Queensland Treasury 18-K Annual report (foreign governments)

EXHIBIT (c)(iv)

Report entitled

“Queensland Budget 2018-19 Mid Year Fiscal and Economic Review”.

QUEENSLAND BUDGET 2018-2019

2018-19 Mid Year Fiscal and Economic Review

© The State of Queensland (Queensland Treasury) 2018

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© The State of Queensland (Queensland Treasury) Mid Year Fiscal and Economic Review 2018-19.

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FOREWORD

I am pleased to present the 2018-19 Mid Year Fiscal and Economic Review (MYFER).   MYFER highlights the Palaszczuk Government’s ongoing commitment to job creation, better infrastructure, economic growth and vital service delivery for all Queenslanders.   It’s a commitment underpinned by a strong Economic Plan and responsible fiscal management that ensures we maintain our income earning assets in public ownership, and utilise debt responsibly and sustainably to build critical economic and social infrastructure.   What’s clear from MYFER is that our Economic Plan is working. Over the past four budgets, we’ve been investing in Queensland and in Queenslanders because we know our future prosperity depends on it.

We’re continuing to work with business and industry to create jobs, we’re building better infrastructure and we’re delivering quality health, education and other vital services to Queenslanders. We’re also helping communities to navigate the challenges of change and to take advantage of the opportunities that come from growth.

Our $46.3 billion capital program over four years is the biggest since the 2011 flood recovery.

This investment in hospitals, schools, road and rail infrastructure will transform our cities and regions while supporting existing jobs and creating new ones.

Queensland has been one of the country’s leading job-creation states, with more than 165,000 jobs created since January 2015. We are focussed on maintaining this momentum by investing in the education and training needed to equip Queenslanders with the skills and support to succeed in a fast-changing world.

Our strong focus on innovation and our investment in the workforce through initiatives such as the Back to Work program, Jobs and Regional Growth Fund and Industry Attraction Fund, has attracted significant national and international investment.

We know this is because investing in Queensland makes good sense. We have one of the most competitive payroll tax regimes in Australia, a multi-cultural, well-educated and resourceful workforce, competitive labour costs, better development approval processes and of course, our unmatched lifestyle.

As one of Australia’s most outward-facing states, Queensland was well positioned to take advantage of the global trade recovery and improved commodity prices. Thanks largely to growth in Asia, our export earnings reached a record high of $94.3 billion in 2017-18.

Queensland’s strong economic performance has again supported an improved budget position. The net operating surplus in 2018-19 is $524 million, up by $376 million on the June forecast.

State budget surpluses are forecast to continue, totalling almost $1 billion over the four years to 2021-22 despite a forecast reduction in GST revenue of more than $770 million for the same period.

This consistency has allowed us to continue to manage General Government Sector Debt, provide funds for services and infrastructure development, and make Queensland a desirable investment destination.

MYFER confirms our plan to sensibly manage and grow the economy to make sure all Queenslanders share in our future prosperity.

The Hon Jackie Trad MP

Deputy Premier

Treasurer

Minister for Aboriginal and Torres Strait Island Partnerships

1

SUMMARY

The Mid Year Fiscal and Economic Review 2018-19 (MYFER) provides an update on the State’s economic and fiscal position since the 2018-19 Budget in June 2018.

The highlights of this year’s MYFER include:

• Forecast net operating surplus of $524 million in 2018-19, an improvement of $376 million on the Budget estimate due to revenue uplifts.

• General Government sector net operating balances expected to remain in surplus, despite a strong reduction in forecast GST revenue.

• A capital program of $46.3 billion over the forward estimates.

• Forecast economic growth of 3% in 2018-19 and 2³⁄₄% in 2019-20, unchanged from the 2018-19 Budget and broadly in line with national growth.

The Palaszczuk Government’s Economic Plan will continue to drive jobs and economic prosperity across the State. The effectiveness of the Economic Plan is exemplified by Queensland’s strong jobs growth: a total of 165,700 new jobs, including 78,700 full time jobs, have been created since January 2015.

The Government is delivering on its election commitments, including restoring and boosting the Skilling Queenslanders for Work program and the building or upgrading of 40 hospitals across Queensland.

The Government continues to deliver on its $46 billion infrastructure program, the biggest spend since the 2011 floods. Key projects include Cross River Rail, upgrades to the M1 and the Bruce Highway, Rookwood Weir, Cairns Convention Centre, and Townsville water pipeline. Our massive investment is helping to deliver infrastructure and create jobs across Queensland. We are also accelerating $100 million in funding for the popular Works for Queensland program which will help support jobs in regional areas.

The Government continues to collaborate with Queensland industry leaders to plan for the future of work and to ensure that the labour market of the future will have workers with the right mix of education and skills. The Future of Work Skills and Industry Summit held in Brisbane in November 2018 highlighted the importance of ongoing collaboration between government, industry and the education sector.

November 2018 also saw the successful launch of Queensland’s container refund scheme, Containers for Change, part of the Government’s comprehensive waste management strategy to increase recycling, improve sector investment, and create new jobs. The majority of funds raised through the waste disposal levy will go towards supporting councils, the waste industry, and environmental programs.

Our Economic Plan is working to create jobs and grow our economy. This strong record of economic management allows us to deliver the infrastructure, skills and services that will help us to manage growth and ensure we can all share in future prosperity.

2  Mid Year Fiscal and Economic Review 2018-19

CONTENTS

Foreword	1
Summary	2
Contents	3
Economic Plan to Continue to Deliver Jobs	4
Economic Overview	5
External conditions	7
Queensland conditions	8
Labour market	10
Fiscal Overview	12
Net operating balance	12
Revenue	14
Expenses	16
Intergovernmental Financial Relations	17
Balance Sheet	18
Government Fiscal Principles	20
Uniform Presentation Framework	22
Taxation and Royalty Revenue Assumptions	31
Key Fiscal Aggregates	32

3

ECONOMIC OVERVIEW

ECONOMIC PLAN TO CONTINUE TO DELIVER JOBS

The Queensland Government’s Economic Plan is continuing to deliver growth, jobs and prosperity for Queenslanders.

Since 2015, the Palaszczuk Government’s Economic Plan has been integral in driving economic prosperity, jobs and enhancing living standards across the State, through its focus on:

• increasing the economic opportunities available to Queenslanders

• enhancing the capacity of Queenslanders to access and capitalise on these opportunities

• ensuring all Queenslanders share in the prosperity and improved quality of life these opportunities deliver.

The effectiveness of the Economic Plan is exemplified by Queensland’s strong jobs growth (3.1%) over the year to June quarter 2018, with a total of 165,700 new jobs, including 78,700 full time jobs, created since January 2015.

Consistent with the Government’s Our Future State Advancing Queensland’s Priorities, the Economic Plan focuses on delivering these outcomes through six key policy channels as outlined in Figure 1.

Despite the strength of the State’s economy and labour market, maintaining a strong, resilient and flexible economy and workforce will be critical for Government and business to respond to global factors and technological change.   Most importantly, the labour market of the future will need workers with the right mix of education and skills to capitalise on the opportunities that arise in a changing economic environment characterised by new technologies, increased automation, rapid innovation and the shift to a knowledge-based economy.   In response to this challenge, the Government is investing significantly in education and skills development to ensure all Queenslanders, particularly the State’s youth, can access additional job opportunities, earn higher incomes and enjoy the benefits of higher living standards both now and into the future. Figure 1: Driving jobs and prosperity through the economic plan  

In line with the Economic Plan, the Government will continue to maintain a strong focus on driving job creation across the entire State, particularly in those regions facing economic challenges, such as Townsville, Central Queensland and Wide Bay. In particular, the Government’s ongoing significant investment in infrastructure, education, training and skills development will continue to help unlock economic opportunities across all regions to create new jobs now and into the future.

4  Mid Year Fiscal and Economic Review 2018-19

ECONOMIC OVERVIEW

ECONOMIC OVERVIEW

The outlook for overall economic growth in Queensland and key measures of the State’s labour market in both 2018-19 and 2019-20 remain unchanged from those published in the 2018-19 State Budget.

Consistent with the risks and opportunities highlighted in the 2018-19 Budget, a range of external factors and ongoing developments in global and national economic conditions continue to impact the outlook for some specific sectors of the State economy. Some of the key international risks outlined in the Budget, particularly related to global trade, have begun to eventuate or have heightened over the second half of 2018.

Key developments since June 2018 include:

• A stronger US economy has seen US Treasury bond yields rise significantly, while the US-China trade war has intensified, adversely affecting the Chinese economy and the outlook for its key Asian trading partners.

• The key impacts of these international developments have been a weaker outlook for industrial production growth, which has in turn tempered the outlook for Queensland export growth. Meanwhile, higher global interest rates have led to some banks increasing interest rates domestically. In addition, a tightening in lending standards by domestic banks has contributed to a reduced availability of credit, despite an unchanged RBA cash rate.

• Continuing dry conditions are expected to lead to a short-term boost to beef exports, as producers once again seek to reduce herds, although these dry conditions may see crop production weaken.

Meanwhile, domestic economic activity has been stronger than expected at the time of the Budget. In particular:

• Last year’s very strong employment growth has supported incomes and flowed through to increased household consumption spending, while the ‘soft landing’ anticipated for dwelling construction remains on track, supported by ongoing growth in renovation activity.

• Domestic activity is also being supported by the ongoing provision of public services and public investment, including the roll-out of the National Disability Insurance Scheme (NDIS) and the Queensland Government’s infrastructure program.

• Business investment has rebounded strongly to grow by 12.5% in 2017-18, supported by significant investment in renewable energy projects. Recent data suggest that business investment in the State is likely to ease slightly in the current financial year, but remain more than $2 billion above 2016-17 levels.

The net impact of these developments on the overall outlook is limited, with GSP growth still forecast to strengthen to 3% in 2018-19, before easing slightly to 2³⁄₄% in 2019-20, unchanged from the Budget and broadly in line with forecast growth in Australia’s Gross Domestic Product.

