFRASTRUCTURE RESERVE
Table B1: Growing Victoria infrastructure reserve – funding by project ($ million) Project 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 TEI (a) Actual Revised Budget Estimate Estimate Estimate from GV Linking Victoria Fast rail links to regional 3.0 147.7 361.3 56.9 4.5 .. 573.3 centres (DOI) Total allocated to Linking 3.0 147.7 361.3 56.9 4.5 .. 573.3 Victoria Skilling Victoria Modernisation/upgrade of 53.0 ...... 110.0 facilities – schools (DE&T) (b) Innovating Victoria: Enhanced 23.7 35.0 31.3 ...... 90.0 learning environments – schools (DE&T) Innovating Victoria: Enhanced 4.8 27.7 12.5 ...... 45.0 learning environments – TAFE (DE&T) Education precinct in .. 9.5 1.0 ...... 10.5 Gippsland (DE&T) Ballarat Vocational .. 5.0...... 5.0 Education and Training Centre (DE&T) Modernisation of facilities – 0.1 0.5 ...... 0.6 Maryborough education precinct (DE&T) Australian College of Wine 3.6 3.8 ...... 7.4 (DE&T) Bacchus Marsh Science and .. 4.0...... 4.0 Technology Centre (DE&T) Gene Technology Access 0.1 3.5 0.6 ...... 4.2 Centre (DE&T) Space Science Education .. 5.2 1.2 ...... 6.4 Centre (DE&T) Science innovation and 5.1 24.9 20.0 ...... 50.0 education precincts across regional Victoria (DPI) Total allocated to Skilling 90.4 119.1 66.6 ...... 333.1 Victoria
Budget Statement 2003-04 Appendix B 263
Table B1 (cont): Growing Victoria infrastructure reserve – funding by project ($ million) Project 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 TEI (a) Actual Revised Budget Estimate Estimate Estimate from GV Connecting Victoria E-Government – 1.0 3.0 ...... 4.0 redevelopment of vic.gov.au portal (DOI) Modernisation of school 21.1 18.9 ...... 40.0 facilities to incorporate ICT (DE&T) Broadband ICT delivery 4.6 10.3 4.1 ...... 19.0 infrastructure for TAFE (DE&T) Regional .. 2.7 0.3 ...... 3.0 telecommunications infrastructure (DSE) Bridging the Digital Divide 16.2 3.8 3.0 ...... 23.0 (DE&T) ICT strategy for health care 7.6 16.0 6.4 ...... 30.0 (DHS) Land titles automation 10.5 7.7 ...... 18.2 project (DSE) Information technology 0.7 4.1 ...... 4.8 document management centre (DSE) Total allocated to 61.7 66.5 13.8 ...... 142.0 Connecting Victoria
Other asset projects (c) .. 315.0 211.6 ...... 526.6
Total Growing Victoria 155.1 648.3 653.3 56.9 4.5 .. 1 575.0 allocation to date (b) Unallocated .. Total Growing Victoria 1 575.0 infrastructure reserve Source: Department of Treasury and Finance Notes: (a) Total estimated investment. (b) Total estimated investment includes $57 million expenditure in 2000-01. (c) Allocated to fund projects approved as part of the Government’s asset program generally.
264 Appendix B Budget Statement 2003-04
APPENDIX C: REVISED 2002-03 BUDGET OUTCOME
This appendix provides revised estimates of the budget outcome for the 2002-03 financial year. The revised 2002-03 estimates take into account government policy decisions and economic developments impacting on both revenue and expenses since the presentation of the 2002-03 Budget to Parliament in May 2002.
REVISED 2002-03 STATEMENT OF FINANCIAL PERFORMANCE The revised 2002-03 statement of financial performance is presented in Table C1. The revised general government sector operating result for 2002-03 is a surplus of $160 million, $362 million lower than the original budget estimate published in May 2002. The deterioration in the budget outlook over this period is mainly attributable to the adverse impact of weak equity market performance on superannuation expenses, and increased costs associated with bushfire and drought response and relief activities. The impact of increased expenses from these sources was partly offset by stronger than expected revenue growth, particularly taxation revenue.
Operating revenue Total estimated operating revenue for 2002-03 has been revised upward by $1 182 million, or 4.7 per cent, from the budget estimate of $25 282 million. A large part of the improvement in the revenue outlook is attributable to a stronger than expected Victorian property market. There has also been higher than budgeted revenue from Commonwealth specific purpose grants, dividends and from a range of one-off miscellaneous revenue items.
Budget Statement 2003-04 Appendix C 265
Table C1: 2002-03 Statement of financial performance ($ million) 2002-03 2002-03 Change Change Budget Revised % Revenue from ordinary activities Taxation 8 802.7 9 345.6 542.9 6.2 Fines and regulatory fees 554.0 550.9 ( 3.1) (0.6) Investment revenue 1 061.6 1 231.0 169.4 16.0 Grants 11 753.5 11 958.5 205.0 1.7 Sale of goods and services 2 049.9 2 021.8 ( 28.1) (1.4) Gain (loss) on the disposal of physical 19.6 ( 5.3) ( 24.8) (126.9) assets Fair value of assets received free of 1.1 62.8 61.7 .. charge or for nominal consideration Inter sector capital asset charge 501.0 501.0 .. .. Other revenue 538.3 797.5 259.2 48.2 Total revenue 25 281.7 26 463.8 1 182.1 4.7 Expenses from ordinary activities Employee benefits 9 041.5 9 263.1 221.6 2.5 Superannuation 1 713.12 802.3 1 089.3 63.6 Depreciation 952.2 962.0 9.8 1.0 Amortisation 70.6 62.3 ( 8.3) (11.7) Borrowing costs 495.2 496.9 1.7 0.3 Grants and transfer payments 4 118.9 4 179.1 60.2 1.5 Supplies and services 8 299.9 8 401.3 101.4 1.2 Other expenses 68.6 136.8 68.3 99.5 Total expenses 24 760.0 26 303.9 1 543.9 6.2 Net result 521.8 159.9 ( 361.8) (69.3) Source : Department of Treasury and Finance
Taxation In 2002-03, state taxation revenue is expected to total $9 346 million, $543 million or 6.2 per cent higher than the 2002-03 Budget estimate (see Table C2). Increases in taxation revenue are largely the result of stronger than expected property market prices, resulting in higher revenue from land transfers, mortgage stamp duty and land tax. Offsetting these increases are reductions in estimates of gambling tax revenue and payroll tax revenue.
266 Appendix C Budget Statement 2003-04
Table C2: 2002-03 Taxation ($ million) 2002-03 2002-03 Change Change Budget Revised % Payroll tax 2 710.1 2 628.0 ( 82.1) (3.0) Taxes on immovable property 709.8 757.1 47.2 6.7 Financial and capital transactions 2 054.3 2 626.4 572.1 27.8 Gambling 1 455.0 1 318.0 ( 137.0) (9.4) Insurance 789.8 856.6 66.8 8.5 Motor vehicles 1 050.8 1 100.5 49.7 4.7 Other licences and levies 32.8 59.0 26.2 79.8 Total taxation 8 802.7 9 345.6 542.9 6.2 Source : Department of Treasury and Finance
Payroll tax Payroll tax revenue in 2002-03 has been revised down 3.0 per cent or $82 million since the budget estimate, to $2 628 million. This decrease reflects the trend in employment growth since 2001-02, which has been stronger in industries such as construction, where there are large numbers of small firms that tend to remain below the tax threshold, as opposed to employment in the manufacturing industry, which tends to consist of larger firms subject to payroll tax.
Taxes on immovable property Taxes on immovable property include land tax, the metropolitan improvement levy and local government contributions to fire brigades. Total taxes on immovable property are estimated to be $757 million, $47 million or 6.7 per cent higher than the budget estimate. Land tax assessments based on the final indexation factors, calculated once site valuations for 2002 became available, were slightly higher than the initial estimates, especially for residential land that had not been used as a principal place of residence.
Taxes on financial and capital transactions Taxes on financial and capital transactions include stamp duties principally from land transfers, mortgages and debits tax. Total taxes on financial and capital transactions in 2002-03 are estimated to generate $2.6 billion, $572 million or 27.8 per cent higher than the 2002-03 Budget estimate. This is predominately due to stronger than expected growth in conveyancing duty collections. In the 2002-03 Budget, it was projected that a
Budget Statement 2003-04 Appendix C 267
moderation in property market activity would lead to a reduction in conveyancing duty collections. However, while there has been a reduction in transaction volumes in 2002-03, this has been more than offset by continued growth in house prices with the result that conveyancing duty is now forecast to rise to $2.1 billion in 2002-03, some $0.5 billion above the original estimate.
Gambling Gambling tax revenue in 2002-03 is estimated at $1 318 million, down $137 million or 9.4 per cent from the budget estimate. This downward revision is due mainly to the negative impact of the smoking ban on revenues from electronic gaming machines and the Casino since 1 September 2002. However, revenue from private lotteries has been higher than expected due to an increase in the price of lottery games since December 2002.
Insurance Total tax revenue collected from insurance taxes is estimated to be $857 million, up $67 million or 8.5 per cent from the budget estimate. This mainly reflects high premium growth, with particularly strong premium increases in public liability and professional indemnity.
Motor vehicles Taxes generated from motor vehicles are estimated to be $1 101 million, $50 million or 4.7 per cent higher than the budget estimate. Increased collections of heavy motor vehicle registration fees, partly reflecting national indexation of heavy vehicle charges, and increased collections of stamp duty on motor vehicle transfers account for the increase.
Other licences and levies Taxes from other licences and levies are estimated to be $59 million in 2002-03, $26 million or 79.8 per cent higher than the budget estimate. This reflects upward revisions to revenue from the land fill levy and an upward revision to revenue from Transurban concession fees.
Fines and regulatory fees Revenue from fines and regulatory fees in 2002-03 is estimated to be $551 million, some $3 million lower than the 2002-03 Budget estimate.
268 Appendix C Budget Statement 2003-04
Investment income Total investment income is expected to be $169 million (16.0 per cent) higher than forecast in the 2002-03 Budget (see Table C3). This mainly reflects higher than expected dividends and tax equivalent payments from public trading enterprises, partly offset by lower than budgeted revenue from interest, rents and miscellaneous investment revenue. Dividends are forecast to be $171 million (42.1 per cent) higher than the 2002-03 Budget estimate of $407 million. The increase reflects:
• higher than budgeted dividends from the water industry, due to the combined impact of higher than expected profits (reflecting strong development activity) and additional dividends from certain water companies to reinforce the commercial focus of the businesses and ensure appropriate financial ratios are maintained;
• increased dividends from the gas sector mainly as a result of the resolution of commercial contractual matters associated with the delayed introduction of full retail contestability in the gas market; and
• partly offsetting the above factors, slower dividend forecasts from public financial corporations mainly as a result of the poorer than expected performance of international equity markets. Income tax equivalent revenue is expected to be $33 million higher than the 2002-03 budget estimate of $106 million, reflecting higher water industry taxes in relation to both the 2001-02 actual profit and the 2002-03 forecast profit.
Table C3: 2002-03 Investment income ($ million) 2002-03 2002-03 Change Change Budget Revised % Dividends 406.5 577.7 171.2 42.1 Income tax and rate equivalent revenue 106.4 139.6 33.2 31.2 Interest 338.1 318.0 ( 20.0) (5.9) Royalties 41.4 53.7 12.3 29.6 Rents 16.6 15.0 ( 1.6) (9.8) Other 152.7 127.1 ( 25.6) (16.8) Total investment revenue 1 061.6 1 231.0 169.4 16.0 Source : Department of Treasury and Finance
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Grants As highlighted in Table C4, total grants received are now expected to be $205 million (1.7 per cent) higher than the 2002-03 budget forecast, with an increase in specific purpose grants more than offsetting a decline in general purpose grants.
Table C4: 2002-03 Grants ($ million) 2002-03 2002-03 Change Change Budget Revised % Operating grants General purpose grants 6 772.4 6 729.6 ( 42.8) (0.6) Specific purpose grants for on-passing 1 179.4 1 314.9 135.5 11.5 Other specific purpose grants 3 146.1 3 328.7 182.5 5.8 Total operating grants 11 097.9 11 373.1 275.2 2.5 Capital grants Specific purpose grants for on-passing 116.9 118.0 1.1 0.9 Other specific purpose grants 538.7 467.4 ( 71.3) (13.2) Total capital grants 655.6 585.3 ( 70.2) (10.7) Total grants 11 753.5 11 958.5 205.0 1.7 Source : Department of Treasury and Finance
The $43 million decrease in general purpose grants to $6 730 million largely reflects a downwards revision of the ABS population estimates since the formulation of the 2002-03 Budget, which was partially offset by an increase in the GST pool. The increase in specific purpose payments from the Commonwealth mainly relates to:
• Commonwealth assistance to both government and non-government schools reflecting changed Commonwealth assumptions on enrolment numbers, the mix between primary and secondary students and movements in average government school recurrent costs;
• the Public Health Outcomes Funding Agreement and the National Health Development Fund reflecting both carryover of grant funds from 2001-02 because of delays in finalising approved projects and additional 2002-03 funding for the National Meningococcal C Immunisation Program; and
• the Commonwealth Additional Grant for new homes. Although eligibility for the grant ended on 30 June 2002, eligible applicants can submit their applications for the grants until 2004, depending on when the applicants entered into their home contracts. The revised estimate for 2002-03 reflects continuing state expenditure, and reimbursement from the Commonwealth. 270 Appendix C Budget Statement 2003-04
Other revenue The 2002-03 revised estimate for other revenue (comprising sales of goods and services, assets received free of charge, gains on disposal of physical assets, inter-sector capital assets charge and other revenue) totals $3 378 million, $268 million (8.6 per cent) higher than the original budget estimate. This increase in revenue was mainly attributable to:
• non-recurring revenue of $66 million arising from the Spencer Street Station Authority entering into four commercial development agreements that granted construction licences to the developers;
• increased revenue from higher than forecast hospital commercial activities ($70 million);
• non-recurring revenue of $135 million from forfeiture of performance bonds by National Express when it withdrew from Victorian rail and tram operations during 2002-03;
• non-recurring revenue from assets received free of charge ($51 million) as a result of the transfer of the Latrobe Regional Hospital assets to the public sector following the wind-up of Latrobe Regional Hospital Pty Ltd; offset by
• lower than forecast revenue from the sales of goods and services ($28 million), mainly in the general government non budget sector; and
• a lower than expected outcome on revenue from the disposal of physical assets ($25 million), mainly reflecting expected losses from the sale of motor vehicles under the State’s motor vehicle lease arrangements.
Operating expenses As shown in Table C1, general government sector operating expenses for 2002-03 are now forecast to be $26 304 million, $1 544 million (6.2 per cent) above the original budget estimate of $24 760 million. The increase in operating expenses is largely due to an increase in superannuation expenses of $1 089 million. This in turn reflects lower than expected investment returns on superannuation fund assets in 2002-03 due to weak global equity markets. The State’s superannuation funds have substantial holdings of domestic and global equities. Equity market performance therefore has a significant impact on the State’s superannuation expenses and unfunded superannuation liability. The increase in superannuation expense also reflects a number of actuarial revisions to the value of the unfunded superannuation liability, including the recalculation of tax credits available to state superannuation schemes.
