2006-07 Budget Papers · Net financial liabilities to revenue % 85.4 100.1 100.2 99.8 98.8 89.3 (a)...

Budget Statement

2010–11 Budget Statement

2010–11

BUDGET PAPER 3

BUD

GET PAPER 3

Presented by the Honourable Kevin Foley MP Deputy Premier and Treasurer of South Australia on the Occasion of the Budget for 2010–11

2010–11 Budget Papers

Budget Paper 1 Budget Overview

Budget Paper 2 Budget Speech

Budget Paper 3 Budget Statement

Budget Paper 4 Portfolio Statements — Volumes 1, 2, 3 and 4

Budget Paper 5 Capital Investment Statement

Budget Paper 6 Budget Measures Statement

BUDGET PAPER 3

BUDGET STATEMENT

2010-11

Presented by The Honourable Kevin Foley MP

Deputy Premier and Treasurer of South Australia on the Occasion of the Budget

for 2010-11

General enquiries regarding Budget Papers should be directed to: The Under Treasurer Department of Treasury and Finance State Administration Centre 200 Victoria Square Adelaide 5000 SOUTH AUSTRALIA Copies may be obtained from:

SERVICE SA Government Legislation Outlet Ground Floor EDS Centre 108 North Terrace Adelaide SA 5000 Website: www.treasury.sa.gov.au

Website: www.statebudget.sa.gov.au

© Government of South Australia 2010 ISSN 1440-8589

http://www.treasury.sa.gov.au/

http://www.statebudget.sa.gov.au/

TABLE OF CONTENTS

Chapter 1: Fiscal Strategy and Budget Priorities Overview ...............................................................................................................................................1.1 Fiscal strategy........................................................................................................................................1.3 Fiscal outlook ........................................................................................................................................1.7 Attachment — Variations in the net operating balance and net lending estimates since the 2009-10 Budget and the 2009-10 MYBR ............................................................................1.11

Chapter 2: Expenditure Overview ...............................................................................................................................................2.1 Savings ..................................................................................................................................................2.4 Public sector employment — new initiatives........................................................................................2.5 Public sector employment — total ........................................................................................................2.6 General government expenditure ..........................................................................................................2.7

Chapter 3: Revenue Overview ...............................................................................................................................................3.1 Annual fee and rate setting....................................................................................................................3.1 General government sector revenue ......................................................................................................3.4 Taxation.................................................................................................................................................3.5 South Australia’s relative tax effort ....................................................................................................3.13 Grant revenue ......................................................................................................................................3.15 Sales of goods and services .................................................................................................................3.21 Interest income ....................................................................................................................................3.22 Dividend and income tax equivalent income ......................................................................................3.23 Other revenue ......................................................................................................................................3.24 Federal financial relations — recent developments ............................................................................3.25

Chapter 4: Managing the State’s Assets and Liabilities Overview ...............................................................................................................................................4.1 General government sector financial position.......................................................................................4.2 Unfunded superannuation liability ........................................................................................................4.6 Non financial public sector financial position.......................................................................................4.8 Management of assets and liabilities...................................................................................................4.10

Chapter 5: Government Businesses Overview ...............................................................................................................................................5.1 Public non financial corporations — performance................................................................................5.3 Non-commercial public non financial corporations — performance ....................................................5.5 Capital investment.................................................................................................................................5.6 Net debt .................................................................................................................................................5.6

Chapter 6: Risk Statement Overview ...............................................................................................................................................6.1 Revenue risks ........................................................................................................................................6.1 Expenditure risks...................................................................................................................................6.5 Contingent liabilities .............................................................................................................................6.9

Chapter 7: South Australian Economy Overview ...............................................................................................................................................7.1 Recent economic performance ..............................................................................................................7.1 Economic outlook .................................................................................................................................7.4

Appendices Appendix A: Uniform Presentation Framework Appendix B: General Government and Non-Financial Public Sector Financial

Statistics Time Series Appendix C: Consolidated Account Appendix D: South Australian State Public Sector Organisations Appendix E: Tax Expenditure Statement Appendix F: Local Government Finances Glossary of terms used in the Budget Statement Abbreviations used in the Budget Statement

CHAPTER 1: FISCAL STRATEGY AND BUDGET PRIORITIES

Overview

The 2009–10 Budget was released in the midst of the global financial crisis, with reductions in revenue from the Goods and Services Tax (GST) and state taxation contributing to a deterioration in the debt outlook over the forward estimates.

The 2010-11 Budget reflects a partial recovery of the previously predicted decline in revenues, due to improved economic conditions and upward revisions to Commonwealth grants.

However, while total taxation, GST and royalty estimates have improved since the 2009-10 Budget and 2009-10 Mid-Year Budget Review (MYBR), they remain almost $1.4 billion lower for the period from 2008-09 to 2012-13 compared to that estimated at the time of the 2008-09 Budget. Also, there continues to be uncertainty around the global economic recovery, which could adversely impact on domestic economic growth and consequently revenue projections over the forward estimates.

Against this background, the 2010-11 Budget sets out a number of measures needed to meet future service delivery needs, but in the context of a sustainable budget.

Those measures are summarised in the following table.

Table 1.1: Budget measures ($million)

2010-11 2011-12 2012-13 2013-14Budget Estimate Estimate Estimate

Revenue — Taxation - 29.2 3.1 14.0 15.1

Revenue — Other 12.3 109.3 134.1 145.1

Operating Initiatives - 423.7 - 523.3 - 524.9 - 465.5

Savings Initiatives 124.8 327.2 491.2 582.7

Total operating initiatives - 315.9 - 83.7 114.4 277.5

Total investing initiatives - 68.7 - 227.6 - 316.6 - 284.7

Note: Totals may not add due to rounding.

With respect to expenditure, it has been necessary to undertake a range of operating and investing initiatives, including those announced in the lead up to the March 2010 election. New operating initiatives (gross of operating savings) total $1937 million over the next four years, and investing initiatives $898 million over the same period.

These new initiatives are primarily directed at the areas of:

Health ($884 million), including the provision of additional health services and hospital upgrades;

Transport, Energy and Infrastructure ($525 million), including work on the Southern Expressway; and

Families and Communities ($307 million), including additional disability services.

In undertaking these initiatives, the government remains committed to delivering its significant capital investment program over the next decade in order to meet the infrastructure needs of the state, create employment opportunities and provide a solid basis for future economic prosperity. As such, this

1.1

budget continues the government’s infrastructure investment program, totalling $7.1 billion for the general government sector and $10.7 billion for the non-financial public sector over four years.

However, this program will be delivered within manageable state debt levels. While levels of general government sector debt increase across the forward estimates, the net financial liabilities to revenue ratio shows a slight improvement from the 2009-10 Budget.

This 2010-11 Budget presents the government’s response to the second report of the Sustainable Budget Commission. The formation of the commission was announced in the 2009-10 Budget in response to the impacts of the global financial crisis.

Existing unallocated savings announced in the 2009-10 and previous budgets amount to $700 million per annum by 2013-14. Some elements of these savings have been allocated to agencies and others have not. The commission sought to identify specific savings measures that could deliver these savings.

The report also identifies the importance of achieving savings in excess of the existing $700 million in order to place the state on a firmer fiscal footing. Using a menu of savings and revenue options identified by the commission, totalling $1.8 billion per annum by 2013-14, the government has identified new measures totalling $762 million, which are included in this budget.

The requirement on agencies to maintain efficiency dividends, absorb indexation adjustments and make FTE (full-time equivalent) savings as previously announced and factored into their budgets has been retained. These measures contribute $150 million to the savings to be delivered in 2013-14. The budget improvement measures announced in this budget, when added to the existing savings to be delivered in 2013-14, and interest savings, contribute to an overall improvement in the net operating position of nearly $1 billion.

The new budget improvement measures for 2013-14 as announced in this budget are set out in Table 1.2.

Table 1.2: Budget improvement measures by type


Expenditure savings measures 124.8 327.2 491.2 582.7Revenue measures 11.7 127.3 160.4 179.2Total new budget improvement measures 136.5 454.5 651.6 761.9Existing measures/interest savings 56.1 110.0 163.3 230.0Total budget improvement measures 192.6 564.5 814.9 991.8


New measures are described in more detail in the Budget Measures Statement.

The adoption of this package of budget improvement measures, reflecting the work undertaken by the commission, has resulted in an improved sustainable fiscal outlook. As a result of them, net operating surpluses are now forecast by 2011-12, with strong surpluses across the remainder of the forward estimates, and maintenance of a sustainable level of net debt.

1.2

Chapter 1: Fiscal Strategy and Budget Priorities

Fiscal strategy

The fiscal strategy of the 2010-11 Budget is to establish and maintain sustainable operating surpluses.

Table 1.3 sets out the expected budget outcomes for 2009-10 and across the forward estimates.

Table 1.3: General government sector budget estimates

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Estimated Budget Estimate Estimate Estimate Projection(a)

ResultNet operating balance $m 167 -389 55 216 370 840

Net lending $m -1124 -1791 -841 -194 126 689

Net debt $m 1587 3335 3633 3864 3847 3243

Net financial liabilities to revenue % 85.4 100.1 100.2 99.8 98.8 89.3

(a) Projections for 2014-15 are based on projections for revenue and expenditure aggregates rather than the detailed build up of portfolio expenditure and individual revenue items, which form the basis of the forward estimates up until 2013-14.

To achieve these outcomes, the budget introduces significant budget improvement measures in addition to the savings announced in previous budgets.

These measures, together with a moderation in infrastructure spending, return the budget to surplus on both an operating and net lending basis by 2013-14. In addition, they produce an improvement in the net financial liabilities to revenue ratio across the forward estimates.

Projections for 2014-15 indicate further strengthening in the state’s financial position.

Net operating balance

The net operating balance is a measure of whether revenues are sufficient to meet the expenses incurred by the government in delivering current services to the public, including expenses for future obligations like long service leave for its workforce and the depreciation of assets used in delivering services.

Figure 1.1 illustrates that the general government sector net operating balance was in surplus from 2002-03 until the $233 million deficit in 2008-09. A net operating surplus is expected for 2009-10, primarily as a result of the nature and timing of Commonwealth grants and expenditure carryovers into 2010-11. A deficit is forecast in 2010-11, significantly due to these timing impacts, before the budget returns to surplus across the remainder of the forward estimates.

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Figure 1.1: General government sector net operating balance and net lending ($million)

-2000

-1800

-1600

-1400

-1200

-1000

-800

-600

-400

-200

0

200

400

600

1998-99 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13

Net operating balance Net lending

Note: 1998-99 to 2008-09 are actual outcomes; 2009-10 to 2013-14 are forecasts.

Net lending

The net lending measure is an indication of whether revenues are sufficient to cover expenses and net capital investment. A net lending deficit means that revenues are not sufficient to fund operating and investment expenditure, resulting in increased liabilities.

A net lending deficit of $1.1 billion is expected in 2009-10, increasing to $1.8 billion in 2010-11. This reflects the government’s significant increase in capital expenditure, to both stimulate the economy and to rebuild the state’s infrastructure assets. The net lending position is expected to improve over the forward estimates, reaching a surplus in 2013-14. The change in net lending from deficit to surplus reflects both improvement in the net operating balance and a tapering off in the level of infrastructure investment across the period.

Net financial liabilities

Net financial liabilities include net debt and other significant liabilities, such as unfunded superannuation and provisions for long service leave entitlements. Net financial liabilities are expected to increase from 85.4 per cent at 30 June 2010 to 98.8 per cent at 30 June 2014.

Net debt is expected to increase over the period from $1.6 billion at 30 June 2010 to $3.8 billion at 30 June 2014. The increase in net debt largely reflects the government’s significant capital investment program.

As a percentage of Gross State Product (GSP), net debt is expected to increase from 2.0 per cent at 30 June 2010 to 3.8 per cent at 30 June 2014.

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Figure 1.2: Net debt as a percentage of GSP

-5

0

5

10

15

20

25

30

35

40

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

General government sector Non-financial public sector

Note: 1991 to 2009 are actual outcomes; 2010 to 2014 are forecasts.

The ratio of general government sector net financial liabilities to revenue is forecast to peak in 2011-12, reflecting the growth in net debt associated with high levels of investment in capital projects and a short-term net operating deficit. The ratio declines over the forward estimates as the operating position moves back into surplus. Refer to Chapter 4 for further details.

South Australia has a longer-term fiscal target of reducing the net financial liabilities to revenue ratio towards that of other triple-A rated states.

The unfunded superannuation liability is a major component of net financial liabilities and South Australia derives estimates of the unfunded superannuation liability using the latest available Commonwealth long-term bond rate. For this budget a discount rate of 5.3 per cent has been used.

The valuation of the unfunded superannuation liability is very sensitive to the discount rate used as illustrated in Table 1.4, which sets out the net financial liabilities to revenue ratio based on the different rates.

Table 1.4: Sensitivity of GGS NFL to revenue ratio to discount rates (%)

2009-10 2010-11 2011-12 2012-13 2013-14Discount Rate (%) Estimated

ResultBudget Estimate Estimate Estimate

5.3 85.4 100.1 100.2 99.8 98.8

6.0 78.0 92.5 92.9 92.9 92.2

7.5 65.1 79.3 80.3 80.8 80.6

The Commonwealth and Tasmanian governments use a 6 per cent discount rate on the grounds that it is a long-term average and using a constant rate allows comparisons from budget to budget.

Prior to the adoption of the Commonwealth bond rate as a result of the new accounting standard, a rate of 7.5 per cent was used.

1.5


The government’s performance to date against its broader fiscal targets is summarised in Table 1.5.

Table 1.5: Progress in achieving the government’s fiscal targets

Target Progress in achieving target

To achieve at least a net operating balance in the general government sector in every year.

South Australia is forecasting a net operating deficit in 2010-11 before returning to surplus in 2011-12.

To achieve net lending outcomes that ensure the ratio of net financial liabilities to revenue continues to decline towards that of other triple-A rated states.

The net financial liabilities to revenue ratio is forecast to peak in 2011-12 before declining across the forward estimates. Most other triple-A rated jurisdictions are also expecting increases in their ratios.

To ensure the state has an effective tax regime having regard to the government’s social and economic objectives.

The 2010-11 Budget includes measures announced by the government during 2009-10, including substantial land tax relief and a payroll tax exemption for apprentices and trainees. The government will also replace existing land rich provisions in the Stamp Duties Act 1923 with a landholder model. The landholder model treats all significant land transfers over $1 million equitably and protects the duty base from being eroded through the manipulation of the land rich test. Previously announced IGA tax reform measures will be implemented during the forward estimates period.

To provide value for money community services and economic infrastructure within available means.

The 2010-11 Budget maintains significant infrastructure spending over the forward estimates in accordance with the Strategic Infrastructure Plan for South Australia.

To fully fund accruing superannuation liabilities and progressively fund past service superannuation liabilities.

The government is on target to fully fund superannuation liabilities by 2034.

To ensure that risks to state finances are managed prudently to maintain a triple-A rating.

South Australia is rated triple-A by both Standard and Poor’s and Moody’s Investor Services.

To ensure public non-financial corporations (PNFCs) will only be able to borrow where they can demonstrate that investment programs are consistent with commercial returns (including budget funding).

The Department of Treasury and Finance advises on PNFC compliance with the government’s target as part of the Cabinet project approval process. It is the government’s policy that projects approved by the relevant PNFC boards should also comply with this target.

1.6


Fiscal outlook

The full suite of accrual statements produced under the uniform presentation framework is provided at Appendix A. Table 1.6 provides operating statement details for the general government sector for 2009-10, the budget year and the following three forward years.

Table 1.6: General government sector operating statement — 2009-10 to 2013-14 ($million)

2009-10 2009-10 2010-11 2011-12 2012-13 2013-14

Budget Estimated Budget Estimate Estimate EstimateResult

Revenue

Taxation revenue 3 526 3 641 3 858 4 188 4 424 4 657

Grants 8 064 8 857 8 319 8 164 8 252 8 101

Sales of goods and services 1 834 1 933 1 877 2 041 2 108 2 147

Interest income 144 163 143 127 152 174

Dividend and income tax equivalent income 388 425 353 388 420 549

Other 489 512 536 620 648 666

Total revenue 14 444 15 531 15 086 15 527 16 005 16 294

less

Expenses

Employee expenses 6 035 6 177 6 379 6 522 6 694 6 803

Superannuation expenses

Superannuation interest cost 444 455 427 420 417 412

Other superannuation expenses 623 646 676 692 703 712

Depreciation and amortisation 601 626 681 763 829 869

Interest expenses 174 179 255 316 366 408

Other property expenses — — — — — —

Other operating expenses 3 728 3 720 3 983 3 932 4 015 4 141

Grants 3 145 3 560 3 073 2 826 2 765 2 579

Total expenses 14 748 15 364 15 475 15 472 15 789 15 924

equals

Net operating balance - 304 167 - 389 55 216 370

plus

Other economic flows 925 879 589 715 867 764

equals

Comprehensive result - total change in net worth

621 1 045 200 770 1 083 1 134

Net operating balance - 304 167 - 389 55 216 370

less

Net acquisition of non-financial assets

Purchase of non-financial assets 2 180 2 162 2 283 1 934 1 626 1 216

less Sales of non-financial assets 343 245 201 275 387 104

less Depreciation 601 626 681 763 829 869

plus Change in inventories — — — — — —

plus Other movements in non-financial assets — — — — — —

equals Total net acquisition of non-financial assets 1 237 1 290 1 402 896 410 244

equals

Net lending / borrowing -1 541 -1 124 -1 791 - 841 - 194 126


The attachment to this chapter summarises the variations to the general government net operating balance and net lending estimates since the 2009-10 Budget and 2009-10 Mid-Year Budget Review (MYBR).

1.7


Key budget aggregates and fiscal trends

Key budget indicators are summarised in Table 1.7.

Table 1.7: Summary of key general government sector budget indicators

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14Actual Estimated Budget Estimate Estimate Estimate

Result

Budget balancesNet operating balance $m - 233 167 - 389 55 216 370Net lending $m - 872 -1 124 -1 791 - 841 - 194 126Cash surplus $m - 721 -1 121 -1 773 - 793 - 139 163

Revenue and expensesRevenue real growth % 1.8 12.3 -5.4 0.2 0.5 -0.7Expenses real growth % 7.4 9.2 -1.9 -2.7 -0.5 -1.6

Interest ratiosNet interest to revenue(a)(b) % 0.2 0.1 0.8 1.2 1.3 1.5Net interest plus nominal

superannuation interest to revenue(b)

% 3.1 3.1 3.6 4.0 4.0 4.0

Balance sheet indicatorsNet debt $m 475 1 587 3 335 3 633 3 864 3 847Net debt to revenue % 3.5 10.2 22.1 23.4 24.1 23.6Unfunded superannuation $m 8 939 9 476 9 442 9 445 9 428 9 389Net financial liabilities $m 11 562 13 271 15 096 15 558 15 967 16 105Net financial liabilities to revenue % 85.5 85.4 100.1 100.2 99.8 98.8Net worth $m 24 146 25 192 25 392 26 162 27 245 28 379

Note: Real-terms calculations use the Adelaide Consumer Price Index.

(a) Net interest does not include nominal superannuation interest cost.

(b) Revenue does not include interest income.

A net operating surplus is expected for 2009-10, followed by a $389 million deficit in 2010-11 before a return to net operating surpluses across the forward estimates.

Net lending deficits from 2009-10 to 2012-13 reflect high levels of capital expenditure as well as the net operating deficit in 2010-11. The budget is projected to return to a net lending surplus in 2013-14.

Real general government sector revenue growth is impacted by a decline in Commonwealth National Partnership grants at the conclusion of economic stimulus measures and other significant infrastructure projects, as well as the timing of funding for urban rail projects.

General government sector expenditure decreases in real terms from 2010-11 as the Commonwealth economic stimulus measures wind down and the budget improvement measures are implemented.

General government sector net debt and net financial liabilities to revenue are forecast to increase from 2009-10 to 2013-14. The net financial liabilities to revenue ratio is forecast to peak in 2011-12 reflecting the growth in net debt associated with high levels of investment in capital projects and a short-term operating deficit. The ratio declines over the remainder of the forward estimates as the operating position moves back into surplus.

1.8


The largest component of net financial liabilities is the unfunded superannuation liability. The unfunded superannuation liability is an obligation to current and former members of the defined benefit superannuation schemes that will need to be met in future years. At 30 June 2010 the unfunded superannuation liability is expected to be $9.5 billion. Chapter 4 provides more information on superannuation assets and liabilities.

Net financial liabilities also includes other liabilities of the general government sector such as long service leave entitlements, offset by financial assets (excluding equity held in public non-financial corporations and public financial corporations) of the sector.

Net worth is the total value of non-financial and financial assets, including the net assets of the public non-financial corporations (PNFCs) and public financial corporations (PFCs), less the value of liabilities.

Table 1.7 shows a $3.2 billion improvement in the net worth of the general government sector from 30 June 2010 to 30 June 2014. The net assets of PNFCs and PFCs controlled by the government are also forecast to increase across the forward estimates, primarily due to the revaluation of assets. Chapter 4 provides further information on changes in net worth.

Figure 1.3 depicts the high levels of capital investment over the forward estimates in the general government sector. Investment in this sector for these years, including public private partnerships (PPPs), is estimated to be $7.1 billion, with a peak of $2.3 billion in 2010-11.

General government sector net infrastructure investment is expected to significantly exceed depreciation over the budget period, providing a major boost to the state’s asset base.

Figure 1.3: General government sector purchases of non-financial assets ($million)

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2400

1998-99 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13

Purchases of non-financial assets Depreciation

Note: 1998-99 to 2008-09 are actual outcomes; 2009-10 to 2013-14 are forecasts.

Chapter 2 and the 2010-11 Capital Investment Statement provide further information on the government’s capital investment program.

Capital expenditure can only be funded from operating surpluses, sales of assets or through increases in net debt. Net debt does increase substantially over the forward years. However, this increase is

1.9


necessary to support the investment that provides for future economic growth, and is considered manageable.

As previously mentioned, the government has taken measures to reduce the amount of net debt incurred. Further discussion on these measures is included in the 2010-11 Budget Measures Statement.

Table 1.8 compares key general government sector aggregates across jurisdictions.

Table 1.8: Interstate comparison of key general government aggregates (figures for 2008-09)

Indicators NSW VIC QLD WA SA TAS ACT NTNet operating balance ($m) -897 251 35 318 - 233 -78 - 64 187Net lending (borrowing) ($m) -3 275 -1 184 -4 399 - 987 - 872 -95 - 150 - 22Net debt to revenue (%) 16.3 13.5 -52.1 -13.5 3.5 -22.9 -29.1 20.0Net financial liabilities to revenue (%) 97.1 82.4 31.5 34.2 85.5 62.0 50.9 89.6Credit rating(a) AAA AAA AA+ AAA AAA AA+ AAA Aa1

(a) Credit rating as assigned by Standard & Poor’s, other than for the Northern Territory, where the Moody’s rating is shown.

Source: 2008-09 Final Budget Outcomes.

Table 1.8 shows that in 2008-09, all jurisdictions reported net lending deficits, resulting from substantial funds being invested into infrastructure projects.

1.10


Attachment — Variations in the net operating balance and net lending estimates since the 2009-10 Budget and the 2009-10 MYBR

Table 1.9: Net operating balance — policy and parameter variations since the 2009-10 Budget ($million)

2009-10 2010-11 2011-12 2012-13

Estimate at 2009-10 Budget -304 78 96 304

Parameter and other variationsRevenue — taxation 104 225 218 208Revenue — other 463 -15 70 184Operating expenses -341 -114 -128 -144

Net effect of parameter and other variations 225 96 159 249

Policy measuresRevenue — taxation — -56 -52 -56Revenue — other 39 7 8 9Operating expenses -171 -164 -105 -209

Net effect of policy measures -132 -212 -149 -256

Use of provisions set aside in the 2009-10 BudgetOperating expenses 37 52 20 20

Estimate at 2009-10 MYBR -174 13 127 316

Parameter and other variationsRevenue — taxation 11 98 187 212Revenue — other 459 344 341 163Operating expenses 11 -523 -534 -594

Net effect of parameter and other variations 480 -81 -6 -219

Policy measures up to the BudgetRevenue — taxation — - 2 — —Revenue — other 14 105 57 57Operating expenses - 18 - 111 - 70 - 75

Net effect of policy measures up to the 2010-11 Budget -5 -8 -13 -17

Policy measures in the BudgetRevenue — taxation — - 29 3 14Revenue — other - 2 12 109 134Operating expenses - 155 - 299 - 196 - 34

Net effect of policy measures in the 2010-11 Budget -157 -316 -84 114

Use of provisions set aside in the 2009-10 Budget and the 2009-10 MYBROperating expenses 22 3 30 22

Estimate at 2010-11 Budget 167 -389 55 216


1.11


Table 1.10: Net lending — policy and parameter variations since the 2009-10 Budget ($million)

2009-10 2010-11 2011-12 2012-13

Estimate at 2009-10 Budget -1 541 -1 324 - 483 17

Net effect of operating variations to 2009-10 MYBR 130 - 65 31 12

Investing variations(a)

Parameter variations - 90 40 118 - 31Policy variations - 52 - 115 - 197 - 149

Total investing variations - 142 - 75 - 79 - 180

Use of provisions set aside in the 2009-10 BudgetNet capital investment expenditure 2 25 13 —

Estimate at 2009-10 MYBR -1 551 -1 439 - 518 - 151

Net effect of operating variations 341 -402 -72 -100

Investing variations(a)

Parameter variations 94 101 - 30 305Policy variations up to the 2010-11 Budget - 4 - 33 - 61 - 6Policy variations in the 2010-11 Budget - 4 - 69 - 228 - 317

Total investing variations 86 — -318 -18

Use of provisions set aside in the 2009-10 Budget and the 2009-10 MYBRNet capital investment expenditure — 50 68 75

Estimate at 2010-11 Budget -1 124 -1 791 - 841 - 194


(a) Investing variations relate to movements in the net acquisition of non-financial assets.

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Table 1.11: Revenue, expense and capital investment expenditure variations (parameter and other) since the 2009-10 MYBR ($million)

2009-10 2010-11 2011-12 2012-13

Revenue — TaxationPayroll tax -4 2 6 6Conveyances 9 64 90 107Land tax — private -11 -10 13 13Land tax — public 4 9 20 26Other property tax -3 7 27 27Insurance taxes 8 13 17 20Gambling tax — -7 -7 -12Motor vehicle taxes 9 18 22 24Total taxation revenue 11 98 187 212

Revenue — OtherGST revenue grants and transitional assistance 152 360 290 261Commonwealth specific purpose and national partnership grants - Current grants 51 94 134 70 - Capital grants 122 - 141 - 40 - 62Other Commonwealth grants 36 12 5 4Other contributions and grants 31 14 - 1 —Dividends and income tax equivalents 24 17 11 - 20Fines and penalties - 1 - 1 — —Royalties - 24 - 20 - 10 3Commonwealth contributions 34 41 54 50Sales of goods and services - 5 3 4 —Interest income 25 - 43 - 108 - 142Other revenue 14 6 1 - 1Total other revenue 459 344 341 163

Operating ExpensesSuperannuation interest cost — -1 6 9Interest expense -9 56 84 126Reversal of previously unallocated savings — -141 -304 -477Commonwealth grants on-passed to SA Water - 61 -98 -132 -57Carryovers 161 -130 -2 -16Depreciation — 4 -3 -6Other variations -80 -213 -183 -173Total expenses 11 -523 -534 -594

Net Capital Investment ExpenditureCarryovers 260 -212 -35 -9Provision for project slippage -200 300 — —Depreciation — -4 3 6Asset sales - revised program - 37 7 -74 283Other variations 71 10 77 24Total net capital investment expenditure 94 101 -30 305


Variations in revenue estimates (parameter and other)

Since the 2009-10 Mid-Year Budget Review (MYBR), taxation revenues have been revised up mainly in respect of property taxes and to a lesser extent motor vehicle taxes and insurance taxes. Upward revisions to property tax revenues mainly reflect stronger than expected growth in property values recorded in 2009-10 and the adoption of stronger medium-term property value assumptions from and

1.13


including 2010-11. The medium-term assumptions impact on conveyance duty revenue from 2010-11 and land tax estimates from 2011-12.

Conveyance duty activity levels have been revised down since the MYBR in both the residential and non-residential sector reflecting experience during 2009-10. The downward revision to transactions partially offsets the impact of the stronger property value assumptions.

Land tax revenues have been revised down in 2009-10 as a result of lower than expected collections. This flows through as a base effect across the forward estimates but is more than offset from 2011-12 by the stronger medium-term property growth assumptions.

Revenue from insurance duty and motor vehicle taxes is also expected to exceed expectations in 2009-10 and this flows through as a base effect to future years. Increased revenue from motor vehicle taxes reflects higher than expected revenue from stamp duty on motor vehicles in 2009-10. It also reflects upward revisions to revenues from motor vehicle registration fees from 2010-11 due to an increase in the projected number of registered heavy and light vehicles as well as an increase in heavy vehicle registration fees. Revenue from insurance duty has been revised up due mainly to upward revisions to the expected growth in the value of insurance premiums from 2009-10.

Significant upward revisions to GST revenue grants reflects revisions to the national GST pool available for distribution to the states and a higher than expected share of the GST pool from 2010-11 following the release of the 2010 Commonwealth Grants Commission’s methodology review. In the out years, pool revisions are partially offset by downward revisions to South Australia’s estimated share of the GST pool, having regard to South Australia’s declining population share, the above per capita receipt of Commonwealth specific purpose and National Partnership funding and revised assessment methods relating to the treatment of jurisdictions’ capital needs.

The upward revision to current grants over the forward estimates is largely due to the recognition of Commonwealth grants received (which are subsequently on-passed), mainly associated with the Adelaide Desalination Plant, that were previously budgeted as being paid directly to SA Water by the Commonwealth.

The significant upward revision to Commonwealth capital grants in 2009-10 is mainly due to increased funding for non-government schools from the National Partnership — Building the Education Revolution program (these funds are fully on-passed to the independent school sector) as well as the bringing forward of funding from 2010-11 for the South Road Superway and the Northern Expressway projects. Capital grants have been revised down over the forward estimates for a range of reasons, including the revised timing of grants for major infrastructure projects as well as a change in the funding arrangements for the South Australian Health and Medical Research Institute. Capital grants associated with the establishment of the institute will now be paid directly to the institute.

Higher than expected distributions from the Land Management Corporation and ForestrySA contribute to upward revisions to dividend and income tax equivalents in 2009-10. Revenue from dividends and income tax equivalents has been revised down in 2012-13 since the MYBR mainly due to an increase in SA Water’s estimated operating expenses and borrowing costs.

Commonwealth contributions have been revised up in all years reflecting the reclassification of funds for storm water management projects and for health related programs, which were previously recorded as Commonwealth grants, as well as funding for aged care services

Royalty revenue has been revised down in 2009-10 as a result of the Clark Shaft incident at Olympic Dam which reduced production levels as well as lower than expected royalty revenues from the Cooper Basin. Royalty revenue has also been revised down in later years reflecting lower production estimates from the Cooper Basin and Olympic Dam. These downward revisions are more than offset by the impact of higher copper prices and royalty revenue from new mines from 2012-13.

1.14


Variations in expense and capital investment expenditure estimates (parameter and other)

The nominal superannuation interest expense in 2009-10 is expected to be $455 million, consistent with forecasts in the 2009-10 MYBR.

Table 1.12 shows that the net interest expense has increased since the 2009-10 MYBR, reflecting the increased estimates of net debt.

Table 1.12: Net interest expense ($million)(a)

2009-10 2010-11 2011-12 2012-13Estimated

ResultBudget Estimate Estimate

2009-10 MYBR 32 126 165 1982010-11 Budget 16 112 189 214Increase in net interest expense since MYBR -16 -14 24 16

(a) Net interest expense is interest expense less interest income.

The reversal of unallocated savings is part of the process whereby previously identified general savings targets are replaced with specific budget improvement measures in the 2010-11 Budget.

The 'Other variations' category for operating expenses shows significant increases over the forward estimates mainly as a result of:

The pull forward of the original grant for the Adelaide Oval Redevelopment to support completion of the project in 2013-14; and

Additional costs associated with the Stage 2 decisions of the Industrial Relations Commission of South Australia in regards to the South Australian Education (Government Preschools and Schools) Arbitrated Enterprise Bargaining Award 2010.

Carryover expenditure reflects under expenditure by agencies in 2009-10, which will now be incurred in later years.

The carryover of capital expenditure in 2009-10 reflects delays in project expenditure. Where appropriate, an estimate of expenditure by agencies for these projects has been carried forward into future years. Investing carryovers from 2009-10 to 2010-11 and future years are $260 million. A $300 million provision for capital slippage is included in 2010-11, based on the established tendency for projects to slip behind schedule.

1.15


1.16


CHAPTER 2: EXPENDITURE

Overview

This chapter provides an overview of new expenditure initiatives in the 2010-11 Budget and describes the trends in aggregate general government expenditure over the forward estimates period. Full details of all budget initiatives are provided in the 2010-11 Budget Measures Statement.

The 2010-11 Budget contains new expenditure initiatives in the general government sector totalling $1309.1 million (net of operating savings) over the next four years. This comprises new operating and investing initiatives totalling $2835.0 million over the next four years, and operating savings of $1525.9 million. Table 2.1 shows the value of operating and investing initiatives across the forward estimates.

Table 2.1: General government expenditure initiatives ($million)


Operating initiatives(a)(b) - 423.7 - 523.3 - 524.9 - 465.5

Operating savings 124.8 327.2 491.2 582.7

Revenue offsets 0.4 8.8 - 4.9 - 9.2

Total operating expenditure initiatives - 298.5 - 187.3 - 38.6 108.0

Total investing expenditure initiatives - 68.7 - 227.6 - 316.6 - 284.7


(a) Excludes depreciation on investing initiatives.

(b) Includes expenditure associated with implementing savings initiatives.

New operating and investing initiatives includes delivering on all commitments given in the lead up to the March 2010 election. Additional resources have also been provided in priority front line service areas. New expenditure initiatives are concentrated in the portfolios of Health, Transport, Energy and Infrastructure and Families and Communities.

The Health portfolio budget contains additional new initiatives of $883.5 million ($730.4 million operating and $153.1 million investing) over the next four years. In addition there are $17.8 million in revenue offsets. Major initiatives include:

$502.2 million over four years for additional resources for health services;

$219.1 million over four years for the Every Patient Every Service initiative (partially offset by the Commonwealth funding) to provide an additional 260 000 elective surgery procedures across metropolitan and country hospitals, implement strategies to achieve a four hour emergency department target for 95 per cent of cases, provide 50 medical officer training positions, and provide 50 nurse practitioner positions and 80 two year scholarships;

$71.7 million over four years for the upgrade of the Women’s and Children’s Hospital;

$46.0 million over three years for a major redevelopment of the Modbury Hospital; and

$38.6 million over two years (from 2012-13) as part of the $125 million redevelopment of The Queen Elizabeth Hospital, due for completion in 2016-17.

2.1

The Transport, Energy and Infrastructure portfolio budget contains additional new initiatives of $525.4 million ($36.9 million operating and $488.5 million investing) over the next four years. In addition there is $5.4 million in revenue offsets. Major initiatives include:

$445.5 million for construction of the Southern Expressway duplication;

$36.1 million over four years for additional buses and bus services across the existing metropolitan system and outer metropolitan areas plus $5.2 million over four years for the upgrade and replacement of bus shelters. This is offset by $2.8 million in additional Metroticket sales;

$12.4 million over four years to expand the rural road safety and black spots programs; and

$12.0 million over four years for the Greenways and Cycle Paths project.

The Families and Communities portfolio budget contains additional new initiatives of $306.8 million ($296.1 million operating and $10.7 million investing) over the next four years. In addition there is a $7.7 million revenue reduction. Major initiatives include:

$137.7 million over four years for increased resources in alternative care;

$70.9 million over four years for additional support in Disability SA;

$70.6 million over four years for an increase to energy, water, sewerage and emergency service levy (ESL) fixed property concessions and an extension of eligibility to lower income earners for energy and ESL fixed property concessions from 1 July 2010;

$13.8 million over four years for disability equipment funding; and

$6.6 million over four years for the Active Ageing initiative including the personal alert systems rebate scheme and Seniors Wise SA home visits.

A summary of the total operating and investing initiatives by agency is shown in tables 2.2 and 2.3 respectively.

Table 2.2: Operating initiatives by portfolio ($million)

Portfolio2010-11 Budget

2011-12 Estimate

2012-13 Estimate

2013-14 Estimate

Legislature — — — —Premier and Cabinet - 0.6 - 1.8 - 10.7 - 2.0Trade and Economic Development / Defence SA - 11.5 - 11.8 - 11.5 - 9.5Treasury and Finance - 0.2 - 85.2 - 0.2 - 0.2Planning and Local Government — — — —Justice - 27.8 - 34.7 - 44.4 - 56.7Primary Industries and Resources - 10.7 - 4.4 - 4.4 - 3.3Transport, Energy and Infrastructure - 3.8 - 9.5 - 9.9 - 13.8Health - 159.2 - 172.1 - 194.0 - 205.1Education and Children's Services - 8.2 - 11.5 - 15.1 - 14.4

Families and Communities - 73.2 - 71.3 - 75.4 - 76.1Environment - 0.4 - 0.4 - 0.4 - 0.4Water - 0.5 — — —Tourism — — — —Further Education, Employment, Science and Technology - 32.8 - 34.0 - 35.0 - 35.7Across government

TVSP scheme expenditure provision - 94.9 - 86.7 - 123.9 - 48.3

Total Operating initiatives - 423.7 - 523.3 - 524.9 - 465.5


2.2

Chapter 2: Expenditure

Table 2.3: Investing initiatives by portfolio ($million)


2011-12 Estimate

2012-13 Estimate

2013-14 Estimate

Legislature - 4.4 - 9.1 - 0.5 —Premier and Cabinet — — — —Trade and Economic Development / Defence SA — — — —Treasury and Finance — — — —Planning and Local Government — — — —Justice - 10.3 - 7.6 - 2.4 - 2.2Primary Industries and Resources - 0.2 — — —Transport, Energy and Infrastructure - 18.4 - 84.8 - 170.7 - 214.7Health - 17.0 - 36.4 - 57.7 - 42.0Education and Children's Services - 5.1 - 47.9 - 39.4 - 14.5

Families and Communities - 1.5 - 3.3 - 5.9 —Environment - 1.5 - 1.0 — —Water — — — —Tourism — — — —Further Education, Employment, Science and Technology - 10.4 - 37.6 - 39.9 - 11.4

Total Investing initiatives - 68.7 - 227.6 - 316.6 - 284.7


In addition to the new budget initiatives, a number of initiatives were approved in the period following the 2009-10 Mid-Year Budget Review (MYBR). These initiatives are shown as memorandum items in the 2010-11 Budget Measures Statement and include:

$121.2 million for sub-acute services to provide an additional 20 sub-acute beds at the Repatriation General Hospital and improve allied health services, create 90 mental health intermediate care places and 80 additional supported care packages, and establish step down facilities for integrated forensic mental health services;

$33.8 million over two years to meet the requirements of recent and expected extensions to the Exceptional Circumstances program by the Commonwealth Government. $31.3 million will be funded by the Commonwealth Government and $2.5 million by the State Government;

$29.9 million over two years for refurbishment works to the Port Bonython Jetty;

$32.8 million over four years (including $13.8 million from the redirection of existing Department of Education and Children’s Services (DECS) resources) to ensure that as current DECS owned school buses reach 25 years of age they are replaced with buses that are fully compliant with current safety standards including seat belts; and that any new contracts with private bus operators are on the basis that the buses will also be compliant with current safety standards;

$24.1 million over four years (in addition to $1.1 million in 2009-10), funded by the Commonwealth, for the construction and operation of Aboriginal Children and Family Centres in South Australia. The Aboriginal Children and Family Centres are a partnership between the states and the Commonwealth;

$21.3 million over two years (in addition to $2.8 million in 2009-10) for road and rail improvements required to service the Greater Edinburgh Parks development;

$20.5 million over four years (in addition to $2.6 million in 2009-10) for additional support for rural general practitioners; and

$20 million over four years as a contribution to the Goyder Institute for Water Research.

2.3


Savings

The Sustainable Budget Commission was announced in the 2009-10 Budget to review budget processes and recommend measures to restore the budget to a sustainable position. The commission provided the government with a menu of savings options. The government used this menu of savings as a starting point in developing the savings measures announced in the 2010-11 Budget.

The 2008-09 Budget announced a savings target of $250 million over three years, $25 million in 2009-10, $75 million in 2010-11 and $150 million in 2011-12. In the 2009-10 Budget an addition of $75 million to this target in 2012-13 was announced, taking the total to $225 million in that year. Measures to achieve the initial $25 million of savings in 2009-10 were announced in the 2009-10 Budget and have been delivered. Further savings were announced in the 2009-10 Budget of $150 million in 2010-11, $250 million in 2011-12 and $350 million in 2012-13.

It was always intended that the annual savings task would be replaced by specific measures in agencies on a progressive basis (such as the identification of the $25 million of savings in 2009-10 mentioned above). The Sustainable Budget Commission announced in the 2009-10 Budget was tasked with identifying the savings to achieve the remaining unspecified savings of over $700 million by 2013-14. The specific measures announced in the 2010-11 Budget do this.

The 2010-11 Budget includes new operating savings totalling $1525.9 million over the next four years. These are additional to cost recovery and revenue measures ($478.6 million) and the retention of some savings included in agencies from previous budgets. The new operating savings apply to all portfolios and there are a number of across government savings measures including:

reductions in the public sector long service leave accrual from 15 days per annum to 9 days per annum for each completed year of service after 15 years of service. This initiative will bring state public sector employees long service leave entitlements more in line with those of the majority of the South Australian workforce; and

replacement of the current recreation leave loading provision for public sector employees who are not engaged as shift workers or seven day week workers; employed under particular legislation (that is the Police Act 1998, the Protective Security Act 2007, the Children’s Services Act 1985, the Education Act 1972, the Technical and Further Education Act 1975, the Fire and Emergency Services Act 2005); and/or in particular employment categories such as police, nurses, teachers and doctors with an additional recreation leave entitlement of two days per annum.