Similarly, following the strongest jobs growth in a decade (3.1% over the year to June quarter 2018), employment growth is forecast to return to more sustainable rates of 1¹⁄₂% in the year to June quarter 2019 and 1³⁄₄% in the year to June quarter 2020, broadly in line with anticipated population growth. Meanwhile, the unemployment rate is expected to stabilise at 6¹⁄₄% in June quarter 2019, before edging lower to 6% in June quarter 2020.

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ECONOMIC OVERVIEW

Table 1: Queensland economic forecasts¹

	2017-18		2018-19				2019-20
	Outcome		Budget		MYFER		Budget		MYFER
Gross state product		2.6		3		3		23⁄4		23⁄4
Employment2		3.1		11⁄2		11⁄2		13⁄4		13⁄4
Unemployment rate3		6.2		61⁄4		61⁄4		6		6
Inflation4		1.7		2		2		21⁄2		21⁄4
Wage Price Index4		2.2		21⁄2		21⁄2		3		3
Population5		1.7		13⁄4		13⁄4		13⁄4		13⁄4

Notes:

1. Annual % change, except for unemployment rate.

2. Through-the-year growth rate to the June quarter (seasonally adjusted).

3. Seasonally adjusted rate for the June quarter.

4. Year-average.

5. Population growth for 2017-18 is the annual growth rate in the three quarters to March quarter 2018.

Sources: ABS 3101.0, 6202.0, 6345.0, 6401.0 and Queensland Treasury.

Chart 1: Real Economic Growth¹, Queensland and Australia

Notes:

1. Gross State/Domestic Product. Chain volume measure (CVM), 2015-16 reference year. 2018-19 and 2019-20 are forecasts.

Sources: Queensland State Accounts - June quarter 2018 for historical data, Queensland Treasury for Queensland forecasts, and 2018-19 Commonwealth Budget for Australia forecasts.

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ECONOMIC OVERVIEW

External conditions

International

The US economy has strengthened in 2018, with the country’s economic growth in the first three quarters of 2018 accelerating to 2.8%, in annual terms. The pace of non-farm employment growth in the US has also picked up over 2018, driving faster wage growth and a reduction in the unemployment rate to below 4%, although the participation rate remains at close to 40-year lows. The outlook for the US economy is clouded by escalating trade tensions with China, the distortionary effects of corporate tax cuts, monetary tightening by the Federal Reserve and rising financial market volatility.

China is continuing an orderly slowdown in economic growth, although the trade dispute between the US and China has adversely affected the Chinese economy. Despite China’s central bank further reducing the bank reserve requirement and directing banks to relax lending requirements, growth in China’s industrial production has continued to moderate and China’s stock market has maintained its downward trend.

Due to the strong trade linkages between China and other industrialised economies in Asia, forecasts of industrial production growth in Japan and Korea have also been downgraded. In response to the weakening economic outlook, currencies of these economies have depreciated against the US$ in recent months, and stock markets in Japan, Korea and Taiwan have all fallen over the period.

Table 2: Industrial production forecasts of key major trading partners¹

Date of forecast	Japan				Korea				Taiwan				China				India
	2018		2019		2018		2019		2018		2019		2018		2019		2018			2019
Jan 2018		2.7		2.3		1.9		1.9		3.1		3.2		6.0		5.8		5.7			n.a.
May 2018		2.0		2.2		0.7		1.9		3.3		3.2		6.3		5.9		5.9			6.4
Nov 2018		1.2		2.0		0.8		1.9		3.5		3.2		6.3		5.7		6.1			6.2
Year-to-date actual3		1.5				-0.2				4.1				6.4				5.2	2

Notes:

1. Annual % change.

2. Annual growth in the first six months of 2018-19 Indian Fiscal Year (April to September).

3. First nine months of 2018 for Japan, Korea and Taiwan. First ten months of 2018 for China.

Sources: Central Statistical Organisation, India; Consensus Economics; Ministry of Economic Affairs, Taiwan; Ministry of Economy, Trade and Industry, Japan; National Bureau of Statistics of China and Statistics Korea.

Australia

In the Commonwealth Budget released in May 2018, economic growth of 3% was forecast in both 2018-19 and 2019-20. However, with most of the external factors that are currently impacting on the Queensland economy – such as the drought and US-China trade tensions – also being evident nationally, downside risks to the national outlook have also intensified over recent months. The recent depreciation of the A$ against the US$ will, however, provide some support to goods and services exporters.

Declines in stock markets and house prices since the Commonwealth Budget have impacted household wealth, which will likely constrain consumption growth. Property prices, especially in Sydney and Melbourne, have eased much faster than expected at the time of the Budget. However, the drag on growth from dwelling investment is still expected to be moderate, with a substantial amount of work still in the pipeline. Meanwhile, public sector demand remains strong, with elevated spending on infrastructure and the ongoing roll-out of the NDIS.

7

ECONOMIC OVERVIEW

While labour market conditions are steadily improving nationally, wages and inflation are expected to lift only gradually. Therefore, the Reserve Bank of Australia (RBA) is likely to leave the official cash rate unchanged at a historic low of 1.5% for a more protracted period than previously expected. However, the impact of these low interest rates will be muted by slower than expected domestic credit growth due to the increasing cost of borrowing on the international credit markets and the tightening in lending standards by domestic banks.

Queensland conditions

In line with the 2018-19 Budget outlook, overall economic growth in Queensland is expected to strengthen to 3% in 2018-19 before easing slightly to 2³⁄₄% in 2019-20. Household consumption and dwelling investment are forecast to gain momentum over these two years. Business investment, while easing slightly in 2018-19, is expected to resume its upward trend in 2019-20.

However, with stronger domestic activity driving up overseas imports growth in 2019-20, the trade sector is not expected to contribute to growth in that year, leading to the slight easing in GSP growth.

Household consumption

Household consumption in Queensland grew by a higher-than-expected 2.5% in 2017-18, the strongest result since 2013-14, supported by strong employment growth and a modest pick-up in private sector wages.

Growth in household consumption is expected to improve gradually over the forecast period. However, any further improvement in household spending will be constrained by modest income growth and the impact on wealth of more recent movements in the stock market.

Dwelling investment

Dwelling investment in Queensland is entering a ‘recovery phase’, following a 4.8% decline in 2017-18. While approvals and construction have declined, the substantial amount of work remaining in the pipeline indicates dwelling investment is headed for a ‘soft landing’ compared with previous housing cycles. Downside risks to the sector have increased since Budget, with Sydney and Melbourne prices falling faster and further than expected.

Business investment

Business investment rebounded strongly in 2017-18, rising 12.5%, stronger than anticipated at Budget. Growth was primarily driven by a 16.2% increase in non-dwelling construction, supported by significant investment in renewable energy projects, including wind and solar farms. Meanwhile, machinery and equipment investment rose 7.6%, the second consecutive solid annual increase.

However, recent data suggests business investment will ease slightly in 2018-19, although it will remain more than $2 billion above 2016-17 levels, before continuing its expansion from 2019-20 onwards. Investment in renewable energy projects is likely to continue to support engineering construction activity in 2018-19.

A sustained lower A$ has supported the Queensland tourism industry and spurred further investment in hotel accommodation projects, particularly on the Gold Coast and in Cairns. However, there is little change in the outlook for machinery and equipment investment, with recent strong employment growth, elevated capacity utilisation and sustained lower lending rates suggesting this component should continue to grow at a solid pace.

8  Mid Year Fiscal and Economic Review 2018-19

ECONOMIC OVERVIEW

Chart 2: Business investment¹, Queensland

Notes:

1. CVM, quarterly, trend. New building includes shops, offices, factories etc.

Source: ABS 5206.0.

Public final demand

Public final demand increased 4.2% in 2017-18, and is forecast to continue to grow solidly in 2018-19 and 2019-20. A range of large programs such as the ongoing roll-out of the NDIS and the Queensland Government’s capital works program, including Cross River Rail, are expected to underpin ongoing solid growth in public final demand.

Overseas exports

The nominal value of Queensland’s overseas goods and services exports reached a record high of $94.3 billion in 2017-18, boosted by a recovery in coal export volumes, as well as sustained high global commodity prices. Looking ahead, while commodity prices are expected to return to more sustainable levels, export volumes are forecast to continue to grow, reflecting modest growth in resources exports, increased metals mining capacity coming online and a competitive A$ exchange rate supporting ongoing growth in services exports.

Coal

The value of Queensland coal exports totalled a record high of $40.7 billion in 2017-18, with export volumes rebounding from the impact of Severe Tropical Cyclone Debbie in 2016-17, and boosted by sustained high prices.

A deteriorating industrial production outlook for major industrial economies in Asia has led to a downward revision in coal export volume forecasts for 2018-19 and 2019-20.

Despite the weakness in demand, benchmark coal prices have remained at high levels in 2018-19 due to several temporary factors impacting supply, including scheduled port maintenance. China has disproportionately increased imports of higher quality coal to help address issues with pollution and the restructuring of its steel industry, which has led to a sharp increase in benchmark coal prices but more moderate increases in prices of lesser quality coal.

9

ECONOMIC OVERVIEW

LNG

LNG export volumes reached 20.3 million tonnes in 2017-18 (valued at an estimated $10.7 billion), to remain Queensland’s second largest export. Recent growth in export values has been driven by higher prices rather than export volumes. Ongoing demand in the east coast domestic gas market has kept total LNG production below the plants’ ‘nameplate’ capacity, indicating that LNG production and export volumes have plateaued at a slightly lower level than previously anticipated. However, higher prices have encouraged investment in further gas developments which should see further growth in LNG export volumes when these projects come online in coming years.

Metals

While the volume of metal exports declined in 2017-18, export values rose 6% to $9.3 billion, boosted by a strong recovery in prices. Looking ahead, the expected volume of base metal exports over the coming years has been revised up since the time of the Budget. This is mainly due to the higher than expected bauxite production from Rio Tinto’s Weipa mine, while the Amrun mine has started operation. The restart of Glencore’s Lady Loretta zinc mine is underway and this will boost Mount Isa’s zinc production from the second half of 2018 onwards, and most significantly, the New Century zinc mine began production in August 2018.

