The Treasury Statement in relation to the Estimated
Financial Statements for the 2015-16 Budget
Scope
The 2015-16 Budget presents financial statements for the general government sector. These include:
General Government Sector Operating Statement
General Government Sector Balance Sheet
General Government Sector Cash Flow Statement and
Derivation of ABS GFS General Government Sector Cash Surplus/(Deficit)
The statements have been prepared in accordance with the Statement of Significant Accounting
Policies and Forecast Assumptions. Collectively the Statements and Statement of Significant
Accounting Policies and Forecast Assumptions are termed the ‘Estimated Financial Statements’.
The Estimated Financial Statements cover the revised estimates for the current year ending
30 June 2015, and estimates for the Budget year ending 30 June 2016 and the three forward years
ending 30 June 2017, 2018 and 2019.
Best available information
The practicalities associated with preparing Budget papers make it is necessary to rule off at a point in
time so that all information is internally consistent. The Estimated Financial Statements have been
prepared to reflect existing operations, the impact of new Government policy decisions and year-end
projections provided by agencies based on end-April data. They have also been prepared to take into
account other economic and financial data available to Treasury up to 18 June 2015, including
Commonwealth Government funding decisions announced in the 2015-16 Commonwealth Budget.
Any estimates or assumptions made in measuring revenues, expenses, other economic flows, assets or
liabilities are based on the latest information available at the time. Assumptions are detailed under the
headings Material Economic and Other Assumptions and Summary of Other Key Assumptions.
Estimated Financial Statements and Auditor-General’s Report
Page 1
Professional judgement
The prospective nature of the Estimated Financial Statements means it is necessary to apply
professional judgement in their preparation. That judgement includes an informed assessment of the
most likely economic and financial outcomes including spending and revenue profiles.
Differences between underlying assumptions and eventual outcomes can reflect the reality of an
uncertain operating environment and the impact of many variables over which the Government has
little or no control.
In my opinion, the Estimated Financial Statements have been properly prepared in accordance with
the Statement of Significant Accounting Policies and Forecast Assumptions and the methodologies
used to determine those assumptions are reasonable.
Philip Gaetjens
Secretary
The Treasury
19 June 2015
Page 2
Estimated Financial Statements and Auditor-General’s Report
2015-16 Budget Estimated Financial Statements
The following pages form part of the estimated financial statements subject to assurance review.
General Government Sector Operating Statement
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Actual Revised
Forward Estimates
Budget
$m
$m
$m
$m
$m
$m
Revenue from Transactions
Taxation
24,295
26,046
27,855
28,678
30,085
31,343
Grants and Subsidies
- Commonwealth General Purpose
15,894
17,065
17,346
17,864
18,214
18,828
- Commonwealth Specific Purpose Payments
7,449
8,073
8,619
9,262
9,681
9,997
- Commonwealth National Partnership Payments
3,963
2,829
2,712
3,794
2,587
1,622
- Other Grants and Subsidies
1,026
1,045
1,098
1,062
783
887
5,677
6,352
8,212
8,856
8,496
8,256
609
651
508
482
481
479
2,260
2,410
1,468
1,081
946
831
700
779
424
452
472
505
4,133
3,892
3,901
4,132
4,411
4,566
66,005
69,143
72,143
75,663
76,157
77,315
27,056
28,287
28,936
30,452
31,715
33,288
- Superannuation Interest Cost
1,762
1,698
1,476
1,478
1,499
1,447
- Other Superannuation
Sale of Goods and Services
Interest
Dividend and Income Tax Equivalents
from Other Sectors
Other Dividends and Distributions
Fines, Regulatory Fees and Other
Total Revenues from Transactions
Expenses from Transactions
Employee
Superannuation
2,694
2,839
2,926
3,066
3,024
3,050
Depreciation and Amortisation
3,954
4,165
4,440
4,645
4,880
5,009
Interest
2,249
...
2,268
...
2,244
...
2,242
...
2,253
...
2,259
...
14,345
14,680
17,567
18,118
17,742
17,821
- Current Grants and Subsidies
9,644
10,179
11,092
11,570
11,605
11,388
- Capital Grants
3,052
2,969
941
898
849
796
64,757
67,085
69,624
72,469
73,567
75,058
...
...
...
...
...
...