Operating savings also include a reduction of executives across government by 20 per cent, of which half will be achieved as part of the specific measures announced in this budget and the remainder is allocated to agencies to achieve through management structure reforms.

The details of the specific savings measures that will achieve the savings are presented in the 2010-11 Budget Measures Statement. Table 2.4 shows the total operating savings by portfolio across the forward estimates.

2.4


Table 2.4: Expenditure savings measures by portfolio ($million)(a)


2011-12 Estimate

2012-13 Estimate

2013-14 Estimate

Premier and Cabinet 3.8 8.6 17.0 25.0Trade and Economic Development / Defence SA 14.0 23.5 29.9 34.9Treasury and Finance 5.4 12.7 17.8 19.9Planning and Local Government 0.5 0.9 1.9 1.9Justice 4.8 18.4 29.2 32.2Primary Industries and Resources 14.2 18.2 22.4 25.6Transport, Energy and Infrastructure 6.9 31.2 37.2 43.4Health 17.6 61.8 103.8 132.7Education and Children's Services 8.7 28.3 49.1 59.6

Families and Communities 2.2 11.3 22.4 24.4Environment 6.0 11.5 22.3 29.8Water 2.5 3.2 3.6 3.4Tourism 1.1 3.0 4.0 4.6Further Education, Employment, Science and Technology 11.4 21.4 29.1 37.2

Across Government Initiatives

Reform of public sector long service leave arrangements — 28.7 30.1 31.8Reform of public sector employee recreation leave loading arrangements

— — 22.8 23.7

Improved motor vehicle fleet utilisation — 2.5 5.0 7.4Motor vehicle fleet mix improvements — 2.2 4.4 6.8Ministerial Office budgets reduction — 2.6 2.9 3.4First Home Owner Bonus Scheme reform 17.1 20.9 20.0 18.9Introduction of First Home Owners Grant Property Value Cap 1.5 2.0 2.0 2.0Removal of Petroleum Subsidy Scheme 7.2 14.3 14.2 14.1

Total operating savings 124.8 327.2 491.2 582.7


(a) Facilities management (DTEI), government ICT reforms (DTEI) and government advertising (DPC) have been budgeted in the associated agencies but potentially have across government implications.

Other savings requirements will remain in agency budgets and continue to be required to be delivered by agencies. These savings have previously been allocated to agencies and their budgets adjusted accordingly. They are:

the ongoing efficiency dividend of 0.25 per cent per annum announced in the 2006-07 Budget;

reduced indexation for supplies and services in line with a lower Consumer Price Index forecast at the time of the 2009-10 Budget; and

the remaining 400 FTE (full-time equivalent) reduction (200 in 2010-11 and 200 in 2011-12) announced in the 2008-09 MYBR as part of the 1600 FTE reduction over three years.

Public sector employment — new initiatives

As shown in Table 2.5 there is a total reduction of 3743 FTE (full-time equivalents) from savings initiatives. This is comprised of new savings initiatives involving a reduction of 2673 FTEs over the period to 2013-14, as well as a further 1070 FTEs from the existing savings measures retained in agency budgets (based on a standard distribution between employee expenses and supplies and services). This reduction is partially offset by an additional 1981 FTEs as a result of additional expenditure initiatives over the same period, giving a net reduction of 1762 FTEs over the period.

2.5


Table 2.5: Full-time equivalent impacts of new initiatives in 2013-14

Expenditure Savingsinitiatives initiatives Total

Premier and Cabinet 7 - 63 - 56Trade and Economic Development 1 - 90 - 89Treasury and Finance 6 - 80 - 74Planning and Local Government — - 18 - 18Justice 349 - 206 142Primary Industries and Resources 7 - 186 - 179Transport, Energy and Infrastructure — - 213 - 213Health 1 277 - 957 320Education and Children's Services 66 - 350 - 284Families and Communities 140 - 108 32Environment 2 - 153 - 151Water — - 17 - 17Tourism — - 51 - 51Further Education, Employment, Science and Technology 127 - 183 - 56Total 2010-11 initiative FTEs 1 981 -2 673 - 692Previously announced savings requirements -1 070Total FTEs -1 762

The Government is fully committed to achieving a sustainable budget outcome through the approved savings measures. Government employees whose positions are determined to be redundant as a consequence of those savings measures will have the opportunity for training and skills development to find alternative employment positions that arise from natural attrition and higher priority expenditure initiatives in the public sector.

Employees whose positions are determined to be redundant and who are not assigned to other positions will also have available generous voluntary separation packages.

Following the introduction of separation packages, if the required reduction in employee numbers is not achieved in twelve months through redeployment and voluntary separation packages, the Government will reconsider its ‘no forced redundancy policy’.

Public sector employment — total

Full-time equivalent (FTE) employee number estimates for general government sector agencies are based on FTE caps applied to them. The caps are consistent with the salaries and wages budget for each agency and are adjusted in line with changes to their budgets. Actual FTEs are monitored on a regular basis with agencies required to explain any significant variations from their FTE cap. PNFCs and PFCs provide estimates of future employment levels.

The estimated aggregate workforce levels in the public sector for the periods ending 30 June 2010 and 30 June 2011 are shown in Table 2.6.

2.6


Table 2.6: Public sector employment numbers

Full-time equivalent employees

30 June 2010 30 June 2011

Estimate EstimateGeneral government sector(a)

79 618 79 879

Public non-financial corporations sector 4 483 4 621

Financial corporations sector 524 539

Estimated total public sector employment 84 625 85 038

Note: Totals may not add due to rounding

(a) The FTE numbers for the general government sector reflect the FTE cap including operating and savings initiatives.

Overall, there is an estimated increase of 261 FTEs in the general government sector from 30 June 2010 to 30 June 2011 including growth in expenditure from new initiatives partially offset by savings measures.

The estimate of FTEs at 30 June 2010 is 1981 higher than estimated at the time of the 2009-10 Budget (2002 in the general government sector, 16 less in the public non-financial corporations sector and 5 less in the financial corporations sector). The increase in the general government sector is mainly due to additional employees in Health (1794 FTEs) and Families and Communities (206 FTEs).

Of the total 2009-10 FTE reduction target of 1200 announced in the 2008-09 Mid-Year Budget Review (MYBR), all portfolios except Health have reported achieving their required savings. Health was 96 FTEs short of meeting their FTE target for 2009-10 and this reduction is now expected to be achieved in 2010-11.

General government expenditure

Forward estimates of general government expenses by type are shown in Table 2.7.

In 2009-10 general government expenses are estimated to be $616 million (4.2 per cent) higher than at the 2009-10 Budget. Expenses are estimated to be $111 million (1.0 per cent) higher in 2010-11 than the 2009-10 Estimated Result. These movements reflect the net impact of decisions made to increase spending in priority areas including the Health, Families and Communities and Justice portfolios.

Purchases of property, plant and equipment are expected to be $2283 million in 2010-11, which is $121 million higher than in 2009-10. The forward estimates contain a major infrastructure investment program of $7.1 billion over four years to rebuild and expand the state’s strategic economic and social infrastructure to meet future needs whilst stimulating the economy and securing jobs.

2.7


Table 2.7: General government expenditure — forward estimates ($million)

2009-10 2009-10 2010-11 2011-12 2012-13 2013-14Budget Estimated Budget Estimate Estimate Estimate

ResultEmployee expenses 6 035 6 177 6 379 6 522 6 694 6 803Superannuation expenses

Superannuation interest cost 444 455 427 420 417 412Other superannuation expenses 623 646 676 692 703 712

Depreciation and amortisation 601 626 681 763 829 869Interest expenses 174 179 255 316 366 408Other property expenses — — — — — —Other operating expenses 3 728 3 720 3 983 3 932 4 015 4 141Grants 3 145 3 560 3 073 2 826 2 765 2 579Total expenses 14 748 15 364 15 475 15 472 15 789 15 924lessDepreciation expense - 601 - 626 - 681 - 763 - 829 - 869plusPurchases of property, plant and

equipment(a)

2 169 2 162 2 088 1 934 1 626 1 216

Assets acquired under finance lease and similar arrangements

11 — 196 — — —

Total expenditure on net lending basis 16 328 16 900 17 077 16 642 16 586 16 272


(a) Includes contributed assets.

The following section provides further details on the key components of expenses including details of expenses by the Australian Bureau of Statistics’ Government Purpose Classification.

Employee expenses

General government sector employee expenses are estimated to be $202 million (3.3 per cent) higher in 2010-11 than the 2009-10 Estimated Result.

In 2009-10 enterprise agreements were finalised for the wages parity (salaried) group, medical specialists and Parliament House employees.

Following extensive arbitration proceedings in the Industrial Relations Commission of South Australia concerning the pre-school and school sector (teachers and others) and the TAFE sector, the Full Commission delivered decisions that resulted in separate enterprise bargaining awards for each of those sectors, both of which came into effect on 3 September 2010.

Negotiations for a new enterprise agreement for the wages parity (weekly paid) group were recently concluded and a new enterprise agreement was approved by the Industrial Relations Commission of South Australia on 1 September 2010. Separate negotiations are proceeding in relation to assistants to members of parliament, nurses and midwives, and SA Ambulance Service employees. Those negotiations are expected to be concluded during 2010-11.

During 2010-11, there will also be enterprise bargaining negotiations in relation to police, wages parity (building, metal and plumbing trades) employees, SA Metropolitan Fire Service (firefighters), and salaried medical officers and clinical academics.

The government has approved an increase of 2.5 per cent for public sector executive and ministerial contract salaries for 2010-11 and will continue to seek to limit future wage outcomes to 2.5 per cent per annum to public sector employees and prevent further job losses being required while ensuring the sustainability of the state’s finances.

2.8


Across the forward estimates period employee expenses are projected to decline marginally in real terms reflecting the net effect of initiatives announced in the 2010-11 Budget and in particular the overall reduction in FTEs in the general government sector. The net impact of 2010-11 Budget initiatives on FTE numbers over the forward estimate period is shown in Table 2.5.

Superannuation expenses

The estimated nominal superannuation interest expense represents the increase during the year in the defined benefit superannuation obligations due to them being one year closer to settlement, less the expected earnings on superannuation assets. The nominal superannuation interest expense for each year is calculated based on the unfunded liability at the end of the preceding financial year.

The estimated unfunded superannuation liability at June 2010 has increased by $1256 million since the 2009-10 MYBR. The increase is primarily due to lower than expected returns on investments in 2009-10, and a lower discount rate used to value the unfunded superannuation liability in accordance with Australian Accounting Standards. The change in the unfunded superannuation liability is discussed further in Chapter 4.

The nominal superannuation interest expense for 2009-10 is $455 million, consistent with estimates in the 2009-10 MYBR.

Depreciation and amortisation

General government sector depreciation and amortisation are estimated to be $55 million higher in 2010-11 than the 2009-10 Estimated Result. Moderate growth is projected across the forward estimates due to the government’s recent significant investment to expand the state’s infrastructure.

Interest expenses

General government interest expenses are projected to increase across the forward estimates period reflecting higher levels of debt to 2012-13 as a consequence of projected net lending deficits that support the government’s significant capital expenditure program.

Figure 2.1 presents a time series of actual and forecast net interest expenses. The steady decline in net interest costs evident from 2002-03 to 2007-08 reflects lower levels of debt as a result of a sustained run of net lending surpluses over the period.

2.9


Figure 2.1: General government sector net interest expense: 2001-02 to 2013-14 ($000)

—

100 000

200 000

300 000

400 000

500 000

600 000

700 000

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Net interest expense plus nominal superannuation interest expense

Net interest expense

Other operating (non-employee) expenses

General government other operating (non-employee) expenses for 2009-10 are estimated to be $3720 million. These are predominantly made up of:

general supplies and services ($2374.2 million);

computer and communications charges ($251.4 million);

consultancies and contractors ($194.8 million);

repairs and maintenance expenses ($153.0 million); and

payments to TransAdelaide ($92.5 million).

The estimated growth in other operating (non-employee) expenses in 2010-11 ($263 million) is mainly due to the carryover of expenditure from 2009-10 into 2010-11 and the net effect of other parameter variations impacting other operating (non-employee) expenses.

Post 2010-11 the growth in expenditure mostly reflects commencements and cessation of various operating programs throughout these years, partially offset by the savings tasks across the forward estimates.

Grants

General government sector grants for 2009-10 are estimated to be $3560 million. These include grants to non-government schools, local government, industry, the South Australian Housing Trust, and community service obligation payments to SA Water and ForestrySA.

Grant expenses are estimated to be $487 million lower in 2010-11 than the 2009-10 Estimated Result. This largely reflects:

a reduction in grant funding to the South Australian Housing Trust by $286.5 million ($744.5 million in 2009-10 down to $458.0 million in 2010-11). This is mainly from reduced funding under the Commonwealth Nation Building — Economic Stimulus Plan ($299.2 million in 2009-10 down to $100.9 million in 2010-11) and under the National Partnership agreements on Social Housing and Remote Indigenous Housing ($112.9 million in 2009-10 down to $20.3 million in 2010-11);

2.10


a reduction in the Building the Education Revolution stimulus funding to non-government schools from $306.9 million in 2009-10 to $139.1 million in 2010-11;

a one-off amount of $83 million in 2009-10 for Murray Futures pipelines; and

a bring forward by the Commonwealth of a quarter ($34.3 million) of South Australia’s 2010-11 local government assistance grant allocation into 2009-10.

Grant expenses are projected to decline over the forward estimates primarily due to:

Reduced funding from the Commonwealth Nation Building — Economic Stimulus Plan including:

– South Australian Housing Trust grants declining from $299.2 million in 2009-10 down to $100.9 million in 2010-11 and $14.7 million in 2011-12; and

– on-passing of grant funding to non-government schools ending in 2010-11.

payments by the Department of Primary Industries and Resources for the exceptional circumstances interest rate subsidies support measures of $41.9 million in 2010-11 reducing to $4.2 million in 2011-12; and

$30.8 million in 2012-13 (including $20.3 million Commonwealth funding) for stormwater management projects which reduces to $661 000 in 2013-14 as projects are completed.

Purchases of property, plant and equipment

General government purchases of property, plant and equipment (investing expenditure) were $1378 million in 2008-09 and are estimated to be $2162 million in 2009-10.

In 2010-11, investing expenditure in the general government sector is estimated to be $2283 million and is focused in the following portfolios:

Transport, Energy and Infrastructure ($952.9 million), including major projects to upgrade and electrify the Noarlunga and Gawler rail lines, electrify the Outer Harbor rail line, extend the Noarlunga rail line to Seaford and complete construction of the new State Aquatic Centre;

Education and Children’s Services ($720.7 million), including projects associated with the Nation Building — Economic Stimulus Plan and six new schools through a public private partnership as part of the Education Works initiative; and

Health ($424.2 million), including redevelopments of a number of metropolitan and country hospitals and health services, infrastructure for mental health services and the construction of GP Plus health care centres and GP Plus super clinics.

The forward estimates contain a major infrastructure investment program of $7.1 billion over four years. The program has an emphasis on the following portfolios:

Transport, Energy and Infrastructure ($3.7 billion over four years) to continue the major rail projects in addition to key road transport improvement projects including construction of the South Road Superway and duplication of the Southern Expressway; and

Health ($1.2 billion over four years) for ongoing hospital and health service upgrades and redevelopments.

2.11


Expenses by function (ABS Government Purpose Classifications)

Expenses by function are shown in Table 2.8 according to the Australian Bureau of Statistics’ (ABS) Government Purpose Classification.

Health (29 per cent) and education (25 per cent) each account for a significant component of general government sector expenses.

Expenditure in 2010-11 is estimated to be higher than the 2009-10 Budget in government priority areas of social security and welfare (12.2 per cent); health (11.1 per cent); public order and safety (7.1 per cent); and education (2.5 per cent).

Some large transactions for specific projects account for movements between years in a number of categories:

the Commonwealth fiscal stimulus measures have significantly boosted the education and housing and community amenities categories in 2009-10 and 2010-11, due to grants on-passed to non-government schools and the South Australian Housing Trust. As discussed above, grants in 2010-11 are lower than in 2009-10;

forecast expenditure for the Adelaide Oval Redevelopment results in an increase in the recreation and culture category in 2010-11; and

higher expenditure in 2008-09 and 2009-10 in the agriculture, forestry, fishing and hunting category reflects expenditure related to the Jervois to Langhorne Creek irrigation pipeline.

Table 2.8: Estimate of expenses by function(a)

2008-09 2009-10 2009-10 2010-11 2010-11Outcome Budget Estimated

ResultBudget % change

on2009-10

$m $m $m $m EstimateGeneral public services 277 373 376 405 7.7Defence(b)

— — — — —

Public order and safety 1 293 1 361 1 386 1 457 5.1Education 3 347 3 824 3 821 3 919 2.6Health 4 000 4 082 4 321 4 534 4.9Social security and welfare 927 980 1 016 1 100 8.3Housing and community amenities 1 330 1 559 1 862 1 389 -25.4Recreation and culture 284 277 292 414 41.7Fuel and energy 52 49 56 45 -18.9Agriculture, forestry, fishing and hunting 243 237 237 188 -20.7Mining and mineral resources (other than fuels); manufacturing and construction 48 83 69 82 19.6Transport and communications 784 809 788 817 3.6Other economic affairs 226 280 305 288 -5.7Other purposes 953 833 834 835 0.1Total expenses 13 764 14 748 15 364 15 475 0.7


(a) Expenses by function data are derived from information submitted by government departments and agencies. The processes for deriving these data are subject to ongoing refinements. Consequently the data may be subject to future revisions. Consistent with the ongoing data improvement policy, refinements have been made to the 2009-10 Budget resulting in a number of reclassifications between categories. The 2008-09 Outcome has not been recast. The ABS Government Purpose Classification does not align neatly to the administrative structure of portfolios.

(b) The ABS defines ‘defence’ as expenditure on military and civil defence affairs, foreign military aid and defence research. The expenditure of Defence SA is included in other economic affairs.

2.12


Expenditure by portfolio

Tables 2.9–2.10 show, respectively, operating expenses and investing expenditure by portfolio.

Table 2.9: Operating expenses by portfolio(a)

2009-10 2009-10 2010-11 2010-11Budget Estimated Budget % change

result on 2009-10

$m $m $m Budget

Legislature - 23 - 23 - 23 1.2

Premier and Cabinet - 299 - 309 - 296 -1.0

Trade and Economic Development / Defence SA - 93 - 96 - 88 -5.4

Treasury and Finance - 203 - 216 - 218 7.3

Planning and Local Government - 26 - 28 - 25 -3.0

Justice -1 381 -1 407 -1 466 6.2

Primary Industries and Resources - 376 - 324 - 265 -29.6

Transport, Energy and Infrastructure -1 235 -1 294 -1 320 6.9

Health -4 036 -4 242 -4 460 10.5

Education and Children's Services -2 330 -2 421 -2 533 8.7

Families and Communities -1 513 -1 670 -1 831 21.0

Environment - 211 - 252 - 243 15.1

Water - 191 - 290 - 184 -3.9

Tourism - 67 - 72 - 62 -7.7

Further Education, Employment, Science and Technology - 533 - 536 - 574 7.7

Auditor-General - 14 - 13 - 14 1.2

Total Portfolio operating expenses -12 530 -13 194 -13 601 8.6

Portfolio


(a) Table will not add to total expenses in the tables in Appendix A due to the non-inclusion of all general government agencies in the Portfolio Statements and the impact of interagency transactions.

2.13


Table 2.10: Investing by portfolio ($million)(a)

2009-10 2009-10 2010-11

Budget Estimated Budget result

Legislature — — -4Premier and Cabinet -51 -24 -55Trade and Economic Development / Defence SA -73 -98 -45Treasury and Finance -10 -13 -18Planning and Local Government -1 -1 —Justice -124 -101 -191

Primary Industries and Resources -15 -7 -9Transport, Energy and Infrastructure -1 097 -1 005 -953

Health -360 -263 -424

Education and Children’s Services -534 -539 -721

Families and Communities -8 -15 -69Environment -26 -18 -30

Water -22 -19 -6

Tourism — — —Further Education, Employment, Science and Technology -28 -49 -28Auditor-General's — — —Contingencies and Other -31 -9 -29

Provision for capital slippage 200 — 300

Total investing expenditure general government sector -2 180 -2 162 -2 283

Total investing expenditure public non-financial corporations -1 728 -1 751 -1 361Other — 45 3Total Investing expenditure non-financial public sector -3 908 -3 868 -3 641 Note: Totals may not add due to rounding.

(a) Table includes contributed assets and assets acquired under finance lease.

2.14


CHAPTER 3: REVENUE

Overview

Revenue estimates in the 2010-11 Budget have been prepared in the context of a positive outlook for the economy. While projections at the time of the 2009-10 Budget reflected a significant decline in revenues, 2009-10 revenues are expected to be stronger than predicted at the time of the budget and 2009-10 Mid-Year Budget Review reflecting an improved economic environment and upward revisions to Commonwealth grants.

However, total estimated revenue from taxation, GST and royalties over the period 2008-09 to 2012-13 remains almost $1.4 billion (excluding revenue measures) lower than the levels estimated in respect of the 2008-09 Budget.

While the outlook for the domestic economy, including the property market in South Australia, remains positive, it is recognised that uncertainty around the global economic recovery and sovereign debt issues in Europe could adversely impact upon domestic economic growth and consequently revenue projections over the forward estimates period.

This budget includes a range of revenue measures that contribute to restoring the budget to a sustainable position going forward. The measures include an increase to some royalty rates and the replacement of land rich provisions with a landholder model in the Stamp Duties Act 1923.

The budget also includes payroll tax relief for employers of apprentices and trainees as announced by the government during the 2010 election campaign. The government has announced that from 1 July 2010, wages paid to eligible apprentices and trainees will be exempt from payroll tax.

Further details on all revenue measures included in this budget are provided in the Budget Measures Statement.

While taxation and Goods and Services Tax (GST) grant revenues are expected to grow over the forward estimates, total operating revenues are projected to be fairly flat in real-terms. This is because of a decline in Commonwealth National Partnership grants reflecting the conclusion of economic stimulus measures and other significant infrastructure projects as well as the timing of funding for urban rail projects.

Annual fee and rate setting

Fees and charges

Table 3.1 sets out the increase in fees and charges in 2010-11 for major government services. These increases took effect from 1 July 2010. In some cases there have been further adjustments to agency fees and charges designed to ensure budget sustainability. The details and revenue impact of any such adjustments are set out in the Budget Measures Statement.

3.1

Table 3.1: 2010-11 increase in selected agency fees and charges

2009-10

$

2010-11

$

Increase

%

Public transport

Single trip tickets — all times and zones 4.40 4.60 4.5

Multi trip tickets — all times and zones 29.00 30.00 3.4

Motor vehicle charges

Registration fee — motor vehicles:

Four cylinders or less 99.00 102.00 3.0

Five or six cylinders 201.00 208.00 3.5

Seven or more cylinders 292.00 302.00 3.4

Registration fee — light commercial vehicles:

Mass between 1001kg and 1500kg 218.00 225.00 3.2

Mass greater than 1500kg 371.00 384.00 3.5

Drivers’ licence renewals

Five years 135.00 140.00 3.7

Ten years 270.00 280.00 3.7

Speeding fines

Exceeding the speed limit by:

Less than 15km/h 190.00 196.00 3.2

More than 15km/h but less than 30km/h 302.00 312.00 3.3

More than 30km/h 453.00 468.00 3.3

Water — residential

Average residential bill(a) 385.60 469.60 21.8

Annual water service availability (supply) charge 137.60 142.40 3.5

Water usage charge per kilolitre supplied:

Up to and including 120 kilolitres 0.97 1.28 32.0

In excess of 120 kilolitres but less than 520 kilolitres 1.88 2.48 31.9

In excess of 520 kilolitres 2.26 2.98 31.9

Motor vehicle charges

Compulsory Third Party premium

Passenger vehicles (metropolitan postcodes):

Standard premium 444.00 476.00 7.2

Input tax credit entitled premium 483.00 518.00 7.2

(a) Average based on water consumption of 190 kilolitres, which was the average metropolitan residential consumption during 2008-09.

The annual indexation factor for fees and charges has been set at 3.3 per cent for 2010-11 reflecting the average increase in the cost of providing the relevant services. Fees and charges are typically adjusted by the indexation factor and then rounded to an administratively convenient amount. This results in the increase of some fees and charges being smaller or greater than the indexation factor.

Not all fees and charges are increased through the annual adjustment process. Adjustments to certain fees and charges are determined as a consequence of specific policy decisions.

3.2

Chapter 3: Revenue

In December 2009, the government announced new water charges to apply from 1 July 2010. The new water charges represent a step towards full compliance by the government with the National Water Initiative Pricing Principles. These principles require SA Water to earn an economic rate of return on all new and replacement investments (including the Adelaide Desalination Plant). The resultant charges are required to provide enough revenue to recover all costs including capital and real financial return on investment over the life of the project.

For residential customers annual water bills have increased by an average of 21.8 per cent. Metropolitan sewerage rates have increased by 3.3 per cent on average and country sewerage rates have increased by 3.8 per cent on average.

Compulsory third party (CTP) premiums have increased by an average 7.2 per cent for 2010-11. The Class 1 premium (metropolitan private passenger vehicle) increased by 7.2 per cent. The increase in CTP premiums is in response to the impact on asset values in the CTP fund as a result of the global financial crisis.

Emergency services levy

The only material factor causing emergency services levy (ESL) bills to rise in 2010-11 is underlying capital value growth impacting on the value of land and buildings. The increase in the ESL bill for a residential property in metropolitan Adelaide with a median capital value of $410 000 is estimated to be $2.79. ESL bills for mobile property will not increase.

The ESL is expected to raise $214.3 million in 2010-11, with private property owners to contribute $120.4 million ($127.7 million less pensioner concessions of $7.3 million) and the remaining $93.9 million to be contributed by the government. Tax relief is provided to property owners through ESL remissions. The Community Emergency Services Fund is compensated for the loss of this revenue by the government paying into the fund amounts equivalent to the cost of remissions and pensioner concessions in addition to the government’s ESL liability on its own property.

For fixed property (land and buildings), the effective ESL rates are summarised in the final column of Table 3.2. For mobile property (motor vehicles), the effective rates are provided in the second last column of Table 3.2.

3.3

Chapter 3: Revenue

Table 3.2: Emergency services levy rates for 2010-11

Prescribed rate(a)

Remission rate Post-remission rate

Effective levy rate paid in Regional

Area 4(b) cents per $ (applied to capital values discounted by

land use and area factors) $50 plus cents per $

of non-discounted capital value

Fixed property

Residential 0.0990 0.0730 0.0260 0.0104

Commercial 0.0990 0.0000 0.0990 0.1006

Industrial 0.0990 0.0000 0.0990 0.1750

Rural and vacant land 0.0990 0.0730 0.0260(c) 0.0078

Special community use 0.0990 0.0565 0.0425 0.0043

Other 0.0990 0.0730 0.0260 0.0130

Mobile property $ $ $ $

Cars and larger motor cycles

32 8 24 n.a.

Metropolitan primary production goods vehicles

32 20 12 n.a.

Recreational boats 12 12 — n.a.

Trailers and caravans 8 8 — n.a.

Historic vehicles 8 2 6 n.a.

(a) The prescribed rate, which is the rate that would apply in the absence of remissions, will be 0.0990 cents in the dollar.

(b) Incorporates the effect of land use weightings applied to capital values. Effective levy rates for each land use category differ depending on the regional location of the property. For ease of exposition, effective levy rates have been calculated only for Regional Area 4.

Regional Area 4 metropolitan Adelaide

Regional Area 1 major country towns

Regional Area 2 incorporated areas outside Regional Areas 1 and 4

Regional Area 3 unincorporated areas of the state

(c) This is the rate that applies in Regional Area 4. In Regional Areas 1, 2 and 3 the remission rate for rural and vacant land is 0.0895 cents in the dollar and the post remission rate is 0.0095 cents in the dollar.

General government sector revenue

Total general government sector operating revenues are projected to decrease by 2.9 per cent in 2010-11, following higher than expected growth in 2009-10. Growth in 2009-10 of 12.3 per cent (in real-terms) is largely due to Commonwealth funding received under the Nation Building — Economic Stimulus Plan. The decrease in 2010-11 in total operating revenues is primarily due to a fall in National Partnership grants as a result of various factors including the discontinuation of the temporary First Home Owners Boost scheme, the winding back of funding provided under the Commonwealth’s Nation Building — Economic Stimulus Plan and exceptional circumstances drought funding as well as the timing of payments under the Water for the Future program.

An expected fall in revenue from sales of goods and services together with lower dividend revenue from SA Water as a result of higher operating costs associated with water security initiatives also contributes to the fall in operating revenues in 2010-11.

Over the forward estimates, operating revenues are expected to grow modestly in nominal terms.

3.4

Chapter 3: Revenue

Table 3.3: General government sector revenues ($million)


ResultTaxation revenue 3 525.9 3 640.5 3 857.9 4 188.0 4 424.1 4 656.6Grant revenue 8 064.1 8 857.2 8 319.4 8 163.9 8 252.4 8 101.1Sales of goods and services 1 833.8 1 932.7 1 876.8 2 040.6 2 108.0 2 146.8Interest income 143.5 163.2 142.6 126.8 151.9 173.8Dividend and ITE

(a) revenue 387.6 425.0 353.1 388.2 420.2 549.1

Other revenue 489.2 512.2 536.0 619.8 648.1 666.5Total revenue 14 444.2 15 530.8 15 085.8 15 527.3 16 004.7 16 293.8

% change on previous yearNominal terms growth % 14.8 - 2.9 2.9 3.1 1.8Real terms growth % 12.3 - 5.4 0.2 0.5 - 0.7


(a) Income tax equivalent (ITE).

Taxation

Taxation revenues have been revised up in 2009-10 compared with budget, largely due to upward revisions to revenue from conveyance duty, motor vehicle taxes and insurance taxes.

The forward outlook for taxation revenue is for moderate nominal growth, with taxation revenue forecast to grow at an annual average rate of 6.5 per cent over the forward estimates.

In policy adjusted terms, taxation revenues are projected to grow by 8.5 per cent in 2010-11 and by an average annual rate of 6.7 per cent from 2010-11 to 2013-14. The policy adjusted series presented in the tables shows the underlying growth in taxation revenues by adjusting taxation estimates to be consistent with 2010-11 policy settings.

Tax estimates are provided in Table 3.4.

3.5

Chapter 3: Revenue

Table 3.4: Taxation ($million)

2008-09 2009-10 2009-10 2010-11 2011-12 2012-13 2013-14Outcome Budget Estimated Budget Estimate Estimate Estimate

Result

Payroll tax 914 915 899 930 1 027 1 094 1 163

Property taxes Conveyance duty(a) 726 695 790 894 1 001 1 091 1 169 Land tax — private 332 365 357 355 373 394 411 Land tax — public 178 184 196 218 224 233 243 ESL on fixed property 90 92 93 97 100 103 107 Mortgage duty 23 — 2 — — — — Natural resource management levy 30 27 30 34 36 35 36 Save the River Murray Levy 23 24 24 25 26 26 27 Guarantee fees 20 24 28 54 72 68 68 Rental duty 10 1 1 — — — — Share duty 6 6 5 6 6 1 — Gaming machine surcharge 1 1 2 2 2 — — All other(b) 8 8 5 6 6 7 7

1 447 1 428 1 535 1 689 1 845 1 960 2 069Gambling taxes Gaming machines 292 296 283 305 329 351 374 SA Lotteries 84 76 87 74 78 79 81 Casino 21 21 22 23 24 26 27 SA TAB 8 5 6 5 4 4 3 Other(c) 2 2 3 3 3 3 3

407 400 401 411 438 462 489Insurance taxes General insurance 212 220 226 226 247 256 265 CTP renewal certificate 62 61 61 62 63 63 64 CTP insurance 48 51 52 56 59 62 63 Life insurance 5 5 8 8 8 8 9

327 338 347 352 377 390 401Motor vehicle taxes Motor vehicle registration fees 273 278 284 296 316 328 340 Stamp duty on registration transfers 139 137 145 149 154 159 163 ESL on mobile property 30 29 30 31 31 32 32

442 445 459 476 501 518 535Total taxation 3 537 3 526 3 641 3 858 4 188 4 424 4 657

Policy adjusted(d) 3 420 n.a. 3 567 3 869 4 184 4 455 4 702

% change on previous yearTotal taxationNominal growth 2.9 6.0 8.6 5.6 5.3Real growth 0.7 3.2 5.7 3.0 2.7Policy adjustedNominal growth 4.3 8.5 8.1 6.5 5.5Real growth 2.1 5.6 5.3 3.8 2.9


(a) Includes voluntary conveyances.

(b) Includes Agents Indemnity Fund and Hindmarsh Island levy.

(c) Includes revenue from small lotteries and soccer pools.

(d) The policy adjusted series shows the underlying growth in tax revenues by adjusting tax estimates to be consistent with 2010-11 policy settings. For comparability with future years, the policy adjusted figure for 2010-11 assumes a full year impact of 2010-11 policy measures.

3.6

Chapter 3: Revenue

Payroll tax

The outlook for payroll tax revenue is provided in Table 3.5.

Table 3.5: Payroll tax

2009-10 2010-11 2011-12 2012-13 2013-14Estimated Budget Estimate Estimate Estimate

ResultTotal payroll tax ($m) 898.7 929.8 1 027.5 1 094.3 1 162.5Nominal growth (%) - 1.7 3.5 10.5 6.5 6.2Real growth (%) - 3.8 0.8 7.6 3.8 3.6Policy adjusted underlying revenue ($m)(a) 876.0 939.2 1 021.0 1 086.1 1 152.5Nominal growth (%) 0.3 7.2 8.7 6.4 6.1Real growth (%) - 1.8 4.4 5.8 3.7 3.5

(a) Budgeted payroll tax collections are lower than the policy adjusted series in 2010-11 due to the cashflow impact of the

winding up of the payroll tax trainee rebate scheme. Some rebates payable under this scheme relating to 2009-10 will be paid in 2010-11 but have been excluded from the policy adjusted series as the scheme was abolished from 1 July 2010.

Payroll tax receipts have been revised down since the 2009-10 Budget primarily reflecting the impact of a softer employment market on the growth in taxable payrolls. Wages growth and average hours worked were lower than expected at the 2009-10 Budget as employers reduced overtime and managed their casual employment workforce as the economy recovered from the global financial crisis.

Employment and wages growth are expected to improve in 2010-11 contributing to stronger growth in taxable payrolls. This growth is partially offset by the net impact of the government’s decision to exempt the wages of eligible trainees and apprentices from payroll tax from 1 July 2010.

Employment and wages are expected to improve further in 2011-12 before reverting back to long-term trend growth rates from 2012-13. The phased abolition of the payroll tax exporters rebate scheme also contributes to the growth in payroll tax from 2011-12.

In policy adjusted terms, payroll tax revenues are expected to grow moderately from 2010-11, with nominal growth of between 6.1 per cent and 8.7 per cent per annum across the forward estimates.

3.7

Chapter 3: Revenue

Property taxes

Property taxes include stamp duties (including on the conveyance of property and transfers of non-quoted marketable securities), land tax, the ESL on fixed property, the Save the River Murray Levy, regional natural resource management levies, guarantee fees and other minor taxes.

The revenue outlook for all property taxes is provided in Table 3.6.

Table 3.6: Property taxes


ResultTotal property taxes ($m) 1 534.8 1 689.4 1 845.0 1 960.2 2 068.9Nominal growth (%) 6.1 10.1 9.2 6.2 5.5Real growth (%) 3.8 7.2 6.3 3.6 3.0Policy adjusted underlying revenue ($m) 1 485.3 1 691.2 1 854.3 2 004.9 2 129.8Nominal growth (%) 8.1 13.9 9.6 8.1 6.2Real growth (%) 5.8 10.9 6.7 5.4 3.6

Property tax revenues are affected by tax reforms agreed under the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations (IGA). They are also affected by revenue policy measures, including land tax relief and the replacement of land rich provisions in the Stamp Duties Act 1923 with a landholder model that take effect over the forward estimate period. IGA reforms affect property tax growth in 2009-10 (final phase of abolition of mortgage and rental duty) and 2012-13 when stamp duty on non-quoted marketable securities and non-real property transfers is abolished. Land tax relief measures commenced in 2010-11, and land tax thresholds will be indexed to site value growth from 2011-12. The landholder model provisions are intended to commence from 1 July 2011.

The policy adjusted series, on the other hand, assumes a continuation of 2010-11 tax policy settings across the forward period in order to measure the expected underlying growth in tax revenues.

The relatively strong growth in property taxes in 2010-11 and 2011-12 primarily reflects the adoption of stronger medium-term property value assumptions from and including 2010-11. The number of property transfers is assumed to return to around trend levels by the end of the forward estimates period.

Conveyance duty

Property market conditions exceeded expectations in 2009-10.

The residential property market was stronger than expected in the 2009-10 Budget buoyed by strong demand from first home buyers, particularly in the first half of the year, and the effects of relatively low levels of interest rates supporting residential property transfers and property values.

Residential and non-residential property values continued to grow strongly in 2009-10 supporting growth in conveyance duty receipts over the year. Data from the Valuer-General shows the median house price in metropolitan Adelaide has increased by 13.9 per cent in the 12 months to the June quarter 2010. While residential property transfers in 2009-10 were stronger than expected at the time of the 2009-10 Budget, turnover in the non-residential property sector was softer than expected reflecting a more cautious commercial and industrial sector.

Conveyance duty revenue is expected to grow strongly over the forward estimates. While a real-terms correction in property values had been anticipated in recent budgets, a downturn in the property

3.8

Chapter 3: Revenue

market is no longer expected. The forward estimates now assume real-terms price growth for both the residential and non-residential property sectors.

The forward estimates assume solid growth in both residential and non-residential turnover as confidence returns to the economy and transactions return to around long-term trend levels towards the end of the forward estimates. Conveyance duty estimates in 2012-13 are affected by the abolition of stamp duty on non-real property transfers from 1 July 2012.

Conveyance duty revenue is also affected by the government’s decision to replace the existing land rich provisions in the Stamp Duties Act 1923 with a landholder model from 1 July 2011. The landholder model has broader application than the land rich provisions and is expected to have a full year revenue impact of $20 million.

Land tax

In 2010-11, private land owners are expected to contribute around 62 per cent of total land tax revenue. Government entities, mainly the South Australian Housing Trust and the Land Management Corporation, contribute the remainder.

Land tax collections in 2010-11 are affected by the land tax relief measure announced in the 2009-10 Mid-Year Budget Review, which included increasing the tax-free threshold from $110 000 to $300 000 and adjusting other tax brackets and tax rates. From 2011-12, all tax thresholds will be indexed annually in line with average site value increases as determined by the Valuer-General.

Land tax assessments are based on land valuations undertaken by the Valuer-General, which have regard to recent market experience.

Site value increases of 10.6 per cent for residential land and 7.8 per cent for commercial and industrial land in calendar year 2009 contribute to the growth in land tax receipts in 2010-11.

Residential and non-residential land values are expected to grow in real-terms over the forward years.

Emergency services levy — fixed property

ESL on fixed property is levied on the capital value of land and buildings. Growth in levy collections reflects growth in property values and in the number of taxable properties.

Capital values have increased as evidenced by property sales experience. This experience impacts on updated valuations determined by the Valuer-General for use in 2010-11 assessments.

The capital valuations that will be used in 2010-11 ESL assessments are estimated to have increased by 6.4 per cent for residential property, 4.4 per cent for commercial property and 5.6 per cent for industrial property from the capital values used in 2009-10 ESL assessments.

Forward projections for years subsequent to 2010-11 assume modest real-terms growth in capital values across the forward estimates.

Mortgage and rental duty

Consistent with the government’s commitment to IGA tax reforms, rental duty and remaining mortgage duty were progressively phased out over a three year period, which commenced on 1 July 2007. These stamp duty rates, which were reduced by one-third from 1 July 2007 and a further one-third on 1 July 2008, were fully abolished on 1 July 2009.

3.9

Chapter 3: Revenue

The small mortgage and rental duty revenues recorded in 2009-10 relate to transactions undertaken in prior years.

Share duty

Share duty applies to transfers of non-quoted marketable securities but will be abolished in 2012-13, as part of the IGA tax reform commitments.

Share duty receipts in 2009-10 were slightly lower than originally budgeted reflecting lower than expected transfers of non-quoted marketable securities.

Natural resources management levies

Natural resources management (NRM) levies are collected by councils on behalf of eight regional NRM boards in existence in South Australia. The levies are paid by landholders and water users to fund the activities of the boards that are responsible for managing and protecting each region’s natural resources.

In 2009-10, revenue from NRM levies is expected to be $3 million higher than originally estimated. Revenue from NRM levies is forecast to increase in 2010-11 primarily due to an increase in the Adelaide and Mount Lofty Ranges NRM levy following a review by the Adelaide and Mount Lofty NRM Board of its programs. In 2011-12, revenue from NRM levies is affected by the cessation of NRM levy relief for drought affected levy payers in the River Murray area. Thereafter, revenue from NRM levies is forecast to remain relatively flat.

Save the River Murray Levy

Funds raised from the Save the River Murray Levy are used to fund specific measures aimed at improving the long-term security and quality of South Australia’s water supply.

Levy rates are indexed annually to movements in the Adelaide Consumer Price Index. SA Water collects the levy.

Modest revenue growth in the levy reflects expected inflation and growth in SA Water’s customer base.

Guarantee fees

Government guarantees on borrowed funds reduce borrowing costs for government authorities. Guarantee fees are charged for this funding cost advantage.

