Budget Overview 2004-05
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PARLIAMENT OF TASMANIA Budget Paper No 1 Budget Overview 2004-05 Presented by the Honourable Paul Lennon MHA, Treasurer, for the information of Honourable Members, on the occasion of the Budget, 2004-05 Printed By The Government Printer, Tasmania Budget Documents are also available at www.treasury.tas.gov.au Useful 2004-05 Budget and Government Web sites www.treasury.tas.gov.au Copies of all Budget Papers can be found at the Department of Treasury and Finance's web site. The Department's web site also provides information on major departmental initiatives, activities and publications. www.media.tas.gov.au This web site contains the Government's Budget related media releases. www.tas.gov.au The Tasmania On-line web site provides links to the web sites of a wide range of Tasmanian public and private sector organisations. www.service.tas.gov.au The Service Tasmania web site provides a comprehensive entry point to Government services in Tasmania. www.tasmaniatogether.tas.gov.au This web site provides detailed information on Tasmania Together, including the current status of this important initiative. CONTENTS Page 1 The 2004-05 Budget 1 2 Tasmanian Economy 31 3 Budget Summary, 2004-05 69 4 Revenue and Expense Estimates, 2004-05 79 5 Taxation Revenue 101 6 State Capital Program 117 7 Assets and Liabilities, 2004-05 147 8 Estimated Outcome, 2003-04 169 9 Forward Estimates 183 10 Commonwealth-State Financial Arrangements 197 11 State Government Concessions 223 Appendix 1 Uniform Government Reporting 239 Appendix 2 Consolidated Fund Estimates 257 Conventions and Glossary of Terms 283 i INDEX Page 1 The 2004-05 Budget 1 Foundations of the 2004-05 Budget 2 Tasmania Together and Our People 2 The Government's Fiscal Strategy 6 Tasmania's Improved Financial Position 12 Tasmania's Economy 14 Getting the Balance Right 24 The 2004-05 Budget 'Investing in People' 25 Looking After Our Kids 25 Healthy Living 25 Helping People 26 Building Communities 27 Investing In Skills 28 Protecting People 28 Jobs and the Economy 29 A Positive Future for Tasmania 29 2 Tasmanian Economy 31 Introduction 32 Recent Economic Performance 33 Overview 33 Gross State Product (GSP) 34 State Final Demand 35 Consumer Spending 36 Wages 38 Labour Market 39 ii Private Sector Investment 45 Public Sector Spending – Consumption and Investment 51 Business and Consumer Confidence 54 Export Activity 55 Demographic Trends 58 Recent Infrastructure Developments 61 Introduction 61 Basslink 61 Wind 61 Natural Gas 62 Other Economic Contributions from the Electricity Entities 62 Forestry Tasmania 63 TT Line Company Pty Ltd 63 Economic Outlook 64 2003-04 Estimates 64 2004-05 Forecasts 66 Summary 68 3 Budget Summary, 2004-05 69 Introduction 70 Operating Statement 70 Fiscal Surplus 71 Balance Sheet 72 Net Worth 73 Net Financial Worth 73 Net Financial Liabilities 74 Net Debt 74 Cash Flow Statement 75 Cash Surplus 75 Consolidated Fund 76 iii 4 Revenue and Expense Estimates, 2004-05 79 Introduction 80 Operating Statement 80 Revenue 81 Grants and Subsidies 82 Recurrent Revenue 83 Capital Revenue 84 Other Payments 85 Taxation Revenue 85 Sales of Goods and Services 88 Interest Income 89 Dividend, Tax and Rate Equivalent Income 90 Other Revenue 91 Expenses 92 Depreciation 92 Employee Expenses 92 Other Operating Expenses 93 Nominal Superannuation Interest Expense 93 Other Interest Expenses 93 Grants and Transfers 93 Net Acquisition of Non-Financial Assets 94 Purchase of New Non-Financial Assets 94 Sale of Non-Financial Assets 94 Depreciation 94 Fiscal Surplus 95 Consolidated Fund Expenditure 96 Explanation of Estimated Major Consolidated Fund Expenditure Variations 98 5 Taxation Revenue 101 Introduction 102 iv Tax Competitiveness 102 Budget Initiatives 102 Estimated Taxation Revenue 103 Estimated Taxation Revenue for 2004-05 106 Payroll Tax 106 Land Tax 107 Motor Tax 108 Light Vehicle Registration Fees 108 Financial Transaction Taxes 109 Gambling Taxes 111 Lottery Tax 112 Other Gaming Tax 113 Casino Tax 113 Guarantee Fees 115 State Fire Commission Revenue 116 Major Legislative and Other Changes 116 6 State Capital Program 117 State Capital Program 118 Government Departments 122 Source of Funds 122 Application of Funds 123 Roads Program 134 Housing Program 138 Economic and Social Infrastructure Fund 140 Economic and Social Infrastructure Fund Projects 142 Social Infrastructure Fund 143 2001-02 Infrastructure Fund 144 2001-02 Infrastructure Fund Projects 144 v 7 Assets and Liabilities, 2004-05 147 Introduction 148 Balance Sheet 148 Net Worth 150 Net Financial Worth 150 Net Financial Liabilities 150 Net Debt 151 Interstate Comparison 152 Interest Costs of the Government 153 Assets 155 Cash Assets 155 Other Non-Equity Assets 156 Equity Investments 156 Land and Fixed Assets 157 Other Non-Financial Assets 158 Liabilities 158 Gross Debt 159 Superannuation Liability 160 Other Employee Provisions 161 Other Non-Equity Liabilities 161 Strategies to Reduce Major Liabilities 162 Superannuation 162 Tasmanian Risk Management Fund 166 8 Estimated Outcome, 2003-04 169 Introduction 170 Fiscal Surplus 