However, market concerns about slowing global trade and industrial production have driven down base metal prices in recent months. As a result, the nominal value of base metal exports for 2018-19 has been revised down. Looking further ahead, stronger production volumes are expected to support the value of base metal exports in 2019-20.

Rural

The volume of rural exports fell 2.8% in 2017-18, with a rise in meat exports more than offset by lower crop and sugar exports. With below average rainfall continuing through 2018 and drought conditions likely to intensify in the short-term, Queensland crop production in 2018-19 is expected to fall. Meanwhile, graziers are expected to reduce herd sizes in 2018-19, in response to challenging weather conditions and high feed prices. Consequently, despite depleted herds, cattle slaughter is expected to increase, leading to higher beef production and exports in the short term.

Services

Queensland tourism and education services exports continued to strengthen in 2017-18, with total overseas services exports exceeding $16 billion last year. Queensland tourism and education export revenue will continue to be supported by rising incomes in Asia as well as a competitive A$. The outlook for this sector remains largely unchanged since the time of the Budget.

Labour market

Consistent with the unchanged economic growth forecasts, labour market forecasts for Queensland are unchanged from the 2018-19 Budget. Following the strongest growth in a decade in 2017-18, employment growth is expected to return to more sustainable rates, to be 1¹⁄₂% over the year to June quarter 2019. Over the year to June quarter 2020, employment growth is expected to pick up to 1³⁄₄%, in line with population growth. Over the three-year period to June quarter 2020, employment is expected to increase by around 150,000 persons.

With employment growth forecast to largely keep pace with population growth over the next two years, the unemployment rate is still forecast to remain at 6¹⁄₄% in June quarter 2019 while a modest improvement to 6% is expected by June quarter 2020.

While not uniform, labour market conditions in regional Queensland have continued to converge with those in South East Queensland over the past 12 months. Supported by improved conditions in the resources sector, the unemployment rate in Mackay was 3.5% in the year ending October 2018, the lowest in the State.

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ECONOMIC OVERVIEW

Wages growth in 2017-18 picked up slightly from its historic low, with the Wage Price Index up 2.2% compared with 1.9% growth recorded in each of the two previous financial years. Looking ahead, wages growth in 2018-19 is expected to remain in line with Budget forecasts, and accelerate only slightly in 2019-20. However, a subdued price inflation outlook means that wages are expected to grow in real terms over the forecast period.

Chart 3: Queensland labour market

Notes:

1. 2018-19 and 2019-20 are forecasts.

2. Employment growth is through-the-year growth rate to the June quarter (seasonally adjusted) and the unemployment rate is the seasonally adjusted rate for the June quarter.

Sources: ABS 6202.0 and Queensland Treasury.

Risks and opportunities

Several risks identified in the 2018-19 Budget have either intensified or been realised since that time. In particular, further monetary policy normalisation has taken place in major economies, particularly in the US. Additional US rate rises could adversely affect bank/business borrowing costs in Australia, increasing downside risks to economic growth.

Since the Budget, the US-China trade war has intensified significantly and increased the risk that demand for key industrial commodities will be impaired. This heightened uncertainty has driven recent falls in global and domestic share markets, impacting wealth and potentially restraining any recovery in household consumption.

The housing sector downturn in NSW and Victoria has steepened, increasing the risk of a flow on into Queensland. In addition, tightening in bank lending standards and potentially higher borrowing costs may further dampen activity in the housing market.

The drought has intensified since the Budget, and if conditions remain dry the impact on agricultural production is likely to be stronger than previously thought, with cotton and other crop production particularly affected.

On the upside, if commodity prices moderate less than anticipated, investment in mining-related projects may be higher than expected. Further, there is the possibility that the recent increase in investment in renewable projects may be sustained for longer than is currently expected.

11

FISCAL OVERVIEW

FISCAL OVERVIEW

The key fiscal aggregates of the General Government Sector are outlined in Table 3.

Table 3: General Government sector – key fiscal aggregates¹

	2017-18			2018-19			2018-19			2019-20			2020-21			2021-22
	Actual2			Budget			MYFER			Projection			Projection			Projection
	$ million			$ million			$ million			$ million			$ million			$ million
Revenue		58,087			57,738			59,002			59,614			60,403			62,167
Expenses		56,335			57,590			58,478			59,421			60,258			62,048
Net operating balance		1,753			148			524			193			145			119
PNFA3		5,127			5,927			5,981			7,420			7,451			7,182
Fiscal balance		(586	)		(3,033	)		(2,632	)		(3,710	)		(3,416	)		(3,305	)
Borrowing		31,530			32,311			33,242			36,787			39,436			42,874
Borrowing (NFPS)4		69,522			70,871			71,609			75,875			79,473			83,505

Notes:

1. Numbers may not add due to rounding. Bracketed numbers represent negative amounts.

2. Reflects published actuals.

3. PNFA: Purchases of non-financial assets.

4. NFPS: Non-Financial Public sector.

Net Operating Balance

The General Government sector net operating surplus is expected to be $524 million in 2018-19. As shown in Chart 4, this is an improvement on the 2018-19 Budget estimated surplus of $148 million. The operating surplus has also been revised upwards in 2019-20 and 2020-21.

The improved position is the result of an uplift in revenue forecasts, supported by coal prices remaining higher for longer than expected, and an improved outlook for transfer duties in 2018-19.

A reduction in forecast GST revenue and transfer duties is expected to negatively impact the net operating balance in 2020-21 and 2021-22. The GST reduction reflects an expected downward revision to Queensland’s share of the national GST revenue pool by the Commonwealth Grants Commission. Queensland’s share of the GST pool is calculated based on three year rolling averages and is expected to be lower due to upward revisions to Queensland’s royalty revenues, and the southern states’ downward revisions to forecast transfer duty collections. The impact of these projected changes in GST are expected to be material with decreases in state revenue totalling $772 million net over the next four years. The largest impact is projected in 2021-22 with a decline in revenue of $555 million.

12  Mid Year Fiscal and Economic Review 2018-19

FISCAL OVERVIEW

Chart 4: Net operating balance 2018-19 to 2021-22

Reconciliation with 2018-19 Budget

Table 4 provides a breakdown of the movements in the net operating balance since the 2018-19 Budget.

Table 4: Reconciliation of net operating balance, 2018-19 Budget to 2018-19 MYFER¹

	2018-19			2019-20			2020-21			2021-22
	MYFER			Projection			Projection			Projection
	$ million			$ million			$ million			$ million
2018-19 Budget Net operating balance		148			160			110			690
GST revisions		(85	)		176			(308	)		(555	)
Royalty revisions		678			398			484			353
Taxation revisions		39			(67	)		(80	)		(13	)
Change to net flows from PNFC and PFC entities		126			8			(179	)		(112	)
Australian Government funding revisions		79			82			262			9
Additional policy expense measures		(126	)		(339	)		(255	)		(240	)
Other parameter adjustments2		(335	)		(225	)		111			(13	)
2018-19 MYFER Net operating balance		524			193			145			119

Notes:

1. Numbers may not add due to rounding.

2. Adjustments largely of a non-policy nature, primarily changes in interest expenses, depreciation, growth funding, swaps, deferrals and administered revenue.

13

FISCAL OVERVIEW

Revenue

General Government revenue in 2018-19 is estimated to be $59.002 billion, $1.264 billion (2.2%) more than the 2018-19 Budget estimate. Revenue in 2019-20 and 2020-21 has been revised upwards by $779 million and $464 million respectively. This is driven by a projected increase in royalties. However, revenue in 2021-22 has been revised downwards by $101 million. The reduction is caused by downward revisions to GST revenue and, to a lesser extent, tax collections and dividends.

The Queensland Government’s action to reduce electricity prices will contribute to the net flows from PNFC and PFC entities, which include dividends from GOCs, declining by a net $157 million over the period 2017-18 to 2021-22 compared with the 2018-19 budget. Dividends from GOCs are expected to fall by 48% over the period 2017-18 to 2021-22.

Revenue growth in 2018-19 is expected to be 1.6%, following growth of 3.4% in 2017-18. Over the four year period to 2021-22 revenue is estimated to grow by an average of 1.7% per annum. This is the same growth rate estimated at Budget.

Since the 2018-19 Budget, royalty revenue has been revised upwards by $1.913 billion across the period 2018-19 to 2021-22. This is mainly the result of coal prices remaining higher for longer than expected, with the year average premium hard coking coal price for 2018-19 revised upward to $US190/t compared to a Budget forecast of $US161/t. The hard coking coal price is expected to progressively decline to a medium-term price of $US140/t by 2021-22.

GST revenue has been revised downwards since the 2018-19 Budget, by $772 million across the period 2018-19 to 2021-22. This is due to downward revisions in the forecast total GST pool, and downward revisions to Queensland’s expected share of the GST pool. The downward revision to Queensland’s GST share is due to the strength of Queensland’s royalty revenues and the downward revisions to transfer duty forecasts for New South Wales and Victoria.

Taxation revenue has also been revised downwards by $121 million across the period 2018-19 to 2021-22, compared to the 2018-19 Budget estimate which allows for a slowing of growth in the property market. This is shown in Chart 5 below.

Chart 5: Revisions to key revenue forecasts since the 2018-19 Budget

14  Mid Year Fiscal and Economic Review 2018-19

FISCAL OVERVIEW

Coal price revisions

Royalty revenue estimates in the 2018-19 Budget assumed that coal prices would gradually decline towards the medium term projection by 2020-21.

While coal prices declined on average during the first half of 2018, from around $US260/t at the start of the year to just over $US180/t during May, prices increased following the Budget and have remained elevated through the December quarter. China’s tighter environmental restrictions leading to demand for more high-quality coal has been a significant driver of the elevated prices.

Overall, coal royalties have been revised up by around $1.8 billion over the period 2018-19 to 2020-21 since Budget.