Guarantee fees are determined each year based on estimated credit margins (spreads) between the cost at which lower rated entities or entities that have no assigned credit rating could borrow at on a stand alone basis and the cost at which they can borrow through the Government of South Australia. That is, the guarantee fee is designed to offset the competitive advantage the organisation gains from access to cheaper financing.

Revenue from guarantee fees is expected to increase significantly in 2010-11 mainly due to an increase in government guarantee fees reflecting the impact of wider credit margins following the global financial crisis and a significant increase in SA Water’s debt levels associated with the funding of capital projects. Revenue from guarantee fees will increase further in 2011-12 as SA Water’s debt levels continue to increase to fund capital projects including the Adelaide Desalination Plant, with revenue from guarantee fees returning to slightly lower levels over the remainder of the forward estimates.

3.10

Chapter 3: Revenue

Gambling taxes

Gambling taxes include taxes on gaming machines in hotels and clubs, distributions from SA Lotteries (comprising a tax on net gambling revenue together with distributions net of income tax equivalents), casino duty and tax on net wagering revenue of the SA TAB.

The outlook for all forms of gambling tax revenue is provided in Table 3.7.

Table 3.7: Gambling taxes


ResultTotal gambling taxes ($m) 400.9 410.9 437.9 462.2 488.5

Nominal growth (%) - 1.6 2.5 6.6 5.5 5.7Real growth (%) - 3.7 - 0.2 3.8 2.9 3.1Policy adjusted underlying revenue ($m) 399.6 410.8 438.8 463.9 490.4

Nominal growth (%) - 1.2 2.8 6.8 5.7 5.7Real growth (%) - 3.4 0.1 4.0 3.1 3.1

Gaming machine revenue is expected to be around $11 million lower than estimated in the 2009-10 Budget as a result of lower expenditure in hotels and clubs. From 2010-11, revenue is expected to grow in line with household consumption expenditure.

Additional sales associated with exceptionally high jackpots during the year was the main contributor to SA Lotteries’ distributions being around $10 million higher than originally estimated in 2009-10. Distributions from SA Lotteries are projected to grow modestly over the forward estimates.

Gambling tax revenues from SA TAB are forecast to fall over the forward estimates period reflecting the government’s decision to further assist the South Australian racing codes by abolishing the wagering tax on SA TAB race betting operations with a correspondingly higher distribution from the SA TAB to the racing codes. The phasing-out of SA TAB wagering tax on racing commenced in 2008-09 with the tax to be eliminated from 1 July 2012. The wagering tax will be retained on SA TAB sports betting.

Insurance taxes

Taxes on insurance comprise stamp duty on insurance premiums (including life insurance, general insurance and compulsory third party (CTP) insurance) as well as a flat stamp duty charge on renewal notices for motor vehicle registration and CTP insurance.

Projected growth rates for insurance tax revenues are provided in Table 3.8.

Table 3.8: Insurance taxes


ResultTotal insurance taxes ($m) 347.1 351.7 376.6 389.5 401.2Nominal growth (%) 6.2 1.3 7.1 3.4 3.0Real growth (%) 3.9 - 1.3 4.2 0.8 0.5

3.11

Chapter 3: Revenue

In 2010-11, the growth in stamp duty on insurance reflects industry projections of increases in household and commercial insurance premiums in the order of 4 per cent to 7 per cent and an average CTP premium increase of 7.2 per cent.

Beyond 2010-11, underlying revenue from general insurance and life insurance is expected to grow modestly reflecting growth in premiums.

The insurance tax line, consistent with Australian Bureau of Statistics’ classifications, also includes stamp duty on CTP renewal certificates, which is a flat charge of $60 per vehicle. Revenue growth in this fee reflects growth in the total stock of registered vehicles.

Motor vehicle taxes

Motor vehicle taxes include registration fees, stamp duty on new registrations and ownership transfers, as well as the ESL on mobile property.

The growth rates for motor vehicle tax revenues are provided in Table 3.9.

Table 3.9: Motor vehicle taxes


ResultTotal motor vehicle taxes ($m) 459.0 476.1 501.0 518.0 535.5Nominal growth (%) 3.9 3.7 5.2 3.4 3.4Real growth (%) 1.7 1.0 2.4 0.8 0.8Policy adjusted underlying revenue ($m) 459.0 476.1 493.5 510.5 527.7Nominal growth (%) 3.9 3.7 3.7 3.4 3.4Real growth (%) 1.7 1.0 0.9 0.8 0.8

Registration fee revenue growth reflects the annual indexation of motor vehicle fees and growth in the stock of registered vehicles. Various policy measures taken in this budget including an increase in the motor vehicle registration administration fee and the reform of registration renewal periods also affect the growth in registration fee revenue.

Stamp duty on new motor vehicle registrations and transfers of used vehicles is expected to exceed the original budget estimate for 2009-10 reflecting an increase in turnover levels and average values for new motor vehicles. The strong growth in new motor vehicle registrations was due in part to the small business tax deductions announced as part of the Commonwealth Government’s economic stimulus package.

Forward projections assume modest growth in revenue from new motor vehicle registrations and transfers of second hand vehicles.

Relatively low growth in revenue raised from the ESL on mobile property is expected reflecting the growth in the stock of registered vehicles. ESL charges on motor vehicles are flat dollar amounts that have not been altered since 2000-01.

3.12

Chapter 3: Revenue

South Australia’s relative tax effort

Each year the Commonwealth Grants Commission (CGC) releases an assessment of relative tax effort for all states and territories as part of its annual relativity update. In February 2010, the CGC published its Report on GST Revenue Sharing Relativities — 2010 Review. Previously, the CGC published an assessment of relative tax effort at the total taxation level. This assessment is no longer published. Based on the information published by the CGC, South Australia’s combined tax effort for the categories still separately assessed by the CGC (payroll tax, land tax, stamp duties on conveyances, insurance tax and motor taxes) has increased from 13.1 per cent above average in 2007-08 to 15.8 per cent above average in 2008-09.

The CGC tax effort ratio for land tax does not take into consideration a genuine incomparability between South Australia and other jurisdictions (namely land tax paid by South Australian public sector entities). South Australia has progressed further than other states and territories in making its government business enterprises liable for the full range of taxes (Commonwealth, state and local) consistent with commitments made under the Competition Principles Agreement. In 1997-98, all Government of South Australia business enterprises included in the tax equivalent regime (TER) became liable for state taxes, including land tax. This included the South Australian Housing Trust (SAHT). Public housing authorities in other jurisdictions are not, however, liable for land tax. The large size of the SAHT’s property holdings has meant that it accounts for approximately one-third of total land tax receipts for the state. There is no net benefit to the budget from these tax payments since additional funding is provided to the SAHT to meet its land tax liability.

To the extent that other states and territories have not expanded the coverage of their TER to include public housing authorities, their land tax receipts will be lower.

After excluding land tax payments made by SAHT, South Australia’s relative tax effort falls from 15.8 per cent to 10 per cent above average in 2008-09.

Details of tax effort assessments are provided in Table 3.10.

Table 3.10: Tax effort ratios by jurisdiction

CGC(a) Adjusted(b) CGC(a) Adjusted(b)

New South Wales 104.9 105.2 106.1 106.5Victoria 99.4 99.7 98.7 99.0Queensland 83.1 83.4 86.9 87.2Western Australia 111.6 111.9 100.8 101.3South Australia 113.1 108.2 115.8 110.0Tasmania 93.0 93.2 93.1 93.3Australian Capital Territory 112.2 112.5 110.7 111.0Northern Territory 93.9 94.1 91.2 91.4

2007-08 2008-09

(a) Tax effort ratios derived from the CGC's Report on GST Revenue Sharing Relativities — 2010 Review publication for

separately assessed taxes (payroll tax, land tax, stamp duties on conveyances, insurance tax and motor taxes).

(b) South Australia adjusted to remove land tax paid by the South Australian Housing Trust.

Tax effort measured by the CGC reflects the use made of available tax bases not their size. South Australia has a small tax base relative to other states. As a result, in terms of tax revenue per capita, South Australia is a relatively low tax jurisdiction (fourth lowest in 2009-10 based on state and territory estimates published in 2010-11 Budget papers).

Details are provided in Table 3.11.

3.13

Chapter 3: Revenue

Table 3.11: Per capita taxation by jurisdiction ($)

2008-09(b)(c)

2009-10(c)(d)

Australian Capital Territory 2 820 3 142Western Australia 2 569 2 777New South Wales 2 517 2 608Victoria 2 338 2 481South Australia

(a)2 097 2 125

Queensland 2 026 2 116Northern Territory 1 810 1 797Tasmania 1 603 1 740All States and Territories 2 325 2 439

(a) Taxation revenues for South Australia have been adjusted to remove land tax paid by the South Australian Housing Trust.

(b) Based on published outcomes for all states and territories.

(c) Population figures for 2008-09 have been sourced from ABS publications and 2009-10 population estimates have been sourced from Commonwealth Treasury estimates.

(d) Based on taxation revenue estimates published in 2010-11 Budget publications.

3.14

Chapter 3: Revenue

Grant revenue

Table 3.12: Grant revenue ($million)


ResultCurrent grant revenueCurrent grants from the Commonwealth

GST revenue grants 3 819.4 4 052.9 4 458.1 4 580.7 4 817.4 5 045.0 Transitional assistance(a) — 7.5 — — — — National Partnership grants 519.2 790.7 606.5 656.4 561.7 404.7 Specific purpose grants 1 327.3 1 345.7 1 404.6 1 467.9 1 530.0 1 552.7 Specific purpose grants for on-passing 664.4 691.7 673.5 725.5 743.6 762.2

Total current grants from the Commonwealth 6 330.4 6 888.4 7 142.7 7 430.4 7 652.7 7 764.5

Other contributions and grants 135.2 120.4 114.1 114.3 114.0 116.5 Total current grant revenue 6 465.6 7 008.8 7 256.7 7 544.7 7 766.7 7 881.1

Capital grant revenueCapital grants from the Commonwealth

National Partnership grants 1 244.4 1 300.8 742.2 466.0 331.1 66.9 National Partnership grants for on-passing 198.2 299.9 139.1 — — — Specific purpose grants 113.5 113.5 115.3 117.0 118.8 116.9 Specific purpose grants for on-passing 10.9 12.8 13.1 13.4 13.8 14.1 Other Commonwealth grants — 92.3 12.4 4.5 3.7 3.6

Total capital grants from the Commonwealth 1 567.1 1 819.4 1 022.1 601.0 467.4 201.4

Other capital contributions and grants 31.4 29.1 40.5 18.2 18.3 18.6 Total capital grant revenue 1 598.5 1 848.4 1 062.6 619.2 485.7 220.0

Total grant revenue 8 064.1 8 857.2 8 319.4 8 163.9 8 252.4 8 101.1

% change on previous yearGST revenue grants

Nominal growth % 7.1 10.0 2.8 5.2 4.7 Real growth 4.8 7.1 — 2.5 2.1

Current revenue grants (excl GST) from the CommonwealthNominal growth % 5.8 - 5.1 6.2 - 0.5 - 4.1 Real growth 3.5 - 7.5 3.3 - 3.0 - 6.4

Capital revenue grants from the CommonwealthNominal growth % 206.3 - 43.8 - 41.2 - 22.2 - 56.9 Real growth 199.8 - 45.3 - 42.8 - 24.2 - 58.0

Note: Totals may not add due to rounding. (a) Transitional assistance ceased from 2009-10 under the new Intergovernmental Agreement on Federal Financial

Relations. The payment received in 2009-10 relates to the 2008-09 year, following the finalisation of the 2008-09 Outcome.

3.15

Chapter 3: Revenue

GST revenue grants

GST revenue grants to South Australia in 2009-10 are expected to be $233.5 million higher than the original budget estimate. Reflecting a stronger recovery than originally estimated by the Commonwealth Treasury, the total GST pool grew by around 7.0 per cent in 2009-10, compared to the Commonwealth’s original budget estimate of growth of 0.5 per cent. GST pool estimates are still below Commonwealth pre-global financial crisis estimates (as published to 2011-12).

Estimated GST revenue grants to South Australia for 2010-11 are significantly higher than estimated at the time of the 2009-10 Budget. Latest Commonwealth estimates of the total GST pool contained in the Commonwealth’s Pre-Election Economic and Fiscal Outlook forecast growth of 7.5 per cent in 2010-11.

In addition, there has been an improvement in South Australia’s estimated relativity weighted population share following the outcome of the 2010 methodology review by the Commonwealth Grants Commission. The 2010 methodology review is discussed in more detail below. When combined with the higher than anticipated growth in the total GST pool, South Australia’s estimated GST revenue grant is estimated to grow by 10.0 per cent in 2010-11.

Over the forward estimates period, the Commonwealth Government is estimating that the total GST pool will grow by 6.8 per cent in 2011-12, 6.1 per cent in 2012-13 and 5.8 per cent in 2013-14.

GST revenue grants to South Australia are expected to grow more slowly than the GST pool over the forward estimates reflecting a reduced share of the GST pool. Factors contributing to South Australia’s reduced share include a declining population share and projected relativities over the forward estimates. Projected relativities are particularly impacted by South Australia’s receipt of Commonwealth specific purpose and National Partnership funding over the period 2009-10 to 2011-12 as well as revised assessment methods relating to the treatment of jurisdictions’ capital needs.

South Australia’s GST revenue grants are expected to grow modestly, increasing by 2.8 per cent in 2011-12, 5.2 per cent in 2012-13 and 4.7 per cent in 2013-14.

Commonwealth Grants Commission 2010 Review

The IGA includes a specific provision that GST revenue grants will be distributed on a horizontal fiscal equalisation (HFE) basis. The principle of HFE is based on Australia’s commitment to ensuring that each state has the capacity to provide public services at a similar standard and level of efficiency as the other states for a comparable revenue raising effort.

In February 2010, the Commonwealth Grants Commission (CGC) released its Report on GST Revenue Sharing Relativities — 2010 Review. The periodic review process seeks to refine the application of HFE, a principle which is well established and has underpinned the distribution of general purpose grants among the states for decades.

The review is the culmination of a five year examination of the CGC’s assessment methodologies and its results will form the basis for distributing GST revenue for the next five years or until the next review is completed. The terms of reference for the review included a requirement for greater simplicity in the assessment methodology used to determine relativities. As a consequence, the CGC reduced the number of assessment categories from 59 to 22, recognised fewer influences on the cost and use of services, placed greater reliance on nationally based and independently sourced data and reduced the assessment averaging period from five years to three years.

The overall outcome of the review was positive for South Australia with its GST distribution relativity rising from 1.24724 in 2009-10 to 1.28497 in 2010-11. In 2010-11, South Australia will receive 9.4 per cent of the GST pool compared to 9.2 per cent in 2009-10.

3.16

Chapter 3: Revenue

Impact of method and other changes

This overall improvement represents the combined effect of several factors including methodological changes, changes to the averaging period and the impact of updating assessments to include 2008-09 data. The increase in relativity for South Australia equates to a $118 million increase in general purpose funding compared to grants received using the previous relativities. This is summarised in Table 3.13.

Table 3.13: 2010 Review — major factors affecting South Australia’s relativity(a)

Factor $ million(b)

Changed expense assessment methods

Treatment of capital -171.3

Welfare and housing 144.5

Justice services 56.5

Services to communities (includes water supply) -66.3

Other expense assessments 101.3 64.7

Changed revenue assessment methods

Land revenue -24.1

Other revenue assessments (including Commonwealth payments) -19.5 -43.6

Total method changes 21.1

Shorter review period 65.2

2008-09 data update 32.2

Total impact 118.4


(a) This table is sourced from the Report on GST Revenue Sharing Relativities — 2010 Review, Volume 1, Tables 8.2 and 8.3.

(b) The amounts in this table are based on 2009-10 GST estimates at the time the review was released in February 2010.

Revised expense assessments (other than capital) benefited South Australia by $236 million. This reflects more favourable assessments in the welfare and housing, justice services and roads categories partially offset by losses in the services to communities (water component) category. Revised assessment methodologies for revenue items, in particular land tax, and for the treatment of Commonwealth payments resulted in a loss of around $44 million.

The treatment of capital grants by ‘inclusion’, that is, regarding virtually all specific purpose payments (SPPs) and National Partnership payments (NPs) as a fungible general revenue source for the states means that a GST grant share will be temporarily reduced when SPP and NP shares are above national average per capita levels, and vice versa.

The most significant method change in the review was the revised assessment for ‘capital’, encompassing assets, financial liabilities and net worth of government financial and trading enterprises, which resulted in a loss to South Australia of $171 million. The CGC contend that the revised approach for assessing states’ needs for ‘capital’ better recognises the needs of states with faster population growth, in particular that higher growth states experience greater dilution of accumulated net worth per capita than do lower growth states. As a consequence, states like Western Australia and Queensland with population growth rates in excess of the national average will benefit at the expense of states with population growth rates below the national average like South Australia.

South Australia will benefit in the short term from the CGC’s decision to revise its averaging period from five years to three years to reflect a desire for more contemporaneous assessments. This will provide an initial benefit of $65 million to South Australia.

3.17

Chapter 3: Revenue

The annual update of assessment data that introduced 2008-09 data and removed 2005-06 data also had a positive impact for South Australia of $32 million. This reflects the redistribution of significant increases in the value of mining revenue in other jurisdictions (primarily from the increased value of coal production) and land tax and payroll tax improvements in other jurisdictions.

Overall, the 2010 Review redistributed around $619 million among the states as compared to the 2009 Update (see Table 3.14), with grants redistributed to New South Wales, Victoria, South Australia and Tasmania and away from the other four states/territories.

After the CGC’s recommended distribution is implemented, South Australia will receive approximately $1 billion more in 2010-11 than if funding were distributed on a simple population share basis without regard to the fiscal needs and capacities of each state.

Table 3.14: Commonwealth Grants Commission 2010 Methodology

2009 Update relativity(a)

2010 Review relativity(a)

Implied effect on

grant share(b) ($m)

New South Wales 0.93186 0.95205 277.3

Victoria 0.91875 0.93995 223.0

Queensland 0.91556 0.91322 -19.8

Western Australia 0.78485 0.68298 -442.9

South Australia 1.24724 1.28497 118.4

Tasmania 1.62040 1.62091 0.6

Australian Capital Territory 1.27051 1.15295 -79.8

Northern Territory 5.25073 5.07383 -76.9

Total redistributed among states 619.3

(a) The relativities show the per capita funding relative to an Australian average of 1.

(b) Estimated impact of change in relativities on the 2009-10 GST pool included in the CGC’s 2010 Review report released in February 2010.

Commonwealth payments for specific purposes

From 1 January 2009, the Intergovernmental Agreement on Federal Financial Relations (new IGA) came into operation following endorsement by the Council of Australian Governments (COAG) in November 2008. The new IGA provides an overarching framework that covers all transfers from the Commonwealth to the states and territories (with the exception of Commonwealth Own Purpose Expenditures) with an emphasis on payments for specific purposes.

Payments for specific purposes have been reformed to improve the quality and effectiveness of government services by reducing Commonwealth prescriptions on service delivery and providing increased flexibility in the way services are delivered.

Under the new IGA there are two types of SPPs:

national SPPs that provide ongoing funding to the states for service delivery in the core areas of health, education, housing, skills and workforce development and disability services; and

NPs that fall into two broad categories — to support the delivery of specific projects (including infrastructure) and to facilitate the implementation or reward the delivery of national reforms.

Table 3.15 summarises expected SPP and NP grants to South Australia by category.

3.18

Chapter 3: Revenue

Table 3.15: Commonwealth payments for specific purposes by category ($million)(a)

Agreement 2009-10

EstimatedResult

2010-11

Budget

2011-12

Estimate

2012-13

Estimate

2013-14

Estimate

Health

National Healthcare SPP

National Health & Hospital Network Payment

National Partnerships

920.2

—

54.3

960.5

—

103.3

—

1 005.7

92.5

—

1 056.0

102.0

—

1 084.1

107.3

Education and Early Childhood

National Schools SPP (government schools)

National Schools SPP (non-government schools)


251.9

551.9

933.5

263.7

565.2

576.8

275.8

579.3

133.4

289.0

593.8

119.9

290.2

608.7

52.0

Skills and Workforce Development

National Skills and Workforce Development SPP


99.1

40.1

100.1

37.3

100.9

38.2

101.4

10.3

101.4

6.0

Community Services

Disability Services SPP


93.1

136.9

100.5

137.2

107.6

145.3

107.6

149.0

101.5

152.7

Housing

National Affordable Housing SPP


94.9

419.3

95.0

130.8

95.0

48.0

94.8

39.8

92.3

36.4

Infrastructure


450.7

297.7

477.7

362.3

102.2

Environment


206.8

141.4

151.1

74.3

—

Other


149.8

63.4

36.2

35.0

14.9

Local Government financial assistance 152.5 121.4 159.6 163.5 167.6

Total Commonwealth payments for specific purposes 4 555.0 3 694.3 3 446.2 3 299.0 2 917.4

Note: Totals may not add due to rounding

(a) NP amounts are the maximum amount of funding available thereby assuming that all necessary performance requirements are met in each agreement.

National specific purpose payments (current)

In 2010-11, South Australia will receive an estimated $2 078.1 million of funding in national SPPs for recurrent purposes. This is an increase of 2 per cent from the $2 037.4 million estimated for 2009-10.

States and territories are required to spend the funding received under each national SPP in the relevant sector but have the flexibility to allocate funds within that sector to meet agreed objectives.

3.19

Chapter 3: Revenue

Previously, the allocation of Commonwealth payments for specific purposes among the states was based on many approaches including Commonwealth discretion, historical allocation and formula based allocation. Under the new IGA arrangements, national SPPs will eventually be distributed between the states on a purely per capita basis based on Australian Bureau of Statistics’ population estimates. This is being phased in over five years from 2009-10.

In the case of the government schools component of the National Schools SPP, the relevant population is each state’s share of full-time equivalent student enrolments in government schools.

The change in the distribution for SPPs will, over time, result in broadly offsetting changes to GST revenue grants.

Over the forward estimates, growth in national SPPs reflects indexation arrangements specified in the new IGA partially offset by the phasing-in of per capita distribution.

From 1 July 2011, the Commonwealth will provide National Health and Hospitals Network funding sourced from the existing National Healthcare SPP, an amount of GST dedicated to health and hospital services and, from 2014-15, a Commonwealth ‘top-up’ payment. The current indexation arrangements will continue to apply to the funding sourced from the National Healthcare SPP and it will be distributed in accordance with population shares.

Grants provided to the states for on-passing mainly comprise funding for non-government schools and local government. The consistent growth pattern for non-government school funding reflects indexation arrangements determined in accordance with the Schools Assistance Act 2008 (Cwth).

National Partnerships (current)

NPs are time limited agreements to fund specific projects and to facilitate and/or reward states that deliver nationally significant reforms. SPPs in existence prior to 1 January 2009, and not incorporated into national SPPs or discontinued, have generally been converted into new NP agreements with funding levels and performance requirements determined between the Commonwealth and the states.

In 2010-11, South Australia will receive an estimated $606.5 million of funding in NPs for recurrent purposes. This is a decrease of 23.3 per cent compared to the $790.7 million estimated for 2009-10 and reflects the discontinuation of the First Home Owner Boost scheme, the winding back of exceptional circumstances assistance (paid to regions experiencing severe climatic conditions — the drought) and the high level of funding provided for remote indigenous housing in 2009-10.

Over the forward estimates, NP funding reflects payment profiles agreed with the Commonwealth.

Other contributions and grants (current)

Other contributions and grants mainly take the form of donations, bequests, industrial research and sponsorship grants. In 2009-10, revenue from other contributions and grants is expected to be lower than estimated in the 2009-10 Budget mainly reflecting revised funding arrangements and costs of the Goolwa Channel Water Level Management Project consistent with the Murray Futures funding deed. This is partially offset by the receipt of once-off funding for activities performed by a number of government agencies.

Revenue from other contributions and grants is expected to be lower in 2010-11 compared with 2009-10 due mainly to the receipt of once-off funding in 2009-10 mentioned above.

Other contributions and grants revenue is estimated to grow at modest levels from 2012-13.

3.20

Chapter 3: Revenue

Capital grants

Capital grants include national SPPs and NPs from the Commonwealth. Consistent with current grants, capital grants from the Commonwealth are also categorised as either direct grants or on-passed grants. Smaller amounts of capital funding are sourced from the private sector including the revenue recognition of assets donated or transferred to the government free of charge.

NP funding for capital purposes will be $881.3 million in 2010-11, a decrease of 44.9 per cent from the $1 600.7 million estimated for 2009-10. This large decrease reflects the winding back of payments under the Commonwealth’s National Building — Economic Stimulus Plan which provided significant infrastructure funding for schools, social housing and road infrastructure projects in 2009-10 and the timing of Commonwealth payments under the Water for the Future program. This is partially offset by increased funding levels for rail projects provided through Infrastructure Australia.

Over the forward estimates, NP funding for capital purposes declines further largely reflecting the cessation of Nation Building funding and the timing of funding from Infrastructure Australia for urban rail projects.

National SPP funding for capital purposes will be $128.4 million in 2010-11, an increase of 1.6 per cent from the $126.3 million estimated for 2009-10.

National SPP on-passed grants mainly reflect Commonwealth capital funding for non-government schools.

Other Commonwealth grants take the form of revenue that is provided directly to the agency from the Commonwealth. The 2009-10 estimated result largely reflects the recognition of road funding grants received in a prior year, funding for GP Plus super clinics and funding for a vocational education infrastructure initiative. These amounts were not included in the original 2009-10 Budget for this line.

Other capital contributions and grants are expected to increase in 2010-11 before returning to more normal levels in 2011-12 reflecting revised funding arrangements for the State Aquatic Centre and the Marion Domain GP Plus Health Care Centre.

Sales of goods and services

Sales of goods and services by the general government sector include government fees and charges that are adjusted annually based on the average increase in the cost of services. As discussed earlier in this chapter, most government fees and charges were increased by 3.3 per cent from 1 July 2010.

Table 3.16: Sales of goods and services ($million)


ResultRegulatory fees 375.0 383.5 402.4 470.5 503.9 533.3Health unit fees 292.3 298.5 324.9 341.2 339.7 351.2Commonwealth contributions 367.8 359.6 324.7 335.4 334.8 315.2TAFE fees 92.1 91.6 95.9 100.4 105.2 108.7Schools revenue 78.1 78.1 80.0 82.5 85.1 87.7Metroticket sales 78.5 78.5 80.4 84.4 88.7 90.9Drivers' licence fees 38.6 36.9 42.4 69.6 75.2 61.8Other user charges 511.4 606.0 526.1 556.5 575.5 598.0Total sales of goods and services 1 833.8 1 932.7 1 876.8 2 040.6 2 108.0 2 146.8


3.21

Chapter 3: Revenue

Sales revenue is expected to exceed the budget estimate by $98.9 million in 2009-10, largely due to revised payment arrangements relating to the Jervois to Langhorne Creek and Currency Creek irrigation pipeline. The arrangements include a payment from the private company involved in the project.

Revenue from sales of goods and services is expected to be lower in 2010-11 largely due to the once-off nature of the Jervois to Langhorne Creek and Currency Creek irrigation pipeline payment and a fall in revenue from Commonwealth contributions.

Commonwealth contributions revenue is expected to fall in 2010-11 reflecting the reclassification of some Commonwealth contributions revenue, for example funding for essential vaccines, to other revenue lines from 2009-10. The impact of the reclassification is offset in 2009-10 by additional revenue from the Commonwealth for a number of government activities that is not expected to flow through across the forward estimates.

Total growth rates for sales of goods and services are affected by the variability in revenue from Commonwealth contributions and drivers’ licence fees. In addition revenue from sales of goods and services is impacted by a range of fee increases that are being introduced as part of this budget, including increases to certain regulatory fees and a move to cost recovery for some user charges. Revenue from Commonwealth contributions is expected to remain relatively flat across the forward estimates and then fall in 2013-14 due to the cessation of funding for stormwater recycling projects in that year. The expected pattern for drivers’ licence fee revenue reflects the renewal cycle of drivers’ licences.

Revenue from regulatory fees is projected to grow by around 16.9 per cent in 2011-12 primarily reflecting the full impact of increases to a number of regulatory fees introduced as part of this budget, including a doubling of the Victims of Crime levy, an increase in court enforcement fees and an increase in the solid waste levy.

Over the forward estimates period, revenue from sales of goods and services, excluding Commonwealth contributions and drivers’ licence fee revenue, is projected to grow at 8.3 per cent in 2011-12, 3.8 per cent in 2012-13 and 4.2 per cent in 2013-14 reflecting the full impact of fee increases in 2011-12 followed by the annual indexation of fees and underlying revenue growth.

Interest income

Interest income is estimated using projections of interest rates applicable to government financial assets. The estimates of interest income are higher than budgeted for 2009-10, primarily reflecting higher than forecast interest rates on cash balances. Interest income is expected to fall in 2010-11 and 2011-12 before returning to levels broadly in line with 2009-10 levels by the end of the forward estimates.

3.22

Chapter 3: Revenue

Dividend and income tax equivalent income

Dividend and income tax equivalent (ITE) revenue is received from public non-financial corporations (PNFCs) and public financial corporations (PFCs).

Table 3.17: Dividend and income tax equivalent (ITE) income


ResultDividend and ITE income from PNFCs 337.9 380.1 274.5 352.0 394.8 519.2Dividend and ITE income from PFCs 49.6 44.7 78.5 36.1 25.2 29.8Other dividend income 0.1 0.1 0.1 0.1 0.1 0.1Total Dividend and ITE revenue 387.6 425.0 353.1 388.2 420.2 549.1

Dividend and ITE from PNFCs compriseSA Water 250.2 246.6 154.2 243.9 314.3 458.8Land Management Corporation 46.6 71.9 64.6 47.8 66.0 45.5Other 41.1 61.6 55.7 60.2 14.5 14.9Total 337.9 380.1 274.5 352.0 394.8 519.2

Dividend and ITE from PFCs compriseSAAMC 23.5 23.5 4.0 8.3 — —HomeStart Finance 14.5 9.7 12.5 15.5 12.5 16.8SAFA 11.6 11.5 61.9 12.3 12.7 13.0Total 49.6 44.7 78.5 36.1 25.2 29.8


Dividend and ITE income is expected to be higher than the original budget estimate by $37 million in 2009-10 mainly due to upward revisions to distributions from Land Management Corporation and ForestrySA, partially offset by lower distributions from SA Water and HomeStart Finance.

Distributions from SA Water in 2010-11 are expected to be $92 million below 2009-10 distributions, mainly due to increased operating expenses and debt levels associated with major infrastructure projects and water security initiatives. A recovery in contributions is forecast from 2011-12 to 2013-14 mainly due to SA Water’s additional sales revenue from the increase in water charges.

Distributions from the Land Management Corporation fluctuate across the forward estimates reflecting the forecast timing of land sales. Major projects impacting on contributions across the forward estimates include Playford Alive, Blakeview, Port Adelaide Waterfront Redevelopment, Hackham and Edinburgh Parks.

Estimated distributions from the South Australian Government Financing Authority in 2010-11 are significantly higher than in other years reflecting a return of projected excess capital from its treasury operation.

3.23

Chapter 3: Revenue

Other revenue

Table 3.18: Other revenue ($million)


ResultRoyalties 143.8 125.0 160.9 197.1 230.3 233.5Fines and penalties 110.0 107.1 114.2 139.2 141.0 144.5Schools revenue (fundraising) 64.3 64.3 65.9 68.0 70.1 72.2Other 171.1 215.8 195.0 215.5 206.7 216.3Total other revenue 489.2 512.2 536.0 619.8 648.1 666.5


Other revenue is expected to exceed the original budget estimate by $23 million in 2009-10 with increases in residual other revenues partially offset by reductions in royalties and fines and penalties.

Royalties are expected to be lower than the budget estimate by $19 million in 2009-10 due to reduced production as a result of the Clark Shaft incident at Olympic Dam and lower royalty revenues from OneSteel’s operations.

Royalty revenue is projected to grow strongly in 2010-11 reflecting increased commodity prices, including copper and crude oil, and higher production levels at Olympic Dam.

Increased royalty rates from 2011-12 introduced as part of this budget, forecast improvements in commodity prices as well as new mines commencing production contribute to an increase in royalty revenue over the forward years.

Revenue from fines and penalties is expected to grow by 21.9 per cent in 2011-12 reflecting the impact of increases to expiation fines and penalties announced in this budget.

Residual other revenue is expected to exceed the original budget estimate by $45 million in 2009-10 due to the reinstatement of intellectual property and research related revenues associated with the proposed model of operations for the South Australian Health and Medical Research Institute. It is also affected by the recognition as revenue of disability support payments, received by the Department for Families and Communities from the Commonwealth and held in trust for clients in residential accommodation provided by Disability SA.

3.24

Chapter 3: Revenue

Federal financial relations — recent developments

Intergovernmental Agreement on Federal Financial Relations (IGA)

On 1 January 2009, the new IGA came into operation following endorsement by the Council of Australian Governments (COAG).

The new IGA provides an overarching framework for the Commonwealth’s financial relations with the states. It aims to improve the quality and effectiveness of government services by reducing Commonwealth prescriptions on service delivery and providing increased flexibility in the way services are delivered. In addition, the new arrangements provide a clearer specification of roles and responsibilities of each level of government and an improved focus on accountability for better outcomes and better service delivery.

As the new IGA has only been in operation for a relatively short period, considerable effort has been spent by both the Commonwealth and the states addressing initial interpretation issues, educating line agencies on the financial framework, developing guidance circulars and attempting to ensure that all new agreements comply with the IGA design provisions.

Council of Australian Governments

In 2009-10, COAG met three times. In addition to the Prime Minister, Premiers, Chief Ministers and the President of the Australian Local Government Association, these meetings were attended by Commonwealth and state Treasurers.

During 2008, COAG’s main focus was on the reform of federal financial relations culminating in the signing of the new IGA. Since then, COAG has considered a broad ranging agenda that has included measures to address the global financial crisis, housing supply and affordability, strategies to address indigenous disadvantage and major regulatory reform.

Health reform

At its April 2010 meeting, COAG (with the exception of Western Australia) agreed to reform of the health system. It agreed to establish the National Health and Hospital Network under which:

the Commonwealth will become the majority funder of public hospitals, funding 60 per cent of the efficient price of all public hospital services delivered to public patients;

the Commonwealth will have 100 per cent funding and policy responsibility for GP and primary health care services, aged care services, and over time ‘primary care equivalent’ outpatient services; and

responsibility for hospital management will be devolved to new Local Hospital Networks, which will be paid on the basis of a national efficient price for each hospital service they provide to public patients (through activity based funding).

From 1 July 2011, these reforms will be financed through the National Healthcare SPP, National Partnerships in the health sector and an agreed proportion of state GST revenue (based on actual health expenditure) to bring the Commonwealth contribution up to 60 per cent with the balance funded by states and territories.

From 1 July 2014, the Commonwealth will provide additional top-up funding to share in the growth of health care costs. This additional funding is guaranteed to be no less than $15.6 billion between 2014-15 and 2019-20.

3.25

Chapter 3: Revenue

The Health Reform package includes significant changes to governance arrangements. Each jurisdiction is required to establish Local Hospital Networks that will manage the provision of public health services for specified regions. Jurisdictions will receive funds from the Commonwealth and state and territory governments and then pay Local Hospital Networks on an activity basis.

From 1 July 2010, the Commonwealth has also provided further funding to address specific health related issues including improved access to public hospital services, waiting times in emergency departments and extra elective surgery.

Ministerial Council for Federal Financial Relations

The Ministerial Council for Federal Financial Relations is a national forum comprised of state and territory Treasurers and the Commonwealth Treasurer. The council allows the Commonwealth to come together with the states and territories to discuss financial and economic issues of national significance.

The council has oversight responsibility for the new IGA on behalf of COAG. This responsibility includes ensuring all relevant funding agreements are drafted in accordance with the new IGA design principles and development of the National Performance Reporting System.

In recent years, the scope of work undertaken by the council has expanded with COAG referring carriage of a broader range of issues and reforms to this forum. These include:

development of a housing supply and affordability reform agenda in conjunction with senior officials from First Ministers’ offices; and

overseeing the establishment of the National Trade Licensing System — a reform that is part of COAG’s Business Regulation and Competition work program.

The council has established a number of forums to support its expanded responsibilities including:

the Heads of Treasuries Committee for Federal Financial Relations to oversee its general responsibilities under the new IGA;

the Heads of Treasuries Consultative Forum to provide guidance on the development of the National Performance Reporting System;

the National Partnership Network to exchange views and information on the development of new National Partnerships and implementation plans, with a particular emphasis on ensuring such agreements comply with the design principles in the new IGA; and

the Housing Supply and Affordability Working Group to prepare a reform agenda in this policy area as referred by COAG.

In December 2009, COAG tasked the Heads of Treasuries (HoTs), in consultation with First Ministers’ senior officials, to undertake a review of agreements entered into pursuant to the new IGA, that is National Agreements, National Partnerships and implementation plans. The review will consider whether agreements are consistent with the design principles in the new IGA; the clarity of objectives, outcomes, outputs and roles and responsibilities; and the quantity and quality of performance indicators and benchmarks in agreements.

HoTs will report through the council to COAG by 31 December 2010.

3.26

Chapter 3: Revenue

CHAPTER 4: MANAGING THE STATE’S ASSETS AND LIABILITIES

Overview

Investment in the state’s infrastructure is essential for its long-term economic future. As a result, the government has continued to undertake significant capital investment, notwithstanding the current financial pressures on the budget.

This investment continues to have an impact on the state’s balance sheet, both in terms of the asset base and the need to finance that investment.

General government sector purchases of non-financial assets are estimated to be $2.3 billion in 2010-11 before gradually declining across the forward estimates to $1.2 billion in 2013-14. The effect of this capital expenditure on the balance sheet is to increase land and fixed assets from $20.0 billion at 30 June 2010 to an estimated $23.3 billion at 30 June 2014.

General government sector net debt is expected to increase from $1.6 billion at 30 June 2010 to $3.8 billion at 30 June 2014, reflecting an increase in borrowing as a result of large net lending deficits in the next two years.

As at 30 June 2010, the state’s unfunded superannuation liability is estimated to be $9.5 billion, an increase of $1.3 billion since the estimate at the time of the 2009–10 Mid-Year Budget Review (MYBR), but down slightly on that forecast in the 2009–10 Budget. This volatility is primarily due to the Australian Accounting Standards’ requirement to discount the gross liability based on the fluctuating market yield of Commonwealth Government bonds.

The ratio of net financial liabilities to revenue is expected to reach 100.2 per cent in 2011-12, largely as a result of the increase in net debt associated with the government’s capital investment program. The ratio is forecast to decline over the remainder of the forward estimates due to revenue growth and stable net debt.

General government sector net worth increases over the forward estimates, mainly due to revaluation increases in the value of non-financial assets held by government.

Non-financial public sector (NFPS) net debt is expected to increase from an estimated $4.9 billion at 30 June 2010 to $7.5 billion at 30 June 2014 as a result of a significant investment in infrastructure in both the general government and public non-financial corporation (PNFC) sectors.

4.1

General government sector financial position

Table 4.1 below summarises key balance sheet indicators for the general government sector.

Table 4.1: Key balance sheet indicators — general government sector

As at 30 June 2009 2010 2011 2012 2013 2014Actual Estimated Estimate Estimate Estimate Estimate

ResultNet debt $m 475 1 587 3 335 3 633 3 864 3 847% of total revenue 3.5 10.2 22.1 23.4 24.1 23.6

Net financial liabilities$m 11 562 13 271 15 096 15 558 15 967 16 105% of total revenue 85.5 85.4 100.1 100.2 99.8 98.8

Net financial worth$m 5 551 5 155 3 898 3 717 4 301 5 099% of total revenue 41.0 33.2 25.8 23.9 26.9 31.3

Net worth$m 24 146 25 192 25 392 26 162 27 245 28 379% of total revenue 178.5 162.2 168.3 168.5 170.2 174.2

Net debt

General government sector net debt is expected to increase from $1587 million at 30 June 2010 to $3847 million at 30 June 2014.

The government’s public private partnership (PPP) arrangements are recognised as finance leases in the balance sheet, and consequently have an impact on net debt and net financial liabilities.

The estimated increase in net debt primarily reflects an increase in borrowing, resulting from large net lending deficits in 2010-11 and 2011-12.


The state’s unfunded superannuation liability makes up the largest component of net financial liabilities. At 30 June 2010, the unfunded superannuation liability is estimated to be $9.5 billion, $1.3 billion higher than estimated in the 2009-10 MYBR. This increase is largely a result of lower than expected earnings on superannuation assets since the MYBR, and the use of a lower discount rate. The unfunded superannuation liability is discussed in more detail later in this chapter.

In addition to net debt and unfunded superannuation liabilities, net financial liabilities include other financial liabilities and financial assets excluding equity held in public non-financial corporations (PNFCs) and public financial corporations (PFCs).

Net financial liabilities are forecast to increase from $13.3 billion at 30 June 2010 to $16.1 billion at 30 June 2014 due mainly to the increase in net debt and an increase in other employee benefits.

Other employee benefits, including long service leave, are estimated to be $1.9 billion at 30 June 2010 and are forecast to increase to $2.3 billion at 30 June 2014, mainly as a result of general increases in remuneration levels.

4.2

Chapter 4: Managing the State’s Assets and Liabilities

The remaining components of net financial liabilities are projected to remain relatively stable from 30 June 2010 to 30 June 2014.

The estimated net financial liabilities to revenue ratio at 30 June 2010 has increased by 3.3 percentage points since the 2009–10 MYBR estimate of 82.1 per cent, largely because of the increase in the unfunded superannuation liability. Net financial liabilities as a percentage of revenue are expected to increase to 100.2 per cent at 30 June 2012, before declining to 98.8 per cent at 30 June 2014.