1,247
2,058
2,520
3,194
2,590
2,257
Other Property
Other Operating
Grants and Subsidies
Total Expenses from Transactions
Transactions from Discontinuing Operations
BUDGET RESULT - SURPLUS/(DEFICIT)
[Net Operating Balance]
Estimated Financial Statements and Auditor-General’s Report
Page 3
General Government Sector Operating Statement (cont)
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Actual
$m
Other Economic Flows - Included in the Operating Result
Gain/(Loss) from Superannuation
...
Gain/(Loss) from Other Liabilities
(689)
Other Net Gains/(Losses)
285
Share of Earnings from Associates (excluding Dividends)
118
Dividends from Asset Sale Proceeds
...
Deferred Income Tax from Other Sectors
(458)
Other
(42)
Discontinuing Operations - Other
Economic Flows
...
Other Economic Flows - included in Operating Result
(785)
Revised
$m
Budget
$m
Forward Estimates
$m
$m
$m
...
(684)
581
(16)
118
...
(27)
...
137
155
(15)
100
...
105
...
392
95
(11)
...
...
125
...
244
100
(17)
...
...
67
...
118
171
(8)
...
...
24
...
(28)
...
483
...
602
...
394
...
305
462
2,030
3,002
3,796
2,984
2,562
(83)
...
3,790
(401)
(4,757)
...
6,049
...
5,024
...
3,364
...
9,819
(0)
3,397
...
6,106
...
3,379
...
3,498
...
3,392
...
Net Gain/(Loss) on Equity Investments in Other Sectors
3,978
4,562
7,033
9,034
5,756
5,159
Net Gain/(Loss) on Equity Investments in Other Sectors
Discontinued
Net Gain/(Loss) on Financial Instruments at Fair Value
Other
Other Economic Flows - Other Comprehensive Income
148
(3)
(21)
7,408
...
...
(1,248)
4,605
...
...
(2,831)
12,590
...
...
(3,466)
18,784
...
...
(1,963)
13,278
...
...
(1,463)
10,587
7,870
6,635
15,592
22,580
16,262
13,149
Operating Result
Other Economic Flows - Other Comprehensive Income
Items that will not be Reclassified to Operating Result
Superannuation Actuarial Gains/(Loss)
Deferred Tax Direct to Equity
Revaluations
Share of Earnings from Associates from Revaluations
Items that may be Reclassified Subsequently to
Operating Result
Comprehensive Result - Total Change in Net Worth
(a)
Key Fiscal Aggregates
Comprehensive Result - Total Change in Net Worth
Less:
Net Other Economic Flows
Equals: Budget Result - Net Operating Balance
Net Acquisition of Non-Financial Assets
Purchases of Non-Financial Assets
Sales of Non-Financial Assets
Less: Depreciation
Plus : Change in Inventories
Plus : Other Movements in Non-Financial Assets
- Assets Acquired Using Finance Leases
- Other
Equals: Total Net Acquisition of Non-Financial Assets
7,870
(6,623)
1,247
6,635 15,592 22,580 16,262 13,149
(4,578) (13,073) (19,386) (13,672) (10,892)
2,058
2,520
3,194
2,590
2,257
8,432
(517)
(3,954)
(25)
9,479
(469)
(4,165)
(4)
9,186
(687)
(4,440)
1
8,216
(400)
(4,645)
(2)
7,705
(474)
(4,880)
8
7,018
(535)
(5,009)
(1)
114
(1,567)
2,484
131
(1,719)
3,254
183
60
4,302
109
69
3,347
125
107
2,591
3,420
110
5,003
(1,236)
(1,196)
(1,783)
(153)
(1)
(2,747)
8,546
9,610
9,369
8,325
7,830
10,438
Less:
Equals: Net Lending/(Borrowing) [Fiscal Balance]
OTHER FISCAL AGGREGATES
(b)
Capital Expenditure
(a) Total change in net worth’ is before transactions with owners as owners, and before revisions to equity from
changes to accounting policies. Therefore it may not equal the movement in balance sheet net worth.
(b) Capital expenditure comprises purchases of non-financial assets plus assets acquired using finance leases.