Higher than expected coal royalties have contributed to the downward revisions to Queensland’s share of GST revenue over the forward years. Queensland’s GST revenue is reduced by approximately 60-70% of the total coal royalties it collects. While the positive fiscal impacts of a royalty revenue uplift are felt immediately, the negative impacts on Queensland’s budget position manifest over three years starting two years after the revenue increase.

The impact on coal price forecasts, due to coal prices remaining higher for longer than expected, is shown in Chart 6.

Chart 6: Year average coal price revisions since the 2018-19 Budget

15

FISCAL OVERVIEW

Expenses

General Government expenses in 2018-19 are estimated to be $58.478 billion, $888 million higher than the Budget estimate. The increased expenditure in 2018-19 is primarily due to an allowance for increased education expenditure as well as Government policy decisions to bring forward grants programs to support regional jobs in 2018-19, deferrals from reprofiled program delivery from 2017-18, and increased support to the Queensland racing industry.

Expenses over the next four years are expected to decline in real per capita terms. Over the four year period to 2021-22, expenses are estimated to grow by an average rate of 2.4% per annum. At Budget they were forecast to grow by 2.1%. Increases in expenses over the four years partly reflect additional provision for the Queensland Government’s planned increase in education funding. The Queensland Government’s additional school education policy measures are subject to negotiations with the Australian Government in renewing the Schools Funding Agreement.

Emerging Fiscal Pressures

At any given time, issues with potentially significant fiscal impacts will exist. However, until they have been considered by Government and have formal agreements in place, uncertainty remains as to when these issues will impact the net operating balance. As a result, the below emerging fiscal pressures have not been included in the current fiscal estimates.

Native Title Compensation Settlement

Potentially, the Government has a significant liability with respect to compensation arising from acts that have extinguished or impaired native title since 1975. The impending High Court decision in relation to Griffiths v Northern Territory of Australia (known as the Timber Creek case) is expected to provide a formula for calculating native title compensation.

Health Funding - National Health Reform Agreement

Currently, the Australian Government is negotiating with State and Territory Governments the renewal of the National Health Reform Agreement from 1 July 2020. There is ongoing uncertainty around the determination of funding under the national health funding model which is undermining its integrity and the ability of jurisdictions to plan and manage health services. The Queensland Government is committed to working with all jurisdictions and the Australian Government to secure an agreement that restores confidence and predictability to national health funding.

Education Agreement

Negotiations are ongoing with the Commonwealth Government over the National Schools Reform Agreement. Provision for additional expenditure in education spending over the next four years has been made in MYFER. However, in order to not prejudice negotiations with the Commonwealth the magnitude of these provisions is not disclosed.

16  Mid Year Fiscal and Economic Review 2018-19

INTERGOVERNMENTAL FINANCIAL RELATIONS

INTERGOVERNMENTAL FINANCIAL RELATIONS

Australian Government Payments

Payments from the Australian Government contribute to Queensland’s ability to meet its current and future service delivery and infrastructure responsibilities. But the Australian Government continues to create uncertainty around these payments by seeking to impose unwarranted conditions, delaying advice on funding extensions, or unilaterally changing the basis of payments. This impacts Queensland’s ability to plan and deliver critical services and infrastructure.

The Australian Government seeks to impose unwarranted conditions on funding, including by enshrining positions in legislation prior to consulting with states and territories. This approach is inconsistent with the principles of the Intergovernmental Agreement on Federal Financial Relations, and has impacted Queensland. For example, in September 2018, the Government decided to not sign the National Partnership for Skilling Australians Fund for this reason. The Australian Government’s approach is particularly concerning because states and territories are currently negotiating major health and education agreements.

There are eight non-infrastructure national partnerships due to expire on 30 June 2019, which provide Queensland with approximately $150 million in 2018-19. A further nine will expire the following year. With agreement, and on behalf of all states and territories, the Deputy Premier wrote to the Australian Treasurer recommending that all expiring agreements be renewed. Unfortunately, there is no clarity about their continuation. Last year, the Australian Government allowed the National Partnership on Remote Housing—which funded remote Indigenous housing initiatives—to lapse despite Queensland’s willingness to negotiate. This places at risk any gains in Closing the Gap.

Despite promises of full and proper consultation, the Australian Government has legislated changes to the distribution of GST revenue that fundamentally changes the system away from full horizontal fiscal equalisation—whereby each state and territory receives revenue so that they have the capacity to deliver the same level of service to all Australians, no matter where they live. Under pressure from states and territories, the Australian Government has legislated a guarantee that no state will be worse off because of the changes during the transition period, from 2021-22 to 2026-27. Queensland will not be worse off during this time, but there is no guarantee beyond this point.

The Commonwealth Grants Commission, responsible for recommending GST distribution to the Australian Government, is also undertaking a major review of its method, including all state revenue capacity and expenditure needs. The review report is due in early 2020. Any recommendations will impact Queensland’s GST share from 2020-21 and will be implemented concurrently with the Australian Government’s legislated changes. The Commonwealth Grants Commission is currently in the consultation phase of the review. The Queensland Government supports a transparent and independent review process and is an active participant, and notes that some proposed changes could improve Queensland’s fiscal position.

17

BALANCE SHEET

BALANCE SHEET

The Government is focused on delivering the services and infrastructure that Queenslanders deserve. The Government maintains its commitment to strong fiscal management while keeping income generating assets in public hands and managing borrowings at a level that does not limit its ability to undertake infrastructure investment to support ongoing and future service delivery requirements and facilitate key economic and social infrastructure to meet the needs of Queensland families, businesses and communities. The level of infrastructure investment will be partly funded through borrowings. Even so, General Government borrowings are expected to be lower in each year of the forward estimates than projected in the 2017-18 Budget. In 2021-22 General Government borrowings are expected to remain below the peak level reached in 2014-15.

General Government sector

General Government Sector borrowings are estimated to be $152 million lower in June 2021 than forecast in the 2018-19 budget. However, the impact of a $555 million decrease in Commonwealth Government GST revenue to Queensland in financial year 2021-22 will contribute to a $584 million increase in borrowings in 2021-22 compared to the 2018-19 budget.

Overall the net reduction in GST revenue of $772 million, parameter adjustments, a provision for increased education spending and increased capital spending have contributed to the General Government borrowings in 2021-22 being $584 million more than the 2018-19 budget estimate. General Government sector borrowings will be $33.242 billion at 30 June 2019, compared to the 2018-19 Budget estimate of $32.311 billion primarily due to the timing of the repatriation of surplus assets relating to the defined benefit scheme. This will result in lower net interest costs over the forward-estimates. The defined benefits scheme remains in a strong surplus funding position as advised by the State Actuary.

Ongoing operating surpluses mean the government is not borrowing to fund the ongoing operations of government including the operating expenditure of health and education. Increased borrowing across the forward estimates reflects the ramp up of the capital program. The demands of a growing economy and the need for infrastructure are outlined in the State Infrastructure Plan. Assessment of infrastructure projects by Building Queensland ensure that the Government’s infrastructure investments will have strong social and economic returns, benefiting Queenslanders now and into the future. The modest increase compared to the 2018-19 Budget reflects the Government’s commitment to fiscally responsible infrastructure investment.

Non-Financial Public Sector

The Non-Financial Public Sector (NFPS) is the consolidation of the General Government and the Public Non-Financial Corporations Sectors, with transactions between these sectors eliminated.

The Government’s focus has been on managing General Government Sector debt as the remainder of NFPS borrowings are primarily held by Government Owned Corporations and are supported by income generating assets including key pieces of economic infrastructure.

Borrowings of $71.609 billion are projected at 30 June 2019 in the NFPS, $738 million more than the 2018-19 Budget estimate, reflecting the increase in the General Government sector.

Borrowings in the NFPS are expected to be $412 million higher than anticipated in the 2018-19 Budget with the increase in the capital program.

18  Mid Year Fiscal and Economic Review 2018-19

BALANCE SHEET

A new accounting standard, AASB 16 Leases, will apply to public and private sectors in Australia from 1 July 2019. The new standard will impact the accounting presentation of corporate and government accounts across Australia from July 2019 and has the potential to impact balance sheets as operating leases are brought on to the balance sheet of lessees for the first time. Currently, only finance leases are accounted for on balance sheet and are classified as borrowings for GFS purposes.

There is no substantive change to Queensland’s financial commitments as a result of the new accounting standard. However, consideration will be given to the incorporation of the impact of the new accounting standard on the Government’s Fiscal Principles in the 2019-20 Budget, to ensure comparability.

Capital Program

The total capital program over the four years to 2021-22 is estimated to be $46.319 billion. This is the largest capital spend since the 2010-11 flood recovery effort. Large projects include Cross River Rail, upgrades to the M1 and the Bruce Highway, Rookwood Weir, Cairns Convention Centre, and Townsville water pipeline.

General Government sector

The General Government capital program in 2018-19 is estimated to be $8.703 billion, slightly higher than estimated in the 2018-19 Budget. Over the four years to 2021-22, the capital program comprises $28.033 billion in purchases of non-financial assets, $4.521 billion in capital grants and $1.151 billion in finance leases - representing a total capital program of $33.705 billion.

Non-Financial Public Sector

Purchases of non-financial assets in the Non-Financial Public Sector are estimated to be $9.095 billion in 2018-19, generally in line with 2018-19 Budget estimate. Over the four years to 2021-22, purchases of non-financial assets are expected to be $40.689 billion, with capital grants and finance leases expected to be $4.479 billion and $1.151 billion respectively, bringing the total capital program to $46.319 billion.

19

GOVERNMENT FISCAL PRINCIPLES

GOVERNMENT FISCAL PRINCIPLES

The Government remains committed to its fiscal principles, which underpin the development of the State’s fiscal strategy and financial decision-making.