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Policy decisions taken since the 2002-03 Budget have also affected operating expenses in 2002-03. In the period between the 2002-03 Budget and the 2002-03 Budget Update output policy decisions accounted for additional operating expenses of $181 million in 2002-03, including the drought assistance provided to farmers of $85 million. Total operating expenses have also been boosted by a number of additional one-off cost pressures, including:
• net additional funding of around $130 million provided to meet fire suppression expenses and assist with fire recovery;
• costs of around $44 million associated with settlement of the Seal Rocks dispute; and
• asset write-offs of around $75 million, mainly relating to the wind-up of Latrobe Regional Hospital Pty Ltd. Specific policy decisions since the 2002-03 Budget are included in Appendix A, Specific Policy Initiatives Affecting the Budget Position. Also affecting the growth of operating expenses in 2002-03 were higher than expected Commonwealth specific purpose payments of $213 million, primarily related to assistance for government schools ($28 million) and non-government schools ($135 million), and increased hospital expenses funded by higher third party revenue sources of $70 million. The factors causing increased operating expenses in 2002-03 have been offset by changes in the treatment of certain transactions (as more information becomes available) to better reflect accounting policies. The following reclassifications have reduced operating expenses in 2002-03:
• grants to the Office of Housing of $142 million are now recognised as capital contributions to other sectors of government, rather than as expenses; and
• roads funding of $90 million in 2002-03 now recognised as capital expenditure, rather than as operating expenditure.
REVISED 2002-03 CASH FLOW STATEMENT Table C5 provides the detailed revised cash flow statement for 2002-03 while Table C6 provides a summary of cash generated through the operations of Victorian government departments and other general government sector agencies during the year and how that cash is applied to infrastructure investment and financing activities. Table C6 also provides a reconciliation of the projected budget operating surplus to the projected change in general government net debt over the forward estimates period. 272 Appendix C Budget Statement 2003-04
Net cash flow from operating activities is now expected to be $1 672 million compared with the published estimate of $1 597 million. The $76 million variation reflects the impact of a $1 075 million increase in operating receipts offset by a $999 million increase in payments in relation to operating activities. The expected increase in receipts is attributable to the factors underpinning the $1 182 million increase in operating revenue outlined earlier in this appendix (see Table C1). The increase in payments is lower than the corresponding variance in operating expenses, mainly due to: • increased expenses, mainly superannuation, not requiring a cash outlay of $1 187 million; offset in part by • additional cash contributions of $750 million to be made to the State Superannuation Fund to reduce the State’s unfunded superannuation liability. Net infrastructure investment (including net contributions to other sectors of government and the purchase of property, plant and equipment net of asset sales) is expected to total $2 225 million in 2002-03, $159 million higher than the original budget estimate. This increase mainly reflects the reclassification of expenditure from operating expenses in relation to roads and housing noted above. This was partly offset by the cancellation of capital expenditure budgeted for the Berwick Community Hospital project ($43 million) following finalisation of the contract to deliver the project through the Partnerships Victoria model.
Table C5: 2002-03 Cash flow statement ($ million) 2002-03 2002-03 Change Change Budget Revised % Cash flows from operating activities Receipts Taxation 8 788.0 9 222.0 434.0 4.9 Fines and regulatory fees 429.6 425.3 ( 4.3) (1.0) Grants 11 752.0 11 957.0 205.0 1.7 Sale of goods and services 2 052.0 2 043.9 ( 8.2) (0.4) Interest received 338.1 317.4 ( 20.7) (6.1) Dividends received 406.5 577.7 171.2 42.1 Capital assets charge received 501.0 501.0 .. .. Other receipts 842.4 1 140.0 297.7 35.3 Total receipts 25 109.6 26 184.2 1 074.6 4.3 Payments Employee benefits (8 844.4) (9 067.0) ( 222.6) 2.5 Superannuation (1 757.9) (2 546.3) ( 788.4) 44.8 Grants and transfer payments (4 117.2) (4 171.0) ( 53.8) 1.3 Supplies and services (8 314.3) (8 236.9) 77.4 (0.9) Interest paid ( 479.3) ( 491.0) ( 11.7) 2.4 Total payments (23 513.1) (24 512.2) ( 999.1) 4.2
Budget Statement 2003-04 Appendix C 273
Table C5 (cont): 2002-03 Cash flow statement ($ million) Net cash flows from operating activities 1 596.5 1 672.1 75.6 4.7 Cash flows from investing activities Net customer loans (granted) repaid 1.8 ( 18.3) ( 20.1) (1111.9) Net contribution to other sectors of government ( 218.0) ( 363.2) ( 145.2) 66.6 Proceeds from sale of property, plant and 79.2 76.1 ( 3.2) (4.0) equipment Purchase of property, plant and equipment (1 927.3) (1 937.7) ( 10.3) 0.5 Net disposal of investments 518.6 836.9 318.3 61.4 Net cash flows from investing activities (1 545.6) (1 406.2) 139.5 (9.0) Cash flows from financing activities Net repayment of borrowings ( 19.0) ( 206.1) ( 187.2) 987.1 Net cash flows from financing activities ( 19.0) ( 206.1) ( 278.8) 1470.3 Net increase in cash and deposits held 31.9 59.8 ( 63.8) (199.9) Cash at beginning of reporting period 1 663.2 1 663.2 Cash and deposits at end of reporting period 1 695.1 1 722.9 ( 63.8) (3.8) Source : Department of Treasury and Finance
Table C6: Application of cash resources ($ million) 2002-03 2002-03 Budget Revised Budget operating surplus 765.3 159.9 Plus: Non-cash expenses (net) (a) 831.2 1 512.1 Net cash flow from operating activities 1 596.5 1 672.1 Plus: Net drawdown of Growing Victoria infrastructure reserve 570.0 648.3 Total cash available for asset investment 2 166.5 2 320.4 Less: Net investment in fixed assets (b) Expenditure on approved projects 2 145.3 2 300.9 Proceeds from asset sales - 79.2 - 76.1 Total net investment in fixed assets 2 066.1 2 224.8 Other investment activities (net) 13.5 - 3.9 Decrease in net debt (excluding Growing Victoria) 87.0 99.5 Source: Department of Treasury and Finance Notes: (a) Includes depreciation and increase in unfunded superannuation liability and increase in liability for employee benefits. (b) Includes net contribution to other sectors of government.
As shown in Table C6, the $1 672 million cash surplus from operating activities will be the main source of financing for the 2002-03 net infrastructure investment program. The balance will be entirely funded by a $648 million drawdown in the Growing Victoria infrastructure reserve. As a result net debt (excluding Growing Victoria) is expected to decline by around $100 million in 2002-03, broadly inline with the $87 million decline projected in the original budget estimates. 274 Appendix C Budget Statement 2003-04
REVISED 2002-03 STATEMENT OF FINANCIAL POSITION The revised 2002–03 statement of financial position is presented in Table C7. Net assets are now projected to increase from $21 845 million at 30 June 2002 to a revised estimate of $22 406 million at 30 June 2003. This represents an increase of $561 million (2.6 per cent) over the course of 2002–03. The increase in net assets reflects the impact of the projected operating surplus of $160 million and an increase in reserves of $1 320 million (mainly relating to revaluation of physical assets), net of contributions to other sectors of government (including the impact of the transfer of Federation Square assets to the public non-financial corporations sector) of $646 million. The projected increase in total assets of $944 million is mainly due to significant increases in infrastructure expenditure (including projects to be funded by the Growing Victoria infrastructure reserve), partly offset by reductions in financial assets held. The increase in total liabilities of $271 million between 2002–03 budget and revised mainly results from an increase in the unfunded superannuation liability and employee benefits, partly offset by reductions in interest bearing liabilities.
Table C7: Statement of financial position as at 30 June ($ million) 2002 2003 2003 Change Change Actual Budget Revised % Current assets Cash assets 1 667.4 1 699.6 1 724.1 56.8 3.4 Other financial assets 1 152.2 1 177.9 1 163.4 11.2 1.0 Receivables 1 105.9 1 161.7 1 220.3 114.4 10.3 Prepayments 41.4 41.4 43.0 1.6 3.9 Inventories 159.7 159.8 129.5 ( 30.2) (18.9) Other assets .. ( 0.5) ...... Total current assets 4 126.4 4 239.9 4 280.2 153.7 3.7 Non-current assets Other financial assets 2 682.1 2 137.7 1 832.3 ( 849.9) (31.7) Receivables 333.4 331.6 359.5 26.1 7.8 Inventories 155.6 155.6 38.7 ( 116.9) (75.1) Plant, equipment and infrastructure 23 449.1 24 517.4 24 362.3 913.2 3.9 systems Roads and earthworks 12 720.6 13 209.9 13 452.4 731.8 5.8 Other assets 3 035.9 3 064.1 3 121.5 85.6 2.8 Total non-current assets 42 376.8 43 416.3 43 166.7 789.9 1.9 Total assets 46 503.3 47 656.2 47 446.9 943.6 2.0
Budget Statement 2003-04 Appendix C 275
Table C7 (cont): Statement of financial position as at 30 June ($ million) 2002 2003 2003 Change Change Actual Budget Revised % Current liabilities Payables 1 560.5 1 571.1 1 553.8 ( 6.7) (0.4) Interest bearing liabilities 120.1 125.1 91.0 ( 29.1) (24.2) Employee benefits 838.8 873.5 807.6 ( 31.2) (3.7) Superannuation 911.2 1 518.9 534.1 ( 377.1) (41.4) Outstanding insurance claims 12.9 11.9 11.2 ( 1.7) (13.2) Other liabilities 374.5 356.7 384.5 10.1 2.7 Total current liabilities 3 817.9 4 457.1 3 382.2 ( 435.7) (11.4) Non-current liabilities .. Payables 8.9 ( 5.0) 122.0 113.1 1274.8 Interest bearing liabilities 6 240.4 6 230.2 6 017.6 ( 222.9) (3.6) Employee benefits 1 707.4 1 869.9 1 916.8 209.4 12.3 Superannuation 12 471.6 11 819.1 13 104.8 633.1 5.1 Outstanding insurance claims 104.0 97.6 217.9 113.9 109.5 Other liabilities 308.4 301.6 280.2 ( 28.2) (9.1) Total non-current liabilities 20 840.7 20 313.3 21 659.2 818.5 3.9 Total liabilities 24 658.6 24 770.4 25 041.4 382.7 1.6 Net assets 21 844.7 22 885.8 22 405.5 560.9 2.6 Source : Department of Treasury and Finance
276 Appendix C Budget Statement 2003-04
APPENDIX D: HISTORICAL AND FORWARD ESTIMATES TABLES
Table D1 shows the trends in general government sector aggregate cash flows over the period 1986-87 to 2006-07. This table of historical data has been compiled as far as possible according to current accounting standards and consistent with the cash flow statement included in Chapter 9, Estimated Financial Statements and Notes. The data from 1997-98 include the transactions of government schools and the arts institutions on a gross operating basis as well as the full trading operations of TAFE institutes and hospitals, nursing homes and ambulances. Although this expanded coverage does not materially influence the net operating result for the general government sector, it does significantly increase the inflows and outflows presented in the cash flow statement. Where possible, significant year-on-year variations in operating receipts and payments and abnormal items (in the main related to major business asset sales, the repatriation of surplus cash to the general government sector from non-budget agencies, and three special payments to reduce the State’s unfunded superannuation liability) have been footnoted. The effects of changes in taxation rates over the years have not been listed apart from the introduction (1992-93) and abolition (from 1995-96) of the state deficit levy, and the introduction of the GST grants from the Commonwealth (from 2000-01). Table D2 shows the general government operating result on a GAAP basis since accrual accounts were first introduced in 1996-97. Following changes to accounting standards operative from 2000-01, the statement of financial performance no longer recognises abnormal items as a separate item. Table D2 has been adjusted to conform to this new reporting standard. However, details of previously reported abnormal items associated with the operating results up to 1999-2000 are included in Table D3.
Budget Statement 2003-04 Appendix D 277
Table D4 presents general government sector current outlays classified by function – that is by government purpose classification. As there is no functional classification of government expenditure on a GAAP basis, the classifications conform to the standards for presenting cash outlays by government purpose on a GFS basis up to 1998-99, when this series ceased with the introduction of accrual GFS. Readers should note that this cash outlay information has been sourced from the ABS historical data. Because of the absence of accrual information for these years, it is not possible to convert or compare these tables with the current series of accrual GFS information included in Table D2 and in Appendix E, Uniform Presentation of Government Finance Statistics, Table E 10. From 1999-2000, the new GFS accruals series of expenses classified by purpose is included as Table D5. As noted above, these accruals data are not comparable to the old cash series.
278 Appendix D Budget Statement 2003-04
Table D1: General government cash flow statement – historical series ($ million) 1986-87 1987-88 1988-89 1989-90 Actual Actual Actual Actual Cash flows from operating activities Taxation (a) (b) 3 914 4 474 5 061 5 365 Regulatory fees and fines 96 96 90 105 Grants (b) (c) 4 665 4 857 5 011 5 240 Sales of goods and services 646 724 811 907 Interest received 189 155 162 144 Dividends received 251 296 354 399 Other receipts 483 493 487 484 Total receipts from operating activities 10 245 11 094 11 975 12 645
Employee entitlements (d) -4 457 -4 808 -5 110 -5 471 Superannuation - 367 - 416 - 519 - 586 Grants and transfer payments (d)(e) -2 463 -2 533 -2 788 -2 834 Supplies and services -2 138 -2 327 -2 530 -2 869 Interest paid -1 079 -1 163 -1 254 -1 423 Total payments from operating activities -10 505 -11 247 -12 200 -13 184 Net cash flows from operating activities - 260 - 152 - 225 - 538 Cash flows from investing activities Sales of property plant and equipment 104 207 189 168 Purchases of property plant and equipment - 953 -1 031 -1 042 -1 085 Net privatisation proceeds and other abnormals (f) 35 35 35 35 Net customer loans repaid ...... Net purchases of investments 77 77 99 111 Net cash flows from investing activities - 737 - 712 - 720 - 771 Cash flows from financing activities Net proceeds of borrowings 1 038 973 852 1 233 Net cash flows from financing activities 1 038 973 852 1 233 Net increase in cash held 42 109 - 93 - 76 Cash at beginning of reporting period 841 883 992 898 Cash at end of reporting period 883 992 898 823 Source: Department of Treasury and Finance
Budget Statement 2003-04 Appendix D 279
Table D1 (cont): General government cash flow statement – historical series ($ million) 1990-91 1991-92 1992-93 1993-94 Actual Actual Actual Actual Cash flows from operating activities Taxation (a) (b) 5 710 6 049 6 582 7 445 Regulatory fees and fines 132 182 176 181 Grants (b) (c) 5 676 5 921 6 138 6 215 Sales of goods and services 963 1 038 1 006 1 004 Interest received 152 121 95 94 Dividends received 327 566 581 815 Other receipts 326 308 251 323 Total receipts from operating activities 13 287 14 185 14 830 16 076
Employee entitlements (d) -5 855 -6 337 -6 846 -6 435 Superannuation - 685 - 782 - 853 - 492 Grants and transfer payments (d)(e) -2 807 -3 134 -3 501 -3 893 Supplies and services -2 885 -2 943 -3 024 -2 897 Interest paid -1 602 -1 787 -2 064 -2 195 Total payments from operating activities -13 834 -14 983 -16 288 -15 912 Net cash flows from operating activities - 547 - 798 -1 458 165 Cash flows from investing activities Sales of property plant and equipment 114 103 132 189 Purchases of property plant and equipment -1 129 -1 066 -1 068 - 980 Net privatisation proceeds and other abnormals (f) 1 292 6 304 498 Net customer loans repaid ...... Net purchases of investments 186 143 - 261 - 501 Net cash flows from investing activities 464 - 815 - 892 - 794 Cash flows from financing activities Net proceeds of borrowings 410 1 506 2 315 841 Net cash flows from financing activities 410 1 506 2 315 841 Net increase in cash held 327 - 107 - 36 211 Cash at beginning of reporting period 823 1 149 1 043 1 007 Cash at end of reporting period 1 149 1 043 1 007 1 219 Source: Department of Treasury and Finance
280 Appendix D Budget Statement 2003-04
Table D1 (cont): General government cash flow statement – historical series ($ million) 1994-95 1995-96 1996-97 1997-98 Actual Actual Actual Actual (1) Cash flows from operating activities Taxation (a) (b) 7 787 8 368 8 786 8 532 Regulatory fees and fines 194 193 186 230 Grants (b) (c) 6 355 6 659 6 928 7 440 Sales of goods and services 1 034 1 136 1 119 1 606 Interest received 117 107 129 140 Dividends received 765 624 967 786 Other receipts 285 346 275 982 Total receipts from operating activities 16 537 17 432 18 389 19 717
Employee entitlements (d) -6 001 -6 187 -6 557 -6 621 Superannuation -1 149 -1 046 -1 213 -1 257 Grants and transfer payments (d)(e) -3 324 -3 101 -3 238 -3 514 Supplies and services -3 273 -3 682 -3 943 -5 503 Interest paid -2 007 -1 923 -1 403 -1 162 Total payments from operating activities -15 754 -15 939 -16 354 -18 057 Net cash flows from operating activities 783 1 493 2 035 1 660 Cash flows from investing activities Sales of property plant and equipment 189 156 163 363 Purchases of property plant and equipment -1 288 -1 285 -1 288 -1 209 Net privatisation proceeds and other abnormals (f) 735 4 794 4 514 1 610 Net customer loans repaid ...... 297 Net purchases of investments 402 - 464 - 141 - 422 Net cash flows from investing activities 39 3 200 3 248 639 Cash flows from financing activities Net proceeds of borrowings - 902 -4 703 -5 406 -2 364 Net cash flows from financing activities - 902 -4 703 -5 406 -2 364 Net increase in cash held - 80 - 9 - 124 - 65 Cash at beginning of reporting period 1 219 1 138 1 129 1 005 Cash at end of reporting period 1 138 1 129 1 005 940 Source: Department of Treasury and Finance Notes: (1) From 1997-98 includes school own-purpose receipts and payments and equivalent receipts from public non-financial corporations and public financial corporations.