Page 4
Estimated Financial Statements and Auditor-General’s Report
General Government Sector Balance Sheet
June 2014 June 2015 June 2016
June 2017 June 2018 June 2019
Forward Estimates
Actual
Revised
Budget
$m
$m
$m
$m
$m
$m
10,881
7,470
102
5,723
6,699
21
5,059
6,277
19
5,441
6,098
40
5,090
5,773
76
10,865
3,232
1,033
4,650
11,369
4,885
1,175
4,786
11,671
2,919
1,301
4,939
12,219
1,037
1,378
5,042
12,869
1,115
1,354
5,101
88,943
3,897
10
131,082
95,976
3,882
10
134,525
105,007
3,870
10
141,072
110,761
3,854
10
145,879
115,918
3,846
10
151,153
Assets
Financial Assets
Cash and Cash Equivalent Assets
9,966
Receivables
6,833
Tax Equivalents Receivable
206
Investments, Loans and Placements
Financial Assets at Fair Value
9,562
Other Financial Assets
4,607
Advances Paid
944
Deferred Tax Equivalents Assets
4,695
Equity
Investments in Other Public Sector Entities 84,695
Investments in Associates
4,039
Other Equity Investments
10
Total Financial Assets
125,557
Non-Financial Assets
Inventories
Forestry Stock and Other Biological Assets
Assets Classified as Held for Sale
Investment Properties
Property, Plant and Equipment
Land and Buildings
Plant and Equipment
Infrastructure Systems
Intangibles
Other Non-Financial Assets
Total Non-Financial Assets
248
7
106
137
244
7
300
142
245
7
42
142
243
7
103
142
251
7
68
142
250
7
47
142
64,100
9,533
74,239
2,356
2,061
152,790
67,334
10,373
78,970
2,661
2,392
162,423
69,672
10,407
83,686
2,984
2,817
170,003
70,064
10,451
89,337
2,940
3,456
176,742
70,619
10,388
94,446
2,691
3,960
182,572
70,911
10,255
102,471
2,370
4,269
190,721
Total Assets
278,346
293,505
304,528
317,814
328,451
341,874
117
5,553
40
122
5,748
48
113
4,976
81
100
4,746
49
86
4,755
18
73
4,856
27
...
13
31,028
791
14,435
...
11
31,632
901
15,179
...
9
32,019
885
15,222
...
7
32,220
893
15,184
...
6
32,233
861
15,211
...
4
35,417
734
15,464
48,262
488
7,934
1,918
54,053
532
8,365
2,512
49,735
537
8,565
2,390
40,379
528
8,788
2,345
34,519
522
9,103
2,298
31,084
523
9,441
2,265
Total Liabilities
110,578
119,102
114,533
105,239
99,614
99,889
NET ASSETS
167,768
174,403
189,995
212,575
228,837
241,985
Liabilities
Deposits Held
Payables
Tax Equivalent Payables
Liabilities Directly Associated with
Assets Held for Sale
Borrowings and Derivatives at Fair Value
Borrowings at Amortised Cost
Advances Received
Employee Provisions
(a)
Superannuation Provisions
Deferred Tax Equivalent Provisions
Other Provisions
Other Liabilities
...
NET WORTH
Accumulated Funds
Reserves
20,085
147,683
16,733
157,669
22,047
167,948
32,316
180,258
39,564
189,273
44,283
197,703
TOTAL NET WORTH
167,768
174,403
189,995
212,575
228,837
241,985
14,979
11,979
19,992
35,833
46,265
51,264
6,869
69,716
6,655
76,964
9,875
75,984
12,270
69,175
13,112
64,496
15,799
64,653
OTHER FISCAL AGGREGATES
Net Financial Worth
(b)
Net Debt
(c)
Net Financial Liabilities
(a) Superannuation liabilities are reported net of prepaid superannuation contribution assets.
(b) Net debt comprises the sum of deposits held, advances received and borrowing, minus the sum of cash
deposits, advances paid, and financial assets at fair value.
(c) Net financial liabilities equals total liabilities less financial assets excluding equity investments in other public
sector entities.