Net financial worth

Net financial worth is a broader measure than net financial liabilities as it incorporates equity interests in PNFCs and PFCs. General government net financial worth is expected to decrease from $5.2 billion at 30 June 2010 to $3.9 billion at 30 June 2011 reflecting increased borrowings resulting from the capital investment program. Net financial worth improves to $5.1 billion at 30 June 2014, due to an increase in investments in other public sector entities, offset by a decrease in advances paid, and an increase in liabilities largely reflecting other employee benefits and borrowings.

Net worth

Net worth is the amount by which the general government sector’s total assets (non-financial and financial) exceed its liabilities. General government sector net worth is expected to increase from $24.1 billion at 30 June 2009 to $25.2 billion at 30 June 2010 due mainly to increases in the value of land and other fixed assets (discussed further below), as well as investments in other public sector entities. This is offset by an increase in the unfunded superannuation liability and borrowings.

Table 4.2 displays movements in net worth attributable to operating transactions and other economic flows (for example revaluations).

Table 4.2: General government sector net worth ($million)

2010-11 2011-12 2012-13 2013-14Estimated

ResultEstimate Estimate Estimate

Net worth at beginning of year 24 146 25 192 25 392 26 162 27 245

Change in net worth from operating transactions:Net operating balance 167 - 389 55 216 370

Change in net worth from other economic flows:Movement in net assets of PFCs 405 21 136 200 163

Movement in net assets of PNFCs(a) 964 563 641 702 635

Revaluation of unfunded superannuation liability - 489 55 - 6 - 6 - 7

Revaluation of long service leave liability - 62 - 66 - 70 - 74 - 75

Revaluation of annual leave liability - 9 - 9 - 9 - 10 - 10

Other revaluation adjustments 70 24 23 55 58

Total other economic flows 879 589 715 867 764

Net worth at year end 25 192 25 392 26 162 27 245 28 379

2009-10Budget


(a) Net of the impact of the disposal of assets in the PNFC sector and the return of proceeds to the general government sector.

4.3


General government sector net worth is forecast to increase over the forward estimates to $28.4 billion at 30 June 2014, largely as a result of further increases in the value of land and other fixed assets, as well as investments in other public sector entities. This is partly offset by a decrease in advances paid and increases in both borrowing and other employee benefits. The increase in the net assets of other public sector entities is mainly caused by the revaluation of non-financial assets held by the South Australian Housing Trust and SA Water.

Land and other fixed assets

Land and other fixed assets held by general government sector agencies include road and rail networks, as well as land and buildings held mainly by education and health related agencies.

Table 4.3 shows the projected holdings of land and fixed assets for the general government sector over the forward estimates period, together with the depreciation expense for each year.

Table 4.3: Land and other fixed assets — general government sector ($million)


Result

Inventories 119 31 31 31 32 32Land 3 470 3 536 3 484 3 391 3 315 3 276Buildings and improvements 6 092 6 836 7 983 8 125 7 922 7 801Water, sewerage & drainage assets 93 104 103 100 98 97Road networks 5 164 5 720 6 041 6 507 7 197 7 502Rail & bus networks 629 918 1 232 1 689 1 894 2 054Other infrastructure assets 2 166 2 029 1 755 1 736 1 621 1 650Heritage assets 853 854 855 856 857 858Self-generating & regenerating assets 3 3 3 3 3 3Total land and fixed assets (net of provisions for depreciation) 18 590 20 031 21 488 22 439 22 938 23 274Depreciation expense 566 626 681 763 829 869


The total value of land and fixed assets held in the general government sector is expected to grow from $20.0 billion at 30 June 2010 to $23.3 billion at 30 June 2014. This increase reflects significant ongoing investment in the state’s infrastructure, particularly transport network assets.

The decline in the value of land assets from 30 June 2010 to 30 June 2014 primarily reflects the sale of land at Strathmont and Magill in 2010-11 and 2011-12 respectively, which are being sold to fund the new secure youth training facility at Cavan, as well as disposal of surplus land associated with the Superway project and the redevelopment of James Nash House.

$2.3 billion of non-financial assets will be acquired within the general government sector in 2010-11, mainly in the areas of transport, education and health. Total general government sector capital investment is expected to be $7.1 billion from 2010-11 to 2013-14.

General government sector net infrastructure investment is expected to significantly exceed depreciation over the forward estimates. Depreciation expense reflects the consumption of an asset’s service potential. It totals $681 million in 2010-11 and rises to $869 million in 2013-14 as a result of the significant increase in the state’s asset base over the same period.

4.4


Figure 4.1 illustrates the government’s capital investment across the forward estimates.

Figure 4.1: General government sector purchases of non-financial assets ($million)

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2400

1998-99 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13


Note: 1998-99 to 2008-09 are actual outcomes. 2009-10 to 2013-14 are forecasts.

The high levels of capital investment continue to increase the state’s infrastructure base, stimulate the economy in the short term and increase the state’s long-term capacity to grow.

Key general government sector balance sheet indicators — time series

Table 4.4 provides a time series of net debt, unfunded superannuation, net financial worth, net worth and net financial liabilities for the general government sector since 30 June 2003 and projected to 30 June 2014.

Significant volatility in the unfunded superannuation liability is evident between 2003 and 2010, reflecting the short-term variability resulting from some key economic assumptions. The rise in the ratio of net financial liabilities to revenue largely reflects the increase in the unfunded superannuation liability over the period.

The increase in the unfunded superannuation liability from 2007 to 2008 reflects both adverse financial market performance in that period and the effects of the 2007 independent actuarial triennial review. The significant increase in the liability from 2008 to 2009 was largely due to a decline in the discount rate used to value the liability and lower than expected investment earnings. The increase in the liability from 2009 to 2010 is again largely due to a decline in the discount rate, offset by higher than expected earnings. These factors are largely outside of government control. The state government’s concern is to ensure that the impact of its budget policy is in accord with its medium-term fiscal objectives.

Estimates of the unfunded superannuation liability from 2010 to 2014 are relatively stable, reflecting an assumed return to the expected long-term earnings rate, an unchanging discount rate, and the continued policy to fully fund the liability by 2034.

4.5


Despite the significant fluctuation in reported liabilities over the time series, net worth has continued to grow. As discussed earlier, this growth is primarily due to increases in PNFC and PFC assets.

Table 4.4: General government sector balance sheet indicators — time series

As at Net debt Unfunded Net financial Net30 June superannuation(a) worth worth % of

$m $m $m $m $m revenue2003 666 4 445 3 500 15 288 6 974 74.6 2004 224 5 668 3 842 15 760 7 858 78.9 2005 144 7 227 3 853 16 359 9 393 88.7 2006 - 119 6 146 5 846 19 703 8 171 72.7 2007(b) - 24 5 075 8 110 22 128 7 254 61.7 2008(c)(d)(e) - 276 6 468 7 580 23 741 8 078 62.7 2009 475 8 939 5 551 24 146 11 562 85.5 2010 1 587 9 476 5 155 25 192 13 271 85.4 2011 3 335 9 442 3 898 25 392 15 096 100.1 2012 3 633 9 445 3 717 26 162 15 558 100.2 2013 3 864 9 428 4 301 27 245 15 967 99.8 2014 3 847 9 389 5 099 28 379 16 105 98.8


(a) There is a structural break in the methodology used to calculate superannuation liabilities between June 2003 and

June 2004. This accounting change, which involved the adoption of the Commonwealth Government Bond rate for valuation purposes in line with AASB119, Employee Benefits, resulted in a significant increase in superannuation liabilities.

(b) There is a structural break in 2007 reflecting the amalgamation of SAFA and SAICORP on 1 July 2006. The transfer of SAICORP’s assets and liabilities from the general government sector to the public financial corporations sector results in an increase in general government net debt of $99 million at 1 July 2006 and an increase in net financial liabilities of $90 million at 1 July 2006.

(c) There is a structural break in 2008 reflecting the transfer of rail assets from TransAdelaide to the general government sector. This results in an increase in net debt and net financial liabilities of $66 million in 2007-08, and a reduction in net financial worth of $591 million, with no impact on net worth.

(d) There is a structural break in 2008 reflecting the transfer of assets from the Adelaide Festival Centre Trust to the general government sector. This results in an increase in net debt and net financial liabilities of $28 million in 2007-08, and a reduction in net financial worth of $76 million, with no impact on net worth.

(e) There is a structural break in 2008 reflecting the first time recognition on the general government balance sheet of South Australia’s share of the net assets of the Murray–Darling Basin Commission. This has no impact on net debt, however results in a reduction in net financial liabilities of $615 million (approximately 5 per cent of revenue) in 2007-08, and increases in net financial worth and net worth of $615 million.

Unfunded superannuation liability

Table 4.4 showed that the unfunded superannuation liability is relatively steady across the forward estimates period. This is partly because the annual increase of the defined benefit obligation, as a result of benefits being one year closer, is broadly offset by the annual cash payments made as part of the government’s target to fully fund all superannuation liabilities by 2034. The relative stability across the forward estimates also reflects an assumed return to the expected long-term earnings rate of 7.0 per cent and an unchanged discount rate.

Table 4.5 summarises the change in the unfunded superannuation liability since the 2009-10 Budget.

4.6


Table 4.5: Unfunded superannuation liability ($million)

As at 30 June 2010 2011 2012 2013 2014

Estimate as at 2009-10 Budget 9 790 9 815 9 819 9 802 9 762

Impact of revised discount rate assumptions used to value superannuation liabilities at the 2009-10 MYBR

compared with 2009-10 Budget assumptions(a)

-1 150 -1 135 -1 116 -1 094 -1 069

Impact of lower than expected returns on superannuation assets in 2008-09 as at 2009-10 MYBR

compared with 2009-10 Budget assumptions(b)

35 36 36 37 37

Impact of higher than expected returns on superannuation assets in 2009-10 as at 2009-10 MYBR

compared with 2009-10 Budget assumptions(c)

- 456 - 460 - 464 - 467 - 468

Estimate as at 2009-10 MYBR 8 220 8 255 8 275 8 278 8 262

Impact of expected lower returns on superannuation assets in 2009-10 compared with 2009-10 MYBR

assumptions(d)

238 240 241 242 242

Impact of revised discount rate assumptions used to value superannuation liabilities at the 2010-11 Budget

compared with 2009-10 MYBR(e)

1 014 1 000 984 965 943

Impact of expected higher returns on superannuation assets in 2010-11 compared with long term

assumptions(f)

0 - 57 - 58 - 58 - 58

Variation between actual and expected experience 42 40 39 37 36

Other actuarial changes - 37 - 37 - 37 - 37 - 37

Estimate as at 2010-11 Budget 9 476 9 442 9 445 9 428 9 389


(a) The discount rate at the time of the 2009-10 MYBR was 5.8 per cent compared with 5.2 per cent assumed in the 2009-10 Budget.

(b) The actual earnings rate for 2008-09 was negative 17.6 per cent compared with negative 17 per cent assumed at the time of the 2009-10 Budget.

(c) The assumed earnings rate for 2009-10 at the time of the 2009-10 MYBR was 17.9 per cent compared with the long-term assumption of 7 per cent.

(d) The actual earnings rate for 2009-10 is 12.2 per cent for the 2010-11 Budget compared with 17.9 per cent assumed in the 2009-10 MYBR.

(e) The discount rate at the time of the 2010-11 Budget is 5.3 per cent compared with 5.8 per cent assumed in the 2009-10 MYBR.

(f) The assumed earnings rate for 2010-11 at the time of the 2010-11 Budget is 8.3 per cent compared with the long-term assumption of 7 per cent.

The projected unfunded superannuation liability has increased since the 2009-10 MYBR. This increase is primarily due to the use of a lower discount rate to value the unfunded superannuation liability in accordance with the Australian Accounting Standards, as well as lower than expected returns achieved by Funds SA in 2009-10.

The estimate of the unfunded superannuation liability as at 30 June 2010 reflects an estimated Funds SA earnings rate of 12.2 per cent for 2009-10. This is greater than the long-term assumed earnings rate of 7.0 per cent but below the 17.9 per cent assumption for 2009-10 forecast in the 2009-10 MYBR.

4.7


The unfunded superannuation liability is estimated at a point in time by discounting future superannuation benefit payments. The discount rate reflects the risk-free interest rate and is set on the basis of the longest dated Commonwealth Government nominal bond. A discount rate of 5.3 per cent (effective annual rate) has been used for the 2010-11 Budget, compared with 5.8 per cent used for the 2009-10 MYBR.

The discount rate changes in response to the economy and financial market conditions. Small changes in the long-term bond rate have a material impact on the reported liability, with a 1.0 percentage point reduction in the bond rate increasing the liability by approximately $2 billion.

The unfunded superannuation liability is a long-term liability. While financial market volatility in the recent past has resulted in multibillion dollar revisions to the value of the liability recorded on the balance sheet, there has been no material change in the actual expected payments to beneficiaries underlying the liability.

The government remains committed to fully funding the superannuation liability by 2034. Table 4.6 shows estimated cash contributions towards the state’s unfunded superannuation liability to achieve that commitment.

Table 4.6: Estimates of past service superannuation liability cash payments ($million)

2009-10 2010-11 2011-12 2012-13 2013-14

406 407 423 440 457

Non-financial public sector financial position

While the general government sector is the focus of the budget, the financial position of the non-financial public sector is also important. The non-financial public sector comprises the general government sector and the public non-financial corporations (PNFC) sector.

Table 4.7 summarises key balance sheet indicators for the non-financial public sector.

Table 4.7: Key balance sheet indicators — non-financial public sector


ResultNet debt$m 2 872 4 864 7 101 7 209 7 360 7 545% of total revenue 20.0 29.8 44.1 43.3 43.0 43.3

Net financial liabilities$m 14 302 16 901 19 253 19 513 19 835 20 191% of total revenue 99.6 103.7 119.6 117.3 116.0 115.9

Net financial worth$m -14 921 -17 168 -19 499 -19 623 -19 745 -19 939% of total revenue -103.9 -105.3 -121.1 -117.9 -115.5 -114.4

Net worth$m 24 146 25 192 25 392 26 162 27 245 28 379% of total revenue 168.2 154.5 157.7 157.2 159.3 162.8

4.8


Non-financial public sector net debt is projected to increase over the forward estimates period as a result of increases in both general government sector and PNFC sector net debt. The PNFC sector component of non-financial public sector net debt is expected to increase from $3.3 billion at 30 June 2010 to $3.7 billion at 30 June 2014. This increase is mainly due to significant investment in infrastructure, including that relating to water.

The estimated ratio of net financial liabilities to revenue for the non-financial public sector is expected to increase by 12.2 percentage points from 30 June 2010 to 30 June 2014. The increase is primarily a result of infrastructure investment initiatives, partly offset by operating surpluses over the period.

The forecast negative net financial worth position of the non-financial public sector contrasts with the positive net financial worth of the general government sector, reflecting:

the exclusion of equity held by the general government sector in the PNFC sector, which is recognised as a financial asset in the general government sector but is eliminated in the consolidation of the non-financial public sector; and

the inclusion of the PNFC sector’s net debt.

Land and other fixed assets

Table 4.8 shows the projected holdings of land and other fixed assets for the non-financial public sector in 2009-10 and across the forward estimates.

Table 4.8: Land and other fixed assets — non-financial public sector ($million)


Result

Inventories 411 395 399 321 313 317Land 8 900 9 055 9 126 9 171 9 223 9 273Buildings and improvements 10 665 11 655 12 767 12 805 12 680 12 854Water, sewerage & drainage assets 9 168 10 558 11 590 12 215 12 730 13 320Road networks 5 168 5 724 6 045 6 511 7 201 7 506Rail & bus networks 629 918 1 232 1 689 1 894 2 054Other infrastructure assets 2 568 2 446 2 155 2 130 2 005 2 046Heritage assets 860 862 862 863 864 865Self-generating & regenerating assets 689 739 703 71 71 71Total land and other fixed assets (net of provisions for depreciation) 39 059 42 351 44 882 45 775 46 981 48 308Depreciation expense 852 931 1 049 1 146 1 223 1 277


The total value of land and other fixed assets for the non-financial public sector is projected to rise from $42.4 billion at 30 June 2010 to $48.3 billion at 30 June 2014, reflecting both the purchase of new assets (for example the desalination plant), as well as increases in the value of assets.

The higher level of non-financial assets in the non-financial public sector compared with the general government sector reflects the inclusion of assets held by PNFCs. These include assets held by SA Water (water and wastewater infrastructure such as pipelines, water filtration plants and reservoirs) and the South Australian Housing Trust.

4.9


Key non-financial public sector balance sheet indicators — time series

Table 4.9 provides a time series of net debt, unfunded superannuation, net financial worth, net worth and net financial liabilities for the non-financial public sector since 30 June 2003 and projected to 30 June 2014.

Table 4.9: Non-financial public sector balance sheet indicators — time series

As at Net debt Unfunded Net financial Net30 June superannuation(a) worth worth % of

$m $m $m $m $m revenue2003 2 696 4 445 -8 811 15 288 9 096 89.4 2004 2 285 5 668 -9 550 15 760 10 031 93.7 2005 2 126 7 227 -11 004 16 359 11 511 101.5 2006 1 786 6 146 -9 889 19 703 10 451 88.5 2007(b) 1 989 5 075 -8 795 22 128 9 518 77.2 2008(c

)(d) 1 611 6 468 -10 487 23 741 10 208 74.9 2009 2 872 8 939 -14 921 24 146 14 302 99.6 2010 4 864 9 476 -17 168 25 192 16 901 103.7 2011 7 101 9 442 -19 499 25 392 19 253 119.6 2012 7 209 9 445 -19 623 26 162 19 513 117.3 2013 7 360 9 428 -19 745 27 245 19 835 116.0 2014 7 545 9 389 -19 939 28 379 20 191 115.9


(a) There is a structural break in the methodology used to calculate superannuation liabilities between June 2003 and

June 2004. This accounting change, which involved the adoption of the Commonwealth Government Bond rate for valuation purposes in line with AASB119, Employee Benefits, resulted in a significant increase in superannuation liabilities.

(b) There is a structural break in 2007 reflecting the amalgamation of SAFA and SAICORP on 1 July 2006. The transfer of SAICORP’s assets and liabilities from the general government sector to the public financial corporations sector results in an increase in non-financial public sector net debt of $99 million at 1 July 2006 and an increase in net financial liabilities of $90 million at 1 July 2006.

(c) There is a structural break in 2008 reflecting the amalgamation of the South Australian Community Housing Authority (PFC) with the South Australian Housing Trust (PNFC). This results in an increase in net debt and net financial liabilities and a decrease in net financial worth of $98 million in 2007-08, with no impact on net worth.

(d) There is a structural break in 2008 reflecting the first time recognition on the general government balance sheet of South Australia’s share of the net assets of the Murray–Darling Basin Commission. This has no impact on net debt, however results in a reduction in net financial liabilities of $615 million (approximately 5 per cent of revenue) in 2007-08, and increases in net financial worth and net worth of $615 million.

As shown in the above table, net debt steadily decreased from 2003 to 2008 before significantly increasing over the forward estimates reflecting the government’s capital investment program. Net worth, however, has continued to improve and is now estimated to reach $28.4 billion at 30 June 2014.

Management of assets and liabilities

Assets

Each agency establishes, implements and maintains its own asset management plan to ensure assets are deployed efficiently and effectively in the delivery of programs.

Debt management

The funding and management of the state’s debt is undertaken by the South Australian Government Financing Authority (SAFA).

4.10


The state’s funding requirements are achieved by SAFA through the issue of securities in the financial markets, including long-term Select Line fixed interest securities issued in Australia and through SAFA’s short-term funding facilities.

The 2009-10 financial year has been characterised by much more stability in issuing conditions than seen through the prior year, as domestic capital markets recovered from the dislocation inspired by the global financial crisis (GFC).

The period of deepest dislocation for issuance of semi-government securities was in March 2009. At this point, the Commonwealth introduced a new scheme whereby in return for a fee, states could issue securities backed by a Commonwealth guarantee. States also had a short window after the issue of new Commonwealth guaranteed securities to opt for guarantee of existing securities, again for a fee. South Australia has chosen not to make use of the Commonwealth guarantee scheme.

The Commonwealth’s explicit and implicit support of semi-government debt issuance together with a general improvement in economic conditions and sentiment in capital markets underpinned an improvement in issuing spreads that carried through the end of the 2008-09 financial year, and into the next financial year.

Over 2009-10 risk appetite has rebounded as best observed by a rebound in equity and commodity markets. Credit spreads are tighter. Spreads of SAFA bonds to Commonwealth bonds and swap are significantly tighter than at the start of the financial year, although they are some way off matching levels seen prior to the GFC and can be volatile on a day-to-day basis.

As at 30 June 2010, SAFA had loans to the Treasurer of approximately $5.2 billion to finance the general government sector and South Australian Housing Trust (via long-term housing agreement debt). These loans are partly offset by deposits the Treasurer has with SAFA. The average interest cost on the Treasurer’s debt for 2009-10 was 4.35 per cent.

In relation to general government debt, the government’s debt management objective is to minimise the long-term average interest cost subject to acceptable levels of interest rate risk.

Under the debt management framework, debt is managed within a duration range of 1 to 1.5 years. There is no discretion to have an interest rate position outside that range. Interest rate risks are also controlled by the use of value at risk limits. The debt management framework is reviewed regularly and such reviews would take into account any significant changes in the state’s debt levels.

In addition to debt managed under this framework, the general government sector has CPI indexed and long-term housing agreement debt. This serves to increase the overall duration of general government sector debt.

The framework for managing the debt of public non-financial corporations, such as SA Water, is determined by the individual corporations.

Managing superannuation liabilities and assets

All public sector employees are covered by some form of superannuation scheme. These schemes include member contributory schemes designed to provide employees with pension or defined lump sum benefits upon retirement. These defined benefit schemes are now closed to new members.

As an employer, the Government of South Australia meets the Commonwealth mandated superannuation guarantee arrangements by means of the Southern State Superannuation (Triple S) Scheme.

4.11


The Triple S Scheme is an accumulation scheme to which the employer contributes at a rate of 10.0 per cent if members contribute at least 4.5 per cent of salary. For non-contributory members or members who contribute less than 4.5 per cent of salary, the employer contribution rate is the Guarantee Charge rate of 9.0 per cent.

The provision by the government of defined benefit superannuation schemes for its employees creates a liability for the government to pay future benefits to scheme members in accordance with the terms of the schemes. The South Australian Superannuation Scheme and the Police Superannuation Scheme, which are the main defined benefit schemes, were closed to new members in 1994. A program began in 1994-95 to fully fund all employer superannuation liabilities. The current funding program aims to have the defined benefit schemes fully funded by 2034.

Superannuation liabilities represent the present value of estimated future benefit payments. The South Australian Superannuation Scheme liabilities (being defined benefit schemes) are calculated assuming general real salary increases of 1.5 per cent per annum and pension increases adjusted by the Consumer Price Index (CPI) assumed to be 2.5 per cent per annum. Commencing with the 2003-04 Mid-Year Budget Review, the liabilities have been calculated using a discount rate set with reference to the Commonwealth Government bond rate. The risk-free discount rate used for the 2010-11 Budget is 5.3 per cent (effective annual rate) but will be adjusted in future years as the risk-free rate moves and the earnings rate for 2009-10 was 12.2 per cent. An earnings rate of 8.3 per cent for 2010-11 has been assumed based on estimated investment earnings by Funds SA to mid August 2010 and using the assumption of 7.0 per cent per annum long-term return for the remainder of the year. The long-term earnings rate assumption of 7.0 per cent per annum may be reviewed periodically to reflect movements in the risk-free discount rate.

Table 4.10 sets out for the superannuation schemes operating in the state public sector, the estimated accrued liabilities of those schemes and the assets available to meet those liabilities, as at 30 June 2010.

Table 4.10: Public sector superannuation liabilities as at 30 June 2010 (estimated)

Accrued liability

Assets Net liability

$m $m $m

Schemes administered by the Government of South Australia(a)

21 263 11 817 9 446

Schemes not administered by the Government of South Australia(b)

241 211 30

Total schemes 21 504 12 028 9 476

(a) The parts of the liability relating to schemes administered by the Government of South Australia that are defined benefits schemes have been determined by the Department of Treasury and Finance on the basis of the present value of expected future benefits that have arisen from membership of the various schemes. The SA Ambulance Service Superannuation Scheme is valued by an independent actuary.

(b) The value of the liabilities and the assets administered by these organisations is based upon actuarially determined estimates and valuations performed by qualified actuaries appointed by the trustees of the various schemes.

Table 4.11 details the components of the unfunded liability for the South Australian Superannuation Scheme, the scheme with the largest unfunded liability.

4.12


Table 4.11: South Australian Superannuation Scheme as at 30 June 2010 (estimated) ($ million)

Liabilities

Pension Scheme

Pensioners 6 374

Contributors 3 584

9 958

Lump Sum Scheme 1 806

Gross liability 11 764

less

Assets

SA Superannuation Fund (members’ contributions) 1 663

Employer fund (contributions by agencies including past service contributions by the government)

2 246

Total Assets 3 909

equals

Unfunded liability 7 855

Insurance arrangements

SAFA manages the government’s insurance and risk management arrangements through a separate insurance division using the trading name SAICORP.

The insurance function of SAFA is operated through two funds specifically established in SAFA’s accounts to quarantine the insurance activities from SAFA’s finance activities.

Premiums received from agencies for insurance cover provided under the government’s insurance and risk management arrangements for incidents occurring from 1 July 1994 are credited to SAICORP Insurance Fund 1, which is used to:

meet loss and claim payments above agreed levels of agency excesses;

provide a reserve to cover future losses and claims;

pay premiums for the government’s catastrophe reinsurance program and other insurances deemed necessary and appropriate in connection with the arrangements;

meet the cost of administering the insurance and risk management program; and

pay service providers for advice and services as required in connection with the insurance and risk management program.

4.13


Claim payments in respect of insurable incidents that occurred prior to 1 July 1994 that survive the Limitations of Actions Act 1936, claims under the builders warranty indemnity reinsurance arrangements and SGIC residual claims are met from SAICORP Insurance Fund 2. From 1 July 2008, non-insurable type liabilities previously met from SAICORP Insurance Fund 2 are managed by the relevant government department and funded separately.

With respect to the builders warranty indemnity reinsurance, on 18 June 2010, the Treasurer approved SAFA providing QBE and Calliden with reinsurance cover in respect of builders warranty insurance with effect from 1 July 2010. These arrangements replace previous arrangements with Vero and CGU who have withdrawn from the builders warranty insurance market.

From 1 July 2006, the Treasurer has indemnified SAFA for the financial outcomes of SAICORP Insurance Fund 2. On an annual basis, payments will be made under the Treasurer’s indemnity to ensure that SAICORP Insurance Fund 2 is maintained on a break-even basis in SAFA’s accounts as at 30 June each year.

All government departments are included in the arrangements, together with all statutory authorities, unless specifically exempted by the Treasurer.

Premium revenue earned by SAFA from client agencies for 2009–10 is estimated to be $35.0 million ($29.4 million for 2008–09). SAFA has a policy of accumulating reserves over time to meet the cost of retained risks. Funds not required to meet day-to-day operational costs or short-term claim costs are invested in the tax exempt multi-sector growth product of Funds SA.

At 30 June 2010, SAICORP Insurance Fund 1 had:

total assets of $325.2 million;

total liabilities of $236.4 million, including outstanding claim liabilities of $236.0 million. Medical malpractice claims accounted for $154.6 million of the outstanding claim liabilities; and

net assets (free reserves) of $88.8 million.

At 30 June 2010, SAICORP Insurance Fund 2 had:

total assets of $65.3 million;

total liabilities of $65.3 million, including outstanding claim liabilities of $65.1 million. Medical malpractice claims accounted for $25.6 million of the outstanding claim liabilities; and

no net assets (a break-even position).

In accordance with the Treasurer’s indemnity in relation to SAICORP Insurance Fund 2, total assets in the fund include a receivable of $6.8 million from the Treasurer.

During 2009–10, SAICORP Insurance Fund 1 and SAICORP Insurance Fund 2 recovered a large part of the losses from the previous year as a result of the global financial crisis. SAICORP is now close to operating within its target level of reserves.

4.14


CHAPTER 5: GOVERNMENT BUSINESSES

Overview

Highlights 2010-11

The public non-financial corporations (PNFC) sector is currently in a period of record capital investment due mainly to SA Water and the construction of the Adelaide Desalination Plant.

The overall investing expenditure program for the PNFC sector is $1361.0 million in 2010-11, including $31.4 million of contributed assets.

In 2010-11 the PNFC sector will contribute $274.5 million in dividends and income tax equivalents to general government revenue.

The net debt of the PNFC sector is budgeted to be $3766.7 million in 2010-11.

Recent developments

The Department of Treasury and Finance Market Projects Unit was established as part of the 2008-09 Mid-Year Budget Review to progress a range of initiatives aimed at realising the value of some of the state's assets and therefore strengthen the state's balance sheet. These measures included identifying a range of commercial property assets for sale and to investigate selling the harvest rights of ForestrySA plantations.

Operating performance

Table 5.1: Public non-financial corporations sector budget aggregates ($million)

2009-10 Budget

2009-10 Estimated

Result

2010-11 Budget

2011-12 Estimate

2012-13 Estimate

2013-14 Estimate

637.8 705.6 249.2 440.2 403.0 466.4

less Dividends(a) 222.0 256.2 186.7 235.4 265.0 350.7

less Income tax equivalents 115.9 124.0 87.8 116.6 129.9 168.5

equals

Net operating balance 299.9 325.5 - 25.3 88.2 8.2 - 52.8

less

Net acquisition of non-financial assets

Gross fixed capital formation(b) 1 513.3 1 441.9 848.9 - 148.6 413.1 707.4

less Depreciation 302.5 305.1 367.9 383.0 393.9 408.4

plus Change in inventories 59.3 71.6 4.1 - 78.9 - 7.7 4.2equals Total net acquisition of non-financial assets

1 270.1 1 208.4 485.1 - 610.5 11.4 303.2

equals

Net lending / borrowing - 970.3 - 882.9 - 510.4 698.7 - 3.2 - 356.0

Net operating balance before dividends and income tax equivalents


(a) In accordance with ABS classification standards, Table 5.1 excludes dividends from SA Lotteries, which are recorded as gambling tax in Table 3.4 and Table 3.7 of Chapter 3 and taxation revenue in the general government sector operating statement at Appendix A.

(b) Gross fixed capital formation comprises purchases of non-financial assets (including contributed assets) less sales of non-financial assets (including donated assets).

5.1

The estimated net operating balance before dividends and income tax equivalents for the PNFC sector in 2009-10 of $705.6 million represents a $67.8 million increase from budget, mainly reflecting higher than forecast grant funding received by SA Water partly offset by increased operating expenses.

From 2009-10 to 2010-11 the net operating balance is forecast to deteriorate by $350.8 million, however net lending is forecast to improve by $372.5 million.

The budgeted 2010-11 net operating balance before dividends and income tax equivalents of $249.2 million is significantly lower than 2009-10, reflecting lower Commonwealth Government grants in 2010-11 for the South Australian Housing Trust, including social housing investment under the Nation Building — Economic Stimulus Plan ($299.2 million in 2009-10 compared to $100.9 million in 2010-11) and the National Partnership agreements on Social Housing and Remote Indigenous Housing ($112.9 million in 2009-10 compared to $20.3 million in 2010-11).

The improvement in net lending from 2009-10 to 2010-11 is due to a $723.3 million reduction in the total net acquisition of non-financial assets, primarily reflecting a $338.2 million reduction in investing expenditure by SA Water and a $201.8 million increase in asset sales (including donated assets) by the South Australian Housing Trust. The reduction in the net acquisition of non-financial assets also reflects a smaller increase in inventories in 2010-11, mainly due to a reduction in the purchase of land held for sale by the Land Management Corporation in 2010-11.

A significant improvement in net lending is forecast in 2011-12, mainly reflecting a $113.6 million improvement in the net operating balance, a $430.2 million reduction in investing expenditure by SA Water and the proposed sale of ForestrySA assets. Proceeds from the sale of ForestrySA’s harvests have not been disclosed so as to avoid prejudicing the sales process.

In 2009-10 the PNFC sector is estimated to contribute a total of $380.1 million in dividend and income tax equivalents, which represents a $42.2 million increase from budget. The increase is mainly a result of higher contributions from the Land Management Corporation and ForestrySA.

Contributions from the PNFC sector are forecast to decrease significantly from 2009-10 to 2010-11, and then increase across the remaining forward estimates to 2013-14, largely reflecting forecast contributions from SA Water.

SA Water’s operating expenses and borrowing costs are forecast to increase in 2010-11, largely as a result of water security initiatives being undertaken to guarantee South Australia’s water supply, resulting in a reduction in contributions in 2010-11.

Contributions from SA Water are forecast to recover from 2011-12 to 2013-14, mainly due to additional sales revenue from the increase in water prices.

SA Water’s forward estimates also include the receipt of Commonwealth Government grants for a number of capital projects. Although this funding will be amortised over the life of the assets by SA Water, as required under accounting standards, the funding will reduce SA Water’s borrowing requirement and associated interest costs, which impact directly on SA Water’s profit.

The recovery in contributions from SA Water over the forward estimates period is partly offset by reduced contributions from ForestrySA, as a result of the planned upfront sale of its harvests.

The revenue sources of a number of major government businesses, including the Land Management Corporation and ForestrySA, are tied to the level of activity in the building and construction sector, particularly residential housing. Dwelling construction activity recovered at a national level in 2009-10 and in South Australia has been maintained at high levels. Building approvals, a forward indicator of building intentions, suggest continued strong building activity in 2010-11.

5.2

Chapter 5: Government Businesses

Public non-financial corporations — performance

Table 5.2 summarises financial transactions between government businesses and the general government sector, including grants, subsidies, community service obligations (CSOs), dividends and income tax equivalents.

Table 5.2: Financial transactions between government businesses and the general government sector ($million)(a)(b)

2009-10 2009-10 2010-11 2009-10 2009-10 2010-11 2009-10 2009-10 2010-11

Budget Estimated Result

Budget Budget Estimated Result

Budget Budget Estimated Result

Budget

PNFC

Adelaide Convention Centre(c) 4.5 4.5 4.5 — — — — — —

Adelaide Festival Centre Trust 13.6 14.1 14.4 — — — — — —

Electricity Lease Entities 5.3 6.2 2.8 — 0.8 — — — —

ForestrySA 3.3 3.2 3.3 19.3 31.1 29.2 9.2 13.6 13.9

Land Management Corporation 1.5 1.5 0.9 31.6 53.6 49.6 15.0 18.3 15.0

Public Trustee — — — 1.7 — 1.7 0.8 0.5 0.8

SA Lotteries(d) — — — — — — 6.3 8.8 6.4

SA Water 162.3 278.3 279.5 168.4 169.0 104.5 81.8 77.6 49.7

South Australian Government Employee Residential Properties

0.1 0.1 0.1 1.2 1.7 1.7 2.0 1.4 1.5

South Australian Housing Trust 649.3 744.5 458.0 — — — — 3.3 —

South Australian Motor Sport Board

2.8 3.0 6.3 — — — — — —

TransAdelaide(e) 2.1 1.6 — — — — — — —

West Beach Trust 1.2 1.3 1.4 — — — 0.8 0.4 0.5

PNFC Total 845.9 1 058.4 771.2 222.0 256.2 186.7 115.9 124.0 87.8

PFC

HomeStart Finance 4.2 4.2 4.5 9.4 4.7 8.2 5.0 5.0 4.4

South Australian Asset Management Corporation

— — — 23.5 23.5 4.0 — — —

South Australian Government

Financing Authority(f) — — — 11.6 11.5 53.4 — — 8.5

PFC Total 4.2 4.2 4.5 44.5 39.7 65.6 5.0 5.0 12.9

PNFC and PFC Total 850.1 1 062.6 775.6 266.6 295.9 252.3 120.9 129.0 100.7

Grants, Subsidies and CSOs

Dividends Income Tax Equivalents


(a) Table 5.2 is presented on an accrual basis and includes only those PNFCs and PFCs that are expected to impact on general government net lending. The table includes Commonwealth Government grants and subsidies paid through the Government of South Australia (for example, subsidies to the South Australian Housing Trust and grants to SA Water). These grants and subsidies are recognised in accordance with ABS classification standards.

(b) The 2009-10 Budget figures have been sourced from Table 6.2 in Chapter 6 of the 2009-10 Budget Statement.

(c) The Adelaide Convention Centre will also be provided with an equity injection of $5 million in 2010-11 to commence work on the Riverbank Precinct Development.

(d) In accordance with ABS classification standards, Table 5.2 excludes dividends from SA Lotteries, which are recorded as gambling tax in Table 3.4 and Table 3.7 of Chapter 3 and taxation revenue in the general government sector operating statement at Appendix A.

(e) Cabinet has approved the transfer of all staff, assets, liabilities, revenues and expenditures from TransAdelaide to the Rail Commissioner (PNFC sector) effective from 1 September 2010, as part of the government's strategy to integrate the administration of public transport. Further transfers of administrative functions from the Rail Commissioner (PNFC sector) to the Department for Transport, Energy and Infrastructure (general government sector) are proposed to occur later in the 2010-11 financial year. Due to the timing of the approval, the transfer of functions between TransAdelaide and the Rail Commissioner are not reflected in the 2010-11 Budget.

(f) The higher South Australian Government Financing Authority (SAFA) dividend in 2010-11 reflects a return of projected excess capital by SAFA and is consistent with reviews undertaken of SAFA’s capital requirements, which recommended a reduction in its capital base.

5.3


SA Water

SA Water plays a key role in the Water for Good Plan, which outlines a range of actions to ensure South Australia’s water supplies are secure, safe, diverse, reliable and able to sustain a growing economy in a changing climate. The new Department for Water, launched 1 July 2010, will lead the management of South Australia’s water resources.

SA Water has shortlisted a number of proponents to bid for the Adelaide Water Contract, for the operation and maintenance of metropolitan Adelaide water and wastewater systems from 1 July 2011.

SA Water’s 2009-10 estimated contributions to government of $246.6 million are slightly below budget, reflecting the negative impact on sales revenue of lower water consumption than forecast.

Grant, subsidy and CSO payments in 2009-10 have increased since budget, mainly due to the recognition of Commonwealth Government grants for the Adelaide Desalination Plant, which were previously budgeted as being paid directly to SA Water, but are now being paid through the Government of South Australia.

Grant, subsidy and CSO payments to SA Water by the government are estimated to total $278.3 million in 2009-10, including $193.6 million in CSOs, $70.2 million in Commonwealth Government grants, $7.1 million for the purchase of water licences on behalf of the former Department for Water, Land and Biodiversity Conservation and $6.6 million in Commonwealth funding towards the Point Sturt and Hindmarsh Island Pipeline. Grants, subsidies and CSOs to SA Water are estimated to continue at similar levels in 2010-11, including $97.8 million in Commonwealth Government grants paid through the Government of South Australia. SA Water is estimated to receive a net contribution (including Commonwealth grant funding) from government in 2009-10 of $31.7 million, which is estimated to increase further in 2010-11 to $125.3 million, as grants, subsidies and CSOs exceed dividends and income tax equivalent payments.

SA Water’s contributions are estimated to decrease by $92.4 million from 2009-10 to 2010-11 due mainly to increased operating expenses and debt levels associated with major infrastructure projects and water security initiatives. These initiatives include the $1.8 billion Adelaide Desalination Plant (including the transfer pipeline to the Happy Valley water treatment plant), which is expected to deliver first water in April 2011, and the $403 million North-South Interconnection System Project to improve connectivity between the northern and southern metropolitan water supply systems.

The government approved an average 21.7 per cent real increase in water charges in 2010-11. This represents a step towards full compliance by the Government of South Australia with the National Water Initiative Pricing Principles released in 2010. The indicative path for water charges revenue to 2013-14 will result in the government achieving full compliance with the pricing principles for the recovery of investing expenditure. These principles require SA Water to earn an economic rate of return on all new and replacement investments (including the Adelaide Desalination Plant). The resultant charges provide enough revenue to recover all costs including capital and a real financial return on investment over the life of the project. However the variations in accounting expenses including nominal interest expense and revenues over time impact on accounting profit and thus the dividend. There will be future impacts on SA Water associated with the 2004 National Water Initiative agreement requirement that water planning and management costs be recovered from water users.

Provision has been made for the continuation of temporary water restrictions until 30 November 2010 and updated permanent water conservation measures from this date. Restrictions are expected to result in SA Water’s contributions in 2010-11 being lower than they would otherwise be. This is due to reduced water sales revenue and the cost of advertising, water licences and management of restrictions. The actual impact on contributions could vary substantially, depending on water flows into the Mount Lofty Ranges and the Murray-Darling Basin catchments in 2010, and customer water use after the return to permanent water conservation measures.

5.4


SA Lotteries

SA Lotteries’ 2009-10 estimated contributions to government are slightly above budget due to additional sales associated with exceptionally high jackpots during the year. SA Lotteries’ contributions are forecast to grow modestly over the forward estimates.

Land Management Corporation

The Land Management Corporation’s estimated contributions to government totalled $71.9 million in 2009-10, including a special dividend of $11.7 million resulting from the transfer of some Technology Park assets to Defence SA during 2009-10. Contributions to government of $64.6 million are forecast for 2010-11.

The Land Management Corporation will undertake a significant land release program in 2010-11, including land releases at Blakeview, Penfield, Evanston and Hackham. This program will contribute towards meeting the state government’s target of a 15 year rolling supply of land zoned for urban development, included in the 30-Year Plan for Greater Adelaide.

Across the remaining forward estimates, annual contributions are forecast to fluctuate between $45 million and $66 million, due to the forecast timing of land sales.

Major projects impacting on contributions across the remaining forward estimates include Playford Alive, Blakeview, Port Adelaide Waterfront Redevelopment, Hackham and Edinburgh Parks.

ForestrySA

ForestrySA’s estimated contributions to government totalled $44.7 million in 2009-10, and are forecast to decrease slightly to $43.2 million in 2010-11.