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Table D1 (cont): General government sector cash flow statement – historical series ($ million) 1998-99 1999-00 2000-01 2001-02 Actual (2) Actual (3) Actual Actual Cash flows from operating activities Taxation (a) (b) 8 846 9 719 8 533 8 708 Regulatory fees and fines 272 306 302 302 Grants (b) (c) 7 480 7 735 10 370 11 879 Sales of goods and services 1 659 1 776 1 957 2 066 Interest received 202 195 301 303 Dividends received 932 888 798 503 Other receipts 1 430 1 238 1 053 1 246 Total receipts from operating activities 20 821 21 857 23 314 25 006
Employee entitlements (d) -7 041 -7 378 -7 962 -8 692 Superannuation -2 083 -1 370 -1 898 -1 030 Grants and transfer payments (d)(e) -3 598 -3 363 -3 757 -4 205 Supplies and services -5 796 -6 373 -7 077 -7 531 Interest paid - 732 - 448 - 464 - 453 Total payments from operating activities -19 250 -18 931 -21 158 -21 910 Net cash flows from operating activities 1 571 2 926 2 155 3 096 Cash flows from investing activities Sales of property plant and equipment 211 187 150 123 Purchases of property plant and equipment -1 327 -1 208 -1 629 -1 941 Net contribution to other sectors of government ...... - 13 Net privatisation proceeds and other abnormals (f) 3 344 ...... Net customer loans repaid 309 122 98 71 Net purchases of investments 390 -1 091 - 689 - 547 Net cash flows from investing activities 2 927 -1 991 -2 071 -2 306 Cash flows from financing activities Net proceeds of borrowings -4 718 - 766 - 72 - 29 Net cash flows from financing activities -4 718 - 766 - 72 - 29 Net increase in cash held - 221 169 13 761 Cash at beginning of reporting period 940 719 889 902 Cash at end of reporting period 719 889 902 1 663 Source: Department of Treasury and Finance Notes: (2) From 1998-99 other receipts includes a capital assets charge receipt from the public non-financial corporations sector. (3) Sales of goods and services and purchases supplies and services do not include the GST component following its introduction in 1999-2000.
282 Appendix D Budget Statement 2003-04
Table D1 (cont): General government sector cash flow statement – historical series ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Revised Budget Estimate Estimate Estimate Cash flows from operating activities Taxation (a) (b) 9 222 9 547 9 751 9 929 10 326 Regulatory fees and fines 425 510 533 551 561 Grants (b) (c) 11 957 12 248 12 722 13 412 13 826 Sales of goods and services 2 044 2 042 2 098 2 177 2 206 Interest received 317 287 287 279 300 Dividends received 578 273 289 337 422 Other receipts 1 641 1 514 1 501 1 538 1 550 Total receipts from operating activities 26 184 26 420 27 182 28 222 29 191
Employee entitlements (d) -9 067 -9 394 -9 769 -10 135 -10 565 Superannuation -2 546 -1 453 -1 135 -1 502 -1 762 Grants and transfer payments (d)(e) -4 171 -4 535 -4 547 -4 774 -4 738 Supplies and services -8 237 -8 582 -8 896 -9 173 -9 478 Interest paid - 491 - 488 - 481 - 477 - 471 Total payments from operating -24 512 -24 453 -24 829 -26 061 -27 013 activities Net cash flows from operating 1 672 1 967 2 353 2 161 2 178 activities Cash flows from investing activities Sales of property plant and equipment 76 67 60 53 44 Purchases of property plant and -1 938 -2 131 -2 459 -2 167 -2 362 equipment Net contribution to other sectors of - 363 - 530 - 228 - 87 - 85 government Net customer loans repaid - 18 20 20 20 22 Net purchases of investments 837 644 298 67 252 Net cash flows from investing activities -1 406 -1 930 -2 310 -2 114 -2 128 Cash flows from financing activities Net proceeds of borrowings - 206 18 12 10 10 Net cash flows from financing activities - 206 18 12 10 10 Net increase in cash held 60 55 55 57 60 Cash at beginning of reporting period 1 663 1 723 1 778 1 833 1 890 Cash at end of reporting period 1 723 1 778 1 833 1 890 1 950 Source: Department of Treasury and Finance
Budget Statement 2003-04 Appendix D 283
Receipts from operating activities (a) State deficit levy commenced in 1992-93 ($173 million), and ceased in 1994-95 ($180 million). (b) Includes effect of GST grants from 2000-01 onwards. However, the GST collected on sales of goods and services and the GST paid on purchases of supplies and services have not been included in this cash flow statement since this amount is recouped in full from the Australian Taxation Office. (c) Significant offshore petroleum compensation grants from the Commonwealth in 1990-91 ($178 million) and 1991-92 ($191 million, including $60 million rent resource tax compensation). The works (capital) grant from the Commonwealth ceased in 1993-94 ($68 million per annum).
Payments from operating activities (d) Separation payments up to 1989-90, mainly for early retirement and enhanced resignation packages to the Public Transport Corporation are included under ‘grants’. Payments in later years were for voluntary redundancy and targeted separation packages across the general government sector and are included under ‘employee entitlements’. (e) Operating subsidy payments to Tricontinental Corporation commenced in 1991-92 subsequent to the sale of the State Bank. Significant payments were in 1991-92 ($150 million), 1992-93 ($123 million), 1993-94 ($53 million), and 1994-95 ($39 million). Major annual subsidy payments for electricity supplied to the Portland aluminium smelter under the flexible tariff agreement commenced in 1992-93 and ceased in 1997-98. Cost of restructure of the Accelerated Infrastructure Program in 1994-95 ($200 million).
284 Appendix D Budget Statement 2003-04
Investing activities (f) Privatisation and other abnormal items to the general government sector include:
• 1986-87 to 1990-91: payments received from the former Melbourne and Metropolitan Board of Works regarding the transfer of ownership of the Thomson-Cardinia Dam of $35 million per annum;
• 1990-91: net proceeds from the sale of the State Bank ($1 257 million);
• 1992-93: sale of the State Insurance Office ($140 million);
• 1993-94: recall of capital from the Transport Accident Commission ($1 200 million), wind-up of the Victorian Equity Trust ($437 million), casino licence fee ($200 million), offset by a special payment to the State Superannuation Fund ($1 399 million);
• 1994-95: sale of Totalisator Agency Board ($609 million);
• 1995-96: sale of electricity sector businesses ($4 641 million), 1996-97 ($4 262 million), and 1997-98 ($2 101 million) offset by a special payment to the State Superannuation Fund ($490 million); and
• 1998-99: sale of the remainder of the electricity businesses ($361 million), gas businesses ($4 690 million), Victorian Plantations Corporation ($550 million), Aluvic ($401 million), V/line Freight ($20 million), offset by a special payment to reduce the State’s unfunded superannuation liabilities ($2 574 million). The above proceeds from the sale of government businesses are the amounts paid in cash (net) to the Consolidated Fund and are not necessarily the total proceeds of sale.
Budget Statement 2003-04 Appendix D 285
Chart D1: Total receipts from operating activities (in real terms)
30 16
14 25 12 20 10
15 8
6 per cent 10 4 $ billion (2001-02 prices) 5 2
0 0 1986-87 1989-90 1992-93 1995-96 1998-99 2001-02 2004-05
Total receipts from operating activities % GSP (rhs)
Source: Department of Treasury and Finance
Chart D2: Total payments from operating activities (in real terms)
30 16
14 25 12 20 10
15 8
6 per cent 10 4 $ billion (2001-02 prices) 5 2
0 0 1986-87 1989-90 1992-93 1995-96 1998-99 2001-02 2004-05
Total payments from operating activities % GSP (rhs)
Source: Department of Treasury and Finance
286 Appendix D Budget Statement 2003-04
Table D2: General government sector statement of financial performance – historical series ($ million) 1996-97 1997-98 1998-99 Actual Actual Actual
Revenue from ordinary activities Taxation 8 670.2 8 590.3 9 151.6 Fines and regulatory fees 241.7 261.2 330.1 Investment income 5 147.9 3 568.0 7 061.9 Grants 7 516.1 7 533.3 7 480.0 Sale of goods and services 813.8 1 246.3 1 428.3 Gain (loss) on disposal of physical assets - 36.6 106.3 6.7 Fair value of assets received free of charge 69.8 42.7 65.5 Inter sector capital asset charge 493.0 Other revenue 477.6 2 139.4 1 263.6 Total revenue 22 900.5 23 487.4 27 280.6
Expenses from ordinary activities Employee entitlements 6 722.4 6 831.8 6 983.7 Superannuation 1 364.8 1 359.7 1 303.7 Depreciation 696.4 759.7 776.2 Amortisation 15.5 28.7 28.6 Borrowing costs 1 948.9 1 127.0 735.7 Grants 2 574.7 3 422.5 3 595.6 Supplies and services 4 162.8 4 846.3 5 447.6 Other expenses 182.7 1 819.5 466.6 Total expenses 17 668.2 20 195.3 19 337.9
Result from ordinary activities 5 232.3 3 292.1 7 942.7 Movements in asset revaluation reserve .. 1 174.1 1 543.7 Other adjustments other than contributions by owner (a) .. .. 496.0 Total .. 1 174.1 2 039.7 Total changes in equity other than contributions to 5 232.3 4 466.2 9 982.4 other sectors by the State in its capacity as owner Source: Department of Treasury and Finance Note: (a) Transitional adjustments consequent to the introduction of accruals – ceased from 1 July 2001.
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Table D2 (cont): General government sector statement of financial performance – historical series ($ million) 1999-00 2000-01 2001-02 Actual Actual Actual
Revenue from ordinary activities Taxation 9 760.0 8 590.9 8 854.2 Fines and regulatory fees 359.3 380.6 424.4 Investment income 1 416.1 1 476.8 1 002.4 Grants 7 710.6 10 365.5 11 873.2 Sale of goods and services 1 788.6 1 992.1 2 168.1 Gain (loss) on disposal of physical assets 2.0 21.4 - 97.5 Fair value of assets received free of charge 19.8 69.4 95.5 Inter sector capital asset charge 493.0 477.0 489.0 Other revenue 510.3 422.6 553.7 Total revenue 22 059.8 23 796.3 25 363.0
Expenses from ordinary activities Employee entitlements 7 438.6 8 170.2 8 893.7 Superannuation 2 216.0 1 437.7 2 595.2 Depreciation 761.8 799.3 859.5 Amortisation 27.2 39.1 78.2 Borrowing costs 477.3 605.3 472.8 Grants 3 382.7 3 793.0 4 175.5 Supplies and services 6 221.8 7 486.1 7 816.0 Other expenses 366.9 249.4 198.8 Total expenses 20 892.4 22 580.1 25 089.6
Result from ordinary activities 1 167.5 1 216.2 273.4 Movements in asset revaluation reserve 1 534.6 815.8 2 967.9 Other adjustments other than contributions by owner (a) 301.6 46.6 .. Total 1 836.2 862.4 2 967.9 Total changes in equity other than contributions to 3 003.6 2 078.6 3 241.3 other sectors by the State in its capacity as owner Source: Department of Treasury and Finance Notes: (a) Transitional adjustments consequent to the introduction of accruals – ceased from 1 July 2001.
288 Appendix D Budget Statement 2003-04
Table D2 (cont): General government sector statement of financial performance – historical series ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Revised Budget Estimate Estimate Estimate
Revenue from ordinary activities Taxation 9 345.6 9 593.2 9 787.9 9 969.2 10 369.6 Fines and regulatory fees 550.9 637.2 663.5 677.3 687.2 Investment income 1 231.0 895.9 921.6 996.8 1 113.3 Grants 11 958.5 12 248.0 12 722.5 13 411.8 13 825.7 Sale of goods and services 2 021.8 2 047.2 2 101.2 2 179.7 2 209.5 Gain (loss) on disposal of physical - 5.3 - 7.3 - 6.6 - 7.9 - 7.9 assets Fair value of assets received free of 62.8 .. 7.5 .. .. charge Inter sector capital asset charge 501.0 514.0 514.0 514.0 514.0 Other revenue 797.5 670.1 668.9 678.5 673.2 Total revenue 26 463.8 26 598.4 27 380.4 28 419.4 29 384.6
Expenses from ordinary activities Employee entitlements 9 263.1 9 597.7 9 977.4 10 347.3 10 690.0 Superannuation 2 802.3 1 950.8 1 896.2 1 984.0 2 045.1 Depreciation 962.0 1 024.8 1 094.3 1 144.9 1 206.1 Amortisation 62.3 67.9 67.2 68.8 69.2 Borrowing costs 496.9 483.3 476.0 483.0 480.0 Grants 4 179.1 4 537.2 4 549.2 4 775.6 4 740.1 Supplies and services 8 401.3 8 598.2 8 902.6 9 216.9 9 516.3 Other expenses 136.8 94.0 96.5 94.5 90.5 Total expenses 26 303.9 26 353.9 27 059.4 28 114.9 28 837.4
Result from ordinary activities 159.9 244.5 321.0 304.4 547.3 Movements in asset revaluation 1 320.4 1 194.5 1 261.5 1 348.3 1 394.0 reserve Other adjustments other than ...... contributions by owner Total 1 320.4 1 194.5 1 261.5 1 348.3 1 394.0 Total changes in equity other than contributions to other sectors by 1 480.3 1 439.0 1 582.5 1 652.7 1 941.3 the State in its capacity as owner Source: Department of Treasury and Finance
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Table D3: Abnormal items – historical series ($ million) 1996-97 1997-98 1998-99 Actual ActualActual Revenue from ordinary activities Taxation - Business asset sales (a) 468.9 16.0 295.7 Investment income - Business asset sales (a) 3 820.3 1 880.2 5 722.9 - Gascor disaggregation - assumption of debt 391.7 Other revenue - Business asset sales (a) 87.5 60.2 234.5 - Reversal of Flexible Tariff Management Unit Trust liability 1 275.2 - Forgiveness of debt owed to Department of Treasury and 106.7 Finance by SEMCL Expenses from ordinary activities Supplies and services - Business asset sales (a) - 55.7 - 49.5 - 100.8 Other expenses - Forgiveness of debt owed by Director of Housing to - 1 086.8 Department of Treasury and Finance - Loss on revaluation of water sector debt - 334.4 - Diminution of VAIP bonds .. .. - 122.0
Total abnormal items 4 321.0 2 152.6 6 136.9 Source: Department of Treasury and Finance Note: (a) Total business asset sales: 4 321.0 1 906.9 6 152.2
290 Appendix D Budget Statement 2003-04
Table D4: General government current outlays (a) by purpose 1986-87 to 1998-99 – historical series ($ million) 1986-87 1987-88 1988-89 1989-90 1990-91 Actual Actual Actual Actual Actual
Government superannuation benefits 524 632 609 657 819 Other general public services 293 306 326 336 268 General public services 817 938 935 993 1 087 Police and fire protection services 478 518 560 625 670 Law courts and legal services 32 24 31 76 126 Prisons and corrective services 62 75 86 104 116 Other public order and safety 3 2 3 3 8 Public order and safety 575 619 680 808 920 Primary and secondary education 2 044 2 135 2 398 2 520 2 467 Tertiary education 922 1 031 1 044 1 097 1 261 Pre-school education and education not 136 170 187 204 185 definable by level Transportation of students 72 78 84 91 99 Education n.e.c. 78 92 34 37 17 Education 3 252 3 506 3 747 3 949 4 029 Acute care institutions 1 374 1 480 1 609 1 737 1 962 Mental health institutions 255 312 346 377 295 Nursing homes for the aged 69 103 119 130 41 Community health services 75 112 111 121 139 Public health services 52 82 128 155 145 Pharmaceuticals - 1 - 2 ...... Health research 2 3 5 6 7 Health administration n.e.c. 29 20 32 44 78 Health 1 855 2 110 2 350 2 570 2 667 Social security 93 97 105 111 105 Welfare services 298 302 370 416 554 Social security and welfare n.e.c. 1 ...... 1 Social security and welfare 392 399 475 527 660 Housing and community development 119 117 146 149 178 Water supply 13 15 16 11 7 Sanitation and protection of the 7 7 7 12 17 environment Other community amenities ...... 1 Housing and community amenities 139 139 169 172 203 Recreation facilities and services 69 74 111 118 121 Cultural facilities and services 65 66 77 84 72 Broadcasting and film production 4 5 4 3 3 Recreation and culture n.e.c. - 1 ...... Recreation and culture 137 145 192 205 196 Source: Australian Bureau of Statistics Note: (a) Current outlays – cash GFS basis.
