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Australian Government Monthly financial statements: September 2006.



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Senator the Hon Nick Minchin

Minister for Finance and Administration Leader of the Government in the Senate

Media Release

67/2006 10 November 2006

AUSTRALIAN GOVERNMENT MONTHLY FINANCIAL STATEMENTS September 2006

KEY POINTS

z The underlying cash balance for the 2006-07 year to 30 September 2006 was a deficit of $2,088

million.

z The fiscal balance for the 2006-07 year to 30 September 2006 was a surplus of $1,174 million.

z The operating result for the 2006-07 year to 30 September 2006 was a surplus of $1,134 million.

Care needs to be taken when comparing monthly or cumulative data across years and to full year estimates. Revenues and expenses do vary from month-to-month. Factors such as The New Tax System, and the accrual framework including the timing of payments and policy decisions, can have a large impact on fiscal aggregates from one year to the next and on year-to-date outcomes. Commencing from April 2006 monthly financial statements are now produced under the Australian Equivalents to International Financial Reporting Standards (AEIFRS).

Consistent with the market basis of valuation of assets adopted under AEIFRS, the basis of valuation of the Government's investment in Telstra Corporation Limited and other Commonwealth entities has changed from cost to fair value. The financial effect of this change is recognised in the Statement of Changes in Equity.

The Australian Government Monthly Financial Statements for September 2006 are prepared using the AEIFRS treatment for education grants. Under this approach the Australian Government’s obligation to

the States and Territories is recognised upon Ministerial determination. The April and May 2006 Australian Government Monthly Financial Statements were prepared using the GFS treatment which recognises the obligation later in the funding year as money is transferred to States and Territories.

FISCAL OUTCOMES

Underlying Cash Balance

The main components of the underlying cash balance are cash from operations and cash movements in the net investment in non-financial assets.

The underlying cash balance for the year to 30 September 2006 was a deficit of $2,088 million. This underlying cash balance is $4,795 million lower than the August pro rata (a surplus of $2,707 million) of the Revised Budget estimate for 2006-07 of $10,828 million. The difference reflects a number of individual variations including the following:

Movements in underlying cash receipts:

Lower receipts from:

z Taxation in line with the usual monthly fluctuations in revenue.

Movements in underlying cash payments:

Higher payments for:

z Education Grants due to payments being made based upon the Ministerial determination thus

occurring on an irregular basis; and

z Payments to employees due to payments on outstanding invoices from 2005-06.

Lower payments for:

z Personal benefits payments due to lower than expected customer numbers;

z Health Grants due to added focus on compliance with meeting milestones affecting the timing of

payments; and

z Suppliers due to focus on contractual compliance affecting the timing of payments

Fiscal Balance

The fiscal balance for the year to 30 September 2006 was a surplus of $1,174 million. The main components of the fiscal balance are the GFS net operating balance, which was a surplus of $859 million, and a net capital investment of $315 million for the year to 30 September 2006 (refer to the Reconciliation of the Operating Result to Fiscal Balance on page 9 for further detail).

FINANCIAL OUTCOMES

Actual expenses are $4,883 million lower when compared with a pro rata of the revised Budget estimate. The main reason for the lower expenses, provided by function, are due to:

z Education function - lower grant expenses due to the timing of payments.

Assets and Liabilities

The net asset balance within the General Government sector is a positive net asset position of $1,134 million at 30 September 2006, including the impact of a change in accounting policy under AEIFRS to recognise investments in Telstra and other Australian Government entities at fair value.