Estimated Financial Statements and Auditor-General’s Report
Page 5
General Government Sector Cash Flow Statement
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Actual Revised
Budget
Forward Estimates
$m
$m
$m
$m
$m
$m
Cash Receipts from Operating Activities
Taxes Received
Receipts from Sales of Goods and Services
Grants and Subsidies Received
Interest Receipts
Dividends and Income Tax Equivalents
Other Receipts
Total Cash Receipts from Operating Activities
24,081
6,316
28,272
550
2,806
7,441
26,247
6,275
28,898
631
2,306
7,684
27,909
8,522
29,866
467
2,128
6,486
28,708
9,281
31,981
442
1,435
6,692
30,107
8,921
31,264
435
1,032
6,941
31,379
8,823
31,316
435
916
7,273
69,467
72,041
75,378
78,539
78,700
80,142
Cash Payments from Operating Activities
Payments for Employees
Payments for Superannuation
Payments for Goods and Services
Grants and Subsidies Paid
(26,297) (27,897) (29,232) (30,309) (31,488) (32,991)
(3,392) (3,438) (3,698) (4,081) (4,277) (4,435)
(15,750) (16,590) (19,927) (20,327) (19,824) (19,830)
(8,556) (9,151) (9,597) (9,913) (9,805) (9,439)
Interest Paid
Other Payments
Total Cash Payments from Operating Activities
Net Cash Flows from Operating Activities
(1,614)
(1,733)
(1,684)
(1,682)
(1,651)
(1,639)
(4,482)
(3,850)
(3,440)
(3,527)
(3,557)
(3,647)
(60,090) (62,660) (67,578) (69,840) (70,601) (71,981)
9,376
9,381
7,800
8,699
8,099
8,162
605
450
697
400
474
535
(8,325)
(9,332)
(9,184)
(8,313)
(7,737)
(6,986)
(7,720)
(8,881)
(8,487)
(7,913)
(7,263)
(6,451)
Net Cash Flows from Investments in
Non-Financial Assets
Sales of Non-Financial Assets
Purchases of Non-Financial Assets
Net Cash Flows from Investments
in Non-Financial Assets
Cash Flows from Investments from
Financial Assets for Policy Purposes
Receipts
2,875
965
222
203
212
267
Payments
(305)
(1,398)
(3,071)
(3,694)
(2,268)
(1,725)
2,570
(433)
(2,849)
(3,491)
(2,056)
(1,458)
Net Cash Flows from Investments
in Financial Assets for Policy Purposes
Net Cash Flows from Investments in Financial
Assets for Liquidity Purposes
Receipts from Sale/Maturity of Investments
Payments for Purchases of Investments
Net Cash Flows from Investments in Financial
Assets for Liquidity Purposes
Net Cash Flows from Investing Activities
724
9,095
495
2,721
2,515
460
(4,984)
(8,202)
(2,181)
(636)
(658)
(682)
(4,260)
893
(1,686)
2,085
1,857
(223)
(8,422) (13,023)
(9,319)
(7,463)
(8,132)
(9,410)
Cash Flows from Financing Activities
Advances Received
Advances Repaid
98
154
23
38
39
29
(54)
(61)
(53)
(53)
(53)
(94)
Proceeds from Borrowings
2,204
1,281
640
480
430
513
Repayments of Borrowings
(444)
(1,215)
(533)
(543)
(726)
(879)
Deposits Received (net)
(956)
4
(9)
(14)
(14)
(14)
15
(8)
(0)
(2)
...
...
Other Financing (net)
Net Cash Flows from Financing Activities
863
155
69
(92)
(323)
(445)
Net Increase/(Decrease) in Cash Held
829
1,114
(5,154)
(712)
313
(415)
9,376
9,381
7,800
8,699
8,099
8,162
(7,720)
(8,881)
(8,487)
(7,913)
(7,263)
(6,451)
1,656
500
(687)
786
836
1,711
Derivation of Cash Result
Net Cash Flows from Operating Activities
Net Cash Flows from Investments in
Non-Financial Assets
Cash Surplus/(Deficit)
Page 6
Estimated Financial Statements and Auditor-General’s Report
Derivation of ABS GFS General Government Sector Cash Surplus/(Deficit)
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Actual
$m
Revised
$m
Budget
$m
Forward Estimates
$m
$m
$m
Cash Surplus/(Deficit)
1,656
500
(687)
786
836
1,711
Assets Acquired under Finance Leases
(114)
(131)
(183)
(109)
(125)
(3,420)
(195)
(129)
(12)
97
32
(32)
1,347
240
(882)
773
743
(1,741)
Other Financing Arrangements
ABS GFS Surplus/(Deficit)
(a)
(a)
Comprises movements in payables and receivables of a capital nature
Estimated Financial Statements and Auditor-General’s Report
Page 7
Statement of Significant Accounting Policies and Forecast
Assumptions
Scope of the Estimated Financial Statements
The Budget Papers present the Estimated Financial Statements of the General Government Sector
including revised estimates for the current year ending 30 June 2015, estimates for the Budget year
ending 30 June 2016 and the three forward years ending 30 June 2017, 2018 and 2019.
These comprise the General Government Sector Operating Statement, General Government Sector
Balance Sheet, General Government Sector Cash Flow Statement and Derivation of ABS GFS General
Government Sector Cash Surplus / (Deficit). These are prepared in accordance with this Statement of
Significant Accounting Policies and Forecast Assumptions.