Budget Statement 2003-04 Appendix D 291
Table D4 (cont): General government current outlays (a) by purpose 1986-87 to 1998-99 – historical series ($ million) 1986-87 1987-88 1988-89 1989-90 1990-91 Actual Actual Actual Actual Actual
Fuel affairs and services .. 1 .. 1 1 Electricity and other energy 27 15 2 2 1 Fuel and energy n.e.c. 6 6 5 17 16 Fuel and energy 33 22 7 20 18 Agriculture 90 92 109 120 107 Forestry 58 63 69 72 85 Agriculture, forestry, fishing and 148 155 178 192 192 hunting Mining and mineral resources other 6 5 6 9 5 than fuels Manufacturing 51 54 38 37 28 Construction 1 2 1 .. .. Mining and mineral resources other 58 61 45 46 33 than fuels; manufacturing; and construction Road transport 231 257 290 291 328 Water transport .. 1 2 2 3 Rail transport 374 307 316 .. .. Other transport 476 327 323 671 720 Communications ...... 3 2 Transport and communications 1 081 892 931 967 1 053 Storage .. 1 ...... Tourism and area promotion 23 26 26 30 35 Labour and employment affairs 102 97 70 72 95 Other economic affairs n.e.c. - 2 - 15 - 23 - 27 - 22 Other economic affairs 123 109 73 75 108 Public debt transactions 804 1 124 1 219 1 410 1 523 General purpose inter-government 148 166 173 177 182 transactions Natural disaster relief 2 .. .. 1 1 Other purposes n.e.c. 1 .. - 4 - 2 - 12 Other purposes 955 1 290 1 388 1 586 1 694 Total current outlays 9 565 10 385 11 170 12 110 12 860 Source: Australian Bureau of Statistics Note: (a) Current outlays – cash GFS basis.
292 Appendix D Budget Statement 2003-04
Table D4 (cont): General government current outlays (a) by purpose 1986-87 to 1998-99 – historical series ($ million) 1991-92 1992-93 1993-94 1994-95 1995-96 Actual Actual Actual Actual Actual Government superannuation benefits 1 023 1 392 1 454 1 411 1 114 Other general public services 226 271 229 202 250 General public services 1 249 1 663 1 683 1 613 1 364 Police and fire protection services 706 760 778 799 854 Law courts and legal services 107 118 121 122 168 Prisons and corrective services 115 103 98 106 108 Other public order and safety 9 4 3 2 - 2 Public order and safety 937 985 1 000 1 029 1 128 Primary and secondary education 2 745 2 723 2 655 2 627 2 697 Tertiary education 1 269 853 460 468 576 Pre-school education and education not 187 183 186 207 223 definable by level Transportation of students 102 106 112 121 127 Education n.e.c. 24 21 20 14 - 6 Education 4 327 3 886 3 433 3 437 3 617 Acute care institutions 2 064 1 974 1 828 1 879 2 139 Mental health institutions 308 356 333 353 372 Nursing homes for the aged 33 52 109 91 115 Community health services 151 179 180 204 243 Public health services 135 118 119 133 140 Pharmaceuticals ...... 9 Health research 8 6 5 5 6 Health administration n.e.c. 80 85 85 - 1 - 47 Health 2 779 2 770 2 659 2 664 2 977 Social security 134 148 186 222 216 Welfare services 604 677 656 734 735 Social security and welfare n.e.c. 1 1 1 1 .. Social security and welfare 739 826 843 957 951 Housing and community development 213 199 203 295 192 Water supply 11 19 16 20 5 Sanitation and protection of the 20 20 22 25 18 environment Other community amenities 1 ...... - 1 Housing and community amenities 245 238 241 340 214 Recreation facilities and services 104 104 62 51 88 Cultural facilities and services 89 91 92 118 118 Broadcasting and film production 3 3 3 4 5 Recreation and culture n.e.c...... Recreation and culture 196 198 157 173 211 Source: Australian Bureau of Statistics Note: (a) Current outlays – cash GFS basis.
Budget Statement 2003-04 Appendix D 293
Table D4 (cont): General government current outlays (a) by purpose 1986-87 to 1998-99 – historical series ($ million) 1991-92 1992-93 1993-94 1994-95 1995-96 Actual Actual Actual Actual Actual Fuel affairs and services - 1 1 13 28 - 1 Electricity and other energy 1 52 3 28 212 Fuel and energy n.e.c. 12 5 2 - 2 - 6 Fuel and energy 12 58 18 54 205 Agriculture 112 83 87 103 153 Forestry 81 90 91 95 47 Agriculture, forestry, fishing and 193 173 178 198 200 hunting Mining and mineral resources other 5 7 6 8 10 than fuels Manufacturing 37 36 17 34 36 Construction ...... Mining and mineral resources other 42 43 23 42 46 than fuels; manufacturing; and construction Road transport 386 357 366 434 342 Water transport - 2 - 2 - 2 5 5 Rail transport ...... 9 Other transport 671 657 613 321 448 Communications 2 ...... 4 Transport and communications 1 057 1 012 977 760 808 Storage ...... Tourism and area promotion 38 41 46 58 29 Labour and employment affairs 95 82 57 69 62 Other economic affairs n.e.c. 171 139 37 86 9 Other economic affairs 304 262 140 213 100 Public debt transactions 1 717 2 027 2 185 1 972 1 910 General purpose inter-government 186 191 191 191 202 transactions Natural disaster relief ...... 30 .. Other purposes n.e.c. .. 251 259 153 9 Other purposes 1 903 2 469 2 635 2 346 2 121 Total current outlays 13 983 14 583 13 987 13 826 13 942 Source: Australian Bureau of Statistics Note: (a) Current outlays – cash GFS basis.
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Table D4 (cont): General government current outlays (a) by purpose 1986-87 to 1998-99 – historical series ($ million) 1996-97 1997-98 1998-99 Actual Actual Actual Government superannuation benefits 1 295 1 732 1 712 Other general public services 288 324 421 General public services 1 583 2 056 2 133 Police and fire protection services 998 941 979 Law courts and legal services 138 133 - 46 Prisons and corrective services 144 131 148 Other public order and safety 43 161 173 Public order and safety 1 323 1 366 1 254 Primary and secondary education 2 824 3 213 3 362 Tertiary education 617 540 502 Pre-school education and education not definable by level 248 24 126 Transportation of students 136 108 157 Education n.e.c. 20 118 - 61 Education 3 845 4 003 4 086 Acute care institutions 2 186 2 599 2 482 Mental health institutions 400 313 401 Nursing homes for the aged 122 .. 153 Community health services 248 .. 288 Public health services 187 781 203 Pharmaceuticals 11 .. 14 Health research 7 16 22 Health administration n.e.c. - 74 - 111 - 51 Health 3 087 3 598 3 512 Social security 236 244 261 Welfare services 762 966 902 Social security and welfare n.e.c...... Social security and welfare 998 1 210 1 163 Housing and community development 187 477 96 Water supply 11 1 10 Sanitation and protection of the environment 31 35 35 Other community amenities - 1 1 - 1 Housing and community amenities 228 514 140 Recreation facilities and services 89 84 70 Cultural facilities and services 127 152 159 Broadcasting and film production 12 1 9 Recreation and culture n.e.c. 6 .. 11 Recreation and culture 234 237 249 Source: Australian Bureau of Statistics Note: (a) Current outlays – cash GFS basis.
Budget Statement 2003-04 Appendix D 295
Table D4 (cont): General government current outlays (a) by purpose 1986-87 to 1998-99 – historical series ($ million) 1996-97 1997-98 1998-99 Actual Actual Actual Fuel affairs and services - 1 - 3 - 3 Electricity and other energy 22 2 92 Fuel and energy n.e.c. - 4 - 4 - 5 Fuel and energy 17 - 5 84 Agriculture 162 170 208 Forestry 76 108 89 Agriculture, forestry, fishing and hunting 238 278 297 Mining and mineral resources other than fuels 12 12 10 Manufacturing 28 44 41 Construction ...... Mining and mineral resources other than fuels; 40 56 51 manufacturing; and construction Road transport 348 427 246 Water transport 4 - 3 4 Rail transport 10 42 190 Other transport 378 384 377 Communications 11 10 7 Transport and communications 751 860 824 Storage ...... Tourism and area promotion 57 36 69 Labour and employment affairs 45 29 26 Other economic affairs n.e.c. - 14 - 23 10 Other economic affairs 88 42 105 Public debt transactions 1 450 1 132 801 General purpose inter-government transactions 210 1 301 Natural disaster relief ...... Other purposes n.e.c. 176 180 - 7 Other purposes 1 836 1 313 1 095 Total current outlays 14 268 15 528 14 993 Source: Australian Bureau of Statistics Note: (a) Current outlays – cash GFS basis.
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Table D5: General government expenses by purpose 1999-2000 to 2006-07 – historical series ($ million) 1999-00 2000-01 2001-02 2002-03 Actual Actual Actual Revised
General public services 838 744 630 660 Public order and safety 1 956 2 004 2 105 2 412 Education 5 629 6 274 6 541 6 825 Health 5 027 5 666 6 128 6 393 Social security & welfare 1 594 1 737 1 807 2 081 Housing and community amenities 833 1 336 1 776 1 160 Recreation and culture 486 491 545 728 Fuel and energy 16 134 149 32 Agriculture, forestry, fishing and hunting 480 468 465 505 Mining and mineral resources other than fuels; 27 12 12 17 manufacturing; and construction Transport and communications 2 029 2 151 2 155 2 384 Other economic affairs 146 158 292 342 Other purposes (a) 1 260 1 337 1 267 1 643 Total expenses (b) 20 321 22 512 23 871 25 184 Source: Department of Treasury and Finance Notes: (a) Includes nominal superannuation interest expense. (b) Expenses by purpose – accrual GFS basis.
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Table D5 (cont): General government expenses by purpose 1999-2000 to 2006-07 – historical series ($ million) 2003-04 2004-05 2005-06 2006-07 Budget Estimate Estimate Estimate
General public services 711 738 792 841 Public order and safety 2 536 2 656 2 792 2 932 Education 7 153 7 365 7 561 7 720 Health 6 705 7 125 7 392 7 659 Social security & welfare 2 255 2 356 2 443 2 529 Housing and community amenities 1 172 1 190 1 260 1 313 Recreation and culture 776 779 841 659 Fuel and energy 31 31 34 38 Agriculture, forestry, fishing and hunting 580 553 557 569 Mining and mineral resources other than fuels; 17 17 17 18 manufacturing; and construction Transport and communications 2 305 2 306 2 426 2 500 Other economic affairs 408 326 314 341 Other purposes (a) 1 525 1 568 1 625 1 673 Total expenses (b) 26 174 27 009 28 055 28 791 Source: Department of Treasury and Finance Notes: (a) Includes nominal superannuation interest expense. (b) Expenses by purpose – accrual GFS basis.
298 Appendix D Budget Statement 2003-04
APPENDIX E: UNIFORM PRESENTATION OF GOVERNMENT FINANCE STATISTICS
THE ACCRUAL GFS PRESENTATION The Government Finance Statistics (GFS) system employed by the Australian Bureau of Statistics (ABS) is designed to provide statistics relating to all Australian public sector entities. The statistics show consolidated transactions of the various institutional sectors of government from an economic viewpoint, providing details of the revenue, expenses, payments, receipts, assets and liabilities. It includes only those transactions over which a government exercises control under its legislative or policy framework. This means that, unlike the accounting viewpoint, the GFS excludes from the calculation of net operating balance both revaluations (holding gains or losses) arising from a change in market prices, and other changes in the volume of assets that result from discoveries, depletion and destruction of assets. This means that differences arise between the GFS and accounting frameworks, particularly within the operating statement.
Operating statement The operating statement, also referred to as a statement of financial performance, is designed to capture the composition of GFS revenues and GFS expenses and the net cost of a government’s activities within a financial year. It shows the full cost of resources consumed by government in achieving its objectives, and how these costs are met from various revenue sources. Unlike a standard accounting operating statement, the GFS operating statement reports two major fiscal measures – the GFS net operating balance and GFS net lending. The GFS net operating balance is calculated as GFS revenue minus GFS expenses. In contrast, GFS net lending, or fiscal balance, includes net capital expenditure but excludes depreciation, thereby giving a measure of a jurisdiction’s call on financial markets.
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Balance sheet The balance sheet records a government’s stocks of financial and non-financial assets and liabilities. This statement, also referred to as a statement of financial position, discloses the resources over which a government maintains control. The GFS balance sheet differs from the standard accounting presentation in that it provides information on financial and non-financial assets, and does not distinguish between current and non-current assets and liabilities.
Cash flow statement The cash flow statement records a government’s cash receipts and payments and shows how a government obtains and expends cash. The GFS cash flow statement reports two major fiscal measures – the net increase in cash held and the cash surplus. Net increase in cash held is the sum of net cash flows from all operating, investing and financing activities. The cash surplus comprises only net cash received from operating activities, and from sales and purchases of non-financial assets, minus distributions paid (in the case of public financial corporations and public non-financial corporations), minus finance leases and similar arrangements. The GFS cash surplus measure is broadly comparable with the old cash-GFS surplus measure, allowing for comparisons between the two frameworks.
INSTITUTIONAL SECTORS
General government sector The general government sector comprises all government departments, offices and other government bodies engaged in providing services free of charge or at prices significantly below their cost of production. General government services include those which are mainly non-market in nature, those which are largely for collective consumption by the community, and those which involve the transfer or redistribution of income. These services are financed mainly through taxes, other compulsory levies and user charges.