ForestrySA’s sales are primarily dependent on the domestic housing and construction sector. Economic conditions in this sector have improved over the course of 2009-10 with a subsequent increase in timber sales. ForestrySA has actively pursued and achieved additional log sales with a range of customers over this period. While the export chip market was depressed during the course of 2009-10, demand for export log increased offsetting the reduced revenue from export chip.

Non-commercial public non-financial corporations — performance

South Australian Housing Trust

Grant funding provided to the South Australian Housing Trust is estimated to be $744.5 million in 2009-10, which is $95.2 million higher than budget mainly due to increased Commonwealth funding under the National Partnership Agreement on Remote Indigenous Housing. A reduction in grant funding to $458.0 million in 2010-11 and $376.4 million in 2011-12 mainly reflects reduced funding from the Commonwealth for social housing investment under the Nation Building — Economic Stimulus Plan ($299.2 million in 2009-10 down to $100.9 million in 2010-11 and $14.7 million in 2011-12) and National Partnership agreements on Social Housing and Remote Indigenous Housing ($112.9 million in 2009-10 down to $20.3 million in 2010-11).

5.5


Capital investment

Figure 5.1: Purchases of non-financial assets and depreciation ($million)(a)

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14


(a) Purchases of non-financial assets comprises investing expenditure and contributed assets.

In 2010-11, the gross fixed capital formation budget for the PNFC sector is $848.9 million, including investing expenditure of $1329.6 million and contributed assets of $31.4 million, less sales of non-financial assets of $512.1 million.

The significant investing expenditure in 2010-11 includes SA Water’s investment program of $888.7 million and the South Australian Housing Trust’s investment program of $374.5 million. SA Water’s investing expenditure will decrease by $338.2 million from 2009-10 to 2010-11, and then decline further across the forward estimates to a total of $399.1 million in 2013-14 with the completion of a number of significant water security projects.

Details of the 2010-11 investing initiatives are contained in the Capital Investment Statement as part of the 2010-11 Budget Papers.

From 2010-11 to 2011-12 there is a large step down in capital investment, which is mainly due to a reduction in investing expenditure on the Adelaide Desalination Plant, a reduction for the South Australian Housing Trust construction program and a scheduled reduction in works under TransAdelaide's Railcar Upgrade Program in 2011-12.

Net debt

Table 5.3: Public non-financial corporations sector net debt ($million)(a)

2009-10 2010-11 2011-12 2012-13 2013-14Estimated

ResultBudget Estimate Estimate Estimate

SA Water 2 919.2 3 453.6 3 543.6 3 572.3 3 711.9Other 358.1 313.0 33.0 - 75.2 - 12.5Total PNFC Net Debt 3 277.3 3 766.7 3 576.6 3 497.1 3 699.4

Net Debt


(a) 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. Net debt does not include fixed assets.

5.6


PNFC sector net debt is forecast to increase from $3277.3 million in 2009-10 to $3766.7 million in 2010-11, which is mainly attributable to water security projects including the building of the $1.8 billion Adelaide Desalination Plant. In 2010-11 SA Water will account for around 92 per cent of the total PNFC sector net debt. In 2011-12, around 50 per cent of PNFC sector net debt is attributable to the Adelaide Desalination Plant. From 2010-11 to 2012-13 PNFC sector net debt is forecast to decline, as the increase in SA Water’s net debt is offset by a reduction in the net debt of other agencies as a result of their asset sales program.

5.7


5.8


CHAPTER 6: RISK STATEMENT

Overview

This chapter outlines the major financial risks that could affect the fiscal outlook set out in the 2010-11 Budget and identifies measures the government has adopted to manage these risks. The risks are summarised in three main sections — risks to revenue, risks to expenditure, and contingent liabilities.

Budget estimates are made on assumptions and judgments formed in the context of information available at the time of their preparation. In practice, both revenues and expenses will be subject to variation from the budget, the size of such variation typically increasing over the forward estimates period.

Financial risks arise from general developments or from specific events that affect the fiscal outlook. They may be positive or negative and they may not necessarily be within the government’s control. Examples include fluctuations in economic activity, changes to demand for services and fluctuations in financial markets.

The budget estimates include allowances to help manage potential financial risks. For example, allowances are made for wage and salary outcomes and capital expenditure contingency provisions. In addition, some sources of risk to the fiscal outlook can, to a certain extent, be managed through established risk management practices such as hedging and insurance.

There continues to be uncertainty around the global economic recovery, which could adversely impact on domestic economic growth and consequently revenue projections over the forward estimates.

Revenue risks

Taxation, grants, royalties and fines

State taxation revenues are exposed to variations and fluctuations in both the volume and value of activity. Broadly based taxes such as payroll tax are influenced by general economic trends, whereas more narrowly based taxes are subject to influences which are specific to particular segments of economic activity. Price and activity trends in the property market have a greater impact on the short-term volatility of state taxation revenues than does the broader economy because of the significant share of revenues derived from property based taxes such as stamp duty and land tax.

Fluctuations in economic activity within the state heighten the risk of state taxation revenues exceeding or falling short of budget forecasts, particularly at turning points in the economic cycle. The performance of the national economy is also a key driver of state government revenues. The pool of Goods and Services Tax (GST) revenue grants allocated to the states and territories is directly influenced by national trends in consumer spending and housing construction. Furthermore, South Australia’s share of GST revenue grants is influenced, in part, by the state’s relative taxation revenue capacity.

If South Australia’s taxation revenues are constrained relative to other states and territories as a result of weaker state economic performance, the horizontal fiscal equalisation (HFE) process will provide South Australia with a higher share of GST revenues. This means that in the medium to longer-term, overall South Australian revenues (GST revenue grants and own source revenues in per capita terms) are ultimately largely driven by national rather than state economic performance. However, the HFE

6.1

process operates with a lag and therefore fluctuations in state economic activity do have a short-term impact on overall revenues.

Prior to the global financial crisis, strong economic growth both nationally and in South Australia provided a supportive environment for revenue growth. While the impact of the global financial crisis was less severe in Australia than in other countries, the downturn in economic activity and uncertainty in financial and property markets did have an adverse impact on state revenues. Budget projections assume economic growth rates consistent with return to trend levels of economic activity over the forward estimates period as the economic recovery continues.

Specific risk factors include:

concerns over the sustainability of the recovery in international economic conditions;

property prices may be more subdued than anticipated, particularly if there are further interest rate increases and/or access to finance tightens in response to volatility in global financial markets;

variations in climatic conditions and water security could impact on the volume of South Australian agricultural output and farm incomes with flow-on impacts into other areas of the economy; and

local industries may face structural pressures from a relatively strong Australian dollar and tighter access to credit.

State taxation revenue is not particularly sensitive to movements in broad based price measures, such as the Consumer Price Index (CPI). Rather, where there are price effects on taxation revenues, they tend to be specific to particular transactions; for example, property values, motor vehicle values and insurance premiums.

Impact: A variance of 1.0 per cent in state taxation revenue, not including GST revenues, equates to about $39 million per annum.

Specific revenue risk areas over and above general economic conditions are considered below.

Property taxes

Conveyance duty revenue is exposed to local variations in the property market. Trends in property market values and activity levels have been difficult to predict in recent years. While activity levels softened significantly during 2008-09 and 2009-10, the anticipated softening in residential property market values did not eventuate. Forward projections of residential property values no longer factor in a real-terms price fall, but rather assume that there will be real-terms growth in property values.

There continues to be some uncertainty surrounding property market conditions going forward, particularly if further interest rate increases occur or there is volatility in financial markets which adversely impacts on the accessibility of cost-effective credit to investors.

Over the past year, conveyance duty has been boosted by substantial first home buyer activity as a result of the temporary increase to the First Home Owners Grant. While it was assumed that some of this first homebuyer activity related to a ‘pull forward’ effect, first homebuyer activity is expected to return to more normal levels during 2010-11.

There is a risk that property prices and/or activity levels will be lower than estimated if higher interest rates, tighter credit conditions and a softer overall outlook for the economy impacts upon underlying confidence in the property market, first home buyer activity or investment activity in the commercial and industrial sectors.

6.2

Chapter 6: Risk Statement

This uncertainty makes forecasting of property taxes difficult, especially conveyance duty receipts. The irregular timing of large commercial transactions also adds to the risk of forecasting error.

Land tax receipts can also vary from expectation over the forward estimates period. Indexation of land tax thresholds, which will commence from 1 July 2011, will avoid the impact of bracket creep when property values are increasing, with growth in land tax revenues to be broadly in line with growth in land values. Land tax thresholds will not be reduced if land values fall and land tax revenues will be additionally impacted if land values decrease.

Impact: A 1.0 per cent variation in property values equates to about $11 million in conveyance duty revenue, while a 1.0 per cent variation in activity equates to about $9 million in conveyance duty revenue.

Gaming machine revenue

There are a number of risks to gaming machine tax revenue collections.

Discretionary spending levels are influenced by a range of factors, including income, debt servicing levels, the cost of essential items and perceived future spending needs. Regulatory reforms also impact on gaming machine taxation revenue collections.

Gaming machine expenditure is expected to grow modestly over the forward estimates in line with household spending forecasts. This projection is however vulnerable to household budget shocks, for example interest rates and petrol prices.

Impact: A variance of 1.0 per cent in hotel and club gaming machine expenditure equates to around $3 million in gambling tax revenue.

Insurance duty

Insurance premiums can vary significantly over time depending on the capacity of the market sometimes affected by major insurable events around the world.

Impact: A variance of 1.0 per cent in premium levels equates to around $3 million.

Royalties

Mining royalties are exposed to external economic forces. In particular, royalties are affected by changes to international prices for oil, copper, uranium and gold. Royalties can also be affected by unplanned operational incidents, such as plant fires and failures and other unforeseen events. Royalties are also exposed to movements in the exchange rate.

There is potential for growth in royalty revenue from new mines. The timing of these additional royalty streams is dependant on the timing of discoveries, global economic growth as well as the time required for development approvals and to develop new mine sites to an operational level. Royalty revenue does not flow until commercial production commences.

No additional royalty income from the Olympic Dam expansion is expected to be received in the forward estimates period.

Variations in royalty revenues arising from the royalty base (production and price levels) are substantially offset over time by consequent variations in the share of Commonwealth GST revenue grants received by South Australia through the HFE process.

6.3


Impact: Excluding HFE impacts, a one cent change in the exchange rate has a direct revenue impact of about $1.5 million on royalty revenue. A 1.0 per cent change in international prices for copper, uranium, gold, oil and petroleum liquids has a direct revenue impact of about $1.2 million.

Traffic infringement fines

Revenue collected from traffic infringement fines is sensitive to changes in driver behaviour patterns and the number of speed detection devices (red light/speed cameras) in operation.

Impact: A variance of 1.0 per cent in the number of traffic infringement notices equates to around $800 000 per annum in fines revenue.

Changes to general purpose payments (GST revenue)

The pool of GST revenue grants allocated to the states and territories is directly influenced by national trends in consumer spending and housing construction. Accordingly, South Australia’s revenue is now more exposed to variations in national economic activity and potential changes in GST policy settings. GST collections and estimates have exhibited more volatility than final demand over the global financial crisis period.

Impact: A 1.0 per cent change in GST revenue growth has a revenue impact for South Australia of about $45 million per annum.

Changes to horizontal fiscal equalisation methodology

Commonwealth GST revenue grants are the vehicle for HFE. The methodology and data underlying the HFE process are determined by the Commonwealth Grants Commission (CGC). The CGC takes into account submissions from states and territories. While the CGC is an independent body, states and territories compete strongly in submitting arguments in support of their position.

Methodology reviews are conducted every five years, with the next scheduled to occur in 2015.

Impact: The risk of HFE methodology changes that may impact on the state, either positively or adversely, is significant over the medium-term.

Changes to data used by the Commonwealth Grants Commission

In each annual update of relativities, the CGC uses the latest available sociodemographic and other data while continuing to use methods established in the last methodology review. While the requirement for the CGC to improve data and data sources wherever possible is appropriate, this can lead to changes in GST relativities.

The CGC has also changed methods used in annual updates where data is no longer available or is now considered unfit for purpose.

An example of how CGC data changes can impact on the budget is the CGC’s use of revised estimates of indigenous resident population in the 2009 Update. The CGC used new data from the 2006 Census provided by the Australian Bureau of Statistics incorporating a change in its method of deriving indigenous population. The adoption of the new data resulted in an increase in GST revenue grants to South Australia of about $18 million.

Fluctuations in the value of mining output per capita in each state can be considerable and have substantial impacts on states’ annual relativities.

6.4


Impact: A 0.01 change in South Australia’s relativity (from the 2010 Review relativity of 1.28497) results in a change in GST revenue grants of about $32 million.

Specific purpose payments

The new federal funding arrangements agreed to by the Council of Australian Governments (COAG) in 2008 provide for a small number of national specific purpose payments (SPPs) covering the major state functions of health, housing, education and disability services. In addition, National Partnership payments (NPPs) are paid to states to support delivery of specified projects or to facilitate or reward the implementation of reforms of national importance. The new arrangements for SPPs place the focus on outcomes and outputs rather than matching and other input controls but some NPPs require funding co-contributions from the states and in some cases penalty provisions apply if performance targets are not met.

Impact: Payments for specific purposes from the Commonwealth account for about 19 per cent of state government revenues. Variations in their level or the conditions applying to these payments pose a risk to the budget.

Changes in profitability of government businesses

As part of their day-to-day operations, government business enterprises, comprising public non-financial corporations (PNFCs) and public financial corporations (PFCs), such as SA Water, Land Management Corporation, ForestrySA and SA Lotteries manage a range of commercial risks. Risks that adversely impact upon a government business may affect its ability to pay dividends and make tax equivalent payments, thereby impacting on the financial position of the general government sector.

Impact: A 1.0 per cent fall in total contributions in 2010-11 to the general government sector from PNFCs and PFCs would have a $3.5 million impact on the budget.

Water security

The Murray-Darling Basin has experienced the worst drought on record, which has led to a significant reduction in River Murray flows to the state over the last few years. Although inflows have improved recently, if inflows decline in the future, there is some risk that water would need to be purchased for critical human need or the environment in future years.

Water restrictions cause SA Water to lose revenue from water sales. The budget provides for the continuation of temporary water restrictions until 30 November 2010 and updated permanent water conservation measures from this date, thereby reducing SA Water’s before tax profit. A reduction in profit results in lower contributions to the general government in 2010-11.

The actual financial impact of the drought on SA Water’s profit in 2010-11 could vary substantially from that assumed for budget purposes, depending on water flows into the Mount Lofty Ranges and the Murray-Darling Basin catchments in 2010, and customer water use after the return to permanent water conservation measures.

Expenditure risks

Drought

The government has provided $62 million over the period 2006-07 to 2010-11 for a range of assistance and support measures for primary producers and regional communities affected by drought. If drought conditions persist, additional expenditures will be incurred.

6.5


Hospital expenditure growth

Hospital expenditure growth has been significant in recent years. Health is implementing a number of administrative and financial management strategies to improve the financial performance of health units.

In addition, the government is implementing a number of community care, primary care and hospital avoidance strategies to manage the financial impact of activity growth. If the growth in hospital activity is higher than expected in the medium-term, this may result in significant additional future costs.

Impact: A 1.0 per cent growth in hospital activity above the level incorporated in the 2010-11 Budget will increase expenses by approximately $14 million per annum.

Student enrolment numbers

The government has implemented strategies designed to engage 15 to 19 year olds in education and training. These strategies will affect student enrolment numbers. The 2010-11 Budget includes a best estimate of expected movements in both the number and composition of student enrolments as a result of current government policy settings. To the extent that actual enrolment numbers vary from those estimates there will be an impact on the state’s financial position.

Impact: Depending on the mix of students, a 1.0 per cent growth in government school enrolment numbers above the levels incorporated in the 2010-11 Budget would increase expenditure in the range of $8 million to $11 million per annum.

Students with additional needs

The budget includes provisions for the resourcing requirements of students with additional needs; this includes Aboriginal students, students with disabilities, new arrivals and students with English as a second language. If the number of students with additional needs increases above budget projections, there will be an impact on the budget.

Impact: Depending on the mix of students, a 1.0 per cent growth in students with additional needs, above the levels incorporated in the 2010-11 Budget, would increase expenditure by approximately $900 000 per annum.

Higher than expected increases in wages and salaries

Enterprise agreements are in place for major workforce groups for the relevant terms of each agreement, with all associated costs included in the 2010-11 Budget.

Enterprise bargaining negotiations are progressing concerning Assistants to Members of Parliament; Nurses and Midwives, and SA Ambulance Service employees and are expected to result in outcomes in 2010-11. Negotiations will take place during 2010-11 in relation to Police; wages parity (Building, Metal & Plumbing Trades) employees; South Australian Metropolitan Fire Service (Firefighters); and Salaried Medical Officers and Clinical Academics.

The outcomes of future wage negotiations will be crucial in determining whether expenditure forward estimates in this budget can be achieved and the level of government services that can be delivered, particularly in light of the current challenging economic conditions.

6.6


Allowances in the forward estimates for enterprise bargaining outcomes cover both salary and non-salary outcomes.

Impact: If public sector wide wage outcomes for new enterprise agreements vary by 1.0 per cent per annum from allowances in the forward estimates, the budget impact will be approximately $180 million in 2013-14.

Capital investment

Historically high levels of investment are budgeted for across the forward estimates. Whilst project estimates include prudent allowances for cost escalations, the risk of additional cost increases with the large investment program. Impact: If cost escalations exceed the allowances included in the investment program, there will be a negative impact on annual net lending outcomes. A 1.0 per cent increase in costs for the general government investment program will increase capital expenditure by approximately $23 million in 2010-11.

Interest rates

Higher than expected interest rates could adversely affect the general government and public non-financial corporations (PNFC) sectors’ budget position through increased interest payments.

Impact: A 1.0 percentage point increase in the average interest rate applying to general government sector debt would increase net interest expense by approximately $25 million in 2010-11 rising to $39 million in 2013-14. A 1.0 percentage point increase in interest rates would increase the PNFC sector’s net interest expense by approximately $35 million in 2010-11. This would affect contributions received by the general government sector from PNFCs.

Increase in Consumer Price Index

Higher inflation may impact on the prices paid by government agencies for goods and services. The government’s indexation policy provides for standard indexation of supplies and services expenditure in line with projections in the Consumer Price Index. Agencies are required to absorb a cost increase from within existing budget allocations, unless the specific price increase has resulted in a material effect on the agency budget. The materiality test applied is that the price change experienced has altered agency costs by more than 0.5 percentage points above or below the standard indexation provided for in agency budgets.

Impact: Not quantifiable.

Fluctuation in foreign exchange rates

Treasurer’s Instruction 23, Management of Foreign Currency Exposures, requires public authorities to recognise and control foreign exchange risks associated with the purchase of imported goods and services. Public authorities are required to obtain forward cover for the acquisition of goods and services that are expected to give rise to a foreign currency exposure exceeding $100 000. This limits potential foreign exchange risks faced by the government once acquisition decisions are made.

Impact: Foreign exchange rates could have an impact on the costs of portfolios that source capital equipment, supplies and services from overseas. This includes items such as pharmaceuticals, transport equipment and the operations of overseas offices.

6.7


Superannuation liabilities and expenses

For defined benefit scheme superannuation liabilities (pension or defined benefit lump sum schemes) the budget is exposed to factors affecting the value of the unfunded liability. These factors include volatility in the expected returns on investment funds and the risk-free discount rate, changes in actuarial assumptions relating to future benefit payments, or an increase in long-term inflation assumptions. The unfunded superannuation liability is the state’s biggest financial liability.

Impact: Volatility in asset markets poses a risk to the budget. A 1.0 percentage point lower than expected return on superannuation assets invested by Funds SA would increase estimated unfunded superannuation liabilities by around $42 million. An increase in unfunded superannuation liabilities of this magnitude would increase nominal superannuation interest expenses, decreasing the net operating balance by around $3 million per annum. A 1.0 percentage point higher than expected return would have the opposite effect by the same amounts.

A fall in the Commonwealth Government bond rate between valuation dates will lead to the use of a lower discount rate for valuation purposes, resulting in an increase in the value of the unfunded liability. A 1.0 percentage point reduction in the discount rate would increase unfunded superannuation liabilities by $2.0 billion. However the impact on the budget balance is the imputed interest on these unfunded liabilities and the interest rate used to calculate this will also fall by 1.0 percentage point. The net effect on the budget would be an improvement of around $28 million per annum in the net operating balance. An increase in the discount rate of 1.0 percentage point would decrease unfunded superannuation liabilities by $1.6 billion and increase the imputed interest by $17 million.

Change in domestic and overseas share prices

Funds SA, WorkCoverSA, the Motor Accident Commission (MAC) and the insurance related investments of the South Australian Government Financing Authority (SAFA) are exposed to both domestic and international equity markets. Changes in domestic and overseas share prices impact on the investments and obligations of these entities.

Impact: A variation in domestic and overseas share prices will directly impact the budget through a change in earnings on superannuation assets. A change in the value of the financial investments of WorkCoverSA and MAC will not have a direct impact on the budget.

A change in the value of SAFA’s financial investments may have a direct impact on the budget through a variation in SAFA’s contribution to the Consolidated Account.

Insurance

Risks associated with insurance liabilities are managed by the insurance division (SAICORP) of SAFA. The operations of SAICORP are described in Chapter 4.

State Government Insurance Commission residual assets and liabilities

The assets and liabilities relating to residual State Government Insurance Commission (SGIC) general policies were transferred to SAICORP on 30 June 2003 by the Motor Accident Commission (Transfer of Residual Assets and Liabilities) Proclamation 2003 under Section 30 of the SGIC (Sale) Act 1995. These were general policies of insurance issued but not transferred to the buyer on the sale of the general insurance business, formerly conducted by SGIC. Specific details of these policies are not available and hence no liability has been recognised by SAICORP in relation to these items. Liabilities will be brought to account if and when individual policy owners make valid claims.

6.8


Government motor vehicle fleet — residual value risk

The state government’s fleet operations transferred to SAFA from 1 July 2009. Accordingly, reductions in residual values of vehicles will be met by SAFA and will impact on government agencies over time through changes to the leasing rates charged by SAFA.

Any reductions in residual values of vehicles will be a risk exposure to SAFA and may impact on the budget through a variation in SAFA’s contribution to the Consolidated Account.

Contingent liabilities

Contingent liabilities are liabilities, or possible liabilities, that have not been recognised in the government’s balance sheet because they:

arise from past events, and will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the government; or

are a present obligation that arises from past events but is not recognised because:

– it is not probable that an outflow of resources will be required to settle the obligation; or

– the amount of the obligation cannot be measured with sufficient reliability.

Full details of the state’s material quantifiable and non-quantifiable contingent liabilities are included in the published 2008-09 Final Budget Outcome and Consolidated Financial Report as at 30 June 2009.

The state’s quantifiable contingent liabilities are summarised in the following table.

Table 6.1: Contingent liabilities of the Government of South Australia to entities external to the public sector at 30 June ($million)

2008 2009

Guarantees 657 698

Other 18 19

Total 675 717

Final whole of government data to 30 June 2010 is not yet available and will be published in the 2009–10 Final Budget Outcome and Consolidated Financial Report as at 30 June 2010. The information below provides 30 June 2010 data for the major individual contingent liabilities where it is available.

Summary of contingent liabilities and other exposures

Significant contingent liabilities and other specific exposures, both quantifiable and non-quantifiable, for the Government of South Australia include the following:

guarantee of Local Government Finance Authority loans and other liabilities — pursuant to the Local Government Finance Authority Act 1983, liabilities incurred or assumed by the Local Government Finance Authority are guaranteed by the Treasurer.

Exposure: $543 million at 30 June 2010

6.9


Osborne Cogeneration arrangements — certain underlying exposures were retained as part of the former government’s sale of electricity assets.

Exposure: $150 million to $200 million at 30 June 2010

electricity entities — as part of the former government’s privitisation of the state’s electricity assets, the government provided certain specified undertakings to the lessees. In the extremely remote event that these undertakings are not enforceable and the leasing arrangements are terminated, the state is required to make specified payments to the lessees and would receive the associated electricity infrastructure assets in return.

Gross exposure: $2.3 billion at 30 June 2010

Alice Springs–Darwin Railway — both the South Australian and Northern Territory governments guarantee the obligations of the AustralAsia Railway Corporation, the joint SA/NT statutory authority that looks after the government’s interests in relation to the Alice Springs–Darwin Railway. The prospect of these contingent liabilities arising is considered to be highly remote.

Exposure: Unquantifiable

Adelaide Oval redevelopment — in December 2009 the government announced a financial assistance package for the Adelaide Oval Redevelopment which was subsequently increased to $535 million on 25 May 2010. The financial assistance package included a guarantee from the Treasurer of up to $30 million as part of South Australian Cricket Association’s (SACA’s) $85 million loan facility from Westpac. The guarantee was not called upon and was discharged on 1 September 2010, when the Treasurer lent $30 million directly to SACA which was used to reduce SACA’s debt to Westpac.

Other, less material, contingent liabilities are reported in individual agency financial statements, as contained in agency annual reports or Part B of the Report of the Auditor-General.

6.10


CHAPTER 7: SOUTH AUSTRALIAN ECONOMY

Overview

According to the latest International Monetary Fund (IMF) forecasts published in July 2010, the size of the world economy is projected to grow by 4½ per cent in real terms in 2010 and 4¼ per cent in 2011. This represents a significant recovery from the global financial and economic crisis that resulted in world economic output contracting by 0.6 per cent in 2009. Notwithstanding the upward revisions to global growth, concerns remain about the sustainability of the economic recovery in some developed economies.

While the recovery in some developed economies has been slow and uneven, robust growth is forecast for emerging and developing economies. A strong rebound in exports and resilient domestic demand is projected to see the Chinese economy grow by 10½ per cent in 2010, before slowing to 9½ per cent in 2011 as a result of measures designed to slow credit growth and maintain financial stability. India’s economic growth is expected to accelerate to about 9½ per cent in 2010.

In contrast to other developed economies, the Australian economy experienced a shallow downturn, assisted by fiscal stimulus and accommodating monetary policy. The Australian economy has strengthened over the past 12 to 18 months and is expected to maintain solid economic growth during 2010-11 and accelerate through 2011-12 as business investment strengthens.

South Australia’s economic performance has been similar to the national economy and this is expected to continue. Public sector infrastructure spending has been a significant contributor to growth, and consumer spending, housing construction and business investment have all been maintained at high levels. Economic growth is likely to be restored to around trend levels in 2010-11, and it is expected that business investment will gradually strengthen leading to stronger growth outcomes in 2011-12 with flow-on impacts to stronger labour market conditions.

Recent economic performance

The Department of Treasury and Finance estimates that South Australia’s Gross State Product (GSP) will grow by around 2 per cent in 2009-10, supported by consumer and public spending and a significantly larger winter crop yield.

State Final Demand (SFD), which is a measure of total spending in the South Australian economy by households, business and governments, increased by a strong 5.9 per cent in real terms through the year to the June quarter 2010, exceeding national growth of 5.3 per cent.

Household consumption spending has strengthened since the end of 2009, increasing by 3.3 per cent in real terms through the year to the June quarter 2010, supported by growth in employment. Retail spending levels in South Australia picked up in the first half of 2010 after experiencing modest growth through 2009.

National new motor vehicle sales have recovered by almost 10 per cent in 2009-10 after a 13 per cent decline in 2008-09. Australian production of motor vehicles has also picked up in the first half of 2010. Local production is expected to be boosted as a result of Holden’s reintroduction of a second shift in November this year to support the production of the new VE Series 2 Commodore and a new 4-cylinder car (Cruze) that is scheduled to come on line in early 2011.

South Australian business investment has been maintained at historically high levels, particularly spending on new machinery and equipment and engineering construction activity. Although mineral

7.1

exploration expenditure in South Australia fell during the global financial crisis, expenditure levels in 2009-10 remain around five times higher than in 2001-02. Mining production in the state has been impacted by the damage incurred in October 2009 to BHP Billiton’s Olympic Dam Clark Shaft haulage system, which is responsible for around three quarters of the mine’s ore production. BHP Billiton estimates that 2009-10 uranium production was reduced by 43 per cent and copper production by 47 per cent. Mining operations returned to full capacity during the June quarter 2010. On the other hand, the state’s mining production has received a significant boost from the 2009 commencement of the Prominent Hill copper and gold mine.

Figure 7.1: Real business investment in South Australia — seasonally adjusted ($million per quarter)

0

200

400

600

800

1000

1200

1400

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

Jun-

10

$ m

illio

n

New machinery and equipment Non-dw elling construction Engineering construction

Source: ABS, Australian National Accounts: National Income, Expenditure and Product, Catalogue no. 5206.0. Values represent constant 2007-08 prices.

Public investment in new infrastructure has been strong in South Australia, rising by 61 per cent through the year to the June quarter 2010, reflecting Commonwealth Government stimulus measures and the state government’s historically high levels of infrastructure spending.

The housing construction sector has continued to perform solidly. South Australia has been constructing in excess of 10 000 new dwellings per annum since 2002. Housing commencements have recovered from mid 2009 lows, and while approvals for construction of private detached houses have softened in response to higher interest rates, the short term outlook should be underpinned by strong levels of medium density residential construction and increased building of public sector housing.

According to the Land Services Group (Department of Transport, Energy and Infrastructure), the median price of established houses in Adelaide rose to $410 000 in the June quarter 2010 and was 14 per cent higher than the same time a year earlier. Rental vacancy rates remain extremely tight in South Australia reflecting high rates of population growth notwithstanding housing construction being maintained at high levels. The residential vacancy rate in Adelaide was just 1.3 per cent in the March quarter 2010. According to the Australian Bureau of Statistics (ABS), average residential rents in Adelaide during the June quarter 2010 were 4.2 per cent higher than at the same time a year earlier.

With near ideal growing conditions across most regions, winter crop production is estimated to have increased by around 53 per cent in 2009-10. Although volumes were much improved, good global grain supplies saw much reduced international grain prices.

Overall, the value of South Australian overseas goods exports fell by 15 per cent to a total of $8.1 billion in 2009-10. This was similar to the national story where export values have fallen 13 per cent in response to weaker international economic growth. Gains were made in South Australian exports of metal ores, reflecting in part the commencement of production of

7.2

Chapter 7: South Australian Economy

concentrates at the Prominent Hill mine. These gains, however, were more than offset by falls in the value of exports of road vehicles, parts and accessories, copper, wheat and wine. The return to full production at the Olympic Dam mine will increase copper exports over the coming year.

South Australia’s annual population growth rate is currently at its highest level since 1975, with the estimated resident population growing by 21 200 during the year to December 2009. Net migration inflows accounted for well over half of the population gain, with net overseas migration inflows (17 300) outweighing a net loss through interstate migration (3300). Changes were made to Commonwealth migration policy settings during 2009-10, including the replacement of the Migration Occupations in Demand List with the Skilled Occupation List, the development of a long-term immigration framework and the introduction of priority visa processing for employer sponsored and state sponsored migrants.

South Australia’s labour market shows continued improvement. Employment has grown by 15 400 through the year to August 2010, with an even larger increase in full-time employment. South Australia’s trend unemployment rate was 5.3 per cent in August 2010, down from 5.6 per cent a year earlier.

Figure 7.2: South Australian employment — trend (index numbers) (August 2000=100)

90

100

110

120

130

140

Aug-00 Aug-02 Aug-04 Aug-06 Aug-08 Aug-10

Em

ploy

men

t (t

rend

, in

dex

- A

ugus

t 20

00 =

100

)

total full-time part-time

Source: ABS, Labour Force Australia, Catalogue no. 6202.0.

Growth in wage costs has moderated from the above 4 per cent growth rates recorded from 2006 through to 2009. South Australian wages growth, based on the ABS hourly rates of pay index, was 2.9 per cent through the year to the June quarter 2010.

In South Australia’s Strategic Plan, the Government of South Australia has an objective of increasing the employment to population ratio, standardised for age differences, to the Australian average. Figure 7.3 shows the latest trends in this measure, based on annual average data to remove volatility in the monthly estimates. Before adjusting for differences in age structure, South Australia’s employment to population ratio in the year to July 2010 was around 1.9 percentage points lower than the national average, but this gap is smaller than it was in 2008-09. The ongoing gap is partly the result of South Australia’s older age structure. When adjustment is made to remove this age structure effect the gap between South Australia’s employment to population ratio and the national average reduces to just 0.2 of a percentage point. South Australia’s employment to population ratio is only slightly lower than its November 2008 peak, which was the highest level since monthly labour force surveys commenced in February 1978.

7.3


Figure 7.3: Employment to population ratios — moving annual average (per cent)

52

54

56

58

60

62

64

Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10

Em

ploy

men

t to

popu

latio

n ra

tio (

%)

AustraliaSouth AustraliaSouth Australia - standardised to national age structure

Source: ABS, Labour Force Australia, Catalogue no. 6291.0.55.001.

Economic outlook

The outlook for the national and state economies remains positive.

The Commonwealth Treasury’s most recent forecasts indicate that the Australian economy will continue to gather momentum over 2010-11 to grow by 3 per cent, strengthening to 3¾ per cent in 2011-12. Wages growth is expected to gather pace as economic growth builds momentum.

For South Australia, the Department of Treasury and Finance is expecting that economic conditions will follow a similar path to the national economy. GSP is forecast to increase by 2¾ per cent in 2010-11. The gradual consolidation of international economic recovery and terms of trade stimulus are likely to boost business investment in 2011, stimulating labour demand and household spending. South Australian GSP growth is forecast to further strengthen to 3½ per cent in 2011-12.

A large number of business investment projects remain in the pipeline in South Australia, including a range of infrastructure and mining prospects. The Cairn Hill magnetite, copper and gold mine has recently commenced operation. While the government infrastructure program has provided support for jobs and incomes over the past 12 to18 months, the expectation is that private business investment will take over as a key driver of growth. Nonetheless, the state government’s capital program will remain at historically high levels in 2010-11.

7.4


Figure 7.4: South Australian government capital investment as a proportion of GSP(a)

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0.5

1.0

1.5

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2.5

3.0

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4.5

5.0

2003

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-08

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-09

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(a) Non-financial public sector purchase of non-financial assets.

Source: South Australian Department of Treasury and Finance; ABS, Australian National Accounts: State Accounts, Catalogue no. 5220.0. Values represent current prices.

Early season crop production forecasts are slightly down from the strong 2009-10 season. PIRSA’s early September estimate suggests that field crop production could be around 7.25 million tonnes in 2010-11, down 7.4 per cent from the previous year but nonetheless well above the five year average. Prices are likely to be significantly higher, boosting farm incomes.

Employment growth in South Australia is expected to maintain its recent momentum, increasing by 1¼ per cent in 2010-11, before strengthening to 2 per cent in 2011-12. In line with Commonwealth Treasury forecasts inflation is likely to remain around 2¾ per cent in 2010-11 and 2011-12.

7.5


Table 7.1: Key economic indicators — Australia and South Australia real growth rates (per cent per annum)

Note: Forecasts and projections are based largely on underlying national economic and state population trends, climatic conditions impacting on farm sector production and emerging major projects.

(a) Australian forecasts from Commonwealth Treasury, Economic Statement, July 2010.

(b) GSP is an estimate.

Source: South Australian Department of Treasury and Finance. Actuals from Australian Bureau of Statistics.

2008-09

Actual 2009-10

Actual2010-11

Forecast2011-12

Forecast2012-13

Projection 2013-14

Projection

Australia(a)

Gross Domestic Product (GDP)

1.2 2.3 3 3¾ 3 3

South Australia

Gross State Product (GSP)

1.4 2(b) 2¾ 3½ 2¾ 2¾

State Final Demand (SFD)

2.4 4.6 2¾ 3½ 2¾ 2¾

Employment 1.7 0.9 1¼ 2 1½ 1

CPI 3.2 2.2 2¾ 2¾ 2½ 2½

7.6


APPENDIX A: UNIFORM PRESENTATION FRAMEWORK

Overview

By agreement between the Commonwealth and the states and territories, each jurisdiction presents financial information on a uniform presentation framework (UPF) basis presented in their budget papers, mid-year budget update and budget outcome reporting. The tables in this appendix present budget information for South Australia on the UPF basis, reflecting the fiscal measures and scope outlined below.

The primary objective of the UPF is to ensure that Commonwealth, state and territory governments provide a common ‘core’ of financial information in their budget papers to enable direct comparisons of each government’s budget and financial results.

In October 2007, the Australian Accounting Standards Board (AASB) issued a new standard AASB 1049 Whole of Government and General Government Sector Financial Reporting applicable from 1 July 2008. Consistent with the disclosure requirements of AASB 1049, the Australian Loan Council approved a revised UPF in March 2008. The tables in this appendix reflect the requirements of the 2008 revision to the UPF.

The Australian System of Government Finance Statistics: Concepts, Sources and Methods, published by the Australian Bureau of Statistics (ABS), requires that provisions for doubtful debts be excluded from the balance sheet. Consistent with the Commonwealth Government’s methodology, South Australia has not adopted this treatment in the UPF reports because excluding such provisions would overstate the value of assets in the balance sheet (and would therefore be inconsistent with the market valuation principle).

Accrual Government Financial Statistics (GFS) fiscal measures

The key measures in the GFS accrual framework are GFS net operating balance, GFS net lending, cash surplus, net debt, net worth, change in net worth, net financial worth and net financial liabilities.

GFS net operating balance

The GFS net operating balance, or operating result, is the excess of revenue from transactions over expenses from transactions. The net operating balance excludes expenditure on the acquisition of capital assets, but includes non-cash costs such as accruing superannuation entitlements and the consumption of capital (depreciation).

Net operating balance can also be defined as the change in net worth less the effects of revaluation of financial assets and liabilities.

GFS net lending

GFS net lending (sometimes referred to as fiscal balance) measures a government’s investment-saving balance.

Net lending (which is recorded in the operating statement) differs from the net operating balance in the treatment of capital expenditure. Unlike the net operating balance, net lending includes net capital expenditure, but not the use of capital (depreciation).

A.1

Net lending is the accrual counterpart of the GFS cash surplus in the cash flow statement. However, the two measures are unlikely to coincide because of the differences arising when transactions are recorded in cash and accrual terms.

GFS cash surplus

The GFS cash surplus/deficit is a flow measure reported in the cash flow statement.

The GFS cash surplus has four components:

net cash received from operating activities — comprising tax revenue plus grants and subsidies received plus revenue from sales of goods and services, less payments for goods and services, interest costs, and grants and subsidies paid;

net cash inflow from sales and purchases of non-financial assets;

the level of distributions paid — in the case of public non-financial corporations and public financial corporations; and

the recognition of the initial increase in liability accruing at the beginning of finance leases and similar arrangements.

Net debt

Net debt comprises the stock of selected gross financial liabilities less financial assets.

Net debt is reported in the balance sheet and is the sum of deposits held, advances received and borrowing, minus the sum of cash and deposits, advances paid, and investments, loans and placements.

Net worth

Net worth is calculated as total assets (both financial and non-financial) minus total liabilities. Net worth incorporates a government’s non-financial assets, such as land and other fixed assets, which may be sold and used to repay debt, as well as certain financial assets and liabilities not captured by the net debt measure, most notably accrued employee superannuation liabilities, debtors and creditors.

The net worth measure is reported in the balance sheet.

Change in net worth

Change in net worth measures the variation in net worth (as described above), and is the most inclusive measure of the change in a government’s financial position over a given period.

Net financial worth

Net financial worth measures a government’s net holdings of financial assets. It is calculated from the balance sheet as financial assets minus liabilities.


Net financial liabilities comprises total liabilities less financial assets (net financial worth), but excludes equity investments (net worth) in the other sectors of the jurisdiction.

A.2

Appendix A

Net financial liabilities is a more accurate indicator than net debt of a jurisdiction’s fiscal position as it includes substantial non-debt liabilities such as accrued superannuation and long service leave entitlements. Excluding the net worth of other sectors of government from net financial worth results in a purer measure of financial worth than net financial worth, as, in general, the net worth of other sectors of government, in particular the public non-financial corporations sector is backed by physical assets.

Scope

The UPF divides the Australian public sector into three institutional subsectors — the general government sector, the public non–financial corporations (PNFC) sector and the public financial corporations (PFC) sector.

General government comprises all government departments, offices and other bodies engaged in providing services free of charge or at prices significantly below their cost of production.

PNFCs are bodies mainly engaged in the production of goods and services of a non-financial nature for sale in the marketplace at prices that aim to recover most of the costs involved. This sector includes some trading enterprises, such as SA Water, ForestrySA and SA Housing Trust. In general, PNFCs are legally distinguishable from the governments that own them.

PFCs are bodies primarily engaged in providing financial intermediation services or auxiliary financial services. Generally, they are able to transact in financial liabilities on their own account.

A listing of government entities within each sector is included in Appendix D.

Budget reporting

Under the UPF agreement, all governments are required to present as part of their budget documentation an operating statement, balance sheet and cash flow statement for the general government sector, PNFC sector and the non-financial public sector. The non-financial public sector is the consolidation of the general government sector and the PNFC sectors. In addition, information is also presented on taxes, general government sector expenses by function and Loan Council Allocations.

This information is presented in Tables A.1 through to A.20 in this appendix.

Reporting of outcomes

Outcomes are presented in the Final Budget Outcome document. In addition to the tables presented at budget time, outcome reporting also contains the accrual financial statements for the PFC sector.