Table 5: The fiscal principles of the Queensland Government

Principle	Indicator
	General Government debt to revenue ratio
		2018-19 Budget		2018-19 MYFER
		%		%
Target ongoing reductions in Queensland’s relative debt burden, as measured by the General Government debt to revenue ratio	2017–18		54		54
	2018–19		56		56
	2019–20		61		62
	2020–21		66		65
	2021–22		68		69
	General Government operating cashflows as a proportion of purchases of non-financial assets
		2018-19 Budget		2018-19 MYFER
		%		%
Target net operating surpluses that ensure any new capital investment in the General Government sector is funded primarily through recurrent revenues rather than borrowing	2017–18		99		107
	2018–19		60		70
	2019–20		40		44
	2020–21		44		48
	2021–22		53		44
	General Government purchases of non-financial assets
		2018-19 Budget		2018-19 MYFER
		($ million)		($ million)
The capital program will be managed to ensure a consistent flow of works to support jobs and the economy and reduce the risk of backlogs emerging	2017–18		4,905		5,127
	2018–19		5,927		5,981
	2019–20		7,557		7,420
	2020–21		7,396		7,451
	2021–22		7,081		7,182
Maintain competitive taxation by ensuring that General Government sector own-source revenue remains at or below 8.5% as a proportion of nominal gross state product, on average, across the forward estimates	General Government own-source revenue to GSP
	2018-19 Budget:				8.2	%
	2018-19 MYFER:				8.4	%
	Average across the forward estimates:				8.1	%
Target full funding of long term liabilities such as superannuation and WorkCover in accordance with actuarial advice	As at the last actuarial review (as at 30 June 2018), accruing superannuation liabilities were fully funded. The WorkCover scheme was also fully funded as at 30 June 2018.
Maintain a sustainable public service by ensuring that overall growth in full-time equivalent (FTE) employees, on average over the forward estimates, does not exceed population growth	FTE growth
	Average across the forward estimates:				1.7	%
	Population growth
	Average across the forward estimates:				13⁄4	%

20  Mid Year Fiscal and Economic Review 2018-19

GOVERNMENT FISCAL PRINCIPLES

Principle 1 – Target ongoing reductions in Queensland’s relative debt burden, as measured by the General Government debt to revenue ratio

A primary fiscal focus for the Government is managing the debt of the General Government sector, and servicing this debt from within the General Government sector through tax revenue, charges and royalties. Targeting ongoing reductions in the debt to revenue ratio enables the Government to improve the State’s fiscal sustainability.

As a result of significant initiatives implemented through the Debt Action Plan, the General Government sector’s debt to revenue ratio has fallen substantially from a peak of 91% in 2012-13 to 56% in 2018-19 MYFER, which is the same level forecast at the 2018-19 Budget. The average across the five years is at the same level forecast at the 2018-19 Budget.

Principle 2 – Target net operating surpluses that ensure any new capital investment in the General Government sector is funded primarily through recurrent revenues rather than borrowing

2018-19 has seen an increase in the proportion of net investments in non-financial assets to operating cashflows from 60% at Budget to 70% at MYFER, driven in part by upward revision to revenue projections. The average across the five years shows an improvement compared to the level forecast at the 2018-19 Budget.

Principle 3 – The capital program will be managed to ensure a consistent flow of works to support jobs and the economy and reduce the risk of backlogs emerging

The 2018-19 MYFER sees General Government sector purchases of non-financial assets (capital purchases) increase from $5.127 billion in 2017-18 to $5.981 billion in 2018-19. Capital purchases over the next three years (2019-20 to 2021-22) average around $7.4 billion per annum. The average across the five years shows an improvement compared to level forecast at the 2018-19 Budget.

Principle 4 – Maintain competitive taxation by ensuring that General Government sector own–source revenue remains at or below 8.5% as a proportion of nominal gross state product, on average, across the forward estimates

General Government own source revenue is forecast to be 8.4% of nominal gross state product in 2018-19 and an average of 8.1% across the forward estimates. This ensures the Government’s revenue efforts do not constrain economic activity or place undue burden on households. Tax revenue will remain below the ten year peak of 4.3% of GSP observed in 2014-15.

Principle 5 – Target full funding of long term liabilities such as superannuation and WorkCover in accordance with actuarial advice

Consistent with the long-standing practice of successive governments, the Queensland Government is committed to ensuring the State sets aside assets, on an actuarially determined basis, to meet long term liabilities such as superannuation and WorkCover.

The latest full actuarial review of the QSuper scheme, as at 30 June 2018, found the scheme to be fully funded. WorkCover is also fully funded as at 30 June 2018.

Principle 6 – Maintain a sustainable public service by ensuring that overall growth in full-time equivalent (FTE) employees, on average over the forward estimates, does not exceed population growth

Across the forward estimates, average growth is 1.7%, in line with expected population growth.

21

UNIFORM PRESENTATION FRAMEWORK AND LOAN COUNCIL ALLOCATION

UNIFORM PRESENTATION FRAMEWORK

Table 6: General Government Sector Operating Statement¹

	2017-18			2018-19			2018-19			2019-20			2020-21			2021-22
	Actual			Budget			MYFER			Projection			Projection			Projection
	$ million			$ million			$ million			$ million			$ million			$ million
Revenue from Transactions
Taxation revenue		13,244			14,155			14,194			15,118			15,871			16,709
Grants revenue		27,966			27,701			28,065			28,487			29,185			29,973
Sales of goods and services		5,884			5,731			5,735			5,953			6,062			6,309
Interest income		2,389			2,201			2,233			2,171			1,983			1,930
Dividend and income tax equivalent income		2,920			2,217			2,344			2,085			1,732			1,676
Other revenue		5,685			5,733			6,431			5,801			5,571			5,570
Total Revenue from Transactions		58,087			57,738			59,002			59,614			60,403			62,167
Less     Expenses from Transactions
Employee expenses		22,678			23,807			23,987			24,841			25,777			26,779
Superannuation expenses
Superannuation interest cost		667			667			637			668			678			704
Other superannuation expenses		2,744			2,887			2,920			2,976			3,023			3,057
Other operating expenses		17,258			15,774			16,239			15,569			15,568			16,126
Depreciation and amortisation		3,325			3,429			3,428			3,545			3,652			3,779
Other interest expenses		1,614			1,474			1,526			1,634			1,695			1,835
Grants expenses		8,048			9,552			9,742			10,189			9,864			9,770
Total Expenses from Transactions		56,335			57,590			58,478			59,421			60,258			62,048
Equals Net Operating Balance		1,753			148			524			193			145			119
Plus     Other economic flows - included in operating result		(384	)		85			(605	)		286			443			371
Equals Operating Result		1,368			233			(81	)		479			588			490
Plus     Other economic flows - other movements in equity		(596	)		2,717			2,682			1,943			2,192			2,288
Equals Comprehensive Result - Total Change In Net Worth		772			2,950			2,601			2,422			2,780			2,778
KEY FISCAL AGGREGATES
Net Operating Balance		1,753			148			524			193			145			119
Less     Net Acquisition of Non-financial Assets
Purchases of non-financial assets		5,127			5,927			5,981			7,420			7,451			7,182
Less     Sales of non-financial assets		291			345			418			372			343			165
Less     Depreciation		3,325			3,429			3,428			3,545			3,652			3,779
Plus     Change in inventories		13			(4	)		(5	)		(67	)		(74	)		6
Plus     Other movements in non-financial assets		815			1,032			1,026			467			180			180
Equals Total Net Acquisition of Non-financial Assets		2,339			3,181			3,156			3,903			3,561			3,425
Equals Fiscal Balance		(586	)		(3,033	)		(2,632	)		(3,710	)		(3,416	)		(3,305	)

Note:

1. Numbers may not add due to rounding.

22  Mid Year Fiscal and Economic Review 2018-19

UNIFORM PRESENTATION FRAMEWORK AND LOAN COUNCIL ALLOCATION

Table 7: Public Non-financial Corporations Sector Operating Statement¹

	2017-18			2018-19			2018-19			2019-20			2020-21			2021-22
	Actual			Budget			MYFER			Projection			Projection			Projection
	$ million			$ million			$ million			$ million			$ million			$ million
Revenue from Transactions
Grants revenue		640			632			545			561			556			578
Sales of goods and services		12,435			11,718			11,652			11,400			11,643			11,925
Interest income		77			52			54			50			52			64
Dividend and income tax equivalent income		13			13			13			13			13			13
Other revenue		487			318			398			299			246			255
Total Revenue from Transactions		13,652			12,733			12,662			12,322			12,510			12,835
Less     Expenses from Transactions
Employee expenses		1,705			1,981			1,865			1,926			2,033			2,077
Superannuation expenses
Superannuation interest cost		(11	)		—			—			—			—			—
Other superannuation expenses		218			164			209			215			221			228
Other operating expenses		4,573			4,032			3,902			3,635			3,896			4,016
Depreciation and amortisation		2,480			2,618			2,619			2,730			2,766			2,834
Other interest expenses		1,903			1,908			1,875			1,886			1,937			2,001
Grants expenses		21			22			27			27			28			28
Other property expenses		870			637			686			614			524			479
Total Expenses from Transactions		11,759			11,361			11,182			11,035			11,405			11,663
Equals Net Operating Balance		1,893			1,372			1,479			1,287			1,104			1,172
Plus     Other economic flows - included in operating result		(210	)		(29	)		71			(76	)		(108	)		(284	)
Equals Operating Result		1,684			1,343			1,550			1,211			996			888
Plus     Other economic flows - other movements in equity		(653	)		(532	)		(461	)		(931	)		(850	)		(837	)
Equals Comprehensive Result - Total Change In Net Worth		1,030			810			1,090			280			146			52
KEY FISCAL AGGREGATES
Net Operating Balance		1,893			1,372			1,479			1,287			1,104			1,172
Less     Net Acquisition of Non-financial Assets
Purchases of non-financial assets		2,509			3,130			3,115			3,514			3,028			3,001
Less     Sales of non-financial assets		47			11			29			10			10			8
Less     Depreciation		2,480			2,618			2,619			2,730			2,766			2,834
Plus     Change in inventories		36			35			38			3			—			1
Plus     Other movements in non-financial assets		79			68			68			69			70			71
Equals Total Net Acquisition of Non-financial Assets		97			604			574			846			322			231
Equals Fiscal Balance		1,797			767			906			442			782			941