Public non-financial corporations sector The public non-financial corporations sector was formerly known as the public trading enterprises sector. It comprises bodies mainly engaged in the production of goods and services (of a non-financial nature) for sale in the market place at
300 Appendix E Budget Statement 2003-04
prices that aim to recover most of the costs involved (e.g. water and port authorities). In general, public non-financial corporations are legally distinguishable from the governments that own them.
Non-financial public sector The non-financial public sector represents the consolidated transactions and assets and liabilities of the general government and public non-financial corporations sectors. In compiling statistics for the non-financial public sector, transactions and debtor-creditor relationships between sub-sectors are eliminated to avoid double counting.
Public financial corporations Public financial corporations are bodies primarily engaged in the provision of financial intermediation services or auxiliary financial services. They are able to incur financial liabilities on their own account (e.g. taking deposits, issuing securities or providing insurance services). The public financial corporations sector includes the Treasury Corporation of Victoria and the Transport Accident Corporation. Estimates are not published for the public financial corporations sector.
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Table E.1: General government sector operating statement ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Revised Budget Estimate Estimate Estimate GFS revenue Taxation revenue 9 245 9 480 9 673 9 850 10 275 Current grants and subsidies 11 373 11 788 12 153 12 894 13 328 Capital grants 585 460 570 518 498 Sales of goods and services 2 972 3 008 3 078 3 178 3 184 Interest income 318 288 287 280 301 Other 1 967 1 574 1 618 1 699 1 798 Total revenue 26 461 26 597 27 379 28 419 29 384
GFS expenses Employee expenses 10 389 10 759 11 201 11 608 11 995 Depreciation 962 1 025 1 094 1 145 1 206 Other operating expenses 8 229 8 424 8 707 8 998 9 300 Nominal superannuation interest 937 955 990 1 043 1 077 expense Other interest expense 474 460 453 460 457 Other property expenses ...... Current transfers 4 092 4 178 4 140 4 332 4 246 Capital transfers 102 374 424 470 509 Total expenses 25 184 26 174 27 009 28 055 28 790
GFS net operating balance 1 277 423 369 364 594 Less: Net acquisition of non-financial assets Purchases of non-financial assets 1 938 2 131 2 459 2 167 2 362 Sales of non-financial assets - 76 - 67 - 60 - 53 - 44 Less: Depreciation 962 1 025 1 094 1 145 1 206 Plus: Change in inventories 0 0 0 0 0 Plus: Other movements in non-financial 63 - 0 7 426 - 0 assets Total net acquisition of non-financial 963 1 039 1 313 1 395 1 111 assets GFS net lending (+) / borrowing (-) (a) 314 -616 - 943 -1 031 - 517 Source: Department of Treasury and Finance Note: (a) GFS net lending also equals net transactions in financial assets less net transactions in liabilities. If the boost to infrastructure investment funded by the Growing Victoria infrastructure reserve is excluded the GFS net lending / borrowing aggregates are: GFS net lending (+) / borrowing (-) 963 37 - 886 -1 027 - 517 (excluding Growing Victoria)
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Table E.2: Public non-financial corporations sector operating statement ($ million) 2002-03 2003-04 Revised Budget GFS revenue Sales of goods and services 3 426 2 989 Current grants and subsidies 736 740 Capital grants 1 5 Interest income 59 43 Other 394 333 Total revenue 4 616 4 109
GFS expenses Employee expenses 408 429 Depreciation 485 514 Other operating expenses 2 739 2 349 Property expenses 698 497 Current transfers 61 67 Capital transfers 47 20 Total expenses 4 438 3 876
GFS net operating balance 178 233 Less: Net acquisition of non-financial assets Purchases of non-financial assets 839 958 Sales of non-financial assets - 83 - 86 Less: Depreciation 485 514 Plus: Change in inventories 25 26 Plus: Other movements in non-financial assets 185 141 Total net acquisition of non-financial assets 481 524 GFS net lending (+) / borrowing (-) (a) - 302 - 291 Source: Department of Treasury and Finance Note: (a) GFS net lending also equals net transactions in financial assets less net transactions in liabilities.
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Table E.3: Non-financial public sector operating statement ($ million) 2002-03 2003-04 Revised Budget GFS revenue Taxation revenue 9 194 9 426 Current grants and subsidies 11 373 11 788 Capital grants 586 462 Sales of goods and services 5 548 5 079 Interest income 376 331 Other 1 791 1 481 Total revenue 28 868 28 567
GFS expenses Employee expenses 10 797 11 086 Depreciation 1 447 1 539 Other operating expenses 10 330 9 605 Nominal superannuation interest expense 937 955 Other interest expense 623 619 Other property expenses .. .. Current transfers 3 155 3 195 Capital transfers 336 504 Total expenses 27 625 27 503
GFS net operating balance 1 244 1 065 Less: Net acquisition of non-financial assets Purchases of non-financial assets 2 777 3 089 Sales of non-financial assets - 159 - 153 Less: Depreciation 1 447 1 539 Plus: Change in inventories 25 26 Plus: Other movements in non-financial assets Total net acquisition of non-financial assets 1 195 1 423 GFS net lending (+) / borrowing (-) (a) 48 - 358 Source: Department of Treasury and Finance Note: (a) GFS net lending also equals net transactions in financial assets less net transactions in liabilities. If the boost to infrastructure investment funded by the Growing Victoria infrastructure reserve is excluded the GFS net lending / borrowing aggregates are: GFS net lending (+) / borrowing (-) (excluding Growing 697 295 Victoria)
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Table E.4: General government sector balance sheet ($ million) as at 30 June 2002 2003 2004 2005 2006 2007 Opening Revised Budget Estimate Estimate Estimate Assets Financial assets Cash and deposits 1 667 1 724 1 779 1 834 1 890 1 950 Advances paid 237 241 221 201 181 159 Investments, loans and 3 812 2 973 2 329 2 031 1 965 1 712 placements Other non-equity assets 1 312 1 448 1 523 1 605 1 697 1 783 Equity 27 266 28 080 28 610 28 839 28 926 29 011 Total financial assets 34 294 34 467 34 463 34 510 34 658 34 614
Non-financial assets Land and fixed assets 38 537 40 105 42 258 44 762 47 436 49 877 Other non-financial assets 1 000 1 018 1 031 1 037 1 038 1 034 Total non-financial assets 39 538 41 123 43 290 45 799 48 474 50 911 Total assets 73 832 75 590 77 752 80 309 83 132 85 525
Liabilities Deposits held 434 457 462 467 472 477 Advances received 2 1 1 1 1 1 Borrowing 6 350 6 099 6 107 6 110 6 558 6 573 Superannuation liability 13 383 13 639 14 137 14 898 15 380 15 663 Other employee entitlements and 2 854 3 141 3 348 3 557 3 789 3 939 provisions Other non-equity liabilities 1 664 1 732 1 735 1 729 1 730 1 726 Total liabilities 24 687 25 069 25 789 26 762 27 929 28 379 Net worth 49 145 50 520 51 963 53 548 55 203 57 146 Net financial worth (a) 9 607 9 397 8 674 7 749 6 729 6 235 Net debt (b) 1 069 1 618 2 239 2 511 2 994 3 229 Source: Department of Treasury and Finance Notes: (a) Net financial worth equals total financial assets minus total liabilities. (b) Net debt equals the sum of deposits held, advances received and borrowings, minus the sum of cash and deposits, advances paid, and investments, loans and placements. If Growing Victoria investments are not included as an offset to debt, on the grounds that these investments are earmarked for infrastructure projects and are therefore not available to redeem debt, the net debt figures are:
Net debt (excluding Growing 2 432 2 333 2 301 2 515 2 994 3 229 Victoria)
Budget Statement 2003-04 Appendix E 305
Table E.5: Public non-financial corporations sector balance sheet ($ million) as at 30 June 2002 2003 2004 Opening Revised Budget Assets Financial assets Cash and deposits 481 411 408 Advances paid 286 235 242 Investments, loans and placements 845 734 813 Other non-equity assets 1 970 1 748 1 650 Equity 0 0 0 Total financial assets 3 582 3 128 3 112
Non-financial assets Land and fixed assets 28 661 29 679 30 683 Other non-financial assets 142 150 158 Total non-financial assets 28 802 29 829 30 841 Total assets 32 384 32 957 33 953
Liabilities Deposits held 64 62 64 Advances received 76 72 74 Borrowing 2 604 2 703 2 844 Superannuation liability 52 52 52 Other employee entitlements and 2 282 2 190 2 215 provisions Other non-equity liabilities 688 542 543 Total liabilities 5 766 5 623 5 790 Shares and other contributed capital 26 618 27 334 28 163 Net worth ...... Net financial worth (a) -28 802 -29 829 -30 841 Net debt (b) 1 132 1 458 1 519 Source: Department of Treasury and Finance Notes: (a) Net financial worth equals total financial assets minus total liabilities. (b) Net debt equals the sum of deposits held, advances received and borrowings, minus the sum of cash and deposits, advances paid, and investments, loans and placements.
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Table E.6: Non-financial public sector balance sheet ($ million) as at 30 June 2002 2003 2004 Opening Revised Budget Assets Financial assets Cash and deposits 2 148 2 135 2 187 Advances paid 363 523 530 Investments, loans and placements 4 557 3 624 3 058 Other non-equity assets 3 199 3 109 3 085 Equity 293 1 007 1 437 Total financial assets 10 560 10 397 10 297
Non-financial assets Land and fixed assets 67 180 69 766 72 924 Other non-financial assets 1 094 1 120 1 141 Total non-financial assets 68 275 70 886 74 065 Total assets 78 835 81 283 84 362
Liabilities Deposits held 494 511 517 Advances received 23 19 20 Borrowing 8 692 8 401 8 550 Superannuation liability 13 435 13 691 14 188 Other employee entitlements and 4 379 4 574 4 805 provisions Other non-equity liabilities 2 352 2 281 2 284 Total liabilities 29 375 29 477 30 364 Net worth 49 459 51 806 53 997 Net financial worth (a) -18 815 -19 080 -20 067 Net debt (b) 2 141 2 651 3 312 Source: Department of Treasury and Finance Notes: (a) Net financial worth equals total financial assets minus total liabilities. (b) Net debt equals the sum of deposits held, advances received and borrowings, minus the sum of cash and deposits, advances paid, and investments, loans and placements. If Growing Victoria investments are not included as an offset to debt, on the grounds that these investments are earmarked for infrastructure projects and are therefore not available to redeem debt, the net debt figures are:
Net debt (excluding Growing Victoria) 3 504 3 366 3 373
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Table E.7: General government sector cash flow statement ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Revised Budget Estimate Estimate Estimate Cash receipts from operating activities Taxes received 9 121 9 434 9 637 9 810 10 232 Receipts from sales of goods and services 2 914 2 906 2 975 3 077 3 081 Grants/subsidies received 11 957 12 248 12 722 13 412 13 826 Other receipts 2 192 1 838 1 853 1 929 2 058 Total receipts 26 184 26 425 27 187 28 228 29 196 Cash payments from operating activities Payment for goods and services -19 940 -19 428 -19 797 -20 826 -21 824 Grants and subsidies paid -3 649 -4 067 -4 023 -4 218 -4 147 Interest paid - 474 - 460 - 453 - 460 - 457 Other payments - 449 - 502 - 562 - 575 -605 Total payments -24 512 -24 457 -24 834 -26 078 -27 032 Net cash flows from operating activities 1 672 1 967 2 353 2 150 2 164 Net cash flows from investing in non- financial assets Sales of non-financial assets 76 67 60 53 44 Purchases of non-financial assets -1 938 -2 131 -2 459 -2 167 -2 362 Total cash flows – non-financial assets -1 862 -2 064 -2 399 -2 114 -2 317
Net cash flows from investments in -416 -510 - 208 - 67 -63 financial assets for policy purposes Net cash flows from investments in 823 644 298 66 252 financial assets for liquidity Net cash flows from financing activities Advances received (net) .. - 1 ...... Borrowings (net) - 250 10 5 13 17 Deposits received (net) 23 5 5 5 5 Other financing (net) - 50 4 2 2 2 Net cash flows from financing activities - 277 18 12 20 24 Net increase in cash held - 60 56 55 56 60
Net cash from operating activities & - 190 - 97 - 46 36 - 154 investments in non-financial assets Acquisitions under finance leases ...... 437 .. Surplus (+) /deficit (-) (a) - 190- 97 - 46 - 401 - 154 Source: Department of Treasury and Finance Note: (a) Table below shows GFS surplus (+)/deficit(-) excluding impact of Growing Victoria.
Surplus (+) /deficit (-) ( excl. Growing Victoria) 459 557 11 - 396 - 154
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Table E.8: Public non-financial corporations sector cash flow statement ($ million) 2002-03 2003-04 Revised Budget Cash receipts from operating activities Receipts from sales of goods and services 3 666 2 980 Grants/subsidies received 738 745 Other receipts 355 311 Total receipts 4 759 4 036 Cash payments from operating activities Payment for goods and services -2 782 -2 259 Grants and subsidies paid - 44 - 35 Interest paid - 151 - 148 Other payments - 775 - 748 Total payments -3 752 -3 190 Net cash flows from operating activities 1 007 846 Net cash flows from investing in non-financial assets Sales of non-financial assets 83 86 Purchases of non-financial assets - 839 - 958 Total cash flows from investing in non-financial assets - 756 - 872
Net cash flows from investments in financial assets for 42 39 policy purposes Net cash flows from investments in financial assets for 33 125 liquidity purposes Net cash flows from financing activities Advances received (net) - 2 - 1 Borrowings (net) 101 136 Deposits received (net) - 0 - 1 Distributions paid - 460 - 307 Other Financing (net) 9 22 Total net cash flows from financing activities - 354 - 150 Net increase in cash held - 27 - 12
Net cash from operating activities, dividends paid, and - 209 - 333 investments in non-financial assets Acquisition of assets under finance leases and similar .. .. arrangements Surplus (+) /deficit (-) - 209 - 333 Source: Department of Treasury and Finance
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Table E.9: Non-financial public sector cash flow statement ($ million) 2002-03 2003-04 Revised Budget Cash receipts from operating activities Taxes received 9 070 9 380 Receipts from sales of goods and services 5 725 4 970 Grants/subsidies received 11 956 12 250 Other receipts 1 943 1 785 Total receipts 28 693 28 385 Cash payments from operating activities Payment for goods and services -22 588 -21 346 Grants and subsidies paid -2 906 -3 210 Interest paid - 624 - 608 Other payments - 672 - 656 Total payments -26 791 -25 820 Net cash flows from operating activities 1 903 2 565 Net cash flows from investing in non-financial assets Sales of non-financial assets 159 153 Purchases of non-financial assets -2 706 -2 901 Total cash flows from investing in non-financial assets -2 547 -2 748
Net cash flows from investments in financial assets for - 432 - 391 policy purposes Net cash flows from investments in financial assets for 839 769 liquidity purposes Net cash flows from financing activities Advances received (net) - 2 - 1 Borrowings (net) 33 146 Deposits received (net) 27 4 Other financing (net) 30 74 Total net cash flows from financing activities 87 223 Net increase in cash held - 150 419
Net cash from operating activities and investments in non- - 644 - 183 financial assets Acquisition of assets under finance leases and similar .. .. arrangements Surplus (+) /deficit (-) (a) - 644 - 183 Source: Department of Treasury and Finance Note: (a) Table below shows GFS surplus (+)/deficit(-) excluding impact of Growing Victoria.