A.3

Appendix A

UNIFORM PRESENTATION FRAMEWORK TABLES

Table A.1: General government sector operating statement ($million)___________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

RevenueTaxation revenue 3 641 3 858 4 188 4 424 4 657Grants 8 857 8 319 8 164 8 252 8 101Sales of goods and services 1 933 1 877 2 041 2 108 2 147Interest income 163 143 127 152 174Dividend and income tax equivalent income 425 353 388 420 549Other 512 536 620 648 666

Total revenue 15 531 15 086 15 527 16 005 16 294

lessExpensesEmployee expenses 6 177 6 379 6 522 6 694 6 803Superannuation expenses Superannuation interest cost 455 427 420 417 412 Other superannuation expenses 646 676 692 703 712Depreciation and amortisation 626 681 763 829 869Interest expenses 179 255 316 366 408Other property expenses — — — — — Other operating expenses 3 720 3 983 3 932 4 015 4 141Grants 3 560 3 073 2 826 2 765 2 579

Total expenses 15 364 15 475 15 472 15 789 15 924

equals

Net operating balance 167 -389 55 216 370

plusOther economic flows 879 589 715 867 764

equals

Comprehensive result - total change in net worth 1 045 200 770 1 083 1 134


lessNet acquisition of non-financial assetsPurchases of non-financial assets 2 162 2 283 1 934 1 626 1 216less Sales of non-financial assets 245 201 275 387 104less Depreciation 626 681 763 829 869plus Change in inventories — — — — — plus Other movements in non-financial assets — — — — —

equals Total net acquisition of non-financial assets 1 290 1 402 896 410 244

equals

Net lending / borrowing -1 124 -1 791 -841 -194 126


A.4

Appendix A

Table A.2: Public non-financial corporations (public trading enterprises) sectoroperating statement ($million)___________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

RevenueTaxation revenue — — — — — Grants 1 075 771 667 553 469Sales of goods and services 1 534 1 697 1 931 2 031 2 238Interest income 18 15 18 19 19Dividend and income tax equivalent income 14 5 6 1 1Other 240 231 202 164 159

Total revenue 2 882 2 720 2 826 2 768 2 886

lessExpensesEmployee expenses 168 170 167 197 207Superannuation expenses Superannuation interest cost — — — — — Other superannuation expenses 24 26 26 28 29Depreciation and amortisation 305 368 383 394 408Interest expenses 184 247 260 276 296Other property expenses 373 270 347 389 514Other operating expenses 1 385 1 581 1 474 1 385 1 413Grants 116 83 81 89 71

Total expenses 2 556 2 745 2 737 2 760 2 939

equals

Net operating balance 325 -25 88 8 -53


equals

Comprehensive result - total change in net worth 960 548 145 793 773

Net operating balance 325 -25 88 8 -53

lessNet acquisition of non-financial assetsPurchases of non-financial assets 1 751 1 361 776 712 838less Sales of non-financial assets 309 512 924 299 130less Depreciation 305 368 383 394 408plus Change in inventories 72 4 -79 -8 4plus Other movements in non-financial assets — — — — —

equals Total net acquisition of non-financial assets 1 208 485 -610 11 303

equals

Net lending / borrowing -883 -510 699 -3 -356


A.5

Appendix A

Table A.3: Non-financial public sector operating statement ($million)___________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

RevenueTaxation revenue 3 325 3 509 3 811 4 039 4 258Grants 8 864 8 317 8 164 8 252 8 101Sales of goods and services 3 192 3 324 3 698 3 846 4 079Interest income 144 117 114 125 136Dividend and income tax equivalent income 59 84 43 26 31Other 718 750 809 809 823

Total revenue 16 303 16 101 16 639 17 098 17 429

lessExpensesEmployee expenses 6 346 6 550 6 689 6 891 7 010Superannuation expenses Superannuation interest cost 455 427 420 417 412 Other superannuation expenses 671 702 718 731 741Depreciation and amortisation 931 1 049 1 146 1 223 1 277Interest expenses 325 461 545 596 647Other property expenses — — — — — Other operating expenses 4 474 4 943 4 737 4 714 4 842Grants 2 609 2 383 2 240 2 301 2 182

Total expenses 15 810 16 515 16 495 16 874 17 112

equals



equals

Comprehensive result - total change in net worth 1 045 200 770 1 083 1 134


lessNet acquisition of non-financial assetsPurchases of non-financial assets 3 868 3 641 2 709 2 335 2 054less Sales of non-financial assets 509 710 1 199 683 234less Depreciation 931 1 049 1 146 1 223 1 277plus Change in inventories 72 4 -79 -8 4plus Other movements in non-financial assets — — — — —

equals Total net acquisition of non-financial assets 2 499 1 887 285 421 547

equals

Net lending / borrowing -2 007 -2 301 -142 -197 -230


A.6

Appendix A

Table A.4: General government sector balance sheet ($million)___________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

AssetsFinancial assets Cash and deposits 2 550 2 182 2 159 2 108 2 544 Advances paid 667 480 183 48 47 Investments, loans and placements 151 163 176 189 203 Receivables 604 557 563 564 569 Equity Investments in other public sector entities 18 426 18 994 19 275 20 268 21 204 Investments - other 707 709 706 701 702 Other financial assets 40 42 40 38 37

Total financial assets 23 144 23 128 23 102 23 917 25 306

Non-financial assets Land and other fixed assets 20 031 21 488 22 439 22 938 23 274 Other non-financial assets 6 6 6 6 6

Total non-financial assets 20 037 21 494 22 445 22 944 23 280

Total assets 43 181 44 622 45 547 46 861 48 586

LiabilitiesDeposits held 478 329 291 279 276Advances received 610 592 591 572 532Borrowing 3 867 5 239 5 268 5 359 5 832Superannuation 9 476 9 442 9 445 9 428 9 389Other employee benefits 1 871 1 957 2 058 2 183 2 314Payables 747 704 706 708 711Other liabilities 940 967 1 025 1 088 1 154

Total liabilities 17 990 19 230 19 385 19 616 20 207

Net worth 25 192 25 392 26 162 27 245 28 379

Net financial worth (a) 5 155 3 898 3 717 4 301 5 099Net financial liabilities 13 271 15 096 15 558 15 967 16 105Net debt (b) 1 587 3 335 3 633 3 864 3 847

Note: Totals may not add due to rounding.(a) Net financial worth equals total financial assets minus total liabilities.(b) Net debt equals the sum of deposits held, advances received and borrowing, minus the sum of cash and deposits, advances paid, and investments, loans and placements.

A.7

Appendix A

Table A.5: Public non-financial corporations (public trading enterprises) sectorbalance sheet ($million)___________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

AssetsFinancial assets Cash and deposits 492 316 238 222 209 Advances paid 53 46 39 31 23 Investments, loans and placements 34 34 36 39 41 Receivables 279 288 281 291 304 Equity Investments in other public sector entities — — — — — Investments - other 16 13 11 8 5 Other financial assets 57 2 2 2 2

Total financial assets 931 700 606 592 584



Total assets 23 254 24 097 23 946 24 638 25 622

LiabilitiesDeposits held — 1 1 2 2Advances received 659 466 170 36 36Borrowing 3 197 3 697 3 718 3 751 3 935Superannuation — — — — — Other employee benefits 77 79 76 77 79Payables 450 455 451 458 466Other liabilities 178 159 145 135 152


Net worth 18 692 19 240 19 385 20 178 20 952

Net financial worth (a) -3 630 -4 157 -3 955 -3 868 -4 086Net financial liabilities 3 630 4 157 3 955 3 868 4 086Net debt (b) 3 277 3 767 3 577 3 497 3 699


A.8

Appendix A

Table A.6: Non-financial public sector balance sheet ($million)___________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

AssetsFinancial assets Cash and deposits 2 773 2 385 2 327 2 278 2 710 Advances paid 61 60 51 43 35 Investments, loans and placements 185 198 213 228 244 Receivables 715 703 701 707 716 Equity Investments in other public sector entities -266 -246 -110 90 253 Investments - other 723 722 717 709 707 Other financial assets 96 43 41 40 38

Total financial assets 4 287 3 866 3 940 4 095 4 703



Total assets 46 646 48 756 49 724 51 085 53 021

LiabilitiesDeposits held 210 216 222 229 235Advances received 610 592 591 572 532Borrowing 7 063 8 936 8 986 9 109 9 766Superannuation 9 476 9 442 9 445 9 428 9 389Other employee benefits 1 949 2 036 2 134 2 260 2 393Payables 1 090 1 053 1 053 1 061 1 070Other liabilities 1 056 1 089 1 132 1 182 1 257


Net worth 25 192 25 392 26 162 27 245 28 379

Net financial worth (a) -17 168 -19 499 -19 623 -19 745 -19 939Net financial liabilities 16 901 19 253 19 513 19 835 20 191Net debt (b) 4 864 7 101 7 209 7 360 7 545


A.9

Appendix A

Table A.7: General government sector cash flow statement ($million)___________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

Cash receipts from operating activitiesTaxes received 3 659 3 855 4 186 4 419 4 652Receipts from sales of goods and services 1 883 1 867 2 011 2 087 2 127Grants and subsidies received 8 901 8 277 8 163 8 251 8 100Interest receipts 157 136 119 144 165Dividends and income tax equivalents 415 379 387 417 542Other receipts 523 559 643 673 690

Total operating receipts 15 537 15 073 15 509 15 991 16 276

Cash payments for operating activitiesPayments for employees -7 305 -7 458 -7 613 -7 793 -7 923Payments for goods and services -3 514 -3 789 -3 752 -3 832 -3 956Grants and subsidies paid -3 653 -3 133 -2 889 -2 830 -2 645Interest paid -147 -287 -316 -365 -408Other payments -130 -78 -76 -73 -71

Total operating payments -14 749 -14 746 -14 645 -14 893 -15 003

Net cash flows from operating activities 787 328 863 1 098 1 273

Net cash flows from investmentsin non-financial assetsSales of non-financial assets 238 186 275 387 104Purchases of non-financial assets (a) -2 146 -2 091 -1 931 -1 624 -1 214

Net cash flows from investments -1 908 -1 905 -1 657 -1 237 -1 110in non-financial assets

Net cash flows from investments in financialassets for policy purposes (b) 140 202 794 44 -138

Net cash flows from investments in financialassets for liquidity purposes -15 -13 -10 -9 -16

Net cash flows from financing activitiesAdvances received (net) -18 -18 -1 -19 -40Borrowing (net) 1 005 1 195 32 93 476Deposits received (net) 114 -149 -38 -13 -3Dividends paid — — — — — Other financing (net) — — -1 -1 -1

Net cash flows from financing activities 1 101 1 027 -8 60 432

Net increase / (decrease) in cash held 105 -361 -18 -44 442

Net cash flows from operating activities 787 328 863 1 098 1 273Net cash flows from investments -1 908 -1 905 -1 657 -1 237 -1 110in non-financial assetsDividends paid — — — — —

Cash surplus / (deficit) -1 121 -1 578 -793 -139 163

Note: Totals may not add due to rounding.(a) The ABS disaggregates this item into new and secondhand non-financial assets.(b) Includes equity acquisitions, disposals and privatisations (net).

A.10

Appendix A

Table A.8: Public non-financial corporations (public trading enterprises) sectorcash flow statement ($million)___________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

Cash receipts from operating activitiesTaxes received — — — — — Receipts from sales of goods and services 1 509 1 672 1 924 2 008 2 211Grants and subsidies received 1 075 771 667 553 469Interest receipts 18 15 18 18 19Dividends and income tax equivalents 14 5 6 1 1Other receipts 230 210 182 143 139


Cash payments for operating activitiesPayments for employees -205 -210 -212 -241 -253Payments for goods and services -785 -792 -714 -716 -736Grants and subsidies paid -116 -83 -81 -89 -71Interest paid -185 -247 -261 -277 -297Other payments -708 -651 -753 -765 -796


Net cash flows from operating activities 845 690 775 635 685

Net cash flows from investmentsin non-financial assetsSales of non-financial assets 255 350 891 299 130Purchases of non-financial assets (a) -1 721 -1 331 -748 -684 -809

Net cash flows from investments -1 466 -981 142 -385 -679in non-financial assets

Net cash flows from investments in financialassets for policy purposes (b) 7 7 8 8 8

Net cash flows from investments in financialassets for liquidity purposes 5 3 1 1 1

Net cash flows from financing activitiesAdvances received (net) -87 -208 -791 -43 138Borrowing (net) 1 008 500 21 34 184Deposits received (net) — — — — — Dividends paid -257 -187 -235 -265 -351Other financing (net) — — — — —

Net cash flows from financing activities 664 105 -1 005 -274 -28

Net increase / (decrease) in cash held 55 -175 -78 -16 -13

Net cash flows from operating activities 845 690 775 635 685Net cash flows from investments -1 466 -981 142 -385 -679in non-financial assetsDividends paid -257 -187 -235 -265 -351

Cash surplus / (deficit) -878 -478 682 -15 -344


A.11

Appendix A

Table A.9: Non-financial public sector cash flow statement ($million)___________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

Cash receipts from operating activitiesTaxes received 3 338 3 505 3 807 4 034 4 254Receipts from sales of goods and services 3 120 3 293 3 664 3 806 4 037Grants and subsidies received 8 908 8 275 8 162 8 251 8 100Interest receipts 138 110 106 117 127Dividends and income tax equivalents 58 85 43 26 31Other receipts 715 751 809 811 823


Cash payments for operating activitiesPayments for employees -7 498 -7 654 -7 810 -8 018 -8 159Payments for goods and services -4 034 -4 346 -4 210 -4 273 -4 405Grants and subsidies paid -2 714 -2 443 -2 303 -2 367 -2 248Interest paid -294 -494 -546 -597 -648Other payments -362 -251 -320 -323 -304


Net cash flows from operating activities 1 375 831 1 403 1 468 1 607

Net cash flows from investmentsin non-financial assetsSales of non-financial assets 448 536 1 165 683 234Purchases of non-financial assets (a) -3 822 -3 422 -2 679 -2 305 -2 023

Net cash flows from investments -3 374 -2 886 -1 514 -1 622 -1 789in non-financial assets

Net cash flows from investments in financialassets for policy purposes (b) 60 1 10 8 8

Net cash flows from investments in financialassets for liquidity purposes -10 -10 -9 -8 -15

Net cash flows from financing activitiesAdvances received (net) -18 -18 -1 -19 -40Borrowing (net) 2 013 1 695 53 126 660Deposits received (net) 6 6 6 6 6Dividends paid — — — — — Other financing (net) — — -1 -1 -1

Net cash flows from financing activities 2 001 1 683 57 112 626

Net increase / (decrease) in cash held 52 -382 -53 -42 437

Net cash flows from operating activities 1 375 831 1 403 1 468 1 607Net cash flows from investments -3 374 -2 886 -1 514 -1 622 -1 789in non-financial assetsDividends paid — — — — —

Cash surplus / (deficit) -1 999 -2 055 -111 -154 -182


A.12

Appendix A

Table A.10: General government sector derivation of ABS GFS cash surplus/deficit ($million)__________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

Cash surplus / (deficit) -1 121 -1 578 -793 -139 163

Acquisitions under finance leases — -196 — — — and similar arrangements (a)ABS GFS Surplus (+) / deficit (-) including -1 121 -1 773 -793 -139 163finance leases and similar arrangements

Table A.11: Public non-financial corporations (public trading enterprises) sectorderivation of ABS GFS cash surplus/deficit ($million)__________________________________________________________________________________________________________________________________________________________________________________________________________

Cash surplus / (deficit) -878 -478 682 -15 -344

Acquisitions under finance leases — — — — — and similar arrangements (a)ABS GFS Surplus (+) / deficit (-) including -878 -478 682 -15 -344finance leases and similar arrangements

Table A.12: Non-financial public sector derivation of ABS GFS cash surplus/deficit ($million)__________________________________________________________________________________________________________________________________________________________________________________________________________

Cash surplus / (deficit) -1 999 -2 055 -111 -154 -182

Acquisitions under finance leases — -196 — — — and similar arrangements (a)ABS GFS Surplus (+) / deficit (-) including -1 999 -2 251 -111 -154 -182finance leases and similar arrangements

Note: Totals may not add due to rounding.(a) Finance leases are shown with a negative sign as they are deducted in compiling the ABS GFS cash surplus/deficit.

A.13

Appendix A

Table A.13: General government sector taxes ($million) (a)___________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

Taxes on employers' payroll and labour force 899 930 1 027 1 094 1 163

Taxes on propertyLand taxes 553 573 597 628 655Stamp duties on financial and capital transactions 829 955 1 081 1 160 1 237Financial institutions' transaction taxes — — — — — Other 153 161 168 172 177

Total 1 535 1 689 1 845 1 960 2 069

Taxes on the provision of goods and servicesExcises and levies — — — — — Taxes on gambling 401 411 438 462 489Taxes on insurance 347 352 377 390 401

Total 748 763 815 852 890

Taxes on use of goods and performance of activitiesMotor vehicle taxes 459 476 501 518 535

Total 459 476 501 518 535

Total GFS taxation revenue 3 641 3 858 4 188 4 424 4 657

Note: Totals may not add due to rounding.(a) Excludes taxes paid by general government entities.

A.14

Appendix A

Table A.14(a): General government sector grant revenue ($million)__________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

Current grant revenueCurrent grants from the Commonwealth General purpose grants 4 060 4 458 4 581 4 817 5 045 National partnership grants 791 606 656 562 405 Specific purpose grants 1 346 1 405 1 468 1 530 1 553 Specific purpose grants for on-passing 692 674 725 744 762

Total current grants from the Commonwealth 6 888 7 143 7 430 7 653 7 765

Other contributions and grants 120 114 114 114 117

Total current grant revenue 7 009 7 257 7 545 7 767 7 881

Capital grant revenueCapital grants from the Commonwealth General purpose grants — — — — — National partnership grants 1 601 881 466 331 67 Specific purpose grants 114 115 117 119 117 Specific purpose grants for on-passing 13 13 13 14 14 Other capital grants 92 12 5 4 4

Total capital grants from the Commonwealth 1 819 1 022 601 467 201

Other contributions and grants 29 41 18 18 19

Total capital grant revenue 1 848 1 063 619 486 220

Total grant revenue 8 857 8 319 8 164 8 252 8 101

Table A.14(b): General government sector grant expense ($million)__________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

Current grant expense State/territory government 6 7 5 5 5 Local government 64 58 58 52 57 Local government on-passing 157 127 163 167 171 Private and not-for-profit sector 942 892 832 838 851 Private and not-for-profit sector on-passing 535 547 563 577 591 Grants to other sectors of Government 756 642 646 555 470 Other 254 275 255 242 239

Total current grant expense 2 715 2 548 2 521 2 436 2 385

Capital grant expense State/territory government — — — — — Local government 10 19 28 32 1 Local government on-passing — — — — — Private and not-for-profit sector 510 357 237 281 177 Private and not-for-profit sector on-passing 13 13 13 14 14 Grants to other sectors of Government 305 131 23 — — Other 7 5 2 2 2

Total capital grant expense 846 525 304 329 195

Total grant expense 3 560 3 073 2 826 2 765 2 579


A.15

Appendix A

Table A.15: General government sector dividend and income tax equivalent income ($million)___________________________________________________________________________________________________________________________________________________________________________________________________________

2009-10Estimated

Result

2010-11Budget

2011-12Estimate

2012-13Estimate

2013-14Estimate

Dividend and income tax equivalent incomefrom PNFC sector 380 274 352 395 519Dividend and income tax equivalent incomefrom PFC sector 45 78 36 25 30Other dividend income — — — — —

Total dividend and income tax equivalentincome 425 353 388 420 549


A.16

Appendix A

Table A.16: General government sector expenses by function ($million)(a)(b)(c)(d)

2009-10 2009-10 2010-11Budget Estimated

ResultBudget

General Public Services 373 376 405Government superannuation benefits — — —Other general public services 373 376 405

Defence(e) — — —

Public order and safety 1 361 1 386 1 457Police and fire protection services 823 812 841Law courts and legal services 266 275 297Prisons and corrective services 223 232 238Other public order and safety 49 67 81

Education 3 824 3 821 3 919Primary and secondary education 3 117 3 182 3 240Tertiary education 530 498 533Pre-school education and education not definable by level 152 112 116Transportation of students 23 26 25Education n.e.c. 2 3 4

Health 4 082 4 321 4 534Acute care institutions 3 493 3 754 3 972Mental health institutions n.a. n.a. n.a.Nursing homes for the aged n.a. n.a. n.a.Community health services 329 294 294Public health services 33 119 117Pharmaceuticals, medical aids and appliances n.a. 9 8Health research 3 6 6Health administration n.e.c. 223 139 137

Social security and welfare 980 1 016 1 100Social security 110 95 107Welfare services 744 801 853Social security and welfare services n.e.c. 125 120 140

Housing and community amenities 1 559 1 862 1 389Housing and community development 895 1 048 651Water supply 197 402 318Sanitation and protection of the environment 450 393 403Other community amenities 18 19 16

Recreation and culture 277 292 414Recreation facilities and services 115 120 246Cultural facilities and services 154 160 158Broadcasting and film production 3 8 6Recreation and culture n.e.c. 5 4 5

A.17

Appendix A

Table A.16: General government sector expenses by function ($million)(a)(b)(c)(d) continued

2009-10 2009-10 2010-11Budget Estimated

ResultBudget

Fuel and energy 49 56 45Fuel affairs and services 20 20 13Electricity and other energy 2 12 8Fuel and energy n.e.c. 27 24 25

Agriculture, forestry, fishing and hunting 237 237 188Agriculture 209 212 165Forestry, fishing and hunting 28 25 23

Mining and mineral resources other than fuels; 83 69 82manufacturing; and construction

Mining and mineral resources other than fuels 23 28 31Manufacturing 6 — —Construction 54 41 51

Transport and communications 809 788 817Road transport 381 335 346Water transport 14 16 16Rail transport 22 36 45Air transport 2 — —Pipelines n.a. n.a. n.a.Other transport 380 391 405Communications 10 11 6

Other economic affairs 280 305 288Storage, saleyards and markets n.a. n.a. n.a.Tourism and area promotion 72 74 62Labour and employment affairs 42 64 62Other economic affairs 166 167 164

Other purposes 833 834 835Public debt transactions 174 179 255General purpose inter-government transactions 99 129 92Natural disaster relief 86 58 55Nominal superannuation interest expense 444 455 427Other purposes n.e.c. 30 13 6

Total GFS expenses 14 748 15 364 15 475


(a) Expenses by function data are derived from information submitted by government departments and agencies. The processes for deriving these data are subject to ongoing refinements. Consequently the data may be subject to future revisions.

(b) Some functional classifications are not readily distinguishable at agency level. Those instances are denoted as not available (n.a.).

(c) Some changes to classification of agency expenditure have been implemented for the 2009-10 Estimated Result and 2010-11 Budget. The 2009-10 Budget has been recast where possible to be on a consistent basis.

(d) Consistent with the ongoing data improvement policy, a number of changes to the allocation of expenditure at the sub group level have been implemented for the 2009-10 Estimated Result and 2010-11 Budget categories. The 2009-10 Budget has not been recast for these changes.

(e) The ABS defines ‘defence’ as expenditure on military and civil defence affairs, foreign military aid and defence research. The expenditure of DefenceSA is included in other economic affairs.

A.18

Appendix A

Table A.17: General government sector capital expenditure by function ($million)(a)

2009-10 2009-10 2010-11

Budget(b) Estimated Result

Budget

General public services 60 55 94

Defence(c)— — —

Public order and safety 137 124 155Education 541 583 650Health 342 256 385Social security and welfare 5 20 56Housing and community amenities 31 22 20Recreation and culture 141 66 115Fuel and energy — — —Agriculture, forestry, fishing and hunting 9 8 8Mining and mineral resources other than fuels; manufacturing; and construction

6 3 —

Transport and communications 832 926 752Other economic affairs 54 99 39Other purposes 22 — 8Total capital expenditure 2 180 2 162 2 283


(a) Expenses by function data are derived from information submitted by government departments and agencies. The processes for deriving these data are subject to ongoing refinements. Consequently the data may be subject to future revisions.

(b) The 2009-10 Budget has been recast to reflect total capital expenditure measured on an accrual basis and includes assets received free of charge, consistent with the treatment in the operating statement.

(c) The ABS defines ‘defence’ as expenditure on military and civil defence affairs, foreign military aid and defence research. The expenditure of DefenceSA is included in other economic affairs.

Table A.18: General government sector net worth ($million)

2010-11 2011-12 2012-13 2013-14Estimated

ResultEstimate Estimate Estimate

Net worth at beginning of year 24 146 25 192 25 392 26 162 27 245

Change in net worth from operating transactions:Net operating balance 167 - 389 55 216 370

Change in net worth from other economic flows:Movement in net assets of PFCs 405 21 136 200 163

Movement in net assets of PNFCs(a) 964 563 641 702 635

Revaluation of unfunded superannuation liability - 489 55 - 6 - 6 - 7

Revaluation of long service leave liability - 62 - 66 - 70 - 74 - 75

Revaluation of annual leave liability - 9 - 9 - 9 - 10 - 10

Other revaluation adjustments 70 24 23 55 58

Total other economic flows 879 589 715 867 764

Net worth at year end 25 192 25 392 26 162 27 245 28 379

2009-10Budget


(a) Net of the impact of the disposal of assets in the PNFC sector and the return of proceeds to the general government sector.

A.19

Appendix A

Loan Council arrangements

The Australian Loan Council — a ministerial council established in 1927 comprising the Commonwealth, state and territory Treasurers — requires all jurisdictions to nominate a Loan Council Allocation (LCA) for consideration at its annual meeting.

LCA nominations, prepared in March, are intended to provide an indication of each government’s probable call on financial markets over the forthcoming financial year. The Loan Council, having regard to each jurisdiction’s fiscal position and reasonable infrastructure requirements, along with the macroeconomic implications of the aggregate figure, then considers the nominations.

Following the endorsement of LCA nominations, jurisdictions are further required to update their nominated LCAs at budget time for changes in economic parameters and policy decisions, and also provide an LCA outcome at the end of the financial year. A tolerance limit of 2 per cent of total public sector revenue, set at nomination time, applies between both the nomination and budget, and the budget and outcome LCAs. If the tolerance limit is exceeded, the Loan Council must be notified and a report detailing the reasons for change released publicly.

Nominated LCAs for 2010-11, for all jurisdictions and in aggregate, were reviewed and endorsed at the meeting of the Australian Loan Council held on 26 March 2010.

South Australia’s nomination, budget and estimated outcome LCAs for 2009-10 are shown in Table A.19, with nomination and budget time LCAs for 2010-11 shown in Table A.20. These tables are prepared in accordance with the requirements of the accrual UPF, endorsed by the Loan Council in March 2000 and revised in April 2008 to recognise acquisitions under finance leases and similar arrangements.

As Table A.19 indicates, South Australia is expecting an LCA deficit of $1474 million for 2009-10. This is lower than the 2009-10 Budget (June 2009) estimated deficit of $1583 million, largely reflecting a decrease in the non-financial public sector cash deficit. On the basis of these estimates, South Australia’s 2009-10 LCA outcome will exceed the 2 per cent of total revenue tolerance limit included in the 2009-10 LCA nomination.

South Australia’s 2010-11 Budget LCA, detailed in Table A.20, is an estimated $1719 million deficit. This is an increase from the $517 million deficit nominated in March of this year and is likely to exceed the LCA nomination tolerance limit of $315 million.

A.20

Appendix A

Table A.19: Loan Council allocation 2009-10 ($million)(a)

Nomination (March

2009)

Budget (June 2009)

Estimated Result

(September 2010)

General government sector cash deficit/surplus 729 1 530 1 121

PNFC sector cash deficit/surplus 700 651 878

Non-financial public sector cash deficit/surplus(b) 1 429 2 181 1 999

Acquisitions under finance leases and similar arrangements

14 11 —

ABS Government Finance Statistics cash surplus 1 443 2 192 1 999

Net cash flows from investments in financial assets for policy purposes(c)

7 -61 -60

Adjusted total non-financial public sector deficit/surplus 1 450 2 131 1 939

Memorandum items(d)

Operating leases(e) -54 -71 19

Recourse asset sales — — —

Superannuation(f) -580 -601 -808

Local government 24 24 45

Home finance schemes 52 100 280

Total memorandum items -558 -548 -465

LCA deficit/surplus(g)(h) 892 1 583 1 474


(a) For the purposes of this table a surplus amount is represented as a negative number while a deficit is shown as a positive number.

(b) The sum of the deficits of the general government and PNFC sectors may not equal the non-financial public sector deficit due to intersectoral transfers, which are netted out in the calculation of the total figure. The figures exclude statutory marketing authorities.

(c) This item is the negative of net advances paid under a cash accounting framework.

(d) Excludes universities.

(e) Increase/decrease in the net present value (NPV) of operating leases with a NPV of $5 million or greater.

(f) Includes both ‘payments in excess of emerging costs of superannuation’ and ‘interest earnings on employer balances’.

(g) The 2 per cent of total revenue tolerance limit around South Australia’s 2009-10 LCA is $289 million.

(h) South Australia had one infrastructure project with private sector involvement that met the recognition criteria for 2009-10 — the construction of six new schools across the northern and western suburbs of Adelaide.

A.21

Appendix A

Table A.20: Loan Council allocation 2010-11 ($million)(a)

Nomination (March 2010)

Budget (September

2010)

General government sector cash deficit/surplus 1 188 1 578

PNFC sector cash deficit/surplus -202 478

Total non-financial public sector cash deficit/surplus(b) 986 2 055

Acquisitions under finance leases and similar arrangements

120 196

ABS Government Finance Statistics cash surplus 1 106 2 251

Net cash flows from investments in financial assets for policy purposes(c)

-2 -1

Adjusted total non-financial public sector deficit/surplus 1 104 2 250

Memorandum items(d)

Operating leases(e) -77 -87

Recourse asset sales — —

Superannuation(f) -645 -645

Local government 19 33

Home finance schemes 116 167

Total memorandum items -587 -531

LCA deficit/surplus(g)(h) 517 1 719


(a) For the purposes of this table a surplus amount is represented as a negative number while a deficit is shown as a positive number.

(b) The sum of the deficits of the general government and PNFC sectors may not equal the non-financial public sector deficit due to intersectoral transfers, which are netted out in the calculation of the total figure. The figures exclude statutory marketing authorities.

(c) This item is the negative of net advances paid under a cash accounting framework.

(d) Excludes universities.

(e) Increase/decrease in the net present value (NPV) of operating leases with a NPV of $5 million or greater.

(f) Includes both ‘payments in excess of emerging costs of superannuation’ and ‘interest earnings on employer balances’.

(g) The 2 per cent of total revenue tolerance limit around South Australia’s 2010-11 LCA is $315 million.

(h) South Australia may have one infrastructure project with private sector involvement that meets the recognition criteria for 2010-11 — the construction of the new Royal Adelaide Hospital.

A.22

Appendix A

APPENDIX B: GENERAL GOVERNMENT AND NON-FINANCIAL PUBLIC SECTOR FINANCIAL STATISTICS TIME SERIES

The following tables provide historical data on key fiscal aggregates, together with estimates reflected in the 2010-11 Budget. Data provided are sourced for 1998-99 from Australian Bureau of Statistics Government Finance Statistics 2007-08 and 1999-2000 to 2008-09 from budget outcome publications for South Australia. The estimates for 2009-10 onwards are contained in the 2010-11 Budget papers.

Data are provided from 1998-99, the first year for which information is available in the accrual format. Before 1998-99, government finances were measured using a cash-based methodology.

As historical data in this time series has not been back-cast to reflect classification and accounting changes, care must be taken in interpreting the data. These changes include a structural break in the methodology used to value the unfunded superannuation liability between 2002-03 and 2003-04, the amalgamation of the South Australian Government Financing Authority (SAFA) and the South Australian Government Captive Insurance Corporation (SAICORP) on 1 July 2006 and the inclusion of new entities.

General government

Table B.1: General government key operating statement aggregates

Net operating

balance

Net acquisition of non-financial

assetsNet

lending $m % real

growth% GSP $m % real

growth% GSP $m $m $m

1998-99 7 290 16.2 7 505 16.7 - 215 19 - 2331999-2000 7 644 2.3 16.1 7 974 3.7 16.8 - 330 140 - 4712000-01 8 108 3.0 15.9 8 406 2.4 16.5 - 297 102 - 3992001-02 8 538 2.0 15.6 8 713 0.5 15.9 - 174 - 50 - 1242002-03 9 346 5.2 16.2 8 898 -1.8 15.4 448 34 4142003-04 9 955 3.4 16.2 9 570 4.4 15.6 385 - 38 4242004-05 10 592 4.0 16.7 10 368 5.9 16.3 224 105 1192005-06 11 242 2.9 16.8 11 040 3.2 16.5 202 119 832006-07 11 757 1.9 16.4 11 547 2.0 16.1 209 139 712007-08 12 879 6.1 16.7 12 414 4.1 16.1 464 242 2222008-09 13 531 1.8 17.1 13 764 7.4 17.4 - 233 639 - 872

2009-10(a) 15 531 12.3 19.1 15 364 9.2 18.9 167 1 290 -1 124

2010-11(a) 15 086 -5.4 17.6 15 475 -1.9 18.0 - 389 1 402 -1 7912011-12 15 527 0.2 17.1 15 472 -2.7 17.0 55 896 - 8412012-13 16 005 0.5 16.7 15 789 -0.5 16.5 216 410 - 1942013-14 16 294 -0.7 16.1 15 924 -1.6 15.8 370 244 126

Revenue Expenses


(a) In 2009-10 and 2010-11 revenue, expenses and net acquisition of non-financial assets are impacted by the Commonwealth Government’s Nation Building — Economic Stimulus Plan.

B.1

Table B.2: General government key balance sheet aggregates ($million)(a)

As at 30 June Net debt(b) Unfunded

superannuation(c)


Net financial worth

Net worth

1988 8591989 6941990 8541991 1 8171992 4 6101993 7 8841994 7 1131995 5 8151996 5 5121997 4 9831998 4 7621999 4 779 3 909 9 733 1 894 10 6242000 1 920 3 543 6 911 2 986 12 4452001 1 246 3 249 6 093 4 091 14 8162002 1 303 3 998 6 907 3 559 14 7212003 666 4 445 6 974 3 500 15 2882004 224 5 668 7 858 3 842 15 7602005 144 7 227 9 393 3 853 16 3592006 - 119 6 146 8 171 5 846 19 7032007(d)

- 24 5 075 7 254 8 110 22 1282008(e)(f)(g) - 276 6 468 8 078 7 580 23 7412009 475 8 939 11 562 5 551 24 1462010 1 587 9 476 13 271 5 155 25 1922011 3 335 9 442 15 096 3 898 25 3922012 3 633 9 445 15 558 3 717 26 1622013 3 864 9 428 15 967 4 301 27 2452014 3 847 9 389 16 105 5 099 28 379

(a) During the implementation of the 2008 revised uniform presentation framework (UPF) minor variances in some aggregates compared with earlier budget publications were discovered. This table reflects minor revisions resulting from the back-casting of budget aggregates associated with implementing the revised UPF.

(b) Net debt data for the years before 1999 are sourced from Australian Bureau of Statistics, Government Financial Estimates 2003-04 (Catalogue no. 5501).

(c) There is a structural break in the methodology used to calculate superannuation liabilities between June 2003 and June 2004. This accounting change, which involved the adoption of Commonwealth Government bond rate for valuation purposes in line with AASB119, Employee Benefits, resulted in a significant increase in superannuation liabilities.

(d) There is a structural break in 2007 reflecting the amalgamation of SAFA and SAICORP on 1 July 2006. The transfer of SAICORP’s assets and liabilities from the general government sector to the public financial corporations sector resulted in an increase in general government net debt of $99 million at 1 July 2006 and an increase in net financial liabilities of $90 million at 1 July 2006.

(e) There is a structural break in 2008 reflecting the transfer of rail assets from TransAdelaide to the general government sector. This results in an increase in net debt and net financial liabilities of $66 million in 2007-08 and a reduction in net financial worth of $591 million, with no impact on net worth.

(f) There is a structural break in 2008 reflecting the transfer of assets from the Adelaide Festival Centre Trust to the general government sector. This results in an increase in net debt and net financial liabilities of $28 million in 2007-08, and a reduction in net financial worth of $76 million, with no impact on net worth.

(g) There is a structural break in 2008 reflecting the first time recognition on the general government balance sheet of South Australia’s share of the net assets of the Murray-Darling Basin Commission. This has no impact on net debt, however results in a reduction in net financial liabilities of $615 million in 2007-08, and increases in net financial worth and net worth of $615 million.

B.2

Appendix B

Table B.3: General government sector receipts, payments and surplus ($million)(a)

Receipts Payments ABS Cash surplus1979-80 1 891 1 671 2201980-81 2 065 1 917 1481981-82 2 210 2 122 871982-83 2 664 2 507 1561983-84 2 988 2 734 2551984-85 3 380 3 057 3241985-86 3 634 3 161 4741986-87 3 956 3 416 5401987-88 4 307 3 858 4491988-89 4 630 3 977 6531989-90 4 973 4 370 6031990-91 5 260 4 796 4631991-92 5 387 5 396 - 101992-93 5 967 5 456 5121993-94 6 087 6 024 631994-95 6 155 6 220 - 661995-96 6 405 6 164 2411996-97 6 379 6 282 971997-98 6 988 6 724 2641998-99 7 165 7 041 1231999-2000 7 676 7 915 - 2392000-01 8 278 8 387 - 1082001-02 8 698 8 748 - 502002-03 9 522 8 864 6582003-04 10 023 9 502 5222004-05 11 252 11 059 1932005-06 11 480 11 293 1872006-07 12 090 12 116 - 262007-08 12 932 12 552 3792008-09 13 579 14 299 - 7212009-10 15 775 16 895 -1 1212010-11 15 260 17 033 -1 7732011-12 15 783 16 576 - 7932012-13 16 378 16 517 - 1392013-14 16 380 16 217 163


(a) There is a break in the series between 1998-99 and 1999-2000. Data for the years before 1999-2000 are sourced from the Australian Bureau of Statistics (ABS) and are consistent with ABS Government Finance Statistics (GFS) reporting requirements on a cash basis. Capital receipts and payments, including payments associated with the provision of financial support for state owned financial institutions (which were treated by the ABS as an ‘investment in financial assets for policy purposes’) are not included in the series before 1999-2000. After 1998-99, data are derived from an accrual ABS GFS reporting framework, with receipts proxied by receipts from operating activities and sales of non-financial assets, and payments proxied by payments for operating activities, purchases of non-financial assets and net acquisition of assets under finance leases and similar arrangements. Due to the associated methodological and data-source changes, time series data that encompass measures derived under both cash and accrual accounting should be used with caution.

B.3

Appendix B

Tab

le B

.4:

Gen

eral

go

vern

men

t se

cto

r o

per

atin

g s

tate

men

t ($

mill

ion

)

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

Rev

enu

eT

axat

ion

reve

nue

2 94

12

979

3 25

03

570

3 53

73

641

3 85

84

188

4 42

44

657

Gra

nts

5 40

65

766

5 96

96

616

7 24

98

857

8 31

98

164

8 25

28

101

Sal

es o

f goo

ds a

nd s

ervi

ces

1 24

41

333

1 46

41

572

1 69

71

933

1 87

72

041

2 10

82

147

Inte

rest

inco

me

161

147

167

203

150

163

143

127

152

174

Div

iden

d an

d in

com

e ta

x eq

uiva

lent

inco

me

455

575

450

429

382

425

353

388

420

549

Oth

er 3

86 4

41 4

56 4

90 5

17 5

12 5

36 6

20 6

48 6

66

Tot

al r

even

ue10

592

11 2

4211

757

12 8

7913

531

15 5

3115

086

15 5

2716

005

16 2

94le

ss

Exp

ense

sE

mpl

oyee

exp

ense

s4

220

4 64

44

933

5 26

85

749

6 17

76

379

6 52

26

694

6 80

3

Sup

eran

nuat

ion

expe

nses

Sup

eran

nuat

ion

inte

rest

cos

t 3

51 3

44 3

16 2

76 3

83 4

55 4

27 4

20 4

17 4

12

Oth

er s

uper

annu

atio

n ex

pens

es 4

29 4

80 5

06 5

46 5

80 6

46 6

76 6

92 7

03 7

12D

epre

ciat

ion

and

amor

tisat

ion

453

454

498

525

566

626

681

763

829

869

Inte

rest

exp

ense

s 2

48 2

23 2

04 2

18 1

80 1

79 2

55 3

16 3

66 4

08O

ther

pro

pert

y ex

pens

es—

——

——

——

——

—

Oth

er o

pera

ting

expe

nses

2 74

22

874

3 02

13

246

3 62

43

720

3 98

33

932

4 01

54

141

Gra

nts

1 92

52

021

2 06

92

337

2 68

23

560

3 07

32

826

2 76

52

579

Tot

al e

xpen

ses

10 3

6811

040

11 5

4712

414

13 7

6415

364

15 4

7515

472

15 7

8915

924

equa

ls

Net

op

erat

ing

bal

ance

224

202

209

464

- 233

167

- 38

9 5

5 2

16 3

70pl

us

Oth

er e

con

om

ic f

low

s 3

753

142

2 21

51

149

708

879

589

715

867

764

equa

ls

Co

mpr

ehen

sive

res

ult

- to

tal c

han

ge

in n

et w

ort

h 5

993

344

2 42

41

613

475

1 04

5 2

00 7

701

083

1 13

4

Net

op

erat

ing

bal

ance

224

202

209

464

- 233

167

- 38

9 5

5 2

16 3

70le

ss

Net

acq

uis

itio

n o

f n

on

-fin

anci

al a

sset

sP

urch

ases

of n

on-f

inan

cial

ass

ets

695

717

771

875

1 30

52

162

2 28

31

934

1 62

61

216

less

Sal

es o

f non

-fin

anci

al a

sset

s 1

19 1

44 1

34 1

08 1

08 2

45 2

01 2

75 3

87 1

04

less

Dep

reci

atio

n 4

53 4

54 4

98 5

25 5

66 6

26 6

81 7

63 8

29 8

69

plus

Cha

nge

in in

vent

orie

s-

18—

——

7—

——

——

plus

Oth

er m

ovem

ents

in n

on-f

inan

cial

ass

ets

——

——

——

——

——

equa

ls T

otal

net

acq

uisi

tion

of n

on-f

inan

cial

ass

ets

105

119

139

242

639

1 29

01

402

896

410

244

equa

ls

Net

len

din

g /

bo

rro

win

g 1

19 8

3 7

1 2

22- 8

72-1

124

-1 7

91-

841

- 19

4 1

26

Not

e: T

otal

s m

ay

not

add

due

to r

ound

ing.