Collectively the statements and the Statement of Significant Accounting Policies and Forecast
Assumptions are referred to as the ‘Estimated Financial Statements’.
The Estimated Financial Statements are prepared for the NSW General Government Sector, which is
determined in accordance with the principles and rules contained in the Australian Bureau of
Statistics, Australian System of Government Finance Statistics: Concepts, Sources and Methods 2005
(cat. No. 5514) (ABS GFS Manual) as amended from time to time.
The General Government Sector comprises government agencies controlled by the State that:
undertake regulatory functions
redistribute income and wealth
provide or distribute goods and services on a non-market basis to individuals and the community
and/or
provide services to general government agencies.
The scope of the General Government Sector is outlined in Appendix B3 of Budget Paper 1.
Basis of Preparation
The Estimated Financial Statements are prepared using the accrual basis of accounting, which
recognises the effect of transactions and events when they are forecast to occur.
They have been prepared to reflect existing operations and the impact of new policy decisions taken by
the New South Wales Government (where their financial effect can be reliably measured). The 2014-15
Budget is derived from the 2014-15 Budget Papers. The revised estimates for 2014-15 are based on
actual results at 30 April 2015, and updated year end projections provided by agencies. They have also
been prepared to take into account other economic and financial data available to Treasury up to 18
June 2015, including Commonwealth Government funding decisions announced in the 2015-16
Commonwealth Budget.
Page 8
Estimated Financial Statements and Auditor-General’s Report
In keeping with these principles, where the impact of a policy decision or planned event cannot be
reliably estimated, the impact is not reflected within the Estimated Financial Statements
(e.g. due to uncertainties regarding the timing and amount of future cash flows).
Any estimates or assumptions made in measuring revenues, expenses, other economic flows, assets or
liabilities are based on the latest information available at the time, professional judgments derived
from experience and other factors considered to be reasonable under the circumstances. Actual results
may differ from such estimates. Assumptions are detailed below, under the headings Material
economic and other assumptions and Summary of other key assumptions.
Accounting Policies
Australian Accounting Standards do not include requirements or provide guidance on the preparation
or presentation of prospective financial statements. However, recognition and measurement principles
within Australian Accounting Standards have been applied in the presentation of the Estimated
Financial Statements to the maximum extent possible.
The Estimated Financial Statements do not include the impact of business asset transactions until they
are finalised. The financial impact of future planned discontinuing operations or restructures are not
recognised due to the commercial-in-confidence nature of the transactions.
The Estimated Financial Statements adopt the accounting policies expected to be used in preparing
general purpose financial statements for 2014-15. With the exception of those matters below, the
policies are not materially different from those applied in the Total State Sector Accounts 2013-14.
Note 1 of the Total State Sector Accounts 2013-14 sets out the significant accounting policies, including
the principles of consolidation and the recognition and measurement policies for revenues, expenses,
other economic flows, assets and liabilities.
Change in Accounting Policies
The following Australian Accounting Standards have been adopted in 2014-15, impacting on the
State’s financial estimates as follows.
Revisions to Standards relating to Consolidations, Joint Arrangements and Associates
The State has adopted the following new and revised standards relating to consolidations, joint
arrangements and associates on 1 July 2014: AASB 10 Consolidated Financial Statements; AASB 11
Joint Arrangements; AASB 12 Disclosure of Interests in Other Entities; AASB 127 Separate Financial
Statements; and AASB 128 Investments in Associates and Joint Ventures.
AASB 10 introduced a revised definition of control and provided several new principles in assessing
whether control exists. AASB 11 requires joint arrangements to be accounted for based on their
contractual arrangements, and distinguishes between joint operations and joint ventures. AASB 12
contains the disclosure requirements associated with ‘other entities’ (i.e. subsidiaries, associates and
joint ventures) that were previously located in AASB 127, 128 and 131 and Interpretations 112 and
113.
Estimated Financial Statements and Auditor-General’s Report
Page 9
The impact of any changes to control relationships on the Estimated Financial Statements, arising
from these new and revised standards, is not expected to be significant. The General Government
Sector does not consolidate Public Non-Financial Corporations and Public Financial Corporations
that it controls on a line by line basis; and instead, recognises an equity investment in those entities
and a gain or loss for changes in the carrying amount of the investment.
Presentation of the Estimated Financial Statements
The Estimated Financial Statements follow the presentation requirements for General Government
Sector reporting contained in AASB 1049 Whole of Government and General Government Sector
Financial Reporting.