Surplus (+) /deficit (-) ( excl. Growing Victoria) 4 471
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Table E.10: General government sector expenses by function ($ million) 2002-03 2003-04 Revised Budget
General public services 660 711 Public order and safety 2 412 2 536 Education 6 825 7 153 Health 6 393 6 705 Social security and welfare 2 081 2 255 Housing and community amenities 1 160 1 172 Recreation and culture 728 776 Fuel and energy 32 31 Agriculture, forestry, fishing, and hunting 505 580 Mining, manufacturing, and construction 17 17 Transport and communications 2 384 2 305 Other economic affairs 342 408 Other purposes 1 643 1 525 Total GFS expenses 25 184 26 174
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Table E.11: General government sector taxation ($ million) 2002-03 2003-04 Revised Budget
Taxes on employers' payroll and labour force 2 628 2 730 Taxes on property Land taxes 654 768 Stamp duties on financial and capital transactions 2 376 2 099 Financial institutions' transaction taxes 251 249 Other 103108 Total 3 383 3 224 Taxes on the provision of goods and services Excises and levies .. .. Taxes on gambling 1 318 1 420 Taxes on insurance 857 951 Total 2 175 2 371 Taxes on the use of goods and performance of .. activities Motor vehicle taxes 1 000 1 091 Franchise taxes 6 6 Other 5358 Total 1 059 1 155 Total GFS taxation revenue 9 245 9 480
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Table E.12: Reconciliation between general government AAS31 net result and GFS measures ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Revised Budget Estimate Estimate Estimate General government net result 160 245 321 304 547
Less: Operating revaluations and gains 41 -1 -2 -0 -0 on sale of physical assets Plus: Expense for doubtful debts 92 94 96 94 90 Amortisation not included as GFS 62 68 67 69 69 expenses Change to provision for employees superannuation (difference between 921 18 - 113 - 103 - 112 nominal interest and expense) Unrealised gains on sales of 0 0 000 investments General government net operating 1 277 423 369 364 594 balance (GFS) Less: Gross fixed capital formation 1 924 2 064 2 407 2 540 2 317 Plus: Depreciation 962 1 025 1 094 1 145 1 206 Change in inventories 0 0 000 GFS net lending(+)/borrowing(-) (a) 314 -616 - 943 -1 031 - 517 Plus: Superannuation expense (difference between operating statement and cash -665 480 875 585 396 flow statement) Other non-cash expenses 161 40 22 45 -32 GFS cash surplus(+)/deficit(-) - 190 - 97 -46 - 401 - 154 Plus: Growing Victoria net cash flow 648 653 57 5 .. GFS cash surplus (+) /deficit (-) 459 557 11 - 396 -154 (excluding Growing Victoria) Plus: net contributions to other sectors 359 524 225 83 81 of government and other Decrease in general government net 100 32 - 214 - 479 - 235 debt (excluding Growing Victoria) Source: Department of Treasury and Finance Note: (a) The table below shows GFS net lending (+) / borrowing(-) excluding the impact of Growing Victoria. GFS net lending (+) / borrowing (-) 963 37 - 886 -1 027 - 517 (excluding Growing Victoria)
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Victoria’s 2003-04 Nominated Loan Council Allocation Table E.13 compares Victoria’s 2003-04 Loan Council Allocation (LCA), as approved by Loan Council in March 2003, with the revised LCA based on the 2003-04 Budget estimates. Victoria’s revised LCA for 2003-04 has decreased due mainly to an increase in tax receipts in the general government sector and a decrease in the purchases of non-financial assets in the public non-financial corporations sector, resulting in a decrease of the non-financial public sector cash deficit. This change is partially offset by an increase in equity acquisitions for policy purposes outside of the non-financial public sector.
Table E.13: Loan Council Allocation 2003-04 ($ million) 2003-04 2003-04 Nomination Revised General government sector cash (+) deficit / (-) surplus 348 97 Public non-financial corporation sector cash (+) deficit / (-) 399 333 surplus Non-financial public sector cash (+) deficit / (-) surplus (a) 670 183 Less: Net cash flows from investments in financial assets for policy purposes (b) - 16 - 391 Plus: Memorandum items (c) 204 204 Loan Council Allocation 890 777 Tolerance limit (2% of non-financial public sector cash 575 575 receipts from operating activities) (d) Source: Department of Treasury and Finance Notes: (a) The sum of the surplus / deficit of the general government and public non-financial corporation sector does not directly equal the non-financial public sector surplus due to intersectoral transfers, which are netted out in the calculation of the non-financial public sector figure. (b) The non-financial public sector surplus relating to the 2003-04 includes net cash flows from investments in financial assets for policy purposes. (c) Memorandum items are used to adjust the ABS deficit to include in LCAs certain transactions, such as operating leases, that have many of the characteristics of public sector borrowings but do not constitute formal borrowings. They are also used, where appropriate, to deduct from the ABS deficit certain transactions that Loan Council has agreed should not be included in LCAs (e.g. the over/under funding of employers’ emerging costs under public sector superannuation schemes, or borrowings by entities such as statutory marketing authorities). (d) A tolerance limit equal to 2 per cent of ‘total non-financial public sector cash receipts from operating activities’ (2002-03 Budget Update) applies to jurisdictions’ LCA nomination and revised LCA at budget time. The tolerance limit applying to Victoria’s 2003-04 LCA nomination and revised is $575 million (2 per cent of $28 733 million).
314 Appendix E Budget Statement 2003-04
Listed below are details of Victoria’s infrastructure projects with private sector involvement for which it is expected that contracts will be signed in the 2003-04 financial year. In line with the current Loan Council guidelines for the treatment of such projects, the termination liabilities as measured by the Government’s contingent exposure, are to be included as a footnote to the LCA. As the following projects are still in development stages, full details about the extent and nature of actual payments, forward commitments and contingent liabilities associated with the projects cannot be provided at this stage, but will be included in the 2003-04 LCA outcome.
Central Highlands Water – North Ballarat Wastewater Plant and Reuse Project This project is being driven by the need to comply with stricter EPA wastewater discharge standards and involves upgrading the Ballarat North Treatment Plant to a tertiary treatment level to cater for full reuse of effluent. Central Highlands Water and their consultants are focusing on Partnerships Victoria opportunities. The likely outcome will be a design, build, finance and operate (DBFO) arrangement where a private proponent would upgrade the Ballarat North and Creswick Wastewater Treatment Plants and take full responsibility for a wastewater reuse system, including the construction and operation of the assets as well as the responsibility of developing the reuse market in the Central Highlands area. The DBFO contract may be structured in a way that encourages the private operator to continue the development of the reuse market throughout the whole period of the partnership. Central Highlands Water is proposing to take an active role in facilitating the promotion of the proposed reuse system with farmers and other groups who may have a use for treated wastewater in the area. The term of the contract is to be 25 years.
Mitcham-Frankston Freeway Project This project is a 40 kilometre link from Mitcham to Frankston, connecting the Eastern Freeway near Springvale Road to the Frankston Freeway at Seaford (and associated works). It is a high priority project for Victoria, serving about 1 million people and connecting major industrial areas to each other and to ports, and provides access to a major growth corridor in which 40 per cent of Melbourne’s manufacturing and production activity is based. When completed it will remove considerable traffic from the local arterial road network thereby enhancing road safety and local amenity. Budget Statement 2003-04 Appendix E 315
On 14 April 2003, the Premier announced that the project will be a toll road. An invitation for Expressions of Interest seeking responses from suitably qualified private sector parties for the design, construct, lease, finance and operations (including tolling systems and customer services) was released by the State on 1 May 2003. Contract execution and/or financial close may not occur until post June 2004. The Government is committed to completing the project in its entirety during 2008.
Metropolitan Mobile Radio The project is a multi-agency initiative to replace the existing metropolitan radio systems for Victoria Police, Metropolitan Fire and Emergency Services Board and the Metropolitan Ambulance Service with a digital trunked radio network. The project is part of the Statewide Integrated Public Safety Communications Strategy (SIPSaCS). The project is being delivered under the Partnerships Victoria policy framework, as a design, finance, construct, own, operate and maintain project. The term of the contract is to be seven years, with the option for the State to extend for a further two years.
Correctional facilities The 2001-02 Budget allocated funding to build two new men’s correctional facilities. A Partnerships Victoria feasibility report was completed in September 2001. The Treasurer and the Minister for Corrections approved a Partnerships Victoria ‘Serviced Infrastructure’ model for the two facilities. Under this model, the public sector will provide custodial services and the private sector will provide accommodation and ancillary services. The term of the contract is proposed to be 25 years post commissioning.
Emergency Alerting Systems The project is a multi-agency initiative to equip career and volunteer emergency services personnel throughout Victoria with alerting devices. It will enable the Country Fire Authority, the Victorian Statewide Emergency Services and Rural Ambulance Victoria to alert staff to emergency situations. The project will establish a network of sites that could be further used for other government projects, including those arising from the Statewide Integrated Public Safety Communications Strategy (SIPSaCS). The project is being delivered under the Partnerships Victoria policy framework, as a design, finance, construct, own, operate and maintain project.
316 Appendix E Budget Statement 2003-04
The term of the contract is to be five years, with the option for the State to extend for a further two years.
Mobile Data Network This project involves building a communications network infrastructure to carry data messages for the Victoria Police and the Ambulance Service in metropolitan Melbourne. The project will form a building block for future communications projects that are part of the Statewide Integrated Public Safety and Communications Strategy (SIPSaCS). The project will facilitate the automation of incident dispatch processes and provide remote database access for field officers. By introducing electronic dispatch and on-screen vehicle tracking more efficient resource usage is expected. A contract may be signed prior to June 2003.
Enviro Altona City West Water is proposing to redevelop the existing Altona Treatment Plant in order to meet new EPA Licence Conditions for discharge into Port Phillip Bay and to cater for significant salt loads due to infiltration in the reticulation system. The project scope involves the upgrade/rebuild of the existing wastewater treatment plant to meet required effluent standards, and to provide a suitable platform for any future increased standards and re-use. The project also involves the establishment of the effluent re-use systems and the operation and management of wastewater treatment plant, and re-use systems. A contract may be signed prior to June 2003.
Budget Statement 2003-04 Appendix E 317
318 Appendix E Budget Statement 2003-04
APPENDIX F: TAX EXPENDITURES
Part of the higher level of disclosure required under the Financial Management (Financial Responsibility) Act 2000 is an overview of tax expenditures. The Victorian tax system, similarly to other state jurisdictions and the Commonwealth, contains a variety of concessions or exemptions as a means of providing assistance, encouragement or relief to particular taxpayers or particular activities. This assistance can take the form of tax exemptions, deductions, rebates, credits, concessionary rates or deferrals of payment of tax. Table F1 shows aggregate tax expenditure estimates by the main categories of tax for the period 2002-03 to 2006-07. The large rise in tax expenditures from $1 760 million in 2002-03 to $1 910 million in 2003-04 mainly reflects the rise in land prices experienced in recent years and its impact on the value of land that is exempt from land tax. This is expected to flatten over the forecast period. Including the estimated value of the tax-free thresholds for land and payroll tax, the total value of tax assistance provided by the Government is estimated at $3.4 billion in 2003-04.
Table F1: Aggregate tax expenditures (excluding thresholds) by type of tax ($ million) 2002-03 2003-04 2004-05 2005-06 2006-07 Description Estimate Estimate Estimate Estimate Estimate Land tax 963 1 092 1 104 1 113 1 069 Payroll tax 501 480 458 485 506 Gambling taxes 65 71 76 82 89 Vehicle taxation 113 122 125 129 131 Other stamp duties 118 145 145 145 145 Total estimated tax expenditures 1 760 1 910 1 909 1 954 1 940 Source: Department of Treasury and Finance
Budget Statement 2003-04 Appendix F 319
Table F2 lists individual tax expenditures that can be costed and exceed zero during the period 2001-02 to 2003-04 (including tax-free thresholds). The payroll tax exemption for apprentices and trainees will be removed for new enrolments in training or apprenticeship courses on or after 6 May 2003 (effective from 1 July 2003), and will be replaced with a new completion bonus scheme, which will pay a bonus to employers when trainees and apprentices complete their qualifications. Transitional arrangements will apply to existing approved courses and group apprenticeships and training schemes, which will remain eligible for the exemption until 31 December 2003. Estimates of several tax expenditures in 2002-03 vary from previous years, reflecting the effect of tax reform initiatives and the availability of up-to-date information. Data sources were updated for many of the payroll tax exemptions, particularly wages for hospitals and charities. In 2002-03, the tax-free threshold for land tax increased to $150 000 and the payroll tax threshold increased to $550 000. From 1 July 2003, the payroll tax rate is set to fall by 0.1 percentage points to 5.25 per cent. Within land tax expenditures, it is estimated that the principal place of residence exemption now exceeds exemptions for Crown property. The rapid growth in the price of residential land has generated the increase in the estimated value of the concession. The strong growth in the value of motor vehicle registration fee exemptions in 2003-04 is largely due to the $17 increase in the base motor vehicle registration fee from 1 July 2003. The increase in revenue from motor vehicle registration fees will be applied to investment in road infrastructure through the Better Roads Victoria Trust Fund. Increased compliance checking of eligibility is expected to reduce the volume of concessional registrations. From 1 July 2003, motor vehicle duty exemptions and concessions will be expanded for incapacitated and disabled persons. It is estimated that the concession for disabled persons will cost $0.5 million per annum in stamp duty forgone or refunded. The Government is providing a payroll tax exemption for employers in respect of wages paid to workers taking maternity or adoption leave, effective from 1 January 2003. The payroll tax exemption applies to all employed women taking maternity leave of up to 14 weeks. It also includes adoption leave for a period of up to 14 weeks for both women and men.
320 Appendix F Budget Statement 2003-04
Table F2: Tax expenditures that can be costed and exceed zero (including threshold) ($ million) Description 2001-02 2002-03 2003-04 Estimate Estimate Estimate Land tax Land tax exemption for property of the Crown in right of 205 245 263 the State of Victoria Principal place of residence exemption from land tax 198 270 300 Land tax exemption for land held in trust for public or 157 190 246 municipal purposes or vested in any municipality Land tax exemption for land used by a charitable 72 87 100 institution exclusively for charitable purposes Land tax exemption for Commonwealth land 59 65 66 Land tax exemption for land used for primary production 48 57 59 Land tax exemption for land which is vested in a public 12 13 17 statutory authority Exemption from land tax for the City Link corporation in 666 respect of land used for the City Link network Assessment of land tax on a single holding basis for land 91014 owned by a municipality and not used for other purposes Land tax concessional rate for non-profit organisations 788 carried on exclusively for social, sporting, cultural, literary purposes; or horse, pony or harness racing Assessment of land tax on a single holding basis for land 677 owned by a charity and not used for other purposes Land tax exemption for retirement villages 2 2 3 Land tax exemption for a non-profit organisation 111 providing or promoting outdoor cultural or sporting recreation (excluding horse, pony or harness racing) Land tax exemption for friendly societies .. 1 1 Land tax exemption for associations of ex-servicemen .. 1 1 Exemption from land tax-aggregated site value below 17 20 29 $150 000 ($125 000 for 2001-02) Total 799 983 1121
Payroll tax Payroll tax exemption for public hospitals 147 154 156 Payroll tax exemption for wages paid by a public 118 123 125 benevolent institution or charity Payroll tax exemption for wages paid by a non-profit, 58 61 63 non-public, school Payroll tax exemption for wages paid to an approved 53 60 30 apprentice or trainee
Budget Statement 2003-04 Appendix F 321
Table F2: Tax expenditures that can be costed and exceed zero (including threshold) - continued ($ million) Description 2001-02 2002-03 2003-04 Estimate Estimate Estimate Payroll tax exemption for Commonwealth Government 39 41 42 departments and agencies, other than transport and communication enterprises Payroll tax exemption for wages paid by non-profit 22 24 24 hospitals Payroll tax exemption for municipal councils (except 23 24 25 wages associated with a council's trading activities) Exemption from payroll tax for provision of fringe benefits 9 9 9 excluded from Fringe Benefits Tax Assessment Act 1986 (Commonwealth) Payroll tax exemption for religious institutions 3 4 4 Payroll tax exemption for leave entitlements paid by the 1 1 1 Construction Industry Long Service Leave Board (now CoINVEST) Payroll tax exemption for paid maternity leave 0 0 1 Payroll tax exemption for employers' payroll below 1372 1395 1418 $550 000 ($515 000 in 2001-02) Total 1845 1896 1898
Gambling Lower rate of tax applied to the net cash balance of 72 65 71 electronic gaming machines located in clubs Total 72 65 71
Other stamp duties Stamp duty exemptions for corporate reconstruction 150 111 138 Conveyance duty concession for concession card 4 7 7 holders and for family first home buyers Total 154 118 145
Vehicle taxation Exemption from motor vehicle (non-commercial) 105 108 116 registration fee for eligible beneficiaries Exemption from registration fee for a vehicle of 4.5 4 4 4 tonnes or less that is used solely for primary production Registration fee concession for commercial passenger 1 1 1 vehicle licensed for the carriage of school children Registration fee exemption for non-commercial vehicle .. .. 1 owned by an incapacitated war service pensioner Motor vehicle duty concession for incapacitated and 0 0 .. disabled persons. Total 110 113 122 Total estimated tax expenditures 2980 3175 3357 Source: Department of Treasury and Finance
322 Appendix F Budget Statement 2003-04
The ratio of tax expenditures to taxation revenue for 2002-03 is estimated at 19 per cent (see Table F3), up from 17 per cent in 2001-02.