Contact:

Senator Minchin’s Office: Simon Troeth (02) 6277 7400/ (0439) 300 335

Department of Finance and Administration: Anne Hazell (02) 6215 3650 Chief Financial Officer Australian Government Reporting

AUSTRALIAN GOVERNMENT GENERAL GOVERNMENT SECTOR - INCOME STATEMENT

Nick Minchin Minister for Finance and Administration 10 November 2006

I J Watt Finance Secretary to the Department of and Administration

10 November 2006

AUSTRALIAN GOVERNMENT GENERAL GOVERNMENT SECTOR - BALANCE SHEET

AUSTRALIAN GOVERNMENT GENERAL GOVERNMENT SECTOR - STATEMENT OF CHANGES IN EQUITY

AUSTRALIAN GOVERNMENT GENERAL GOVERNMENT SECTOR - CASH FLOW STATEMENT

AUSTRALIAN GOVERNMENT GENERAL GOVERNMENT SECTOR - INCOME STATEMENT BY FUNCTION

AUSTRALIAN GOVERNMENT GENERAL GOVERNMENT SECTOR - RECONCILIATION OF THE OPERATING RESULT TO FISCAL BALANCE

AUSTRALIAN GOVERNMENT GENERAL GOVERNMENT SECTOR - DERIVATION OF UNDERLYING AND HEADLINE BALANCE

NOTES:

13/11/2006 http://www.financeminister.gov.au/media/2006/mr_672006.html

The accounting policies in this part are generally consistent with the requirements of AEIFRS. While the scope for financial reporting recommended by AEIFRS and AAS 31 is the whole of government (that is, the Australian Government public sector), the Financial Management and Accountability Act 1997 requires monthly financial statements to be consistent with the budget estimates. Accordingly and pursuant to the Charter of Budget Honesty Act 1998, this presentation covers the general government sector only. This publication does not include full note disclosures.

With the introduction of Business Activity Statements and Instalment Activity Statements in 2000-2001, taxpayers provide information on payments associated with several types of tax when lodging the statement and paying the aggregate net tax amount. Thus, while total tax collections are known with certainty at the end of each month, the distribution across the relevant heads of revenue cannot be finalised until all statements are received and processed. The outcomes for some revenue items provided in this statement are thus estimates, in accordance with the best judgement of the Taxation

Commissioner, and subject to revision. The taxation revenue items not affected are: Petroleum Resource Rent Tax, Excise duty, Customs duty, Other Taxes and Individuals Refunds.

The sum of the revenue accrued in the month and the revisions to prior periods equals the revenue reported in the Statement of Revenue and Expenses.

All taxation items in these notes are reported on an AEIFRS basis, unless otherwise indicated.

NOTE 1: INCOME TAX

NOTE 2: INDIRECT TAX

NOTE 3: GOODS AND SERVICES TAX

In regard to GST revenue, AAS would suggest the gross amount of GST be included in the Australian Government’s Financial Statements. However, the clear policy intent of the Intergovernmental

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Agreement on the Reform of Australian Government-State Financial Relations is that the GST is a State tax collected by the Australian Government in an agency capacity. Therefore, accrued GST revenues and associated payments to the States and Territories are not recognised in these statements.

NOTE 4: ADJUSTMENT FOR EDUCATION GRANT EXPENDITURE

In regard to education grant expenditure, adherence to AAS results in fewer education expenses being reported until the signing of the Ministerial determination, which normally occurs between December and March each year. This produces a bunching of expenses such that the full year's expense is recognised at that time and remains relatively constant until June. The table below provides details of the cash paid by DEST and attributable to the Education function for the year to date.

NOTE:

Style Conventions

1. Figures in tables and generally in the text have been rounded. Discrepancies in tables between totals and sums of components are due to rounding.

International Monetary Fund (IMF) Special Data Dissemination Standards (SDDS)

2. In accordance with the IMF's SDDS, quarter ahead notice of the date of release of the data on central government operations, which is contained in the Australian Government Financial Statements, is given on the IMF's Data Dissemination Bulletin Board at http//dsbb.imf.org.

3. Monthly and quarterly data on debt guaranteed by the Australian Government (central) government that meet the coverage and timeliness requirements of the SDDS are published on the AOFM website at http://www.aofm.gov.au/content/borrowing/commonwealth.asp?NavID=32. In accordance with the IMF SDDS, the approximate date of release of the data on debt guaranteed by the Australian Government (central) government, is given on the IMF's Data Dissemination Advance Release Calender http://dsbb.imf.org

Media Contact: Simon Troeth (02) 6277 7400/ (0439) 300 335

Website:

www.financeminister.gov.au