AASB 1049 harmonises generally accepted accounting principles (GAAP, i.e. Australian accounting
standards) with Government Finance Statistics (GFS) principles in accordance with the GFS
framework adopted by the Australian Bureau of Statistics. This occurs by requiring that:
the statement of comprehensive income (referred to as the operating statement) classifies income
and expenses as either transactions or other economic flows to be consistent with GFS principles,
applied from a GAAP perspective
The net operating balance (i.e. Budget result) is the net result of harmonised GFS-GAAP transactions
for the general government sector.
In the operating statement:
the net operating balance (i.e. the Budget result) is the net result of income and expense
transactions. It excludes other economic flows, which represent changes in the volume or value of
assets or liabilities that do not arise from transactions with other entities and which are often
outside the control of government.
the operating result is the same under both the harmonised GFS-GAAP and pure GAAP
presentations.
Further, AASB 1049 requires:
the financial statements adopt the recognition, measurement and disclosure requirements of
GAAP
where options exist in GAAP, the financial statements adopt the option that is aligned with GFS,
to minimise differences between GAAP and GFS
where options do not exist in GAAP and there is conflict between GAAP and GFS, GAAP
prevails.
Due to the prospective nature of the statements, detailed notes to the financial statements, including
disclosure of contingent assets and liabilities, are not required to be presented within the meaning of
Australian Accounting Standards as outlined in Section 27A (5) of the Public Finance and Audit Act
1983.
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Estimated Financial Statements and Auditor-General’s Report
Each year ends on 30 June. All monetary amounts are presented in Australian dollars and rounded to
the nearest million dollars ($m).
Use of a zero (“0”) represents amounts rounded to zero. Use of three dots (“…”) represents nil
amounts.
Tables may not add in all instances due to rounding to the nearest million dollars.
Presentation Changes
There has been a minor presentation change within the Balance Sheet since the release of the 2014-15
Budget Papers to separately disclose ‘Financial Assets at Fair Value’ and ‘Other Financial Assets’ that
are not recorded at fair value under the heading ‘Investments, Loans and Placements’. This
presentation remains consistent with GAAP and GFS presentation requirements.
Definitions
Key technical terms, including fiscal aggregates, are defined in the Glossary to Budget Paper No 1.
Material Economic and Other Assumptions
The Estimated Financial Statements have been prepared using the material economic and other
assumptions as set out in Table B2.1.
Key economic performance assumptions (a)
2013-14 2014-15
Outcomes Forecasts
2015-16
Forecasts
2016-17 2017-18 and 2018-19
(b)
Forecasts
Projections
New South Wales
Real state final demand
2.7
3¼
3½
3½
Real gross state product
2.1
2½
3
3
2¾
Employment
0.6
1¼
1¾
1¾
1¼
5.7
6
5¾
5¾
2.5
1¾
2½
2¾
2.8
1¾
2½
2¾
2.5
2¼
2½
2¾
3.1
4
4
4¾
Unemployment rate
(c)
(d)
Sydney CPI
- through the year to June quarter
(d)
Wage price index
(e)
Nominal Gross State Product
(a)
Per cent change, year average, unless otherwise indicated.
(b)
Average across 2017-18 and 2018-19.
2½
3½
(c)
Year average, per cent.
(d)
2014-15 includes a ¾ of a percentage point detraction from the abolition of the carbon tax. 2014-15 to
2016-17 include a ¼ of a percentage point contribution from tobacco excise increases.
(e)
Nominal GSP measures the value of production whereas real GSP measures the volume of production. The
difference is a measure of the average change in prices for goods and services produced.
Source: ABS 5206.0, 5220.0, 6202.0, 6401.0, 6345.0 and Treasury
Estimated Financial Statements and Auditor-General’s Report
Page 11
Summary of Other Key Assumptions
The following section outlines the other key assumptions used in the preparation of the Estimated
Financial Statements. The summary takes into account materiality in relation to the General
Government Sector’s overall financial position and sensitivity to changes in key economic
assumptions.
Notwithstanding these key assumptions, agency finance officers apply appropriate professional
judgement in determining estimated financial information.
Revenues from Transactions
Taxation
Taxation revenue is forecast by assessing economic and other factors that influence the various
taxation bases. For example for payroll tax, this involves an assessment of the outlook for employment
and wages. Forecasts of government guarantee fees take into account an assessment of the level of debt
of public non-financial corporations and their credit rating differential compared with the State as a
whole. The forecasts of taxation revenue also involve the analysis of historical information and
relationships (using econometric and other statistical methods) and consultation with relevant
government agencies.