Note:

1. Numbers may not add due to rounding.

23

UNIFORM PRESENTATION FRAMEWORK AND LOAN COUNCIL ALLOCATION

Table 8: Non-financial Public Sector Operating Statement¹

	2017-18			2018-19			2018-19			2019-20			2020-21			2021-22
	Actual			Budget			MYFER			Projection			Projection			Projection
	$ million			$ million			$ million			$ million			$ million			$ million
Revenue from Transactions
Taxation revenue		12,988			13,892			13,911			14,816			15,541			16,353
Grants revenue		28,006			27,788			28,078			28,496			29,194			29,983
Sales of goods and services		16,375			15,353			15,288			15,192			15,447			15,900
Interest income		2,421			2,219			2,255			2,195			2,008			1,962
Dividend and income tax equivalent income		217			164			203			164			185			206
Other revenue		6,168			6,051			6,829			6,099			5,817			5,825
Total Revenue from Transactions		66,175			65,467			66,564			66,962			68,193			70,228
Less     Expenses from Transactions
Employee expenses		24,283			25,688			25,736			26,649			27,688			28,730
Superannuation expenses
Superannuation interest cost		656			667			637			668			678			704
Other superannuation expenses		2,962			3,051			3,129			3,191			3,245			3,285
Other operating expenses		19,868			17,703			18,032			17,035			17,199			17,800
Depreciation and amortisation		5,804			6,047			6,046			6,275			6,418			6,613
Other interest expenses		3,336			3,198			3,215			3,322			3,410			3,584
Grants expenses		7,469			9,029			9,238			9,665			9,345			9,229
Total Expenses from Transactions		64,378			65,383			66,033			66,805			67,983			69,945
Equals Net Operating Balance		1,797			84			531			157			210			284
Plus     Other economic flows - included in operating result		(644	)		(54	)		(644	)		(120	)		(112	)		(283	)
Equals Operating Result		1,153			31			(113	)		37			98			0
Plus     Other economic flows - other movements in equity		(380	)		2,920			2,713			2,385			2,683			2,778
Equals Comprehensive Result - Total Change In Net Worth		773			2,950			2,600			2,422			2,780			2,778
KEY FISCAL AGGREGATES
Net Operating Balance		1,797			84			531			157			210			284
Less     Net Acquisition of Non-financial Assets
Purchases of non-financial assets		7,644			9,057			9,095			10,933			10,478			10,182
Less     Sales of non-financial assets		339			356			447			382			353			173
Less     Depreciation		5,804			6,047			6,046			6,275			6,418			6,613
Plus     Change in inventories		49			31			33			(64	)		(74	)		7
Plus     Other movements in non-financial assets		894			1,100			1,094			536			251			252
Equals Total Net Acquisition of Non-financial Assets		2,443			3,785			3,729			4,748			3,884			3,655
Equals Fiscal Balance		(647	)		(3,701	)		(3,198	)		(4,591	)		(3,674	)		(3,372	)

Note:

1. Numbers may not add due to rounding.

24  Mid Year Fiscal and Economic Review 2018-19

UNIFORM PRESENTATION FRAMEWORK AND LOAN COUNCIL ALLOCATION

Table 9: General Government Sector Balance Sheet¹

	2017-18			2018-19			2018-19			2019-20			2020-21			2021-22
	Actual			Budget			MYFER			Projection			Projection			Projection
	$ million			$ million			$��million			$ million			$ million			$ million
Assets
Financial Assets
Cash and deposits		1,298			303			476			447			422			354
Advances paid		629			703			681			654			671			709
Investments, loans and placements		32,846			30,306			31,865			30,881			30,054			30,154
Receivables		4,750			4,182			4,151			4,365			4,282			4,307
Equity
Investments in other public sector entities		23,120			23,812			24,210			24,490			24,636			24,688
Investments - other		155			154			155			155			155			155
Total Financial Assets		62,797			59,460			61,538			60,992			60,220			60,367
Non-financial Assets
Land and other fixed assets		200,458			207,985			204,695			209,555			214,042			218,401
Other non-financial assets		7,392			6,767			6,891			7,156			7,304			7,470
Total Non-financial Assets		207,850			214,752			211,585			216,711			221,345			225,870
Total Assets		270,647			274,212			273,124			277,703			281,566			286,238
Liabilities
Payables		4,396			4,088			4,370			4,469			4,506			4,541
Superannuation liability		26,000			23,414			24,383			23,159			21,610			19,931
Other employee benefits		5,974			5,888			6,855			6,940			7,061			7,201
Deposits held		2			2			2			2			2			2
Advances received		2,747			1,814			1,866			1,572			1,488			1,592
Borrowing		31,530			32,311			33,242			36,787			39,436			42,874
Other liabilities		4,290			4,059			4,097			4,042			3,951			3,808
Total Liabilities		74,939			71,575			74,814			76,971			78,054			79,948
Net Worth		195,708			202,636			198,310			200,731			203,512			206,290
Net Financial Worth		(12,141	)		(12,115	)		(13,276	)		(15,980	)		(17,834	)		(19,581	)
Net Financial Liabilities		35,261			35,928			37,486			40,470			42,470			44,269
Net Debt		(494	)		2,815			2,088			6,380			9,779			13,251

Notes:

1. Numbers may not add due to rounding.

25

UNIFORM PRESENTATION FRAMEWORK AND LOAN COUNCIL ALLOCATION

Table 10: Public Non-financial Corporations Sector Balance Sheet¹

	2017-18 Actual $ million			2018-19 Budget $ million			2018-19 MYFER $ million			2019-20 Projection $ million			2020-21 Projection $ million			2021-22 Projection $ million
Assets
Financial Assets
Cash and deposits		581			465			584			564			700			719
Advances paid		2,284			1,360			1,422			1,216			1,175			1,302
Investments, loans and placements		482			547			425			386			391			399
Receivables		1,580			1,432			1,723			1,716			1,720			1,832
Equity
Investments - other		238			240			231			231			231			231
Total Financial Assets		5,165			4,043			4,385			4,112			4,217			4,483
Non-financial Assets
Land and other fixed assets		62,506			63,882			64,185			65,752			66,728			67,419
Other non-financial assets		1,113			1,203			1,177			1,182			1,191			1,237
Total Non-financial Assets		63,619			65,085			65,362			66,934			67,920			68,657
Total Assets		68,784			69,128			69,747			71,046			72,137			73,140
Liabilities
Payables		3,495			2,890			2,906			2,936			2,805			2,939
Superannuation liability		(368	)		(316	)		(360	)		(352	)		(344	)		(336	)
Other employee benefits		769			746			750			755			760			766
Deposits held		15			17			15			15			15			15
Advances received		7			6			6			5			5			4
Borrowing		37,992			38,560			38,367			39,088			40,038			40,631
Other liabilities		7,970			7,901			8,068			8,324			8,437			8,649
Total Liabilities		49,879			49,805			49,753			50,772			51,716			52,667
Net Worth		18,905			19,323			19,995			20,274			20,421			20,472
Net Financial Worth		(44,715	)		(45,761	)		(45,368	)		(46,660	)		(47,499	)		(48,184	)
Net Debt		34,667			36,212			35,958			36,944			37,792			38,230

Notes:

1. Numbers may not add due to rounding.

26  Mid Year Fiscal and Economic Review 2018-19

UNIFORM PRESENTATION FRAMEWORK AND LOAN COUNCIL ALLOCATION

Table 11: Non-financial Public Sector Balance Sheet¹

	2017-18 Actual $ million			2018-19 Budget $ million			2018-19 MYFER $ million			2019-20 Projection $ million			2020-21 Projection $ million			2021-22 Projection $ million
Assets
Financial Assets
Cash and deposits		1,879			768			1,060			1,011			1,122			1,074
Advances paid		622			682			667			634			652			691
Investments, loans and placements		33,328			30,852			32,290			31,267			30,445			30,552
Receivables		4,273			3,808			4,146			4,177			4,266			4,470
Equity
Investments in other public sector entities		4,216			4,490			4,216			4,216			4,216			4,216
Investments - other		393			394			386			386			386			386
Total Financial Assets		44,711			40,994			42,766			41,691			41,087			41,389
Non-financial Assets
Land and other fixed assets		262,964			271,866			268,879			275,307			280,769			285,820
Other non-financial assets		1,591			1,014			1,180			1,261			1,239			1,191
Total Non-financial Assets		264,554			272,880			270,059			276,568			282,008			287,011
Total Assets		309,265			313,874			312,825			318,259			323,096			328,400
Liabilities
Payables		5,861			5,193			5,576			5,530			5,604			5,841
Superannuation liability		25,632			23,098			24,022			22,807			21,265			19,594
Other employee benefits		6,743			6,634			7,605			7,695			7,821			7,967
Deposits held		18			19			18			18			18			18
Advances received		462			439			436			342			299			275
Borrowing		69,522			70,871			71,609			75,875			79,473			83,505
Other liabilities		5,319			4,982			5,250			5,260			5,103			4,911
Total Liabilities		113,556			111,237			114,515			117,528			119,584			122,111
Net Worth		195,709			202,636			198,310			200,731			203,512			206,289
Net Financial Worth		(68,845	)		(70,243	)		(71,749	)		(75,837	)		(78,497	)		(80,722	)
Net Financial Liabilities		73,062			74,733			75,966			80,053			82,713			84,938
Net Debt		34,173			39,027			38,046			43,323			47,571			51,481

Notes:

