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 ii 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