Table F3: Estimated aggregate tax expenditures (excluding thresholds) and tax receipts in 2002-03 ($ million) Tax Tax Description Expenditure receipts Ratio Land tax 963 654 1.47 Payroll tax 501 2 628 0.19 Gambling taxes 65 1 318 0.05 Vehicle taxes 113 1 100 0.10 Other stamp duties 118 2 471 0.05 Debits tax 0 251 0.00 Other/miscellaneous 0 9230.00 Total for items estimated 1 760 9 346 0.19 Source: Department of Treasury and Finance Table F4 provides a grouping of estimated tax expenditures to particular persons or entities based on the legal incidence of state taxes.
Table F4: Aggregate tax expenditures (excluding thresholds) classified by persons or entities affected ($ million) 2001-02 2002-03 2003-04 Description Estimate Estimate Estimate Business 165 126 153 Construction industry 1 1 1 Charitable organisations 196 217 232 Employers 53 60 30 Educational institutions 59 62 64 Gambling clubs 72 65 71 Commonwealth and State government departments 315 364 388 Local government 189 224 285 Hospitals 169 178 180 Pensioners/concession card holders 111 118 128 Property owners 198 270 300 Primary producers 52 61 63 Religious institutions 3 4 4 Sporting, recreation and cultural organisations 8 9 9 Other 0 1 2 Total for items estimated 1 591 1 760 1 910 Source: Department of Treasury and Finance
Budget Statement 2003-04 Appendix F 323
324 Appendix F Budget Statement 2003-04
APPENDIX G: GROWING VICTORIA TOGETHER PROGRESS REPORT
INTRODUCTION Growing Victoria Together was launched in November 2001 to express the Government’s broad vision for the future. It provides a basis for involving all Victorians in the challenge of creating a future based on fairness, prosperity and sustainability, and for organising government actions to help create these outcomes. The Bracks Government’s vision for Victoria is that by 2010 we will be a State where:
• innovation leads to thriving industries generating high quality jobs;
• protecting the environment for future generations is built into everything we do;
• we have caring, safe communities in which opportunities are fairly shared; and
• all Victorians have access to the highest quality health and education services all through their lives. To further articulate this vision, Growing Victoria Together identifies the following issues of importance to Victoria over the next ten years: • valuing and investing in lifelong education; • high quality, accessible health and community services; • sound financial management; • safe streets, homes and workplaces; • growing and linking all of Victoria; • promoting sustainable development; • more jobs and thriving, innovative industries across Victoria; • building cohesive communities and reducing inequalities; • protecting the environment for future generations; • promoting rights and respecting diversity; and, • government that listens and leads. Budget Statement 2003-04 Appendix G 325
In Growing Victoria Together these important issues are linked to the priority actions that need to be taken, and the measures that can be used to demonstrate progress on these issues. This progress report assesses the Government’s performance against the ‘Demonstrating Progress Measures’ identified by Growing Victoria Together. The focus is the available information on the Demonstrating Progress Measures. The report does not canvass the range of Government priorities, strategies and initiatives that are directed towards achieving the broad vision and goals set out in Growing Victoria Together. Information on these initiatives is set out in the annual budget papers and other statements of the Government’s policy. In general, the Government is making steady progress against the Demonstrating Progress Measures, but more work needs to be done. As part of continuing work to develop the Growing Victoria Together framework, attention will be paid to refining the progress measures to take account of a range of definitional and data issues and, importantly, to encompass commitments made by the Government since the release of Growing Victoria Together.
VALUING AND INVESTING IN LIFELONG EDUCATION
Victorian primary school children will be at or above national benchmark levels for reading, writing and numeracy by 2005 The Department of Education and Training annually administers nationally consistent tests to assess the literacy and numeracy standards of primary school children. In 2001, the percentage of Victorian students achieving at or above national benchmarks was:
• 89.0 per cent for year 3 reading;
• 90.9 per cent for year 5 reading;
• 94.1 per cent for year 3 numeracy; and
• 94.7 per cent for year 5 numeracy. National results for 2001 are not yet available. However, based on national results for 2000, the Victorian results are likely to be at or above the national average on a range of national reading and numeracy benchmarks.
326 Appendix G Budget Statement 2003-04
90 per cent of young people in Victoria will successfully complete year 12 or its equivalent by 2010 Survey data collected in conjunction with the Australian Bureau of Statistics (ABS) publication Education and Training Indicators (Cat. 4230.0) are used to derive statistics on Victorian secondary school completion rates. The percentage of 18-24 year olds in Victoria in 2002 who had completed year 12 or a vocational certificate at Australian Quality Framework Level Two or above was 82.4 per cent, second only to the ACT among the Australian States and Territories.
The percentage of young people 15-19 in rural and regional Victoria engaged in education and training will rise by 6 per cent by 2005 Relevant information on this progress measure was developed using administrative data from the school, TAFE, adult and community education and higher education sectors. Based on this information, the percentage of 15-19 year olds in rural and regional Victoria who participated in education and training at any time during 2001 was 90.3 per cent, compared to 90.0 per cent in 2000 and 89.5 per cent in 1999. The metropolitan participation rate in 2001 was 85.0 per cent.
The proportion of Victorians learning new skills will increase The learning of new skills occurs in a variety of settings, including within firms and across a broad range of education and training institutions. Data are not currently available on the full range and depth of new skills acquisition by Victorians. The percentage of Victorians aged 25-64 who successfully completed a formal training or further education program can be used as a proxy measure. During 2001 this measure stood at 8.5 per cent, up from 8.1 per cent in 1999.
HIGH QUALITY, ACCESSIBLE HEALTH AND COMMUNITY SERVICES
Waiting times and levels of confidence in health and community services will improve The Department of Human Services publishes a quarterly Hospital Services Report based on hospital administrative data. According to this data waiting times for emergency treatment in Victoria were steady or improved marginally from
Budget Statement 2003-04 Appendix G 327
March 1999 to March 2002, with improvements becoming more evident after March 2002.
Chart G1: Emergency treatment within ideal times
e 100
95
90
85
80
75
70
65 1999 2000 2001 2002 March quarter per cent of patients treated within triage tim 2003 Triage 1: Resuscitation case requiring immediate treatment Triage 2: Emergency case requiring treatment within 10 minutes Triage 3: Urgent case requiring treatment within 30 minutes
Source: Department of Human Services The number of patients treated within ideal times has been achieved despite a large and sustained increase in the number of people presenting to major emergency departments. The ideal times are set by the Australasian College of Emergency Medicine. The Department of Human Services conducts an annual Victorian Population Health Survey that gathers information on a range of population health issues including satisfaction with selected services. Recent results show that satisfaction with the surveyed range of Victorian health and community services (including public hospitals, community health centres, home nursing, kindergartens, and maternal and child health centres) remains high.
328 Appendix G Budget Statement 2003-04
Chart G2: Victorians' satisfaction with selected health and community services, 2001-02 Public Hospital Kindergarten/Preschool Maternal/Child Health
100
80
60
40
per cent of respondents 20
0 2001 2002 2001 2002 2001 2002
Very satisfied Satisfied Neither satisfied Dissatisfied Very dissatisfied nor dissatisfied
Source: Department of Human Services
Health and education outcomes for young children will improve Composite measures of health and education outcomes for young children are not yet well developed and the range of available and potentially relevant statewide information is limited. One proxy measure of education outcomes is preschool participation. Department of Human Services data show that the proportion of four year olds participating in preschool has increased in every year since 1999, from 91.8 per cent to 96.4 per cent in 2002.
Waiting times for drug treatment will decrease as will deaths from drugs, including tobacco and alcohol The Department of Human Services has estimated waiting times for drug and alcohol treatment using data provided for each course of treatment reported to the publicly available Alcohol and Drug Information System (ADIS). The waiting time is a measure (in days) of the time taken from when a client is identified as requiring a particular treatment type to the actual commencement of that treatment type. Overall waiting times for alcohol and drug treatment services have decreased by 72 per cent during the period 1998-99 to 2001-02, with residential withdrawal waiting times all under ten days. Current waiting times are so low that any fluctuation will inevitably lead to a small increase in waiting times. Budget Statement 2003-04 Appendix G 329
Deaths from drugs including tobacco and alcohol cannot be readily identified from existing ABS data due to difficulties in accounting for indirect and/or multiple causes of death. The Australian Institute of Health and Welfare calculates estimates of death caused by drugs every three years, however the most recent available results are for 1998. Further estimates of deaths attributable to tobacco and alcohol in Victoria were calculated by the Department of Human Services as part of the Victorian Burden of Disease Study conducted in 1996. Results of the 2001 Victorian Burden of Disease Study are due out in late 2003.
SOUND FINANCIAL MANAGEMENT
An annual budget surplus The 2003-04 estimated budget surplus is $245 million. A budget operating surplus well over the Government’s objective of $100 million each year has been maintained since 1999.
Victoria’s taxes will remain competitive with the Australian average Tax competitiveness is measured as state taxation revenue expressed as a share of nominal GSP, as this relates the level of taxation revenue to state economic capacity. Victoria’s taxation as a share of nominal GSP was above the national average in 2001-02. However, taking into account all announced future tax initiatives, Victoria’s taxation as a share of nominal GSP is set to be at the Australian average, but remain a substantial 0.6 percentage points of GSP (or $1 060 million) below New South Wales, and about the same above Queensland. This is explained in more detail in Chapter 1, Financial Policy Objectives and Strategies.
Maintain a triple-A rating In October 2002, international credit rating agency Standard and Poor's affirmed Victoria's AAA local currency credit rating and stable rating outlook. In February 2003 Standard and Poor's upgraded Victoria's foreign currency credit rating to AAA to reflect the raising of Australia's foreign currency country ceiling. In October 2002, Moody's Investors Service affirmed Victoria's Aaa domestic currency credit rating and stable rating outlook. Moody's also raised Victoria's foreign currency rating to Aaa to reflect the raising of Australia's foreign currency country ceiling.
330 Appendix G Budget Statement 2003-04
SAFE STREETS, HOMES AND WORKPLACES
Violent crime and fear of violent crime will be reduced Statistics published by Victoria Police show the following trends in the rates of violent crime (defined as crimes against the person) since 1999:
• decreased sex (non-rape) offences;
• a slight increase in robberies, but with some evidence of a decrease since 2000-01;
• a steady increase in the rate of assaults;
• a stable rate of rape offences; and
• a stable rate of homicide offences. Little information is currently available to measure trends in fear of violent crime. However, surveys carried out by the Department of Justice between April and June 2002 indicate that the perception of personal safety among Victorians is high. Over 78 per cent of Victorians felt ‘very safe’ or ‘safe’ going about their normal daily activities. A majority of Victorians felt ‘very safe’/‘safe’ at home (91 per cent), at their work place (91 per cent), and in the streets where they normally go in their daily activities (82 per cent).
Chart G3: Rates of violent crime, 1999-2002
140 700
120 600
100 500
80 400
60 300
40 200
Offences per 100 000 population 20 100
0 0 1999-00 2001-02
Rape Sex: non-rape Robbery Homicide Assault (RHS)
Source: Victoria Police
Budget Statement 2003-04 Appendix G 331
Road accidents and deaths will be reduced by 20 per cent over the next five years Victoria Police reports detailed data every month on the nature, location and circumstances of road accidents in its Road Traffic Collision Analysis. Annualised data from this report show that the total number of road traffic collisions reported to Victoria Police has remained relatively steady over the past four years, at 41 204 for calendar year 2002 compared to 41 901 for calendar year 1999. However, a decrease in deaths in 2002 and decreasing major and serious road injuries per 100 000 population provide some evidence that ongoing concerted road safety campaigns are having an effect.
Chart G4: Deaths and injuries from road accidents in Victoria, 1999-2002(a)
10 300 n r 7.5 270
5 240 100 000 population 2.5 210 Road major/serious injuries pe Road deaths per 100 000 populatio
0 180 1999 2000 2001 2002
Road deaths (LHS) Major/serious injuries (RHS)
Source: Victoria Police, Australian Bureau of Statistics Note: (a) ‘Major’ injuries require hospital admission; ‘serious’ injuries require medical treatment.
GROWING AND LINKING ALL OF VICTORIA
The proportion of freight transported to ports by rail will increase from 10 per cent to 30 per cent Data collection and monitoring by the Ports and Marine Division, Department of Infrastructure indicate that the share of freight transported to Victorian ports by rail was 17 per cent in 2001-02, compared to 15 per cent in 2000-01. Extensive works are underway to improve rail access to Victoria’s ports, including:
332 Appendix G Budget Statement 2003-04
• a new rail access line and intermodal facility at Swanson Dock West; and
• development of a masterplan for the Dynon freight precinct.
Rail travel times will be reduced to Ballarat, Geelong, Bendigo and the Latrobe Valley While there has been no reduction in rail travel times during the period under review, the Regional Fast Rail project will provide faster services on the Ballarat, Geelong, Bendigo and Latrobe Valley (Traralgon) lines. Contracts were signed in June 2002 for the country infrastructure upgrades on the four lines for completion in 2005 with the expectation that travel times will be reduced as shown in Table G1.
Table G1: Regional fast rail travel times
Destination Current Travel Times (a) Resulting Travel Tim es (a) Ballarat 82 minutes 64 minutes Geelong 51 minutes 45 minutes Bendigo 99 minutes 84 minutes Latrobe Valley 116 minutes 95 minutes Source: Department of Infrastructure Note: (a) Current and resulting travel times are taken from Spencer Street Station in Melbourne.
Travel in Melbourne taken on public transport will increase from 9 per cent to 20 per cent by the year 2020 The Transport Research Centre at RMIT has collected data assessing public transport use through an annual Victorian Activity and Travel Survey. In 2000 (the most recent year for which data have been released), public transport was used for about 10 per cent of personal travel boardings by motorised means (i.e. excluding people travelling in freight vehicles, walking and cycling). In terms of distance travelled, measured as person kilometres, public transport was used for about 8 per cent of the total distance travelled by people by motorised means in 2000. Achievement of the public transport target within Melbourne will require a large change in travel behaviour. Implementation of the Melbourne 2030 Metropolitan Strategy is expected to increase public transport usage by 2020.
Budget Statement 2003-04 Appendix G 333
PROMOTING SUSTAINABLE DEVELOPMENT
Renewable energy efforts will increase The Sustainable Energy Authority monitors the development of the State’s renewable energy capacity. At the end of 2002, Victoria had approximately 680MW of installed renewable energy capacity, accounting for over 4 per cent of total Victorian electricity generation. Total Green Power sales increased by 20 per cent for the year ended 30 June 2002, to approximately 56 GWh. The number of domestic and commercial Green Power customers sourcing their electricity from renewable sources in 2001-02 was 18 388, an increase of 87 per cent since 1999.