Grants revenue
Forecast grants from the Australian Government are based on the latest available information from the
Australian Government and projections of timing of payments at the time of preparation of the
Budget. This takes into account the conditions, payment timetable and escalation factors relevant to
each type of grant.
The Goods and Services Tax (GST) grants are forecast based on estimates of the national GST pool by
the Australian Government. For 2015-16, the GST forecast is based on the assessed relativity for New
South Wales in 2015-16 and the Australian Government’s population projections. The assessed
relativity is the average of the past three years annual per capita relativities (2011-12, 2012-13 and
2013-14) as published by the Commonwealth Grants Commission.
After 2015-16, the State’s share of GST is based on assessed relativities in a particular year and the
Australian Government’s population and GST pool projections. The forecast per capita annual
relativities are based on the projected relative fiscal capacity of New South Wales compared to other
States and Territories.
Sales of goods and services
Revenue from the sale of goods and services is forecast taking into account factors including estimates
of changes in demand for services provided or expected unit price variations based on proposed fee
increases imposed by general government agencies and/or indexation.
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Estimated Financial Statements and Auditor-General’s Report
Dividend and income tax equivalents from other sectors
Dividend and income tax equivalent revenues are estimated by public financial and non-financial
corporations based on expected profitability and the agreed dividend policy at the time of the Budget.
Fines, regulatory fees and other revenues
Fines, regulatory fees and other revenues include estimates of fines issues by the Courts, estimated
traffic infringement fines, estimated revenue from enforcement orders, regulatory fees, contributions
and royalty revenue for which estimates are based on assessments of coal volumes and prices and the
Australian dollar exchange rate. Other revenue forecasts are adjusted for indexation where
appropriate.
Expenses from Transactions
Employee expenses
Employee expenses are forecast based on expected staffing profiles, current salaries, conditions and
on-costs. Employee expenses are adjusted over the forecast period for approved wage agreements.
Beyond the period of the agreements, allowance is made for further adjustments consistent with the
Government’s wages policy at a net cost of 2.5 per cent per annum inclusive of scheduled increases in
the superannuation guarantee levy. The forecasts for employee expenses also reflect the impact of new
approved initiatives and required efficiency savings.
Superannuation expense (and liabilities)
Superannuation expenses comprise:
for the defined contribution plan, the forecast accrued contribution for the period, and
for defined benefit plans, the forecast service cost and the net interest expense. This excludes the
re-measurements, (i.e. actuarial gains and losses and return on plan assets excluding the gross
interest income) which are classified as ‘other economic flows – other comprehensive income’.
Superannuation expenses for defined contribution plans are based on assumptions regarding future
salaries and contribution rates.
Superannuation expenses for defined benefit plans are estimated based on actuarial advice applying
the long-term Government Bond yield as at 30 June in the prior year to the opening value of net
liabilities (gross superannuation liabilities less assets), less benefit payments at the mid-point of the
contribution year, plus any accruing liability for the year.
Forecasts of defined benefit superannuation liabilities are based on actuarial estimates of cash flows for
the various defined benefit superannuation schemes discounted using a nominal long-term
Commonwealth Government bond yield as at 30 June. Gross liability estimates are based on a number
of demographic and financial assumptions. The major financial assumptions used for the budget and
forward estimates period are outlined in the table below.
Estimated Financial Statements and Auditor-General’s Report
Page 13
The table below sets out the major financial assumptions used to estimate the superannuation expense
and liability in respect of defined benefit superannuation for the budget and forward estimates period.
Superannuation Assumptions – Pooled Fund / State Super Schemes
2014-15
%
2015-16
%
2016-17
%
2017-18
%
2018-19
%
Liability discount rate
2.77
3.02
3.79
4.33
4.55
Expected return on
investments
15.3
8.60
8.60
8.60
8.60
2.25
2.50
2.50
2.50
2.50
2.25
2.50
2.50
2.50
2.50
1.50
2.50
2.75
2.75
2.50
Expected salary increases(a)
- SSS and SASS Members
- PSS Members
(b)
Expected rate of CPI
(b)
(a)
Taking the increased Superannuation Guarantee Contribution into account, total remuneration will increase by
2.5 per cent.