B.4

Appendix B

Tab

le B

.5:

Gen

eral

go

vern

men

t se

cto

r b

alan

ce s

hee

t ($

mill

ion

)

As

at 3

0 Ju

ne

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Ass

ets

Fin

anci

al a

sset

sC

ash

and

depo

sits

1 96

02

210

2 38

42

760

3 08

42

550

2 18

22

159

2 10

82

544

Adv

ance

s pa

id 9

59 9

02 9

05 7

82 7

52 6

67 4

80 1

83 4

8 4

7

Inve

stm

ents

, loa

ns a

nd p

lace

men

ts 1

70 1

80 1

19 1

34 1

40 1

51 1

63 1

76 1

89 2

03

Rec

eiva

bles

374

454

471

498

610

604

557

563

564

569

Equ

ity

In

vest

men

ts in

oth

er p

ublic

sec

tor

entit

ies

13 2

4614

017

15 3

6415

658

17 1

1318

426

18 9

9419

275

20 2

6821

204

In

vest

men

ts -

oth

er 1

45 1

73 3

0 6

68 7

07 7

07 7

09 7

06 7

01 7

02O

ther

fina

ncia

l ass

ets

60

44

39

38

43

40

42

40

38

37

Tot

al fi

nanc

ial a

sset

s16

915

17 9

7919

311

20 5

3922

449

23 1

4423

128

23 1

0223

917

25 3

06

Non

-fin

anci

al a

sset

s

Land

and

oth

er fi

xed

asse

ts12

411

13 8

4014

013

16 1

3818

590

20 0

3121

488

22 4

3922

938

23 2

74O

ther

non

-fin

anci

al a

sset

s 9

4 1

7 4

23

5 6

6 6

6 6

Tot

al n

on-f

inan

cial

ass

ets

12 5

0513

857

14 0

1816

161

18 5

9520

037

21 4

9422

445

22 9

4423

280

Tot

al a

sset

s29

420

31 8

3633

329

36 7

0041

045

43 1

8144

622

45 5

4746

861

48 5

86

Lia

bili

ties

Dep

osits

hel

d 2

83 2

82 3

31 3

28 3

35 4

78 3

29 2

91 2

79 2

76

Adv

ance

s re

ceiv

ed 6

86 6

82 6

59 6

44 6

28 6

10 5

92 5

91 5

72 5

32

Bor

row

ing

2 26

52

209

2 39

42

427

3 48

83

867

5 23

95

268

5 35

95

832

Sup

eran

nuat

ion

7 22

76

146

5 07

56

468

8 93

99

476

9 44

29

445

9 42

89

389

Oth

er e

mpl

oyee

ben

efits

1 30

51

393

1 49

21

646

1 86

71

871

1 95

72

058

2 18

32

314

Pay

able

s 4

83 6

16 5

53 6

65 7

60 7

47 7

04 7

06 7

08 7

11

Oth

er li

abili

ties

812

805

699

779

881

940

967

1 02

51

088

1 15

4T

otal

liab

ilitie

s13

061

12 1

3311

201

12 9

5916

898

17 9

9019

230

19 3

8519

616

20 2

07

Net

wo

rth

(a)

16 3

5919

703

22 1

2823

741

24 1

4625

192

25 3

9226

162

27 2

4528

379

Net

fina

ncia

l wor

th (a

) (b)

(c)

3 85

35

846

8 11

07

580

5 55

15

155

3 89

83

717

4 30

15

099

Net

fina

ncia

l lia

bilit

ies (a

) (b)

(c )

9 39

38

171

7 25

48

078

11 5

6213

271

15 0

9615

558

15 9

6716

105

Net

deb

t (b) (

c) (d

) 1

44-

119

- 24

- 27

6 4

751

587

3 33

53

633

3 86

43

847

N

ote:

Tot

als

ma

y no

t a

dd d

ue to

rou

ndin

g.

(a)

The

re is

a s

truc

tura

l bre

ak in

200

8 re

flect

ing

the

first

tim

e re

cogn

ition

on

the

gen

eral

gov

ernm

ent b

ala

nce

shee

t of S

outh

Aus

tral

ia’s

sha

re o

f the

net

ass

ets

of th

e M

urra

y–D

arlin

g B

asin

C

omm

issi

on.

Thi

s ha

s no

impa

ct o

n ne

t deb

t, h

ow

ever

res

ults

in a

red

uctio

n in

net

fina

ncia

l lia

bilit

ies

of $

615

mill

ion

in 2

007-

08,

and

incr

ease

s in

net

fina

ncia

l wor

th a

nd n

et w

orth

of $

615

mill

ion.

(b)

The

re is

a s

truc

tura

l bre

ak in

200

8 re

flect

ing

the

tran

sfer

of r

ail a

sset

s fr

om T

rans

Ade

laid

e to

the

gen

eral

gov

ernm

ent

sect

or.

Thi

s re

sults

in a

n in

crea

se in

net

deb

t and

net

fina

ncia

l lia

bilit

ies

of

$66

mill

ion

in 2

007-

08, a

nd

a re

duc

tion

in n

et fi

nanc

ial w

orth

of $

591

mill

ion,

with

no

impa

ct o

n ne

t w

ort

h.

(c)

The

re is

a s

truc

tura

l bre

ak in

200

8 re

flect

ing

the

tran

sfer

of a

sset

s fr

om th

e A

dela

ide

Fes

tival

Cen

tre

Tru

st to

the

gene

ral g

over

nmen

t sec

tor.

Thi

s re

sults

in a

n in

crea

se in

net

deb

t an

d n

et

finan

cial

liab

ilitie

s of

$28

mill

ion

in 2

007-

08, a

nd a

red

uctio

n in

net

fin

anci

al w

orth

of

$76

mill

ion,

with

no

impa

ct o

n ne

t w

ort

h.

(d)

The

re is

a s

truc

tura

l bre

ak in

200

7 re

flect

ing

the

am

alga

mat

ion

of S

AF

A a

nd S

AIC

OR

P o

n 1

Jul

y 2

006.

The

tra

nsfe

r of

SA

ICO

RP

’s a

sset

s an

d lia

bilit

ies

from

the

gen

eral

gov

ernm

ent

sect

or to

the

publ

ic fi

nanc

ial c

orpo

ratio

ns s

ecto

r re

sulte

d in

an

incr

ease

in g

ener

al g

over

nmen

t ne

t de

bt o

f $99

mill

ion

at 1

Jul

y 20

06.

B.5

Appendix B

Table B.6: General government expenses by function ($million)(a)

2007-08 2008-09 2009-10 2010-11

Outcome(b) Outcome Estimated Result

Budget

General public services 247 277 376 405

Defence(c)— — — —

Public order and safety 1 220 1 293 1 386 1 457

Education 3 129 3 347 3 821 3 919

Health 3 626 4 000 4 321 4 534

Social security and welfare 871 927 1 016 1 100

Housing and community amenities 921 1 330 1 862 1 389

Recreation and culture 376 284 292 414

Fuel and energy 38 52 56 45

Agriculture, forestry, fishing and hunting 206 243 237 188Mining and mineral resources other than fuels; manufacturing; and construction

65 48 69 82

Transport and communications 748 784 788 817

Other economic affairs 169 226 305 288

Other purposes 798 953 834 835

Total expenses 12 414 13 764 15 364 15 475


(a) Expenses by function data derived from information submitted by government departments and agencies. The processes for deriving these data are subject to ongoing refinements. Consequently the data may be subjected to future revisions.

(b) Consistent with the ongoing data improvement policy, refinements have been made to 2007-08 Outcome data resulting in a number of minor reclassifications between categories.


Table B.7: General government sector capital expenditure by function ($million)(a)

2007-08 2008-09 2009-10 2010-11

Outcome(b) Outcome(b) Estimated Result

Budget

General public services 105 139 55 94

Defence(c)— — — —

Public order and safety 70 84 124 155Education 89 64 583 650Health 141 183 256 385Social security and welfare 2 7 20 56Housing and community amenities 14 24 22 20Recreation and culture 20 36 66 115Fuel and energy — — — —Agriculture, forestry, fishing and hunting 5 20 8 8Mining and mineral resources other than fuels; manufacturing; and construction

— 4 3 —

Transport and communications 286 601 926 752Other economic affairs 127 136 99 39Other purposes — 6 — 8Total capital expenditure 860 1 305 2 162 2 283


(a) Expenses by function data derived from information submitted by government departments and agencies. The processes for deriving these data are subject to ongoing refinements. Consequently the data may be subjected to future revisions.

(b) From the 2008-09 Outcome, total capital expenditure has been measured on an accrual basis and includes assets received free of charge, consistent with the treatment in the operating statement. Data prior to 2008-09 was prepared on a cash basis.


B.6

Appendix B

Non-financial public sector

Table B.8: Non-financial public sector key operating statement aggregates

Net operating

balance

Net acquisition of non-financial

assets

Net lending

$m % real growth

% GSP $m % real growth

% GSP $m $m $m

1998-99 9 468 21.0 9 597 21.3 - 129 - 115 - 141999-2000 9 206 -5.1 19.3 9 552 -2.9 20.1 - 346 -3 508 3 1612000-01 9 051 -4.5 17.8 9 279 -5.7 18.2 - 228 -1 111 8832001-02 9 367 0.3 17.1 9 487 -0.9 17.3 - 120 - 124 52002-03 10 172 4.4 17.6 9 696 -1.7 16.8 476 72 4052003-04 10 707 2.2 17.4 10 294 3.1 16.7 413 33 3792004-05 11 343 3.5 17.9 11 029 4.7 17.4 314 125 1892005-06 11 807 0.9 17.6 11 634 2.3 17.4 172 53 1192006-07 12 321 1.7 17.2 12 175 2.0 17.0 147 173 - 262007-08 13 634 7.1 17.7 13 065 3.9 17.0 569 303 2662008-09 14 360 2.1 18.2 14 567 8.0 18.4 - 207 1 249 -1 456

2009-10(a) 16 303 11.1 20.0 15 810 6.2 19.4 492 2 499 -2 007

2010-11(a) 16 101 -3.8 18.8 16 515 1.7 19.3 - 414 1 887 -2 3012011-12 16 639 0.6 18.3 16 495 -2.8 18.1 143 285 - 1422012-13 17 098 0.2 17.8 16 874 -0.3 17.6 224 421 - 1972013-14 17 429 -0.6 17.3 17 112 -1.1 17.0 317 547 - 230

Revenue Expenses


(a) In 2009-10 and 2010-11 revenue, expenses and net acquisition of non-financial assets are impacted by the Commonwealth Government’s Nation Building — Economic Stimulus Plan.

B.7

Appendix B

Table B.9: Non-financial public sector key balance sheet aggregates ($million)

As at 30 June Net debt(a) Unfunded

superannuation(b)


Net financial worth

Net worth

1988 4 3971989 4 1971990 4 4571991 5 4181992 8 1421993 11 6101994 10 5501995 8 8441996 8 4321997 8 1701998 7 9271999 7 657 3 909 13 099 -12 256 10 6242000 4 355 3 543 9 914 -8 986 12 4452001 3 223 3 249 8 151 -7 109 14 8162002 3 317 3 998 8 973 -7 902 14 7212003 2 696 4 445 9 096 -8 811 15 2882004 2 285 5 668 10 031 -9 550 15 7602005 2 126 7 227 11 511 -11 004 16 3592006 1 786 6 146 10 451 -9 889 19 7032007(c) 1 989 5 075 9 518 -8 795 22 1282008(d)(e) 1 611 6 468 10 208 -10 487 23 7412009 2 872 8 939 14 302 -14 921 24 1462010 4 864 9 476 16 901 - 17 168 25 192

2011 7 101 9 442 19 253 - 19 499 25 392

2012 7 209 9 445 19 513 - 19 623 26 162

2013 7 360 9 428 19 835 - 19 745 27 245

2014 7 545 9 389 20 191 - 19 939 28 379 (a) Net debt data for the years before 1999 are sourced from Australian Bureau of Statistics, Government Financial Estimates

2003-04 (Catalogue no. 5501).

(b) There is a structural break in the methodology used to calculate superannuation liabilities between June 2003 and June 2004. This accounting change, which involved the adoption of Commonwealth Government bond rate for valuation purposes in line with AASB119, Employee Benefits, resulted in a significant increase in superannuation liabilities.

(c) There is a structural break in 2007 reflecting the amalgamation of SAFA and SAICORP on 1 July 2006. The transfer of SAICORP assets and liabilities from the general government sector to the public financial corporations sector resulted in an increase in non-financial public sector net debt of $99 million at 1 July 2006 and an increase in net financial liabilities of $90 million at 1 July 2006.

(d) There is a structural break in 2008 reflecting the amalgamation of the South Australian Community Housing Authority (public financial corporation) with the South Australian Housing Trust (public non-financial corporation). This results in an increase in net debt and net financial liabilities and a decrease in net financial worth of $98 million in 2007-08, with no impact on net worth.

(e) There is a structural break in 2008 reflecting the first time recognition on the general government balance sheet of South Australia’s share of the net assets of the Murray–Darling Basin Commission. This has no impact on net debt, however results in a reduction in net financial liabilities of $615 million in 2007-08, and increases in net financial worth and net worth of $615 million.

B.8

Appendix B

Table B.10: Non-financial public sector receipts, payments and surplus ($million)(a)

Receipts Payments ABS Cash surplus1979-80 2 681 2 388 2921980-81 2 877 2 649 2281981-82 3 145 2 963 1821982-83 3 651 3 356 2951983-84 4 383 4 014 3691984-85 4 887 4 356 5311985-86 5 172 4 415 7571986-87 5 542 4 790 7521987-88 6 078 5 299 7801988-89 6 946 5 784 1 1621989-90 7 517 6 465 1 0521990-91 7 830 6 839 9911991-92 8 352 7 969 3831992-93 8 939 7 946 9931993-94 8 761 8 119 6421994-95 8 570 8 142 4281995-96 8 985 8 654 3311996-97 8 908 8 532 3751997-98 9 426 8 895 5321998-99 9 301 8 692 6091999-2000 13 014 9 501 3 5132000-01 10 572 9 414 1 1582001-02 9 726 9 722 42002-03 10 439 9 805 6342003-04 10 891 10 403 4882004-05 12 051 11 786 2652005-06 12 239 11 868 3702006-07 12 684 12 809 - 1252007-08 13 943 13 477 4662008-09 14 563 15 806 -1 2432009-10 16 724 18 723 -1 9992010-11 16 555 18 806 -2 2512011-12 17 757 17 867 - 1112012-13 17 728 17 883 - 1542013-14 17 606 17 788 - 182


(a) There is a break in the series between 1998-99 and 1999-2000. Data for the years before 1999-2000 are sourced from the ABS and are consistent with ABS GFS reporting requirements on a cash basis. Capital receipts and payments, including payments associated with the provision of financial support for state owned financial institutions (which were treated by the ABS as an ‘investment in financial assets for policy purposes’) are not included in the series before 1999-2000. After 1998-99, data are derived from an accrual ABS GFS reporting framework, with receipts proxied by receipts from operating activities and sales of non-financial assets, and payments proxied by payments for operating activities, purchases of non-financial assets and net acquisition of assets under finance leases and similar arrangements. Due to the associated methodological and data-source changes, time series data that encompass measures derived under both cash and accrual accounting should be used with caution.

B.9

Appendix B

Tab

le B

.11:

N

on

-fin

anci

al p

ub

lic s

ecto

r o

per

atin

g s

tate

men

t ($

mill

ion

)

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

Rev

enu

eT

axat

ion

reve

nue

2 73

12

749

3 00

93

308

3 24

43

325

3 50

93

811

4 03

94

258

Gra

nts

5 40

55

849

6 03

96

616

7 26

28

864

8 31

78

164

8 25

28

101

Sal

es o

f goo

ds a

nd s

ervi

ces

2 48

12

494

2 61

02

926

3 08

23

192

3 32

43

698

3 84

64

079

Inte

rest

inco

me

135

113

155

188

125

144

117

114

125

136

Div

iden

d an

d in

com

e ta

x eq

uiva

lent

inco

me

143

126

42

24

36

59

84

43

26

31

Oth

er 4

47 4

76 4

66 5

72 6

11 7

18 7

50 8

09 8

09 8

23T

otal

rev

enue

11 3

4311

807

12 3

2113

634

14 3

6016

303

16 1

0116

639

17 0

9817

429

less

Exp

ense

sE

mpl

oyee

exp

ense

s4

382

4 80

85

108

5 45

05

944

6 34

66

550

6 68

96

891

7 01

0S

uper

annu

atio

n ex

pens

esS

uper

annu

atio

n in

tere

st c

ost

351

344

316

276

383

455

427

420

417

412

Oth

er s

uper

annu

atio

n ex

pens

es 4

45 4

99 5

25 5

68 6

05 6

71 7

02 7

18 7

31 7

41D

epre

ciat

ion

and

amor

tisat

ion

682

692

755

798

852

931

1 04

91

146

1 22

31

277

Inte

rest

exp

ense

s 3

33 3

10 2

90 3

22 2

90 3

25 4

61 5

45 5

96 6

47O

ther

pro

pert

y ex

pens

es 2

3 1

3 9

74

——

——

——

Oth

er o

pera

ting

expe

nses

3 25

13

313

3 47

53

765

4 40

44

474

4 94

34

737

4 71

44

842

Gra

nts

1 56

31

655

1 69

81

811

2 08

92

609

2 38

32

240

2 30

12

182

Tot

al e

xpen

ses

11 0

2911

634

12 1

7513

065

14 5

6715

810

16 5

1516

495

16 8

7417

112

equa

lsN

et o

per

atin

g b

alan

ce 3

14 1

72 1

47 5

69-

207

492

- 41

4 1

43 2

24 3

17pl

usO

ther

eco

no

mic

flo

ws

286

3 17

22

278

1 04

4 6

82 5

53 6

14 6

27 8

59 8

17eq

uals

Co

mp

reh

ensi

ve r

esu

lt -

to

tal c

han

ge

in n

et w

ort

h 5

993

344

2 42

41

613

475

1 04

5 2

00 7

701

083

1 13

4

Net

op

erat

ing

bal

ance

314

172

147

569

- 20

7 4

92-

414

143

224

317

less

Net

acq

uis

itio

n o

f n

on

-fin

anci

al a

sset

sP

urch

ases

of n

on-f

inan

cial

ass

ets

1 04

01

127

1 14

51

399

2 32

83

868

3 64

12

709

2 33

52

054

less

Sal

es o

f non

-fin

anci

al a

sset

s 2

34 3

81 2

17 2

98 3

04 5

09 7

101

199

683

234

less

Dep

reci

atio

n 6

82 6

92 7

55 7

98 8

52 9

311

049

1 14

61

223

1 27

7pl

us C

hang

e in

inve

ntor

ies

1—

——

76

72

4-

79-

8 4

plus

Oth

er m

ovem

ents

in n

on-f

inan

cial

ass

ets

——

——

——

——

——

equa

ls T

otal

net

acq

uisi

tion

of n

on-f

inan

cial

ass

ets

125

53

173

303

1 24

92

499

1 88

7 2

85 4

21 5

47eq

uals

Net

len

din

g /

bo

rro

win

g 1

89 1

19-

26 2

66-1

456

-2 0

07-2

301

- 14

2-

197

- 23

0

Not

e: T

otal

s m

ay

not

add

due

to r

ound

ing.

B.10

Appendix B

Tab

le B

.12:

N

on

-fin

anci

al p

ub

lic s

ecto

r b

alan

ce s

hee

t ($

mill

ion

)

As

at 3

0 Ju

ne

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Ass

ets

Fin

anci

al a

sset

sC

ash

and

depo

sits

2 12

92

372

2 56

63

040

3 36

02

773

2 38

52

327

2 27

82

710

Adv

ance

s pa

id 8

0 8

3 3

4 8

1 7

1 6

1 6

0 5

1 4

3 3

5In

vest

men

ts, l

oans

and

pla

cem

ents

180

204

139

163

176

185

198

213

228

244

Rec

eiva

bles

318

436

522

521

520

715

703

701

707

716

Equ

ity

Inve

stm

ents

in o

ther

pub

lic s

ecto

r en

titie

s 5

07 5

62 7

23-

279

- 61

9-

266

- 24

6-

110

90

253

In

vest

men

ts -

oth

er 1

77 1

99 5

8 6

93 7

27 7

23 7

22 7

17 7

09 7

07O

ther

fina

ncia

l ass

ets

58

46

41

40

82

96

43

41

40

38

Tot

al fi

nanc

ial a

sset

s3

450

3 90

24

084

4 25

94

316

4 28

73

866

3 94

04

095

4 70

3

Non

-fin

anci

al a

sset

sLa

nd a

nd fi

xed

asse

ts27

338

29 5

6430

917

34 2

0239

059

42 3

5144

882

45 7

7546

981

48 3

08O

ther

non

-fin

anci

al a

sset

s 2

5 2

8 6

25

8 8

9 9

9 9

Tot

al n

on-f

inan

cial

ass

ets

27 3

6329

592

30 9

2234

227

39 0

6742

360

44 8

9045

784

46 9

9048

317

Tot

al a

sset

s30

813

33 4

9435

006

38 4

8643

384

46 6

4648

756

49 7

2451

085

53 0

21

Lia

bili

ties

Dep

osits

hel

d 1

55 1

47 1

59 1

66 1

74 2

10 2

16 2

22 2

29 2

35A

dvan

ces

rece

ived

719

715

659

644

628

610

592

591

572

532

Bor

row

ing

3 64

23

583

3 91

04

084

5 67

77

063

8 93

68

986

9 10

99

766

Sup

eran

nuat

ion

7 22

76

146

5 07

56

468

8 93

99

476

9 44

29

445

9 42

89

389

Oth

er e

mpl

oyee

ben

efits

1 38

41

473

1 56

01

719

1 94

41

949

2 03

62

134

2 26

02

393

Pay

able

s 4

92 7

06 7

15 8

01 9

071

090

1 05

31

053

1 06

11

070

Oth

er li

abili

ties

836

1 02

0 8

01 8

62 9

691

056

1 08

91

132

1 18

21

257

Tot

al li

abili

ties

14 4

5413

790

12 8

7814

745

19 2

3721

455

23 3

6423

562

23 8

4024

642

Net

wo

rth

(a)

16 3

5919

703

22 1

2823

741

24 1

4625

192

25 3

9226

162

27 2

4528

379

Net

fina

ncia

l wor

th(a

) (b

)-1

1 00

4-9

889

-8 7

95-1

0 48

7-1

4 92

1-1

7 16

8-1

9 49

9-1

9 62

3-1

9 74

5-1

9 93

9

Net

fina

ncia

l lia

bilit

ies

(a)

(b)

11 5

1110

451

9 51

810

208

14 3

0216

901

19 2

5319

513

19 8

3520

191

Net

deb

t (b)

(c)

2 12

61

786

1 98

91

611

2 87

24

864

7 10

17

209

7 36

07

545

N

ote:

Tot

als

ma

y no

t a

dd d

ue to

rou

ndin

g.

(a)

The

re is

a s

truc

tura

l bre

ak in

200

8 re

flect

ing

the

first

tim

e re

cogn

ition

on

the

gen

eral

gov

ernm

ent b

ala

nce

shee

t of S

outh

Aus

tral

ia’s

sha

re o

f the

net

ass

ets

of th

e M

urra

y–D

arlin

g B

asin

C

omm

issi

on.

Thi

s ha

s no

impa

ct o

n ne

t deb

t, h

ow

ever

res

ults

in a

red

uctio

n in

net

fina

ncia

l lia

bilit

ies

of $

615

mill

ion

in 2

007-

08,

and

incr

ease

s in

net

fina

ncia

l wor

th a

nd n

et w

orth

of $

615

mill

ion.

(b)

The

re is

a s

truc

tura

l bre

ak in

200

8 re

flect

ing

the

am

alga

mat

ion

of t

he S

outh

Au

stra

lian

Com

mun

ity H

ousi

ng A

utho

rity

(pub

lic fi

nanc

ial c

orpo

ratio

n)

with

the

Sou

th A

ustr

alia

n H

ousi

ng T

rust

(pu

blic

no

n-fin

anci

al c

orpo

ratio

n).

Thi

s re

sults

in a

n in

crea

se in

net

deb

t and

net

fina

ncia

l lia

bilit

ies

and

a de

crea

se in

net

fina

ncia

l wor

th o

f $9

8 m

illio

n in

200

7-08

, w

ith n

o im

pact

on

net

wor

th.

(c)

The

re is

a s

truc

tura

l bre

ak in

200

7 re

flect

ing

on th

e am

alga

mat

ion

of S

AF

A a

nd S

AIC

OR

P o

n 1

July

200

6. T

he tr

ansf

er o

f SA

ICO

RP

’s a

sset

s an

d lia

bilit

ies

from

the

gen

eral

gov

ernm

ent

sect

or to

th

e pu

blic

fina

ncia

l cor

pora

tions

sec

tor

resu

lted

in a

n in

crea

se in

non

-fin

anci

al p

ublic

sec

tor

net d

ebt

of $

99 m

illio

n at

1 J

uly

200

6.

B.11

Appendix B

B.12

Appendix B

2010-11 2009-10 2009-10Budget Estimated Budget

Result$000 $000 $000

ReceiptsTaxation 3 584 616 3 403 122 3 276 876Commonwealth general purpose grants 4 411 925 4 107 163 3 819 400Commonwealth specific purpose grants 1 590 453 1 460 360 1 440 823Commonwealth National Partnership payments 35 485 98 121 73 443Contributions from state undertakings 385 443 420 798 366 622Fees and charges 360 351 311 811 295 054Recoveries 60 014 232 756 48 397Royalties 160 934 124 990 143 819Other receipts 372 016 294 335 268 694Total receipts 10 961 237 10 453 456 9 733 128

PaymentsAppropriation Act 12 482 308 11 583 182 11 578 430Specific appropriation authorised in various Acts 131 998 136 574 120 312Total payments 12 614 306 11 719 756 11 698 742

Consolidated Account financing requirement 1 653 069 1 266 300 1 965 614

Borrowing from (+) repayment to (-) South Australian Government Financing Authority 1 653 069 1 266 300 1 965 614

APPENDIX C: CONSOLIDATED ACCOUNT

Table C.1: Summary of receipts and payments

C.1


Result$000 $000 $000

Payments from Appropriation ActPremier and Cabinet Department of the Premier and Cabinet 132 619 133 292 133 840 Administered Items for the Department of the Premier and Cabinet 11 541 12 162 12 160 State Governor's Establishment 2 882 2 896 2 903 Arts SA 139 101 131 801 146 655Trade and Economic Development Department of Trade and Economic Development 61 378 61 804 61 825 Defence SA 63 550 110 511 84 234Treasury and Finance Department of Treasury and Finance 75 500 95 703 95 703 Administered Items for the Department of Treasury and Finance 1 703 759 1 682 074 1 611 729 Independent Gambling Authority 1 592 1 568 1 568Planning and Local Government Department of Planning and Local Government 17 703 18 570 18 002 Administered Items for the Department of Planning and Local Government 2 510 2 366 2 215Justice Attorney-General's Department 146 381 126 980 138 279 Administered Items for the Attorney-General's Department 51 292 57 473 70 020 Courts Administration Authority 86 494 81 403 82 102 Department for Correctional Services 214 234 174 465 179 865 South Australia Police 673 863 588 690 599 132 Administered Items for South Australia Police 165 162 162 Electoral Commission of South Australia 3 221 11 643 11 672Primary Industries and Resources Department of Primary Industries and Resources 133 259 116 753 135 931 Administered Items for the Department of Primary Industries and Resources 3 349 3 285 3 291Transport, Energy and Infrastructure Department for Transport, Energy and Infrastructure 687 904 780 995 800 605 Administered Items for the Department for Transport, Energy and Infrastructure 13 412 12 596 12 696 TransAdelaide — 1 578 2 079Health

Department of Health 3 673 497 3 254 892 3 272 016Education and Children's Services Department of Education and Children's Services 2 196 172 2 017 868 2 038 971 Administered Items for the Department of Education and Children's Services 200 674 182 639 179 782Families and Communities

Department for Families and Communities 1 218 540 1 060 054 1 008 395Administered Items for the Department for Families and Communities 157 492 134 306 143 606

Environment

Department of Environment and Natural Resources(a) 136 273 119 456 128 885 Administered Items for the Department of Environment and

Natural Resources(a) 21 821 5 104 5 014 Environment Protection Authority 3 686 4 412 2 957Water

Department for Water(b) 97 793 100 434 88 000

Administered Items for the Department for Water(b) 8 469 11 151 10 865

(a) Name changed effective 1 July 2010. Previously Department for Environment and Heritage.

(b) Name changed effective 1 July 2010. Previously Department of Water, Land and Biodiversity Conservation.

Table C.2: Estimates of payments

C.2

Appendix C


Result$000 $000 $000

Tourism South Australian Tourism Commission 54 515 59 139 57 800 Minister for Tourism 4 454 4 454 4 454Further Education, Employment, Science and Technology Department of Further Education, Employment, Science and Technology 442 078 384 462 394 683Auditor-General Auditor-General's Department 13 565 13 221 13 445Legislature House of Assembly 8 034 7 856 7 881 Joint Parliamentary Services 14 402 9 867 9 894 Legislative Council 5 134 5 097 5 114Total payments appropriated for administrative units, statutory 12 482 308 11 583 182 11 578 430authorities and Ministers

Payments for which specific appropriation is authorised in variousActs 131 998 136 574 120 312

Total Consolidated Account payments 12 614 306 11 719 756 11 698 742

Table C.2: Estimates of payments (continued)

C.3

Appendix C


Result$000 $000 $000

Payments for which specific appropriation is authorised in various Acts

Salaries and allowancesAgent-General — Pursuant to Agent-General Act 1901 319 134 313Auditor-General — Pursuant to Public Finance and Audit Act 1987 286 271 269Commissioners of Environment, Resource and Development Court— Pursuant to Remuneration Act 1990 992 957 939Commissioner of Police — Pursuant to Police Act 1998 276 271 271State Coroner and Deputy Coroner — Pursuant to Remuneration Act 1990 763 716 703Electoral Commissioner and Deputy Electoral Commissioner —Pursuant to Electoral Act 1985 321 311 311Employee Ombudsman — Pursuant to Fair Work Act 1994 134 131 131Governor — Pursuant to Constitution Act 1934 276 267 258Judges — Pursuant to Remuneration Act 1990

Chief Justice 605 568 573Judges and Masters 21 274 19 937 19 872

Magistrates — Pursuant to Remuneration Act 1990 13 072 12 378 12 469Members of Various Standing Committees — Pursuant toParliamentary Remuneration Act 1990 and Parliamentary Committees (Miscellaneous) Act 1991 687 657 700Ombudsman — Pursuant to Ombudsman Act 1972 315 296 267Parliamentary Salaries and Electorate Other Allowances —Pursuant to Parliamentary Remuneration Act 1990

Ministers, Officers and Members of Parliament 13 111 12 829 12 888Senior Judge and Judges of the Industrial Relations Courtand Commission — Pursuant to Remuneration Act 1990 2 638 2 598 2 566Solicitor-General — Pursuant to Solicitor-General Act 1972 570 537 475Valuer-General — Pursuant to Valuation of Land Act 1971 121 117 117

Total salaries and allowances 55 760 52 975 53 122

OtherCompensation for injuries resulting from criminalacts — Pursuant to Criminal Injuries Compensation Act 1978 7 244 6 990 6 990Electoral Districts Boundaries Commission — Pursuant to Constitution Act 1934 520 — — First Home Owner Grant — Pursuant to First Home Owner Grant Act 2000 68 474 76 609 60 200Total other 76 238 83 599 67 190

Total payments for which specific appropriation is authorised invarious Acts 131 998 136 574 120 312

Table C.2: Estimates of payments (continued)

C.4

Appendix C


Result$000 $000 $000

Taxation receiptsPayroll tax 1 133 500 1 085 375 1 096 600

Commonwealth places mirror payroll tax(c) 19 800 19 050 19 200Stamp duties 1 421 635 1 317 833 1 185 835

Commonwealth places mirror stamp duties(c) 300 299 300Land tax 570 723 553 256 548 200

Commonwealth places mirror land tax(c) 1 600 1 324 1 500Other taxes on property 10 29 10Save the River Murray Levy 24 600 23 659 23 900Gaming machines tax 305 300 283 449 295 600Contribution from Lotteries Commission of South Australia 75 929 87 962 77 675Contribution from casino operations 23 000 21 757 20 600Contribution from South Australian Totalizator Agency Board 5 200 6 390 5 300Contribution from on-course totalizators, bookmakers and small lotteries 2 819 2 739 1 956Recoup from Recreation and Sport Fund 200 — 200Total taxation receipts 3 584 616 3 403 122 3 276 876

Commonwealth general purpose paymentsGST revenue grants 4 411 925 4 099 708 3 819 400

Transitional assistance(d) — 7 455 —

Total Commonwealth general purpose payments 4 411 925 4 107 163 3 819 400

Commonwealth specific purpose payments(e)

Council of Australian Governments funding arrangements 1 590 453 1 460 360 1 440 823Total Commonwealth specific purpose payments 1 590 453 1 460 360 1 440 823

Commonwealth National Partnership payments(f)

Concessions to pensioners and others 24 573 23 553 22 361First Home Owners Boost 10 912 74 568 36 900

Legal Aid(g) — — 14 182Total Commonwealth National Partnership payments 35 485 98 121 73 443

(c) Taxes akin to state taxes are levied on activities conducted on Commonwealth places under the authority of

Commonwealth mirror tax legislation. Revenue is retained by the state.

(d) Transitional assistance ceased from 2009-10 under the new Intergovernmental Agreement on Federal Financial

Relations. The payment received in 2009-10 relates to the 2008-09 year, following the finalisation of the

2008-09 Outcome.

(e) Refers only to those Commonwealth specific purpose payments paid to the Consolidated Account.

(f) Concessions to pensioners and others, First Home Owners Boost, and legal aid previously classified as specific

purpose payments are now classified as National Partnership payments. The Commonwealth pays the remainder of

National Partnership payments into the Intergovernmental Agreement on Federal Financial Relations special deposit

account for subsequent disbursement to the relevant line agencies.

(g) Legal aid, previously paid to the Consolidated Account, is now paid directly from the Intergovernmental Agreement

on Federal Financial Relations special deposit account to the Attorney-General's Department.

Table C.3: Estimates of receipts

C.5

Appendix C


Result$000 $000 $000

Contributions from state undertakingsAdelaide Convention Centre Dividend — 1 017 — Arrangements with private electricity entities Local government rate equivalent 214 208 208Defence SA Local government rate equivalent 213 199 168Department for Transport, Energy and Infrastructure Income tax equivalent 3 002 2 952 2 952 Local government rate equivalent 824 804 804Department of Treasury and Finance Income tax equivalent — — 506ForestrySA Dividend 29 237 31 067 19 257 Income tax equivalent 13 503 13 307 8 868Funds SA Local government rate equivalent 179 173 168HomeStart Finance Dividend 9 173 5 628 9 410 Income tax equivalent 4 372 3 393 5 040Land Management Corporation Dividend 49 602 53 603 31 554 Income tax equivalent 16 643 16 701 15 057 Local government rate equivalent 570 469 375Lotteries Commission of South Australia Income tax equivalent 6 399 8 856 6 331 Local government rate equivalent 5 5 5Public Trustee Office Dividend 1 808 — 627 Income tax equivalent 507 — 83SA Water Corporation Dividend 104 456 169 009 168 354 Income tax equivalent 73 728 69 511 56 687 Local government rate equivalent 1 373 1 340 1 250South Australian Asset Management Corporation Dividend 4 000 23 500 23 500

Table C.3: Estimates of receipts (continued)

C.6

Appendix C


Result$000 $000 $000

South Australian Government Employee Residential Properties Dividend 1 706 1 706 1 156 Income tax equivalent 1 462 1 407 1 956South Australian Government Financing Authority Dividend 53 449 11 513 11 513 Income tax equivalent 8 488 — — South Australian Housing Trust Income tax equivalent — 3 300 — TransAdelaide Local government rate equivalent — — 38Transmission Lessor Corporation Dividend — 769 — West Beach Trust Income tax equivalent 530 361 755Total contributions from state undertakings 385 443 420 798 366 622

Fees and charges(h)

Auditor-General's Department — fees for audit and other sundry receipts 12 529 12 145 12 341Court fines 31 179 27 728 29 138Court regulatory fees 27 136 25 292 30 876

Land and Business Regulations(i) 2 894 3 498 —

Land Services regulatory fees 148 396 133 390 116 968Department for Water — Natural Resources Management penalties — — 1 132Guarantee fees 54 832 29 351 24 928Infringement Notice Schemes — Expiation fees 81 873 79 000 79 000Small lotteries 1 412 1 367 643Sundry fees 100 40 28Total fees and charges 360 351 311 811 295 054

RecoveriesAutomotive Assistance Package 1 150 950 1 500Adelaide Entertainment Centre — 700 — Child Abuse Protection program — Intrasector grants received 200 200 200Contribution to the cost of private plated vehicles 10 10 10Essential Services Commission of South Australia 5 468 5 244 5 360Department for Transport, Energy and Infrastructure — Indentured Ports 4 071 4 071 4 071Department for Water — Qualco Sunlands 250 250 250Helicopter service — recovery of costs and sponsorships 1 020 1 020 1 050Independent Gaming Corporation contribution to GamblersRehabilitation Fund 2 000 2 000 1 500Metropolitan Drainage Fund 7 7 7National Tax Equivalent Program 50 50 50Return of cash to Consolidated Account — Cash Alignment Policy — 143 901 1 587

(h) Refers to only those fees and charges paid to the Consolidated Account.

(i) Previously received by the Department for Transport, Energy and Infrastructure and then disbursed to relevant

agencies. From 1 July 2009, revenue is received in the Consolidated Account.


C.7

Appendix C


Result$000 $000 $000

Return of deposit account balances 12 919 61 141 — Return of deposit account balances — Superannuation 30 000 10 400 30 000Sale of Government Gazette 170 166 166Sundry recoupment 137 134 134Unclaimed monies and personal property 2 562 1 947 1 947United Water — 565 565Total recoveries 60 014 232 756 48 397

RoyaltiesDepartment of Primary Industries and Resources 160 934 124 990 143 819Total royalties 160 934 124 990 143 819

Other receipts

InterestInterest on investments 103 713 85 500 85 500Interest recoveries from general government entities 2 571 4 800 5 575Interest recoveries from non commercial public trading enterprises 27 542 31 601 31 885Interest recoveries from the private sector 54 60 61

Repayment of advancesAdministered Items for the Department for Transport, Energy and Infrastructure 209 196 196Department of Health 872 2 162 2 162Department of Primary Industries and Resources 1 000 1 000 1 000Land Management Corporation — 9 435 205Renmark Irrigation Trust 116 110 110SA Country Arts Trust 20 20 20South Australian Housing Trust 193 270 73 120 73 120South Australian Tourism Commission 50 193 193Other recoveries — 5 4

Repayment of equity capital contributionsArts SA — 2 975 — Defence SA 7 427 721 8 404Department of the Premier and Cabinet — 14 406 — Department for Transport, Energy and Infrastructure — 4 250 — South Australian Asset Management Corporation — 52 000 52 000

OtherOther recoveries 550 1 241 1 094Sale of land and buildings 34 622 10 540 7 165Total other receipts 372 016 294 335 268 694

Total Consolidated Account receipts 10 961 237 10 453 456 9 733 128


C.8

Appendix C

APPENDIX D: SOUTH AUSTRALIAN STATE PUBLIC SECTOR ORGANISATIONS

General Govt.

Sector

Public Non-Financial Corporations

Sector

Public Financial

CorporationsSector

Adelaide Cemeteries Authority ................................................... *

Adelaide Convention Centre Corporation................................... *

Adelaide Entertainments Corporation (trading as Adelaide Entertainment Centre) ...............................

*

Adelaide Festival Centre Trust ................................................... *

Adelaide Festival Corporation .................................................... *

Adelaide Film Festival ................................................................ *

Adelaide and Mount Lofty Ranges Natural Resources Management Board....................................................................

*

Alinytjara Wilurara Natural Resources Management Board ....... *

Art Gallery Board, The................................................................ *

Attorney-General’s Department.................................................. *

Auditor-General’s Department.................................................... *

Australian Children’s Performing Arts Company (trading as Windmill Performing Arts) .........................................

*

Bio Innovation SA....................................................................... *

Carrick Hill Trust ......................................................................... *

Correctional Services, Department for ....................................... *

Courts Administration Authority .................................................. *

Dairy Authority of South Australia ............................................... *

Defence SA ................................................................................ *

Distribution Lessor Corporation.................................................. *

Education Adelaide..................................................................... *

Education and Children’s Services, Department of .................... *

Electoral Commission of South Australia.................................... *

Environment and Natural Resources, Department of ................. *

Environment Protection Authority ............................................... *

Essential Services Commission of South Australia .................... *

Eyre Peninsula Natural Resources Management Board ............ *

Families and Communities, Department for ............................... *

Further Education, Employment, Science and Technology, Department of.............................................................................

*

Generation Lessor Corporation .................................................. *

Government Schools.................................................................. *

Health, Department of ................................................................ *

D.1

General Govt.

Sector


Sector

Public Financial

CorporationsSector

History Trust of South Australia .................................................. *

HomeStart Finance..................................................................... *

House of Assembly..................................................................... *

Independent Gambling Authority ................................................ *

Joint Parliamentary Services ...................................................... *

Justice, Department of ............................................................... *

Kangaroo Island Natural Resources Management Board .......... *

Land Management Corporation.................................................. *

Legislative Council ..................................................................... *

Libraries Board of South Australia .............................................. *

Lotteries Commission of South Australia (trading as SA Lotteries).............................................................