Energy consumption in government buildings will be reduced by 15 per cent and the use of electricity from Green Power by government will be increased to 5 per cent by 2005 The Sustainable Energy Authority monitors energy consumption by type for all government departments and buildings on an ongoing basis. This monitoring reveals that the Government is already well on the way towards meeting the 5 per cent Green Power target, having entered into two whole-of-government contracts that increased Green Power use to approximately 3.4 per cent of contracted consumption. The remaining commitment is being met as other contracts expire and are renegotiated. Cost-effective consumption reduction targets will lead to savings estimated at $5.0 million by 2005, and annual ongoing savings of $11.2 million thereafter. Based on energy usage figures for all institutional establishments/buildings that are funded at least 50 per cent under the state budget, and using 1999-2000 as a baseline, this would represent a 15.7 per cent reduction in electricity costs or an 11.7 per cent reduction in total energy costs.
Waste recycling efforts will increase and the use of landfill as a waste disposal method will be reduced EcoRecycle Victoria collects information and publishes annual data about landfill use and recycling of waste. The most recent data from EcoRecycle Victoria suggest that generated waste and landfill use are increasing, both in absolute terms and on a per capita basis. Total tonnage of waste sent to landfill increased 9.5 per cent between 1999 and 2002, from 4.185 million tonnes to 4.583 million
334 Appendix G Budget Statement 2003-04
tonnes. However, the tonnage of waste diverted from landfill and subsequently recycled has also increased in every year since 1999, and the recovery rate of waste has increased from 43 to 47 per cent of total waste generated over the same period.
Wastewater reuse in Melbourne will increase from 1 per cent to 20 per cent by 2010 According to data sourced from the annual reports of Melbourne Water and metropolitan water retailers, 2.4 per cent of effluent from sewage treatment plants across Melbourne was recycled and used to replace treated water in industrial and agricultural applications during 2001-02. This figure has increased steadily since the viability of recycled water use first attracted serious research attention in the 1990s.
MORE JOBS AND THRIVING, INNOVATIVE INDUSTRIES ACROSS VICTORIA Victoria’s productivity and competitiveness will increase. We will see this through increasing GSP per worker
Chart G5: Real gross state product (GSP) per worker (a)
$78,000
(b) $76,000
$74,000 Dollars per worker
$72,000 1999-00 2000-01 2001-02
Victoria Australia
Source: Australian Bureau of Statistics Notes: (a) Annual data are based on an aggregation of monthly time series. (b) Number of workers comprises total full time and part time employed persons and not ‘full time equivalent’ employed persons, as this gives a picture of economic value added per worker. Budget Statement 2003-04 Appendix G 335
Estimates of labour productivity were derived using data from the ABS publications Australian National Accounts: State Accounts (Cat. 5220.0) and Labour Force, Selected Summary Tables, Australia, Monthly (Cat. 6291.0.40.001). These estimates indicate that Victoria's real gross state product per worker has increased over the past three financial years. GSP per employed person in real terms has consistently exceeded the national estimate in the three-year period ending 2001-02.
There will be more and better jobs across Victoria The ABS collects extensive data on employment levels. The number of jobs in Victoria has consistently increased in each of the past three years. The average annual rate of employment growth in Victoria has been more than 2 per cent in the three years since 1998-99. Full-time employment opportunities have grown by an annual average of 1.7 per cent since 1998-99, while growth in part-time employment opportunities has exceeded 4 per cent annually over the same period. Average weekly earnings per worker in Victoria, as a proxy for quality of employment, have increased on a seasonally adjusted basis since 1999 ($711.60 as at November 2002, up 16.5 per cent from November 1999) and are slightly ahead of the national figure (ABS, Cat. 6302.0). The proportion of Victorians learning new skills will increase Please refer to earlier commentary in Appendix G on this measure. A greater share of innovative R&D activity will be in Victoria The latest available ABS information on research and development expenditure (Cat. 8112.0) relates to 2000-01. In that year gross expenditure on research and development (by business, government, higher education and private non-profit organisations) in Victoria amounted to nearly 30 per cent of the national total of $10 251 million. This represented about a 0.5 percentage point increase for Victoria in its national share since 1998-99.
BUILDING COHESIVE COMMUNITIES AND REDUCING INEQUALITIES
The extent and diversity of participation in community, cultural and recreational organisations will increase The Victorian Population Health Survey conducted by the Department of Human Services in late 2002 collected information on participation in a range of community organisations. The following percentages of Victorians answered ‘definitely’ or ‘sometimes’ to the following questions: 336 Appendix G Budget Statement 2003-04
Table G2: Levels of community participation, 2002 Urban Rural Total Were active members of a local organisation 44% 58% 48% Attended management or organising committee 18% 29% 21% meetings Took part in a local community project/working bee 33% 51% 37%
Attended a local community event (in the past six 55% 67% 59% months) Participated in organised sport and recreation .. .. 39% Source: Department of Human Services
In a crisis there will be more people Victorians can turn to for support The Victorian Population Health Survey in 2001 and 2002 included the question: ‘Can you get help from friends/family members/neighbours when you need it?’ with the following responses received:
Chart G6: Where Victorians can get help in a crisis, 2001-02
Friends Family Neighbours
80%
60%
40%
percent of Victorians 20%
0% ll ll ll y n a y n ly n tel e e e te t a ft at ft a o o init of t ot times t f times t o n e o e o N definitel N de m N , not s, o o Sometimes No, Som No, not at a e S N Yes, defini Yes, 2001 2002 Y
Source: Department of Human Services
Budget Statement 2003-04 Appendix G 337
Inequalities in health, education and wellbeing between communities will be reduced A range of potentially relevant composite measures of state government influence on inequality between communities is being examined. The area remains a key focus for the Government, as reflected in its 2002 election commitments on health, education and economic development. This focus is further reinforced by the creation of the Department for Victorian Communities in December 2002. Consideration will be given to a range of approaches with the aim of developing a better understanding of progress in reducing inequality and disadvantage in Victoria.
PROTECTING THE ENVIRONMENT FOR FUTURE GENERATIONS
The Snowy River will be returned to 21 per cent of its original flow within 10 years and over time to 28 per cent In June 2002, the NSW, Victorian and Commonwealth Governments signed the Snowy Water Inquiry Outcomes Implementation Deed, which sets out the agreed targets for increasing environmental flows in the Snowy River. These targets are to restore 15 per cent of original flow (i.e. average natural flow) by June 2009, 21 per cent of original flow by June 2012, and 28 per cent in the longer term. On 28 August 2002, flows were increased by 3 percentage points to 6 per cent of average natural flow by releasing water from the Mowamba Weir. Environmental flows down the Snowy River will be increased through water saving projects undertaken in both northern Victoria and NSW. These primarily focus on water savings, environmental improvement and regional development in diversions from the Murray, Murrumbidgee and Goulburn river systems. If necessary, they will extend to purchasing water entitlements and water rights from holders in a manner that promotes the water trading market.
The quality of air and drinking water will improve
Air The Air Quality Index produced by the EPA indicates that on most days in 2001-02 (the last completed and representative data set), air quality in Melbourne, Geelong and the Latrobe Valley was considered to be good to very good (see Chart G7). When poor to very poor air quality was observed, this was typically due to exceedence of a particle standard (either visibility or PM10, fine particles
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smaller than 10µm in diameter). This maintains a trend of continuing improvements in air quality in Victoria.
Chart G7: Air quality index, 2001-02 Central Melbourne
poor to very poor fair 3% 8%
good to very good 89%
Geelong
poor to very poor fair 1% 8%
good to very good 91%
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Latrobe Valley
poor to very poor 4% fair 12%
good to very good 84%
Source: Environment Protection Authority
Water There are many parameters used by urban water authorities to measure the quality of drinking water. From a public health perspective, the presence of E.Coli organisms is a key headline indicator. The Department of Human Services requires zero E.Coli organisms for a drinking water sample to be considered compliant. The Victorian Water Industry Association reports that in 2001-02, 16 of the State’s 19 urban water suppliers reported that more than 99 per cent of samples tested were E.Coli compliant, compared to 8 suppliers in 1998-99. It is important to note that there are many and wide variations in E.Coli levels and the many other drinking water quality parameters, such as pH, colour and turbidity, in each town and region of the State. A decision to invest in improving water quality depends on the quality of the water source, the size of the distribution system and the needs of the relevant population. There are also variations in the standard of drinking water considered acceptable, which is determined by water authorities in consultation with their relevant communities. The health of Victoria’s catchments, rivers and bays will improve In its report on overall catchment health released in November 2002, the Victorian Catchment Management Council foreshadowed the need for rapid changes in land use and farm practices to improve catchment health.
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In 1999, the Department of Sustainability and Environment (then the Department of Natural Resources and Environment) surveyed 950 river reaches representing 18 000 kilometres of Victoria’s major rivers and their tributaries. The survey measured the current river flow regime, water quality, condition of the channel and riparian zone and the invertebrate communities living in the stream, providing an overall indication of changes in river conditions. In that survey 22 per cent of river length was assessed as being in good or excellent condition. The next round of data collection is scheduled for 2004. EPA Victoria collects and reports data on water quality in Victoria’s major bays (Westernport, Port Phillip and Gippsland Lakes). Since 1984, the nutrient status of Westernport and Port Phillip appears to have altered over periods of two to five years, and this has resulted principally from changing climate conditions, rather than any significant change in human activities. Within the range of climate conditions experienced during this time, it would appear that nutrient status and water clarity have been maintained. Concentrations of the critical nutrient, nitrogen, have not increased over time and there is some evidence of a decrease. Concerning levels of nutrient loads in the Gippsland Lakes are being addressed by the Gippsland Lakes Rescue Package, which is reducing nutrient loads of the Macallister irrigation district. The East and West Gippsland catchment management authorities are also investing in works to reduce river erosion and reduce nutrient loads to the Lakes. The area covered by native vegetation will increase To date only a one-off survey has been conducted by the then Department of Natural Resources and Environment on native vegetation coverage, in 2001. However, as a result of the Victorian Native Vegetation Framework recently released by the Department of Sustainability and Environment, a regional catchment activity monitoring system has been created and, over time, may provide the necessary data source. The methodology for examining both the quantity and quality of native vegetation cover has been substantially developed around the concepts of ‘habitat hectare’ and vegetation ‘net gain’. Next phases involve the release of operational guidelines for implementing the Native Vegetation Framework, instituting permit tracking systems for native vegetation, and reforming local government planning regulations. There will be a real reduction in the environmental and economic impact of salinity by 2015 The National Land and Water Resources Audit (2001) estimated that in 2000, the area at risk in Victoria from shallow saline water tables was approximately 670 000 hectares, which could increase to over three million hectares within 50 years. The audit predicted that between 8 per cent and 18 per cent of the State's
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agricultural land will fall into the high salinity risk category by 2050, with up to a further 47 per cent in the moderate-risk category under the worst-case scenario. There are no quick remedies for the problems created by salinity in Victoria, including the loss of productive agricultural land and infrastructure damage. Progress will be dependent upon continued effort and investment over time. The National Action Plan for Salinity and Water Quality agreed between the Commonwealth and the States commits $1.4 billion over seven years to projects applying regional solutions to salinity and water quality problems. In Victoria, this includes major investment in building salt mitigation works and improving water management by farmers, particularly in irrigation areas. Actions include tree planting, targeted engineering solutions, better mapping, and the adoption of innovative land management practices, such as new cropping techniques.
PROMOTING RIGHTS AND RESPECTING DIVERSITY The proportion of Victorians aware of their legal and civil rights will increase While the necessary information is not available to report on this progress measure, a number of initiatives have been implemented to improve awareness of legal and civil rights. These include:
• funding of the Victorian Aboriginal Justice Agreement to establish and maintain an Indigenous Women’s Justice Forum and Community Legal Education Program through the Victorian Aboriginal Legal Service; training and appointment of 27 Koori mediators with the Dispute Settlement Centre of Victoria; development of regional Koori social justice plans; and publication of the Koori Justice newsletter;
• funding for the Women’s Information Referral Exchange and its Women’s Information Centre, to provide access to advice on rights and where to get help on issues such as separation, domestic violence and sexual assault; and
• an additional $14 million over four years in funding to Victoria Legal Aid to improve Victorians’ access to justice. More Victorians from all backgrounds will have the opportunity to have a say on issues which matter to them The Victorian Population Health Survey in 2001 and 2002 included the question: ‘Do you feel there are opportunities to have a real say on issues that are important to you?’ Around 73 per cent of those surveyed in 2002 responded positively to this question, compared to 70 per cent in the 2001 survey.
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GOVERNMENT THAT LISTENS AND LEADS More Victorians will be consulted on issues which matter to them The Government is committed to community consultation. Two particularly important initiatives should be noted:
• Community Cabinet: Community Cabinet meetings are held in metropolitan and regional locations to give citizens an opportunity to speak directly with members of the Government about their issues and concerns. There are twelve ministerial visits each year, which are advertised through local newspapers and distribution of flyers. The agenda may include individuals’ submissions, usually made in writing by citizens as part of a formal process. Departments are required to follow up all submissions.
• The Scrutiny of Acts and Regulations Committee has been requested to undertake an inquiry into electronic democracy (e-democracy). The inquiry involves an analysis of the opportunities available through the use of new technologies to improve public access to, and participation in, the processes of the Parliament and government. There will be regular reports on progress in improving the quality of life for all Victorians and their communities This progress report to Victorians on Growing Victoria Together is in line with this commitment.
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APPENDIX H: REQUIREMENTS OF THE FINANCIAL MANAGEMENT ACT 1994
This appendix describes the provisions of the amendments to the Financial Management Act 1994 and the Audit Act 1994, as contained in the Financial Management (Financial Responsibility) Act 2000, passed by Parliament in April 2000. The provisions of the Financial Management (Financial Responsibility) Act 2000 have been complied with in these budget papers. Table H1 details the statements required to be included in the budget under the provisions of the Act, together with the respective chapters of the Budget Statement 2003-04 where these statements can be found.
Table H1: Statements required by the Financial Management (Financial Responsibility) Act 2000 and their location in Budget Statement 2003-04 Relevant section of the amended Acts and Location corresponding requirement Sections 23 E-G of the Financial Management Act 1994 Statement of financial policy objectives and Chapter 1, Financial Policy Objectives strategies for the year and Strategies & Chapter 9, Estimated Financial Statements and Notes Sections 23 H-J of the Financial Management Act 1994 Estimated financial statements for the year Chapter 9, Estimated Financial comprising: Statements and Notes - an estimated statement of financial performance over the year; - an estimated statement of financial position at the end of the year;
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Table H1: Statements required by the Financial Management (Financial Responsibility) Act 2000 and their location in Budget Statement 2003-04 (cont.) Relevant section of the amended Acts and Location corresponding requirement - an estimated statement of cash flows for the year; and - a statement of the accounting policies on which these statements are based and explanatory notes. (Section 23 K of the Financial Management Act 1994) Statement accompanying the budget which: - outlines the material economic assumptions Chapter 3, Economic Conditions and used in preparation of the estimated financial Outlook & Chapter 9, Estimated statements; Financial Statements and Notes - discusses the sensitivity of the estimated Chapter 8, Statement of Risks financial statements to changes in these assumptions; - provides an overview of estimated tax Appendix F, Tax Expenditures expenditures in the budget; - provides a statement of the risks that may Chapter 8, Statement of Risks have a material effect on the estimated financial statements. Section 16B of the Audit Act 1994 The Auditor-General review and report on the Chapter 9, Estimated Financial estimated financial statements to ensure they Statements and Notes are consistent with accounting convention and that the methodologies and assumptions used are reasonable.
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STYLE CONVENTIONS
Figures in the tables and in the text have been rounded. Discrepancies in tables between totals and sums of components reflect rounding. Percentage changes in all tables are based on the underlying unrounded amounts. The notation used in the tables and charts is as follows: LHS left-hand-side RHS right-hand-side s.a. seasonally adjusted n.a. not available or not applicable Cat. No. catalogue number 1 billion 1 000 million 1 basis point 0.01 per cent
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