Appendix D: Progress Against Fiscal Responsibility
Act 2005 Targets and Principles1
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
12.8 per cent at June 2010. (The ratio was
12.2 per cent at June 2009).
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
2.3 per cent at June 2010. (The ratio was
2.1 per cent at June 2009).
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
10.8 per cent of GSP at June 2015.
(They were 12.0 per cent at June 2011).
General government sector
net debt
Maintain as share of GSP at or
below level at June 2005
This target will not be met. The ratio of
general government net debt to GSP is
expected to be 2.7 per cent at June 2015.
(The ratio was 1.8 per cent at June 2011).
Total state sector unfunded
superannuation liabilities
Eliminated by 30 June 2030
Employer contributions being assessed
periodically to ensure full funding by
2030.
Long-term
While the GFC has slowed progress, the
downward trend is continuing, and full
funding by June 2030 is still expected.
Total state net unfunded superannuation
liabilities were $33.9 billion at 30 June
2011 (7.8 per cent of GSP), and are
expected to decline to $30.6 billion at
30 June 2015 (5.7 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 2011-12
D-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 2011-12 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
2010-11 and 2014-15 respectively are:
Total expenses
 6.2 per cent and 4.2 per cent

NCOS

(6.3 per cent and 4.7 per cent
Long term average revenue growth is
5.2 per cent
3. Managing public sector employee costs
Public sector employee costs
Government policy in
negotiating rates of pay and
conditions to be consistent
with fiscal targets
The Government has amended the Industrial
Relations Act to give stronger force to
government policies on public sector
conditions of employment, and has issued a
new regulation tightening 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
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.
50 reviews were undertaken in 2010-2011
covering 77 projects valued at $7.9 billion.
Since 2004, 356 reviews have been
under- taken of projects valued at nearly
$40 billion.
Agency compliance with Gateway remains
steady, 80 percent of the projects listed in
the 2010-11 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
D-2
Budget Statement 2011-12
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
Budget Paper 6 contains an updated
five-yearly assessment of long term fiscal
pressures which estimates the pre-Budget
long-term fiscal gap at 2.8 per cent of GSP
by 2050-51. Factors in this Budget
potentially reduce the fiscal gap by
1.0 point from 2.8 to to 1.8 per cent of GSP,
including the National Health Agreement
(by 0.6 per cent), revenue measures (by 0.1
per cent), and savings and efficiency
measures (by 0.3 per cent).
6. General government net worth
General government sector
net worth
At least maintain in real
terms
General government net worth increased by
an average 2.1 per cent per annum in real
terms from June 2001 to June 2011.
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 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
was 100 per cent in 2010-11.
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.
Budget Statement 2011-12
D-3
Progress Indicator
Legislative Target
Status
On 24 August 2009, NSW Treasury issued
the Internal Audit and Risk Management
Policy. The Policy strengthens risk
management in NSW Public Sector agencies
by mandating adoption of enterprise risk
management, independent audit
committees and risk based internal audit.
Treasury is currently revising the policy to
align with the latest risk management
international standard and address some
other issues. Additional guidance for
agencies on risk management is also under
development.
10. Tax restraint
Impact of tax policy
measures
D-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 $1.4 billion cumulatively
from 2011-12 to 2014-15.
Budget Statement 2011-12