171 Revenue 173 Explanation of Estimated Major Revenue Variations 173 Expenses 176 vi Explanation of Estimated Major Expense Variations 176 Net Acquisition of Non-Financial Assets 177 Consolidated Fund Surplus 178 Explanation of Estimated Major Expenditure Variations 180 Consolidated Fund Surplus and Fiscal Surplus Reconciliation, 2003-04 182 9 Forward Estimates 183 Forward Estimates 2005-06 to 2007-08 184 The Forward Estimates Concept 184 Impact of Policy Initiatives 184 Forward Estimates Operating Statement 186 Revenue 187 Explanation of Major Revenue Variations 187 Expenses 188 Explanation of Major Expense Variations 188 Net Acquisition of Non-Financial Assets 188 Forward Estimates Balance Sheet 189 Net Worth 191 Net Financial Worth 191 Net Financial Liabilities 192 Net Debt 192 Forward Estimates Cash Flow Statement 193 10 Commonwealth-State Financial Arrangements 197 Introduction 198 Summary of Commonwealth Sourced Revenue 199 Major Issues in Commonwealth–State Financial Relations 202 Commonwealth Grants Commission 2004 Major Review 202 Impact of the IGA on Commonwealth Sourced Revenue 203 2004 Treasurers' Conference 204 Major Specific Purpose Payment Issues 205 vii Commonwealth Sourced Revenue - Detailed Information 208 General Purpose Payments 208 Specific Purpose Payments 211 Total Commonwealth Sourced Revenue 214 Appendix 1 216 Why Commonwealth Revenue is Essential 216 Appendix 2 219 The Commonwealth Grants Commission 219 11 State Government Concessions 223 Introduction 224 Agency Concessions 225 Department of Education 225 Finance-General 226 Department of Health and Human Services 229 Department of Infrastructure, Energy and Resources 233 Department of Primary Industries, Water and Environment 235 Department of Tourism, Parks, Heritage and the Arts 236 Department of Treasury and Finance 236 Appendix 1 Uniform Government Reporting 239 Introduction 240 Government Financial Estimates 241 Loan Council 253 Loan Council Arrangements 253 Loan Council Allocations 253 Consolidation of Transactions 254 Appendix 2 Consolidated Fund Estimates 257 Introduction 258 Estimated Outcome, 2003-04 259 Estimated Consolidated Fund Surplus 259 viii Estimated Receipts, 2003-04 260 Estimated Expenditure, 2003-04 262 Budget Estimates, 2004-05 265 Consolidated Fund Surplus, 2004-05 265 Consolidated Fund Receipts, 2004-05 266 Consolidated Fund Expenditure, 2004-05 274 Recurrent Services 274 Works and Services 274 Forward Estimates 278 Conventions and Glossary of Terms 282 Conventions 282 Glossary of Terms 282 ix 1 THE 2004-05 BUDGET Features • In the 2004-05 Budget, the Government is investing in the people of Tasmania through expanding and developing the range of Government services, stimulating economic development and promoting equity. • In this context, the 2004-05 Budget continues to be based upon the Government's four key strategies: Tasmania Together, Partnership Agreements, the Industry Development Plan and the Fiscal Strategy. • The 2004-05 Budget is also framed in the context of getting the balance right - a balance between additional funding for government services, new social initiatives, tax relief for business and the community, duty relief on conveyance duty for first home buyers, recurrent and capital expenditure, short and long-term economic development, strong financial management and many other factors. • Getting the balance right is highlighted by the fact that this Budget provides for significant additional funding for the key social areas of health, education, justice and public safety while also enabling the elimination of General Government Net Debt a year earlier than provided by the current Fiscal Strategy. • The 2004-05 Budget has also been prepared in the context of a Tasmanian Economy which has achieved record levels of employment and private investment in recent years, and a return to positive population growth. • The Forward Estimates show that Tasmania will have eliminated General Government Net Debt by 30 June 2007, a full year earlier than provided for in the 2002 Fiscal Strategy. • The 2004-05 Budget provides $445.3 million in additional recurrent funding to agencies over the next four years. • A Fiscal Surplus of $15.2 million is forecast for 2004-05. This result means that the Government's Fiscal Strategy target of continued Budget surpluses is again being met. • The Government has announced that debits duty will be abolished on 1 July 2005. This will bring the total tax cuts implemented by the Government to over $100.0 million per annum. • The initiatives in this Budget demonstrate the Government's commitment to consolidate the gains that have been made to date and the importance of investing in Tasmanians to continue to build a positive future for Tasmania. Chapter 1: The 2004-05 Budget 1 FOUNDATIONS OF THE 2004-05 BUDGET The 2004-05 Budget represents a continuation of the strategic directions that the Government has developed and implemented since first being elected in 1998. In the 2004-05 Budget, the Government has sought to invest in the people of Tasmania – to expand and develop the range of Government services, stimulate economic development and promote equity.