*

Motor Accident Commission....................................................... *

Museum Board ........................................................................... *

Northern and Yorke Natural Resources Management Board ..... *

Outback Communities Authority ................................................. *

Planning and Local Government, Department of........................ *

Playford Centre .......................................................................... *

Premier and Cabinet, Department of the.................................... *

Primary Industries and Resources, Department of..................... *

Public Trustee............................................................................. *

Rail Commissioner ..................................................................... *

RESI Corporation ....................................................................... *

SACE Board of South Australia .................................................. *

South Australia Police (also known as South Australian Police Department, SAPOL) ...

*

South Australian Ambulance Service.......................................... *

South Australian Arid Lands Natural Resources Management Board....................................................................

*

South Australian Asset Management Corporation ...................... *

South Australian Country Arts Trust............................................ *

South Australian Country Fire Service........................................ *

South Australian Film Corporation.............................................. *

South Australian Fire and Emergency Services Commission (trading as SAFECOM) ..............................................................

*

South Australian Forestry Corporation (trading as ForestrySA)

*

South Australian Government Employee Residential Properties...................................................................................

*

South Australian Government Financing Authority (trading as SAFA) .......................................................................

*

South Australian Housing Trust .................................................. *

D.2

Appendix D

General Govt.

Sector


Sector

Public Financial

CorporationsSector

South Australian Local Government Grants Commission........... *

South Australian Metropolitan Fire Service ................................ *

South Australian Motor Sport Board ........................................... *

South Australian Murray Darling Basin Natural Resources Management Board....................................................................

*

South Australian State Emergency Service (trading as SES)..... *

South Australian Tourism Commission ....................................... *

South Australian Water Corporation (trading as SA Water) ........ *

South East Natural Resources Management Board................... *

South Eastern Water Conservation and Drainage Board ........... *

State Electoral Office.................................................................. *

State Governor’s Establishment ................................................. *

State Opera of South Australia ................................................... *

State Procurement Board ........................................................... *

State Theatre Company of South Australia................................. *

Superannuation Funds Management Corporation of South Australia (trading as Funds SA)..................................................

*

Trade and Economic Development, Department of.................... *

TransAdelaide ............................................................................ *

Transmission Lessor Corporation............................................... *

Transport, Energy and Infrastructure, Department for ................ *

Treasury and Finance, Department of ........................................ *

Venue Management, Office of .................................................... *

Water, Department for ................................................................ *

West Beach Trust (trading as Adelaide Shores) ......................... *

WorkCover Corporation of South Australia................................. *

Zero Waste SA ........................................................................... *

D.3

Appendix D

General Govt.

Sector


Sector

Public Financial

CorporationsSector

Changes since the 2009-10 Budget:

Change of Entity name since previous Budget:

Outback Communities Authority .................................................Previously known as the Outback Areas Community Development Trust. The organisation’s name change was effective 10 December 2009.

*

Department of Environment and Natural Resources ..................Previously known as the Department for Environment and Heritage, change effective 01 July 2010.

*

Department for Water .................................................................Previously known as the Department of Water, Land and Biodiversity Conservation, change effective 01 July 2010.

*

D.4

Appendix D

APPENDIX E: TAX EXPENDITURE STATEMENT

Overview

This statement provides a summary of tax expenditures incurred by the Government of South Australia in 2008-09 and 2009-10.

What are tax expenditures?

The term ‘tax expenditure’ refers to differential tax treatment where the difference constitutes a departure from the tax standard or benchmark.

Examples of tax expenditures can include revenue forgone from:

tax exemptions;

reduced rates of taxation;

tax rebates or deductions; and

deferral of the payment of tax liabilities.

Thus a tax expenditure is a reduction in tax revenue resulting from ‘preferential’ tax treatment. In practice, differentiating preferential tax treatment from tax differences that are integral to efficient revenue raising design is not always straightforward.

In the design of expenditure and revenue policy, governments observe various principles of fairness and equity. Such principles apply to decisions on taxation policies as well as decisions that underpin the direction of public expenditure. As a result, a number of differential tax treatments across a broad spectrum of taxpayers and particular activities may arise. Differential treatment afforded to certain taxpayers to achieve social and political objectives rather than tax design objectives constitutes a tax expenditure.

Why measure tax expenditures?

The immediate and direct impact of preferential tax treatment is to reduce the revenue yield from a given tax. In the absence of concessions and exemptions, governments would be able to support a higher level of government spending, or reduce the severity of their tax rates or, if expenditures and revenues remain unchanged, reduce their borrowing requirements.

The provision of preferential tax treatment is indisputably a cost to the budget and may also impose additional costs on non-favoured taxpayers. It is often a hidden cost. By explicitly publishing estimates of the magnitude of this preferential tax treatment, transparency is increased and the community is made more fully aware of the government’s fiscal priorities. The government should also be better placed to ensure that resources, in total, are committed to the areas that clearly reflect policy priorities.

E.1

Valuation of tax expenditures

Tax expenditures in this appendix are calculated according to the revenue forgone method, which involves applying the general structure of a tax to a tax base (that is, a group of people or activities) that is currently exempt from the tax or subject to concessional treatment.

This static approach does not take into account possible behavioural changes which may result from the removal of a tax concession, that is, the revenue forgone approach assumes that taxpayer behaviour will remain unchanged if concessions are removed. Therefore, tax expenditures measured using this approach are likely to be only a broad indication of actual revenue impacts and, more specifically, this approach is likely to overstate the actual revenue forgone as a result of an individual tax concession.

Some qualifications apply to the estimates contained in this statement. Aside from the absence of assumptions about behavioural responses, the estimates are in many cases approximations, reflecting data limitations and the use of proxy indicators to measure the size of revenue bases relevant to tax concessions.

Benchmark for measuring tax expenditures

Tax expenditures should be quantified by comparing the existing tax structure with a benchmark tax structure based entirely on taxation design principles. In practice deciding on such a structure does involve some judgements. For example, the benchmark structure used for payroll tax is a flat tax at the current rate with no threshold. There is no particular merit in the current rate from the point of view of tax design but it has been adopted because it is the existing rate. Further, a zero threshold would probably not be desirable from a tax design point of view because the administrative costs of collecting revenue from very small employers might well exceed the revenue collected. However, for the sake of simplicity, a zero threshold has been adopted in this exercise.

Summary

The view has been taken that the extent of tax relief provided through the availability of exemptions, concessions, rebates and allowable deductions is sufficiently important to warrant documentation even if:

the benchmark against which the tax expenditure is assessed could be argued to be imperfectly defined;

the measurement of those imperfectly defined expenditures is also subject to qualification; and

the value of many tax expenditures cannot be quantified.

Many tax expenditures have not been able to be quantified. In particular, there are a large number of exemptions from stamp duties that are not reflected in the estimates due to a lack of information on the size of the affected tax bases. Similarly, a number of exemptions relating to some payroll tax exemptions have not been quantified. As such, the aggregate total of the estimates contained in Table E.1 does not represent the total value of assistance provided by tax expenditures.

The largest tax expenditures are the payroll tax threshold exemption and the land tax exemptions for the principal place of residence and primary production.

The following is a brief summary of the individual tax expenditures quantified.

E.2

Appendix E

Payroll tax

Total quantified tax expenditures relating to payroll tax for 2009-10 ($594 million) represent 66 per cent of payroll tax revenue collections (excluding government). This represents an increase of $50 million from 2008-09.

The largest payroll tax expenditure relates to the tax-free threshold. Payroll tax is levied on wages paid by employers and was applied at a rate of 5 per cent in 2008-09 and 4.95 per cent in 2009-10 above an annual threshold of $552 000 in 2008-09 and $600 000 in 2009-10. The threshold exemption results in a large number of small businesses not being liable for payroll tax. In addition, those businesses that are liable for payroll tax do not have tax liabilities in respect of annual wages below the threshold.

It is estimated that the tax revenue forgone as a result of the existence of the threshold is $418 million for 2009-10 in respect of private sector employers. This comprises $297 million in revenue forgone from small businesses that are not liable for payroll tax, and $121 million in respect of employers who are liable for payroll tax but benefit from not paying tax on annual wages up to the applicable threshold.

Several other groups of taxpayers are exempt from payroll tax liabilities, many of which have not been able to be quantified in terms of tax expenditures. Of those that have been calculated, the largest tax expenditure relates to the exemption for public hospitals, which is estimated to amount to $100 million in 2009-10. Other expenditures include local government councils ($24 million), non-profit schools ($14 million) and non-profit hospitals and providers of health services ($14 million).

During 2008-09 and 2009-10, the government also offered schemes whereby businesses could claim payroll tax rebates in respect of trainees ($8 million) and export activity ($6 million).

Stamp duties

Stamp duties apply to a range of transactions including conveyances, insurance and motor vehicle registration. Stamp duty was also previously applied to mortgages and rental transactions but mortgage and rental duty were abolished from 1 July 2009. There are a large number of exemptions contained in stamp duty legislation, many of which cannot be quantified. The total tax expenditure in 2009-10 for stamp duties ($31 million) is equivalent to 2 per cent of gross stamp duty revenues. The total cost of stamp duty expenditures has fallen by $24 million from 2008-09 primarily as a result of the abolition of mortgage and rental duty from 1 July 2009.

Conveyance duty tax expenditures amount to $14 million in 2009-10. Prior to 5 June 2008, eligible first homebuyers were entitled to a full stamp duty concession on home purchases valued up to $80 000. A partial concession applied for first home purchases valued between $80 000 and $250 000. The total cost of this exemption in 2008-09 was approximately $600 000. This scheme has been replaced by the government’s $4000 first home bonus scheme, applying for first home contracts entered into on or after 5 June 2008. The cost of this scheme is reported as an expenditure item and is published in the Department of Treasury and Finance’s portfolio statement. The stamp duty exemption for family farm transfers is estimated to cost $8 million in 2009-10. Stamp duty relief for corporate reconstructions is estimated to cost $4 million in 2009-10 compared to $5 million in 2008-09. General remissions are also expected to cost $2 million in 2009-10.

There are no tax expenditures for mortgage duty and rental duty in 2009-10 as these taxes were fully abolished from 1 July 2009.

Approximately $17 million of stamp duty tax expenditures in 2009-10 relate to exemptions given in respect of the $60 stamp duty fee payable on the combined renewal certificate for vehicle registration and compulsory third party insurance. Of this, $10 million relates to concessions provided to

E.3

Appendix E

pensioners and state concession cardholders. The balance mainly relates to conditionally registered vehicles (for example historic and left hand drive vehicles, special purpose vehicles such as fork lifts, tractors, self propelled farm implements and mobile cranes), government vehicles registered under the Continuous Government Registration Scheme and vehicles owned by councils.

Land tax

Total land tax expenditures are estimated to be $874 million in 2009-10. This represents 158 per cent of land tax collections (including from government).

Land tax is calculated on the aggregate taxable value of all land held by a person as at 30 June preceding the assessment year. No tax is payable if the total taxable value of all land is less than the threshold level. The tax free threshold was $110 000 in 2008-09 and 2009-10 and will increase to $300 000 from 1 July 2010. A marginal tax rate structure applies above this threshold; with increasing marginal tax rates applied as the value of landholdings increases.

The 2009-10 tax expenditures associated with land tax include:

the tax-free threshold — estimated to cost $51 million;

the principal place of residence exemption (provided the land is owned by a natural person as distinct from a corporate body) — estimated to cost $320 million;

the primary production exemption (provided it meets certain criteria) — estimated to cost $376 million;

the for-profit aged care facilities exemption provided from 1 July 2009 — estimated to cost $1 million; and

other specific exemptions provided in sections 4 and 5 of the Land Tax Act 1936. Exempt categories include caravan parks, residential parks, supported residential facilities, land used for religious purposes, state subsidised hospitals, libraries, parklands, conservation of native flora and fauna, sporting activities and so on. The cost of these exemptions amounts to approximately $125 million in 2009-10.

Gambling taxes

Tax expenditures for gambling taxes arise from the gambling tax threshold and the differential tax treatment of non-profit venues and hotels.

In South Australia, gambling tax is levied on net gambling revenue above an annual threshold of $75 000. In addition, non-profit venues are subject to a tax structure that is relatively less severe than that applicable to hotels.

In 2009-10, it is estimated that the revenue foregone as a result of the existence of the threshold is $11 million. The benefit to non-profit venues of the tax differential is estimated to be $8 million in 2009-10. The combined costs of gambling tax expenditures represent approximately 5 per cent of gambling tax collections in 2009-10.

Save the River Murray Levy

The Save the River Murray Levy was introduced to fund specific measures aimed at improving the long-term security and quality of South Australia’s water supply.

E.4

Appendix E

The levy is imposed at a flat rate on SA Water customers and is indexed annually to movements in the Adelaide Consumer Price Index. Consideration of the impact the levy would have on different sections of the community was taken into account before the introduction of the levy. To relieve the burden of the levy, eligible pensioners and low income earners are exempt from SA Water rates and charges. This exemption amounts to an estimated tax expenditure of $6 million in 2009-10, or 26 per cent of revenue raised from the Save the River Murray Levy.

Primary producers who own land that is not contiguous, but is farmed as a single farming enterprise, are allowed to amalgamate their Save the River Murray Levy liabilities in certain circumstances. This limits their Save the River Murray Levy liability to the non-residential charge applicable on one property. However, it is not possible to quantify expenditure for this exemption.

Emergency services levy

The emergency services levy (ESL) was originally intended to provide a comprehensive method of funding emergency services by raising sufficient funds from property holders to support aggregate expenditure on emergency services. In practice, property owners (fixed and mobile) now collectively contribute over half of the total levy proceeds. The remaining levy proceeds are provided by government in the form of remissions, pensioner concessions and the levy payable on the government’s own property. The tax expenditure costings measure the difference between standard levy rates and post remission levy rates which vary depending on land use code and location (for fixed property) and by class of vehicle (for mobile property).

The ESL is a complex tax with differential rates of levy on land use types and regions. The motivation for the differential levy rates lies in a desire to achieve some alignment with relative risk of property types, the value of the service provided (related to property value) and regional variation in service levels. Remissions of the variable property value element of the ESL effectively shifts the balance of the ESL revenue to the flat dollar amount per property.

Growth in tax expenditures

The cost of tax expenditures has increased in 2009-10 mainly in respect of:

land tax — reflecting growth in land values; and

payroll tax — reflecting the increase in the tax free threshold from 1 July 2009.

The cost is partially offset by a range of factors, including the reduction in tax expenditures relating to mortgage duty and rental duty following the abolition of these taxes on 1 July 2009.

E.5

Appendix E

Table E.1: Summary of tax expenditures

Tax expenditures ($m) 2008-09(a) 2009-10

PAYROLL TAXThreshold exemption 384.9 418.1 of which:

benefit to existing taxpayers with payrolls above the threshold 110.8 120.8 benefit to employers with payrolls below the threshold 274.0 297.3

Export rebates 6.8 6.2

Trainee rebates(b) 7.9 7.8 Firm specific relief 0.3 1.1 Public benevolent institutions and not-for-profit charitable organisations 7.9 8.9 Public hospitals exemption 89.6 99.6 Non-profit schools or colleges at or below secondary level 12.6 13.6 Non-profit hospital and health providers exemption 10.6 13.9 Child care centres 0.2 0.2 Local government council exemption 23.3 24.3 Assistance for motion picture production companies 0.2 <0.1General remissions 0.2 0.3 TOTAL FOR PAYROLL TAX 544.4 594.0

STAMP DUTIESConveyance duty

Family farm exemption 9.7 7.9

First home owner concessions(c) 0.6 <0.1Corporate reconstruction relief 4.6 3.8 Inner city housing rebate 0.2 0.3 General remissions 1.7 1.5

Mortgage duty (d)

First home exemption 2.9 — Exemption for residential loans for owner occupation, 16.1 —

refinancing and mortgage dischargesDrought relief 0.1 —

Stamp duty on renewal certificate for motor vehicle registration and compulsory third party insurance (CTP) - exemptions for:

The Crown and vehicles registered under the 1.1 1.1 Continuous Government Registration Scheme

Hire vehicles with more than 12 seats 0.1 0.1 Councils 0.3 0.3 Conditionally registered vehicles 5.5 5.6 Incapacitated ex-servicemen and other persons 0.2 0.2 Pensioner and State concession card holders 9.9 10.0

Rental duty (d)

Differential treatment of hire purchase arrangements 2.0 — General remissions <0.1 —

Stamp duty on motor vehicle registrationsGeneral remissions <0.1 0.1

TOTAL FOR STAMP DUTIES 55.1 30.8

E.6

Appendix E

Table E.1: Summary of tax expenditures continued

Tax expenditures ($m) 2008-09(a) 2009-10

LAND TAXThreshold exemption 49.5 50.6 Principal place of residence exemption 272.6 320.2 Primary production exemption 366.0 376.3 Caravan parks and residential parks exemption 1.1 1.2 Supported residential facilities exemption 0.3 0.3

For Profit Aged Care Facilities(e) - 1.4

Other exemptions(f) 113.0 123.8 TOTAL FOR LAND TAX 802.5 873.8

GAMBLING TAXESThreshold exemption 10.9 10.9 Differential treatment of non-profit businesses 8.1 8.0 General remissions 0.2 <0.1TOTAL FOR GAMBLING TAXES 19.2 18.9

OTHER TAXES ON PROPERTYSave the River Murray Levy

Pensioner concessions 5.6 6.1 Emergency services levy

Pensioner concessions 6.1 6.0 General remissions

Fixed property 84.0 80.1 Mobile property 10.5 10.7

TOTAL FOR OTHER TAXES ON PROPERTY 106.3 102.9


(a) Costing of specific exemptions for 2008-09 differ from those published in the 2009-10 Budget reflecting new data.

(b) 2008-09 and 2009-10 costs include prior year adjustments.

(c) Relates to first homeowner stamp duty relief scheme. Since July 2000 in accordance with undertakings under the Intergovernmental Agreement, the government administers and funds grants under the First Home Owner Grant Scheme. The government also provides a first home owners bonus grant. These grants are reported on the expenditure side of the budget.

(d) There are no tax expenditures in 2009-10 as these taxes were fully abolished from 1 July 2009.

(e) From 1 July 2009 land tax relief is provided for land that is used for residential for profit aged care facilities.

(f) Includes a wide range of exemptions provided to land used for a number of specific activities under section four of the Land Tax Act 1936. Some of these include land used for religious purposes, state subsidised hospitals, libraries, parklands, conservation of native flora and fauna, sporting activities and so on.

E.7

Appendix E

E.8

Appendix E

APPENDIX F: LOCAL GOVERNMENT FINANCES

Overview

This appendix provides information on the overall financial performance and position of local government in South Australia and the financial relationships local government has with both the Commonwealth and the state government. It also describes recent developments in local government financial governance.

Financial performance and position

The financial performance data shown in Table F.1 is presented using a simplified Australian Bureau of Statistics’ Government Finance Statistics framework. With the assistance of the South Australian Local Government Grants Commission, the data has been drawn from the annual financial statements of councils that are prepared in compliance with Australian Accounting Standards.

Consistent with an agreement between the Commonwealth, states and territories whereby each jurisdiction presents financial information on a uniform presentation framework basis, the General Meeting of the Local Government Association (LGA) in March 2006 resolved that each council’s annual budget papers would include a common core of financial information (similar to Table F.1). This ensures that information on both operating and capital investment activities is made available on a consistent basis and enables more meaningful comparisons of each council’s finances.

Table F.1: Local government operating statement ($million)

2004-05 2005-06 2006-07 2007-08 2008-09

Income(a) 1 181 1 263 1 361 1 449 1 575

less Expenses(b) 1 220 1 287 1 369 1 449 1 551

Operating surplus(+) / deficit(-) -39 -24 -8 — 24

Less: Net outlays on non-financial assets

Capital investment expenditure on new/upgraded assets and renewal/ replacement of existing assets(c)

342 375 444 447 542

less Proceeds from sale of assets 56 57 52 49 50

less Depreciation 280 288 314 322 345

less Amounts received specifically for new/upgraded assets(c)

49 58 57 68 105

Net outlays on non-financial assets -43 -28 21 8 42

Equals: Net lending(+)/borrowing(-) 4 4 -29 -8 -18

(a) Income excludes book gains on sale of assets and amounts received specifically for new/upgraded assets.

(b) Expenses include depreciation but exclude book losses on the sale or revaluation of assets.

(c) Excludes the value of non-financial assets donated to councils.

As shown in Table F.1, the aggregate level of local government’s annual operating deficit has reduced steadily since 2004-05 and was eliminated in 2007-08. While an operating surplus of $24 million was recorded in 2008-09, a break-even operating result (i.e. income equal to expenses) would have

F.1

occurred but for the early receipt, in June 2009, of Commonwealth Government financial assistance grants otherwise due in 2009-10. While the financial performance of local government as a whole has improved significantly since 2004-05, it is emphasised that the current financial condition of individual councils varies substantially.

Local government taxation revenue (from general and other rates on property) was $1030 million in 2008-09 and is estimated to be approximately $1110 million in 2009-10. Together with other own-source funding (mainly user charges), approximately 85 per cent of local government income is from its own sources. In real terms, after excluding the Commonwealth grants received in advance in 2008-09, income for local government increased by 16.4 per cent over the four-year period from 2004-05 to 2008-09. Expenses increased in real terms by 12.7 per cent over the same period. Capital investment expenditure increased in real terms by 40.5 per cent from 2004-05 to 2008-09 and includes a significant increase in expenditure on renewing and replacing infrastructure. The increased capital expenditure was supported heavily by Commonwealth economic stimulus funding.

Table F.2 shows an abridged balance sheet for local government as a whole at the end of the financial years 2004-05 through to 2008-09.

Table F.2: Local government balance sheet ($million)

2004-05 2005-06 2006-07 2007-08 2008-09

Assets

Financial assets

Cash and cash equivalents 213 263 277 291 318

Trade and other receivables 80 95 107 115 115

Equity accounted investments in council businesses

28 19 30 53 59

Other financial assets 6 2 1 1 10

Non-financial assets

Assets held for sale and inventories

30 36 42 57 105

Land, buildings, infrastructure, plant, equipment and other non-financial assets

10 258 11 553 12 648 14 114 16 267

Total assets 10 615 11 968 13 105 14 631 16 874

Liabilities

Trade and other payables 113 159 217 243 278

Borrowings and finance leases 438 456 472 471 485

Employee entitlements and other provisions

107 103 92 109 112

Total liabilities 658 718 781 823 875

Net worth 9 957 11 250 12 324 13 808 15 999

Net financial liabilities(a) 359 358 396 416 433

(a) Net financial liabilities equals total liabilities less financial assets (excluding equity accounted investments in council businesses).

As shown in Table F.2, the level of local government net financial liabilities at 30 June 2009 was $433 million, which represents 28 per cent of local government’s income in 2008-09. This compares with a figure of 30 per cent in 2004-05.

With assistance in various ways from the state government, the LGA has created a number of financial institutions to manage, on behalf of councils, a range of commercial arrangements. These include the

F.2

Appendix F

Local Government Finance Authority, the LGA Mutual Liability Scheme, the Local Government Superannuation Scheme, and the LGA Workers Compensation Scheme. These institutions deliver efficient and effective shared service arrangements for local government and have received strong support from individual councils. At 30 June 2009, the institutions were managing assets valued at $1871 million and had a combined net worth of $90 million. These amounts are not included in Table F.2. In addition, the state government and the LGA have established arrangements for the joint tendering and contracting of electricity for those councils on the national electricity grid, resulting in efficiencies and cost savings to councils.

An independent inquiry initiated by the LGA in 2005 into the financial sustainability of local government in South Australia made significant recommendations regarding the need for local government to improve its financial governance. In particular, it expressed concern at the lack of long-term financial and asset management planning. While the inquiry acknowledged an increasing level of capital investment expenditure on renewal and replacement of existing assets, it highlighted that such expenditure remained significantly less than that needed to minimise whole of life cycle costs of assets. The LGA, with the support of councils, subsequently embarked on a comprehensive Financial Sustainability Program to implement the inquiry’s recommendations and support improved council performance. The state government is providing practical help in various ways to support the LGA’s program.

In 2006, the LGA initiated a statewide project to help councils develop strategies, policies and tools to achieve sustainable asset management. Councils are custodians of roundly $16 billion of infrastructure and other assets on behalf of their communities. The LGA entered into an alliance with the Institute of Public Works Engineering Australia to adopt an internationally recognised approach for preparing asset management policies and plans. The Sustainable Asset Management in SA project is likely to be the most important outcome of the LGA’s Financial Sustainability Program. Associated projects are being implemented to improve councils’ financial governance and include development of long-term financial plans, improvement of external financial reporting and strengthening the internal and external audit regime.

During 2007, an implementation framework for additional shared service arrangements in local government was developed by the LGA. Following endorsement of the framework by councils, the LGA embarked on an ambitious program of pilot projects to explore a wide range of opportunities for increased resource sharing between councils. Progress on some pilot projects has been slower than anticipated.

Financial relationships with the Commonwealth Government and the state government

Commonwealth Government

The Commonwealth provides both general and specific purpose payments to local government in South Australia.

The general purpose payments are made to the state and on-passed to councils on the recommendations of the South Australian Local Government Grants Commission. Arrangements for the payment of these untied financial assistance grants to councils are embodied in the Commonwealth’s Local Government (Financial Assistance) Act 1995. The financial assistance is provided in two parts — general purpose grants and untied local roads grants. For South Australia, these grants are estimated to be $106.9 million in 2010-11, consisting of $80.4 million in general purpose funding and $26.5 million in untied local road funding. These grants would have totalled $140.5 million (instead of $106.9 million) but for a decision by the Commonwealth to bring forward, into 2009-10, the payment of $33.6 million of grants otherwise payable in 2010-11. The Act provides for the allocation of grants to councils within the state on the basis of horizontal fiscal

F.3

Appendix F

equalisation (HFE) principles, subject to a minimum grant provision. This provision requires that each council receive, as a minimum, its per capita share of 30 per cent of the general purpose pool of grants.

Commonwealth payments for specific purposes will be received by South Australian councils under a variety of programs in 2010-11. Estimates of grants include:

$31.5 million under the Roads to Recovery component of the National Partnership (NP) on the Nation Building Program;

$9.6 million under the National Water Security for Cities and Towns Program component of the NP on Water for the Future;

$3.1 million for community wastewater management systems under the NP on Water for the Future;

$15.3 million for community infrastructure projects under the Regional and Local Community and Infrastructure Program; and

an extra allocation of $15.5 million for local road funding. The supplementary local road funding of $15.5 million is a continuation of arrangements that recognise the current inequitable share of untied local road grants being received by South Australia under the Local Government (Financial Assistance) Act 1995.

In addition, depending on the success of applications under a nationally competitive process, South Australian councils are expected to receive grant funding in 2010-11 under the NP on the Natural Disaster Resilience Program, the Jobs Fund covering infrastructure employment projects, the Healthy Communities Program, the National Affordable Housing specific purpose payment and the NP on the Local Government Reform Fund Program. The Reform Fund Program has been established to accelerate the implementation of Local Government and Planning Ministers’ Council agreed asset and financial management frameworks, build capacity and resilience in local government and increase collaboration between councils in planning and service delivery.

State government

In 2004, a state/local government relations agreement was established to improve consultation arrangements and communication practices and to build more productive and collaborative working relationships between the state and local government. The agreement is between the state government and the LGA and is signed by the Premier and the President of the LGA. A schedule of priorities for joint action is agreed on an annual basis. The agreement was revised in 2006 to reflect the national tripartite Intergovernmental Agreement on local government matters signed in April 2006. The state government and the LGA have agreed to undertake a further review of the agreement during 2010 to ensure that it remains contemporary.

In 2007, amendments to the Local Government Act 1999 were brought into effect. Amending provisions aimed at improving the accountability of councils as well as strengthening their financial governance, asset management, rating practices and auditing arrangements.

The changes included the requirement for councils to:

prepare and adopt long-term financial plans;

prepare and adopt long-term infrastructure and asset management plans;

establish audit committees;

adopt several measures to strengthen the independence of external auditors; and

adopt a consistent and improved reporting format covering annual financial statements.

F.4

Appendix F

These legislative reforms were supported by the LGA and are consistent with the recommendations of the LGA’s independent inquiry into the financial sustainability of local government. The reforms support the directions of the LGA’s Financial Sustainability Program, which is helping councils to meet these requirements. Additional legislative amendments occurred in 2009 to further improve the legislative framework for internal and external review of council administration and financial management.

Table F.3 sets out arrangements by program or purpose under which the state provides grants and subsidies to councils (including for state programs) or payments to councils for local government or joint state-local government programs. Amounts included in the table do not include funding that is provided by the Commonwealth to the state and on-passed to local government or contract payments to councils for the provision of services on behalf of state agencies. Care needs to be taken in any comparison of the level of state government financial support to councils provided in different state jurisdictions. Significant definitional differences exist between the states and the level of information captured within each varies. In addition, certain funding in some states relates to functions that in general are not performed by South Australian councils.

F.5

Appendix F

Table F.3: Specific purpose payments from the state to local government ($000)

Program/purpose 2009-10 Estimated

Result

2010-11 Budget

Premier and Cabinet

Cultural Facilities Program, Public Art Program and Sundry Grants 317(a) 110(b)

Community Arts Development Program 63(a) 31(b)

Out of the Square Theatre Program 150 150

Public Library Services 17 383 17 773

Trade and Economic Development

Community Builders Program 25(a) —

Treasury and Finance

Community Wastewater Management Systems 3 453 3 539

Local Government Disaster Fund 271 1 358

Regional Development Infrastructure Fund 1 500(a) —(b)

Rural Town Development —(a) 497(a)

Upper Spencer Gulf and Outback Enterprise Zone Fund 250 —(b)

Planning and Local Government

European Wasp Program 70 70

Grants for Regional Open Space and the Public Realm 17 189(a) 7 473(b)

Justice

Campbelltown Leisure Centre Redevelopment — 3 000

Community Recreation and Sport Facilities Program 403(a) —(b)

Crime Prevention and Community Safety Grants Program 141(a) —(b)

Inclusive Recreation and Inclusive Sport Program 15(a) —(b)

National Youth Week and Youth Advisory Committees 264 275 Natural Disaster Resilience Program 1 210(a) —(b)

Statewide Recreation and Sport Enhancement Program 278(a) 283(b)

Subsidy to Adelaide City Council — Aquatic Centre 750 —

Primary Industries and Resources

Contribution to administration of Municipal Council of Roxby Downs 600 300

Transport, Energy and Infrastructure

Community Road Safety 10 —

Regional Roads Program 500 250

State Bicycle Fund 424 431(a)

State Black Spot Program — Safer Local Roads 1 407 2 396

Subsidy of electricity provision at Coober Pedy 2 800 1 956(b)

TravelSmart SA Program 167 120

Victoria Square Upgrade 2 000 —

Health

Drug and Alcohol Services Program 482 501

Families and Communities

Council rate Concessions 32 744 33 500

Family and Community Development Program 805 824

Home and Community Care Program 6 132 6 644

Support for disability services 430 478

Environment

Adelaide City Parklands grant 1 317 1 356

Coast Protection Board grants (mainly rural councils) 423 340

Environment Protection Fund 29 31

Kerbside Performance Incentives Program 202 1 437

Local Heritage Reviews 60 120

Metropolitan Council Coast Protection Works 146 —

Problematic Waste Initiatives 304 284

Resource Efficiency Assistance Program — Local Government 44 50

Regional Implementation Program 582 818

Water

Adelaide Stormwater Projects 1 270 4 710

Port Pirie Stormwater Feasibility Study — 470

Stormwater Management Fund 4 308 4 418

Further Education, Employment, Science and Technology

Adult Community Education Program 201(a) 204(a)

CareerStart SA 243 —(b)

Total 101 362 –—(c)

(a) The portion of funding for the program(s) which was allocated to local government, or which is estimated will be allocated.

(b) Total program funding not yet determined or is dependent on success of applications under a competitive grants process.

(c) When allocations for all programs are finalised, funding of around $100 million can be expected in 2010-11.

F.6

Appendix F

GLOSSARY OF TERMS USED IN THE BUDGET STATEMENT

Accrual accounting: The accounting approach by which income, expenses, equity, assets and liabilities are recognised in the reporting period to which they relate, regardless of when cash is received or paid.

Accrual budget: The preparation of a budget based on accrual Government Finance Statistics (GFS) accounting principles.

Accrual GFS principles: Principles based on accrual standards established by the Australian Bureau of Statistics.

Administered items: Resources over which an agency has legal custody, but which the agency does not control because it cannot deploy them to meet its own objectives.

Assets: Resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

Australian Equivalents to International Financial Reporting Standards: Accounting Standards issued by the Australian Accounting Standards Board that are equivalent to Standards issued by the International Accounting Standards Board. These standards are binding on South Australian government entities by authority of Treasurer's Instruction 19 Financial Reporting.

Balance sheet: A statement showing the financial position (at a specific time) of a reporting entity in terms of its recognised assets, liabilities and equity at the end of a reporting period.

Capital Investment Program comprises projects and programs that result in the capitalisation of assets on the balance sheet. They include the acquisition and construction of, or addition to non-current assets, including property, plant and equipment and other productive assets. Examples include roads, hospitals, medical equipment and schools.

Cash flow statement: A statement showing the inflows and outflows of cash and cash equivalents of a reporting entity during the reporting period. Cash flows are classified as operating, investing and/or financing activities.

Consolidated Account: The government’s main operating account, from which appropriations are paid and revenues of the state are credited, created pursuant to the Public Finance and Audit Act 1987.

Consumer Price Index: A general indicator of the rate of change in prices paid by households for consumer goods and services published by the Australian Bureau of Statistics.

Contingent asset: A possible asset that arises from past events and whose existence will be confirmed by the occurrence or non-occurrence of uncertain future events not wholly within the control of the entity.

Contingent liability: A possible obligation that arises from past events and whose existence will be confirmed by the occurrence or non-occurrence of uncertain future events not wholly within the control of the entity; or a liability that does not meet the recognition criteria.

Controlled items: Resources that an agency is able to control and deploy to meet its objectives.

Depreciation: The systematic allocation of the depreciable amount of an asset over its useful life.

Deposit account: An account authorised by the Treasurer under Section 8 (special deposit account) or Section 21 of the Public Finance and Audit Act 1987. In 1991-92 the accounting operations of most budget sector agencies were transferred from the Consolidated Account to deposit accounts. These accounts are used by agencies for expenditure and receipts as part of their normal operations.

Equity: The residual interest in the assets of an entity after deducting all liabilities.

Equity contribution: The investment of additional cash in an agency to increase its asset base or reduce its debt.

Expense: A decrease in economic benefits during the accounting period in the form of outflows or depletion of assets or incurrence of liabilities that result in decreases of equity other than those relating to distributions to owners. (Also see GFS transactions).

Financial Reports: Under Australian equivalents to International Financial Reporting Standards, there are four financial statements produced by reporting entities, being the income statement, balance sheet, statement of changes in equity and cash flow statement. Financial reports for the various sectors of the public sector are also produced in accordance with the Uniform Presentation Framework. These are the operating statement, balance sheet and cash flow statement.

Gains: Part of income. Gains represent items other than revenue items that meet the definition of income and may, or may not, arise in the course of the ordinary activities of an entity.

General government: The sector of government that includes all government agencies that provide services free of charge or at prices significantly below the cost of production or provide regulatory services.

Government Finance Statistics (GFS): Statistics that measure the financial activities of governments and reflect the impact of those activities on other sectors of the economy. GFS is based on international statistical standards.

GFS Transactions: Changes to assets, liabilities and equity that arise from mutually agreed interactions between entities. (Also see Other economic flows).

Government Purpose Classification: A system used to classify expenses and net acquisition of non-financial assets of the public sector in terms of the purposes for which the transactions are made.

Gross fixed capital formation: The value of acquisitions less disposals of new and existing produced assets that can be used in production, other than inventories.

Gross State Product: The total market value of goods and services produced in the state within a given period after deducting the cost of goods and services used up in the process of production, but before deducting allowances for the consumption of fixed capital.

Hedging: Any technique designed to reduce or eliminate financial risk; for example, taking two positions that will offset each other if prices change.

Horizontal fiscal equalisation: The principle underlying the Commonwealth Grants Commission’s assessment of per capita relativities, which are the basis for the interstate distribution of general revenue grants. Under this principle, grants are distributed so as to give each state and territory the capacity to provide public services at an average standard and level of efficiency, for comparable revenue effort.

Income: Comprised of revenues and gains (refer to these respective definitions). Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contribution by owners.

Income tax equivalent payments: Payments equivalent to income tax that certain public authorities or business units (if a legal entity) would be liable to pay under the Commonwealth’s Income Tax Assessment Act 1997, were that public authority or business unit (if a legal entity) not an instrumentality of the Crown in right of the State of South Australia.

Investment income: Income received and receivable on financial assets.

Liabilities: Present obligations arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.

Modified duration: A measure of the sensitivity of a portfolio of interest bearing securities to changing interest rates. It is derived from the discounted average term to maturity of all cash flows.

National Partnership payments: Commonwealth payments to the states to support the delivery of specified outputs or projects, and to facilitate the implementation, or reward the delivery, of national reforms.

National specific purpose payments: Commonwealth payments to the states providing ongoing funding for service delivery in core areas of health, education, housing, skills and disability services.

Net debt: The sum of deposits held, advances received and borrowing, minus the sum of cash and deposits, advances paid, and investments, loans and placements.

Net financial liabilities: Total liabilities less financial assets, other than equity in non-financial public corporations and in public financial corporations. This measure is broader than net debt as it includes significant liabilities other than borrowings, such as unfunded superannuation and long service leave entitlements.

Net financial worth: Net financial worth measures a government’s net holdings of financial assets. It is calculated from the balance sheet as financial assets minus liabilities. It differs from net financial liabilities in that equity in non-financial public corporations and public financial corporations are included as assets.

Net lending/borrowing position: A GFS measure of the net operating balance, less acquisition of non-financial assets, plus consumption of fixed capital (depreciation). Measures the extent to which accruing operating expenses (less depreciation) and investment expenditures are funded by revenues.

Net operating balance: A GFS measure of the operating result of a sector of government. It is the excess of GFS revenue over GFS expenses.

Net worth: Net worth is calculated as total assets (both financial and non-financial) minus total liabilities, shares and other contributed capital. Net worth incorporates a government’s non-financial assets, such as land and other fixed assets, as well as financial assets and liabilities not captured by the net debt measure, most notably accrued employee superannuation liabilities, debtors and creditors.

Non-financial public sector: The consolidation of the general government sector and public non-financial corporations sector.

Operating statement: The financial statement disclosing all income and expenses (and their sources) of a reporting entity recognised in the reporting period unless an accounting standard requires otherwise. Also referred to as the income statement.

Other economic flows: Changes to assets, liabilities and equity that are not the result of GFS transactions. (Also see GFS transactions).

Public financial corporation (PFC): Government controlled entity that is mainly engaged in financial intermediation or the provision of auxiliary financial services.

Public non-financial corporation (PNFC): Government controlled entity that is mainly engaged in the production of market goods and/or non-financial services, which recovers a significant portion of its costs through user charges.

Put Option: A contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time.

Real terms: Estimates of financial aggregates in real terms reflect adjustments made in order to take account of the impact of rising prices on the purchasing power of money. Throughout this budget paper, reference is made to real term aggregates and growth rates. All real terms calculations use the Adelaide Consumer Price Index (CPI), unless specifically stated otherwise.

Revenue: Part of income. The gross inflow of economic benefits during the period arising in the course of the ordinary activities of the entity when those inflows result in an increase in equity, other than increases relating to contributions by owners. (Also see GFS transactions).

Sector: An ABS national accounting concept used to group entities with similar economic characteristics. Sectors comprising the public sector are general government, public non-financial corporations and public financial corporations.

Statement of changes in equity: A statement showing the changes in an entity’s equity between two reporting dates and reflects the increase or decrease in net assets during the period except for changes resulting from transactions with owners.

Strategic resource allocation: The allocation of resources based on identified policy priorities of government, usually over the medium term.

Unfunded Superannuation Liability: The amount by which the liabilities of a superannuation scheme or schemes, (measured as the present value of expected future superannuation benefits that have accrued to members), at the reporting date exceeds the value of assets held by the superannuation scheme or schemes to meet those benefits.

Uniform presentation framework (UPF): The reporting framework agreed by the Commonwealth, state and territory governments, to ensure all governments provide a common ‘core’ of financial information in their budget papers (refer to Appendix A).

Value at Risk: A technique used to estimate the probability of portfolio losses based on the statistical analysis of historical price trends and volatilities.

ABBREVIATIONS USED IN THE BUDGET STATEMENT

AASB Australian Accounting Standards Board

ABS Australian Bureau of Statistics

CGC Commonwealth Grants Commission

COAG Council of Australian Governments

CPI Consumer Price Index

CSO community service obligation

CTP compulsory third party

DPC Department of the Premier and Cabinet

DTEI Department for Transport, Energy and Infrastructure

ESL emergency services levy

FTE full-time equivalent

GFC global financial crisis

GP General Practitioner

GSP Gross State Product

GST Goods and Services Tax

HFE horizontal fiscal equalisation

HoTs Heads of Treasuries

IGA Intergovernmental Agreement

IMF International Monetary Fund

ITE income tax equivalent

MAC Motor Accident Commission

MYBR Mid-Year Budget Review

NFPS non-financial public sector

NP National Partnership

NRM natural resources management

PFC public financial corporation

PIRSA South Australian Department of Primary Industries and Resources

PNFC public non-financial corporation

PPP public private partnership

SACA South Australian Cricket Association

SAFA South Australian Government Financing Authority

SAHT South Australian Housing Trust

SAICORP South Australian Government Captive Insurance Corporation

SFD State Final Demand

SGIC State Government Insurance Commission

SPP specific purpose payment

TAFE Technical and Further Education

TER tax equivalent regime

Triple S Southern State Superannuation

TVSP targeted voluntary separation package

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