Appendix A: Progress Against Fiscal Responsibility
Act 2005 Targets and Principles1
The Government has introduced the Fiscal Responsibility Bill 2012 (the Bill) to Parliament which
will replace the Fiscal Responsibility Act 2005 (the Act). Refer Chapter 1 and Chapter 3 for further
details on the Bill.
These tables report on the targets and principles of the original Act (2005). As required by
legislation.
Fiscal Targets
Progress Indicator
Legislative Target
Status
Medium-term
General government sector
net financial liabilities (NFL)
At or below 7.5 per cent GSP
by June 2010
This target was not met. The ratio of
general government NFL to GSP was
11.9 per cent at June 2011. (The ratio was
12.7 per cent at June 2010).
General government sector
net debt
Maintain as share of GSP at or
below level at June 2005
(0.9 per cent of GSP)
This target was not met. The ratio of
general government net debt to GSP was
1.8 per cent at June 2011. (The ratio was
2.2 per cent at June 2010).
General government sector
net financial liabilities
At or below 6 per cent of GSP
by June 2015
This target will not be met. General
government NFL are expected to be
11.2 per cent of GSP at June 2015.
(They were 11.9 per cent at June 2011).
General government sector
net debt
Maintain as share of GSP at or
below level at June 2005
(0.9 per cent of GSP)
This target will not be met. The ratio of
general government net debt to GSP is
expected to be 3.9 per cent at June 2016.
(The ratio was 1.8 per cent at June 2011).
Total state sector unfunded
superannuation liabilities
Eliminated by 30 June 2030
Employer contributions are assessed
periodically to ensure full funding by
2030.
Long-term
The current arrangement will be reviewed
following completion of the triennial
actuarial review in December 2012.
Total state net unfunded superannuation
liabilities are forecast at $41.8 billion at
30 June 2012 (9.1 per cent of GSP), and
are expected to fall to $25.9 billion at
30 June 2016 (4.6 per cent of GSP).
1
For a review of performance over the first half-decade of the Act, refer to the Report of the Treasurer to the
NSW Parliament on the Review of the Fiscal Responsibility Act 2005, which was tabled on 15 June 2011.
Budget Statement 2012-13
A-1
Fiscal Principles
Progress Indicator
Legislative Target
Status
1. Keeping the Budget in surplus
Net operating result
Net operating result in
surplus
The net operating result is expected to be
in deficit in 2012-13 but to be in surplus in
each of the following three years.
2. Constrained growth in net cost of services and expenses
Growth in net cost of services
(NCOS) and expenses
4-year average annual growth
(1) ending with the financial
year prior to the Budget year;
and (2) for the Budget year
and forward estimates, not to
exceed long-term average
revenue growth
Average annual growth of the following
variables for the 4-year periods ending
2011-12 and 2015-16 respectively are:
Total expenses
 6.0 per cent and 3.3 per cent
NCOS
 6.1 per cent and 3.3 per cent
Long term average revenue growth is
5.6 per cent
Public sector employee costs
Government policy in
negotiating rates of pay and
conditions to be consistent
with fiscal targets
The Government amended the Industrial
Relations Act in 2011 to give stronger force
to government policies on public sector
conditions of employment. A regulation also
tightened the requirement for savings
offsets for any wage increases exceeding
2.5 per cent.
4. Evaluation of capital expenditure proposals
Stability of capital project
budgets
A-2
Capital expenditure
proposals to be evaluated in
accordance with government
procurement policy
requirements
Strategic and Business Case Gateway
Reviews assess project planning and identify
alternatives for projects over $10 million.
Gateway reviews test the soundness of a
project’s procurement process, with the
objective of ensuring agencies have an
appropriate level of procurement discipline
being applied.
34 reviews were undertaken in 2011-2012
covering 122 projects valued at $3.1billion.
Since 2004, 390 reviews have been
under- taken of projects valued at nearly
$43 billion.
Agency compliance with Gateway has
improved, 93 percent of the projects listed
in the 2011-12 Budget Infrastructure
Statement were reviewed at the mandated
gates.
However, there have been major decisions
made where the business case assessment
has not been properly applied. These
include the now-abandoned CBD Metro and
the previously proposed Parramatta to
Epping Rail Line.
Infrastructure NSW was established in May
2011 to improve planning and management
Budget Statement 2012-13
Progress Indicator
Legislative Target
Status
5. Managing State finances with a view to long-term fiscal pressures
The long-term fiscal gap
Reporting the impact of the
Budget on the long-term
fiscal gap
Policy and parameter changes since the
2011-12 Budget have no impact on the
fiscal gap of 1.8 per cent of GSP as reported
in the 2011-12 Budget. The result reflects
parameter changes (principally lower GST
receipts) which increase the gap by 0.14
percentage points largely offset by the net
impact of policy measures which reduce the
fiscal gap by 0.10 percentage points. Refer
Chapter 1 for further details.
6. General government net worth
General government sector
net worth
At least maintain in real
terms
General government net worth is estimated
to have increased by an average 0.6 per
cent per annum in real terms from June
2001 to June 2012.
7. Superannuation liabilities
Unfunded super liability of
GG sector and PTE sector
Manage and fund the liability
to meet the long-term target,
subject to periodic review
See long-term fiscal targets (page A-1)
8. Total asset management
Best practice asset
maintenance or management
policies
Progress reporting in budget
papers on measures to
implement this principle
The Government uses Total Asset
Management (TAM) information from the
major asset-managing agencies to prioritise
investments and forecast infrastructure
requirements.
The share of State assets held by nominated
agencies that was covered by a TAM plan is
forecast at 100 per cent in 2011-12.
9. Prudent risk management
Financial risk management
comprising total state sector:



net financial liabilities
contingent liabilities debt
and
financial assets
Progress reporting in budget
papers on measures to
implement this principle
Aggregate risk is managed by Treasury,
TCorp and the NSW Self Insurance
Corporation. This Includes ongoing review
of asset allocation and risk management
policies and procedures of authorities
subject to the Public Authorities (Financial
Arrangements) Act 1987.
Agency and project level risk identification
procedures and strategies are in place or
being developed through the Financial
Management Framework, the Commercial
Policy Framework and Total Asset
Management guidelines.
Project specific risks for privately financed
infrastructure projects are also managed
within the National Public Private
Partnerships Policy Framework. This
Framework includes a Jurisdictional
Requirements Volume which refers to the
NSW 2006 Working with Government
Guidelines for Privately Financed Projects
for NSW specific requirements and NSW
specific commercial risk allocation
principles.
On 24 August 2009, NSW Treasury issued
Budget Statement 2012-13
A-3
Progress Indicator
Legislative Target
Status
the Internal Audit and Risk Management
Policy for the NSW Public Sector. The Policy
strengthens internal audit and risk
management in NSW Public Sector agencies
by mandating adoption of current standards
for professional practice and corporate
governance requirements to ensure the
independence of the internal audit function.
Following a review of implementation
issues, Treasury is developing additional
guidance for agencies in a number of areas,
including risk management.
10. Tax restraint
Impact of tax policy
measures
A-4
Adjustments to legislated tax
rates, thresholds and bases
to be made with maximum
possible restraint; policies
should enable predictability
and stability of tax regime
The net effect of tax changes since
26 March 2011 is to increase the NSW tax
burden by around $2.8 billion cumulatively
from 2011-12 to 2015-16, including
$1.5 billion for supplementary royalties to
recoup the impact of the carbon tax.
Budget Statement 2012-13