(b)
SSS – State Superannuation Scheme, SASS – State Authorities Superannuation Scheme, PSS – Police
Superannuation Scheme
Depreciation and amortisation
Property, plant and equipment is depreciated (net of its residual value) over its useful life. Depreciation
is generally allocated on a straight-line basis.
Depreciation is forecast on the basis of known asset carrying valuations, the expected economic life of
assets, assumed new asset investment and asset sales programs. The expense is based on the
assumption that there will be no change in depreciation rates over the forecast period, but includes the
estimated impact of the current and future revaluation of assets over the forecast period. The
depreciation expense may also be impacted by future changes in useful lives, carrying value, residual
value or valuation methodology.
Certain heritage assets, including original artworks and collections and heritage buildings, may not
have a limited useful life because appropriate custodial and preservation policies are adopted. Such
assets are not subject to depreciation. Land is not a depreciable asset.
Intangible assets with finite lives are amortised under the straight line method. Intangible assets with
an indefinite life are not amortised, but tested for impairment annually.
Interest expense
The forecasts for the interest expenses are based on:
payments required on the current general government sector debt,
expected payments on any new borrowings (including any refinancing of existing borrowings)
required to finance general government activities based on forward contracts for NSW Treasury
Corporation bonds, and
the unwinding of discounts on non-employee provisions.
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Estimated Financial Statements and Auditor-General’s Report
Other operating expenses
Other operating expenses mainly represent the day-to-day running costs incurred in the normal
operations of agencies and include the cost of supplies and services. They are forecast by applying
appropriate economic parameters and known activity changes, including planned changes in the
method of service delivery and the application of government policy. Other operating expenses also
reflect the impact of government efficiency strategies, such as efficiency dividends.
Grants and subsidies expense
Grant and subsidy expenses generally comprise cash contributions to local government authorities and
non-government organisations. For the general government sector they include grants and subsidies
paid to the Public Non-Financial Corporation and Public Financial Corporations sectors. The forecast
grant payments are determined taking into account current and past policy decisions, the forecast
payment schedules and escalation factors relevant to each type of grant.
Other Economic Flows
Revaluations
The estimates are based on an examination and extrapolation of historical trends in the valuation of
non-financial physical assets. The forward estimates include the estimated impact of revaluations of
non-financial physical assets.
Superannuation actuarial gains / losses
The forecast gain or loss on defined benefit superannuation is based on the revised estimates of the
margin of forecast fund earnings in excess of the expected discount rate.
Net gain on equity investments in other sector entities
The gain or loss on equity investments in other sector entities is based on estimates of the public
financial corporation and public non-financial corporation sectors’ forward comprehensive results
adjusted for transactions with owners. The underlying management estimates of future comprehensive
results are based on current Statements of Corporate Intent. Future distributions to owners are based
on the Treasury Commercial Policy Framework.
Estimated Financial Statements and Auditor-General’s Report
Page 15
Assets
Land and buildings, plant and equipment, and infrastructure
The estimates of non-financial physical assets over the forecast period are at fair value and take into
account planned acquisitions, disposals, and the impact of depreciation and revaluations. New
investments in assets are valued at the forecast purchase price and, where appropriate, recognised
progressively over the estimated construction period. The forward estimates include the estimated
impact of revaluations of non-financial physical assets. These estimates are based on an examination of
expected cost trends.
The Estimated Financial Statements also include provisions for future capital expenditure. These
include agency estimates of approved projects and future new works held within agencies, as well as a
central estimate for future new works still to be approved at the agency level. The central estimate for
future new works is based upon historical trends.
Liabilities
Borrowings
Estimates for borrowings are based on current debt levels, amortisation of any premiums or discounts
and the cash flows expected to be required to fund future government activities.
Employee provisions
Employee provisions are forecast based on expected staffing profiles and current salaries, conditions
and on-costs. For the forecast period, employee benefits are adjusted for approved wage agreements.
Beyond the period of the agreements, allowance is made for further adjustments consistent with the
Government’s wages policy at a net cost of 2.5 per cent per annum inclusive of scheduled increases in
the superannuation guarantee levy. The forecasts for employee expenses also reflect the impact of new
initiatives and required efficiency savings.
Superannuation provisions
Refer to superannuation expense (above) for information on assumptions that also impact the
measurement of the superannuation provisions.
Other provisions
Other provisions include the State’s obligations for several insurance schemes. To estimate future
claim liabilities, actuarial assumptions have been applied for future claims to be incurred, claim
payments, inflation and liability discount rates. Actual liabilities may differ from estimates.
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Estimated Financial Statements and Auditor-General’s Report