1. Numbers may not add due to rounding.

27

UNIFORM PRESENTATION FRAMEWORK AND LOAN COUNCIL ALLOCATION

Table 12: General Government Sector Cash Flow Statement¹

	2017-18			2018-19			2018-19			2019-20			2020-21			2021-22
	Actual			Budget			MYFER			Projection			Projection			Projection
	$ million			$ million			$ million			$ million			$ million			$ million
Cash Receipts from Operating Activities
Taxes received		13,232			14,153			14,192			15,116			15,869			16,708
Grants and subsidies received		28,020			27,712			28,323			28,488			29,186			29,974
Sales of goods and services		5,916			5,947			6,000			6,166			6,283			6,525
Interest receipts		2,389			2,199			2,230			2,169			1,981			1,928
Dividends and income tax equivalents		2,668			2,619			2,679			2,161			2,003			1,694
Other receipts		6,992			7,007			7,706			7,079			6,811			6,710
Total Operating Receipts		59,216			59,637			61,129			61,179			62,131			63,539
Cash Payments for Operating Activities
Payments for employees		(25,964	)		(27,701	)		(27,809	)		(28,882	)		(29,764	)		(30,845	)
Payments for goods and services		(18,496	)		(17,635	)		(18,149	)		(17,439	)		(17,436	)		(18,040	)
Grants and subsidies		(8,014	)		(9,492	)		(9,735	)		(10,145	)		(9,807	)		(9,724	)
Interest paid		(1,590	)		(1,474	)		(1,526	)		(1,634	)		(1,695	)		(1,834	)
Other payments		(1	)		—			—			—			(1	)		(3	)
Total Operating Payments		(54,066	)		(56,303	)		(57,218	)		(58,098	)		(58,704	)		(60,446	)
Net Cash Inflows from Operating Activities		5,150			3,334			3,911			3,080			3,428			3,093
Cash Flows from Investments in Non-Financial Assets
Purchases of non-financial assets		(5,127	)		(5,927	)		(5,981	)		(7,420	)		(7,451	)		(7,182	)
Sales of non-financial assets		291			345			418			372			343			165
Net Cash Flows from Investments in Non-financial Assets		(4,835	)		(5,582	)		(5,562	)		(7,047	)		(7,107	)		(7,017	)
Net Cash Flows from Investments in Financial Assets for Policy Purposes		534			(53	)		(126	)		(35	)		238			390
Net Cash Flows from Investments in Financial Assets for Liquidity Purposes		(1,095	)		2,877			2,316			4,247			819			(86	)
Receipts from Financing Activities
Advances received (net)		905			(410	)		(879	)		(291	)		(82	)		106
Borrowing (net)		(396	)		(393	)		(434	)		17			2,678			3,447
Deposits received (net)		7			(47	)		(47	)		—			—			—
Net Cash Flows from Financing Activities		517			(851	)		(1,360	)		(274	)		2,596			3,553
Net Increase/(Decrease) in Cash held		271			(275	)		(821	)		(30	)		(25	)		(67	)
Net cash from operating activities		5,150			3,334			3,911			3,080			3,428			3,093
Net cash flows from investments in non-financial assets		(4,835	)		(5,582	)		(5,562	)		(7,047	)		(7,107	)		(7,017	)
Surplus/(Deficit)		315			(2,248	)		(1,651	)		(3,967	)		(3,679	)		(3,924	)
Derivation of ABS GFS Cash Surplus/Deficit
Cash surplus/(deficit)		315			(2,248	)		(1,651	)		(3,967	)		(3,679	)		(3,924	)
Acquisitions under finance leases and similar arrangements		(584	)		(864	)		(864	)		(287	)		—			—
ABS GFS Cash Surplus/(Deficit) Including Finance Leases and Similar Arrangements		(269	)		(3,112	)		(2,516	)		(4,254	)		(3,679	)		(3,924	)

Note:

1. Numbers may not add due to rounding.

28  Mid Year Fiscal and Economic Review 2018-19

UNIFORM PRESENTATION FRAMEWORK AND LOAN COUNCIL ALLOCATION

Table 13: Public Non-financial Corporations Sector Cash Flow Statement¹

	2017-18			2018-19			2018-19			2019-20			2020-21			2021-22
	Actual			Budget			MYFER			Projection			Projection			Projection
	$ million			$ million			$ million			$ million			$ million			$ million
Cash Receipts from Operating Activities
Grants and subsidies received		707			585			517			604			506			564
Sales of goods and services		14,226			13,113			12,684			12,554			12,824			13,008
Interest receipts		73			52			54			50			52			64
Dividends and income tax equivalents		13			13			13			13			13			13
Other receipts		426			215			324			225			170			174
Total Operating Receipts		15,445			13,977			13,592			13,444			13,564			13,823
Cash Payments for Operating Activities
Payments for employees		(1,885	)		(2,143	)		(2,085	)		(2,128	)		(2,242	)		(2,291	)
Payments for goods and services		(5,615	)		(4,610	)		(4,571	)		(4,181	)		(4,568	)		(4,474	)
Grants and subsidies		(270	)		(264	)		(274	)		(303	)		(28	)		(28	)
Interest paid		(1,896	)		(1,910	)		(1,878	)		(1,884	)		(1,934	)		(2,004	)
Other payments		(1,452	)		(1,172	)		(1,207	)		(974	)		(1,018	)		(979	)
Total Operating Payments		(11,118	)		(10,098	)		(10,015	)		(9,471	)		(9,790	)		(9,775	)
Net Cash Inflows from Operating Activities		4,327			3,879			3,577			3,974			3,774			4,048
Cash Flows from Investments in Non-Financial Assets
Purchases of non-financial assets		(2,509	)		(3,130	)		(3,115	)		(3,514	)		(3,028	)		(3,001	)
Sales of non-financial assets		47			11			29			10			10			8
Net Cash Flows from Investments in Non-financial Assets		(2,462	)		(3,119	)		(3,086	)		(3,504	)		(3,018	)		(2,993	)
Net Cash Flows from Investments in Financial Assets for Policy Purposes		(988	)		284			742			45			(325	)		(563	)
Net Cash Flows from Investments in Financial Assets for Liquidity Purposes		71			(3	)		(4	)		(12	)		(13	)		(13	)
Receipts from Financing Activities
Advances received (net)		(1	)		(1	)		(1	)		(1	)		(1	)		(1	)
Borrowing (net)		(32	)		471			446			735			941			582
Dividends paid		(1,658	)		(1,805	)		(1,835	)		(1,462	)		(1,323	)		(1,040	)
Deposits received (net)		(2	)		—			—			—			—			—
Other financing (net)		(138	)		60			164			205			100			—
Net Cash Flows from Financing Activities		(1,831	)		(1,275	)		(1,225	)		(522	)		(282	)		(459	)
Net Increase/(Decrease) in Cash held		(883	)		(233	)		3			(20	)		136			19
Net cash from operating activities		4,327			3,879			3,577			3,974			3,774			4,048
Net cash flows from investments in non-financial assets		(2,462	)		(3,119	)		(3,086	)		(3,504	)		(3,018	)		(2,993	)
Dividends paid		(1,658	)		(1,805	)		(1,835	)		(1,462	)		(1,323	)		(1,040	)
Surplus/(Deficit)		207			(1,045	)		(1,344	)		(992	)		(567	)		14
Derivation of ABS GFS Cash Surplus/Deficit
Cash surplus/(deficit)		207			(1,045	)		(1,344	)		(992	)		(567	)		14
ABS GFS Cash Surplus/(Deficit) Including Finance Leases and Similar Arrangements		207			(1,045	)		(1,344	)		(992	)		(567	)		14

Note:

1. Numbers may not add due to rounding.

29

UNIFORM PRESENTATION FRAMEWORK AND LOAN COUNCIL ALLOCATION

Table 14: Non-financial Public Sector Cash Flow Statement¹

	2017-18			2018-19			2018-19			2019-20			2020-21			2021-22
	Actual			Budget			MYFER			Projection			Projection			Projection
	$ million			$ million			$ million			$ million			$ million			$ million
Cash Receipts from Operating Activities
Taxes received		12,982			13,891			13,910			14,815			15,540			16,352
Grants and subsidies received		28,048			27,788			28,344			28,563			29,168			29,993
Sales of goods and services		18,210			16,609			16,229			16,184			16,469			16,815
Interest receipts		2,421			2,217			2,253			2,193			2,006			1,959
Dividends and income tax equivalents		220			166			161			206			172			188
Other receipts		7,416			7,222			8,030			7,304			6,981			6,884
Total Operating Receipts		69,298			67,892			68,927			69,263			70,336			72,192
Cash Payments for Operating Activities
Payments for employees		(27,749	)		(29,743	)		(29,779	)		(30,891	)		(31,883	)		(33,010	)
Payments for goods and services		(22,157	)		(19,789	)		(20,258	)		(19,078	)		(19,360	)		(19,789	)
Grants and subsidies		(7,602	)		(9,247	)		(9,513	)		(9,919	)		(9,312	)		(9,208	)
Interest paid		(3,315	)		(3,202	)		(3,218	)		(3,321	)		(3,408	)		(3,587	)
Other payments		(647	)		(503	)		(507	)		(463	)		(493	)		(498	)
Total Operating Payments		(61,470	)		(62,484	)		(63,274	)		(63,671	)		(64,457	)		(66,092	)
Net Cash Inflows from Operating Activities		7,827			5,408			5,652			5,592			5,879			6,100
Cash Flows from Investments in Non-Financial Assets
Purchases of non-financial assets		(7,644	)		(9,057	)		(9,095	)		(10,933	)		(10,478	)		(10,182	)
Sales of non-financial assets		339			356			447			382			353			173
Net Cash Flows from Investments in Non-financial Assets		(7,305	)		(8,701	)		(8,648	)		(10,551	)		(10,125	)		(10,010	)
Net Cash Flows from Investments in Financial Assets for Policy Purposes		484			(104	)		(75	)		14			(28	)		(46	)
Net Cash Flows from Investments in Financial Assets for Liquidity Purposes		(1,024	)		2,873			2,312			4,235			807			(100	)
Receipts from Financing Activities
Advances received (net)		(34	)		(16	)		(25	)		(91	)		(41	)		(21	)
Borrowing (net)		(428	)		78			12			753			3,620			4,028
Deposits received (net)		5			(47	)		(47	)		—			—			—
Other financing (net)		(138	)		—			—			—			—			—
Net Cash Flows from Financing Activities		(595	)		15			(59	)		661			3,578			4,007
Net Increase/(Decrease) in Cash held		(612	)		(509	)		(819	)		(49	)		111			(48	)
Net cash from operating activities		7,827			5,408			5,652			5,592			5,879			6,100
Net cash flows from investments in non-financial assets		(7,305	)		(8,701	)		(8,648	)		(10,551	)		(10,125	)		(10,010	)
Surplus/(Deficit)		522			(3,293	)		(2,996	)		(4,959	)		(4,246	)		(3,909	)
Derivation of ABS GFS Cash Surplus/Deficit
Cash surplus/(deficit)		522			(3,293	)		(2,996	)		(4,959	)		(4,246	)		(3,909	)
Acquisitions under finance leases and similar arrangements		(584	)		(864	)		(864	)		(287	)		—			—
ABS GFS Cash Surplus/(Deficit) Including Finance Leases and Similar Arrangements		(62	)		(4,157	)		(3,860	)		(5,246	)		(4,246	)		(3,909	)

Note:

1. Numbers may not add due to rounding.

30  Mid Year Fiscal and Economic Review 2018-19

TAXATION AND ROYALTY REVENUE ASSUMPTIONS

TAXATION AND ROYALTY REVENUE ASSUMPTIONS

Table 15: Taxation and royalty revenue¹

	2017-18		2018-19		2018-19		2019-20		2020-21		2021-22
	Actual		Budget		MYFER		Projection		Projection		Projection
	$ million		$ million		$ million		$ million		$ million		$ million
Payroll tax		3,906		4,086		4,116		4,323		4,563		4,839
Transfer duty		3,023		3,214		3,254		3,301		3,481		3,680
Other duties		1,474		1,572		1,572		1,649		1,731		1,817
Gambling taxes and levies		1,190		1,307		1,333		1,400		1,460		1,520
Land tax		1,180		1,313		1,328		1,368		1,433		1,512
Motor vehicle registration		1,770		1,829		1,847		1,902		1,971		2,043
Other taxes		701		834		744		1,175		1,231		1,298
Total taxation revenue		13,244		14,155		14,194		15,118		15,871		16,709
Royalties
Coal		3,737		3,522		4,261		3,501		3,196		3,171
Petroleum2		187		447		422		470		495		490
Other royalties3		372		479		443		519		528		531
Land rents		160		167		167		168		169		172
Total royalties and land rents		4,455		4,615		5,292		4,657		4,388		4,364

Notes:

1. Numbers may not add due to rounding.

2. Includes impact of liquefied natural gas (LNG).

3. Includes base and precious metal and other mineral royalties.

Table 16: Royalty assumptions

	2018-19		2019-20		2020-21		2021-22
	MYFER		Projection		Projection		Projection
Tonnages – crown export1 coal (Mt)		218		231		232		235
Exchange rate US$ per A$2		0.73		0.74		0.74		0.74
Year average coal prices (US$ per tonne)3
Hard coking		190		153		142		140
Semi-soft		137		119		112		111
Thermal		105		89		83		80
Year average oil price
Brent ($US per barrel)4		73		70		69		67

Notes:

1. Excludes coal produced for domestic consumption and coal where royalties are not paid to the Government, i.e. private royalties 2018-19 estimate for domestic coal volume is approximately 26.9 Mt and private coal is 11.3 Mt.

2. Year average.

3. Price for highest quality coking and thermal coal. Lower quality coal can be sold below this price with indicative average prices for 2018-19 as follows: Hard coking US$174 and thermal US$84.

4. Published Brent oil prices are lagged by one quarter to better align with royalty revenue.

31

KEY FISCAL AGGREGATES

KEY FISCAL AGGREGATES

Table 17: Key Fiscal Aggregates¹

	2010-11			2011-12			2012-13			2013-14			2014-15			2015-16			2016-17			2017-18			2018-19			2019-20			2020-21			2021-22
	Actual2			Actual2			Actual2			Actual2			Actual2			Actual2			Actual2			Actual2			Revised			Projection			Projection			Projection
	$ million			$ million			$ million			$ million			$ million			$ million			$ million			$ million			$ million			$ million			$ million			$ million
General Government
Total revenue		42,013			45,801			41,755			46,705			49,970			50,780			56,194			58,087			59,002			59,614			60,403			62,167
Tax revenue		9,981			10,608			10,937			11,840			12,598			12,547			12,919			13,244			14,194			15,118			15,871			16,709
Total expenses		43,479			46,028			46,313			46,217			49,551			50,112			53,369			56,335			58,478			59,421			60,258			62,048
Employee expenses		16,826			18,250			18,130			17,816			18,592			20,045			21,258			22,678			23,987			24,841			25,777			26,779
Net operating balance		(1,466	)		(226	)		(4,558	)		488			420			668			2,825			1,753			524			193			145			119
Capital purchases		8,237			7,971			7,001			6,323			4,635			4,044			4,620			5,127			5,981			7,420			7,451			7,182
Net capital purchases		5,579			5,241			3,387			3,085			996			1,163			2,265			2,339			3,156			3,903			3,561			3,425
Fiscal balance		(7,045	)		(5,467	)		(7,944	)		(2,597	)		(576	)		(495	)		560			(586	)		(2,632	)		(3,710	)		(3,416	)		(3,305	)
Borrowings		24,594			29,518			37,879			41,369			43,105			35,486			33,240			31,530			33,242			36,787			39,436			42,874
Net debt		(9,542	)		(5,720	)		2,466			5,208			5,749			654			(355	)		(494	)		2,088			6,380			9,779			13,251
Non-Financial Public Sector
Total revenue		49,040			52,307			49,181			53,502			56,178			57,393			64,855			66,175			66,564			66,962			68,193			70,228
Capital purchases		13,306			11,980			10,774			9,313			7,811			6,852			7,291			7,644			9,095			10,933			10,478			10,182
Borrowings		53,708			61,542			69,086			72,637			75,233			72,922			71,884			69,522			71,609			75,875			79,473			83,505

Notes:

1. Bracketed numbers represent negative amounts.

2. With the implementation of the latest GFS Manual (AGFS15), some categories have been restated above to ensure comparability.

32  Mid Year Fiscal and Economic Review 2018-19

KEY FISCAL AGGREGATES

Table 18: Key Fiscal Indicators¹

	2010-11			2011-12			2012-13			2013-14			2014-15			2015-16			2016-17		2017-18			2018-19			2019-20			2020-21			2021-22
	Actual3			Actual3			Actual3			Actual3			Actual3			Actual3			Actual3		Actual3			Revised			Projection			Projection			Projection
	%			%			%			%			%			%			%		%			%			%			%			%
General Government
Revenue/GSP		16.2			16.5			14.8			16.1			16.9			16.7			17.2		16.7			16.1			15.8			15.4			15.2
Tax/GSP		3.8			3.8			3.9			4.1			4.3			4.1			4.0		3.8			3.9			4.0			4.0			4.1
Own source revenue/GSP		8.3			8.2			8.2			8.6			8.9			8.9			8.8		8.7			8.4			8.2			7.9			7.9
Expenses/GSP		16.7			16.5			16.4			16.0			16.8			16.5			16.3		16.2			15.9			15.7			15.3			15.2
Employee expenses/GSP		6.5			6.6			6.4			6.2			6.3			6.6			6.5		6.5			6.5			6.6			6.6			6.5
Net operating balance/GSP		(0.6	)		(0.1	)		(1.6	)		0.2			0.1			0.2			0.9		0.5			0.1			0.1			0.0			0.0
Capital purchases/GSP		3.2			2.9			2.5			2.2			1.6			1.3			1.4		1.5			1.6			2.0			1.9			1.8
Net cash inflows from operating activities/Net cash flows from investments in non-financial assets		26.3			36.3			(40.7	)		45.9			97.5			122.9			134.2		106.5			70.3			43.7			48.2			44.1
Fiscal balance/GSP		(2.7	)		(2.0	)		(2.8	)		(0.9	)		(0.2	)		(0.2	)		0.2		(0.2	)		(0.7	)		(1.0	)		(0.9	)		(0.8	)
Borrowings/GSP		9.5			10.6			13.4			14.3			14.6			11.7			10.2		9.1			9.1			9.7			10.0			10.5
Borrowings/revenue		58.5			64.4			90.7			88.6			86.3			69.9			59.2		54.3			56.3			61.7			65.3			69.0
Revenue growth		13.3			9.0			(8.8	)		11.9			7.0			1.6			10.7		3.4			1.6			1.0			1.3			2.9
Tax growth		12.6			6.3			3.1			8.3			6.4			(0.4	)		3.0		2.5			7.2			6.5			5.0			5.3
Expenses growth		17.2			5.9			0.6			(0.2	)		7.2			1.1			6.5		5.6			3.8			1.6			1.4			3.0
Employee expenses growth		17.6			8.5			(0.7	)		(1.7	)		4.4			7.8			6.1		6.7			5.8			3.6			3.8			3.9
Non-Financial Public Sector
Capital purchases/GSP		5.1			4.3			3.8			3.2			2.6			2.3			2.2		2.2			2.5			2.9			2.7			2.5
Borrowings/GSP		20.7			22.1			24.5			25.1			25.5			24.0			22.0		20.0			19.5			20.1			20.2			20.4
Borrowings/revenue		109.5			117.7			140.5			135.8			133.9			127.1			110.8		105.1			107.6			113.3			116.5			118.9
Net financial liabilities2/revenue		112.3			132.1			157.1			148.7			140.7			144.0			128.3		125.8			128.8			134.3			136.9			136.6

Notes:

1. Bracketed numbers represent negative amounts.

2. UPF definition, which is equal to total financial assets less investments in other public sector entities less total liabilities.

3. With the implementation of the latest GFS Manual (AGFS15), some categories have been restated above to ensure comparability.

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