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Commonwealth budget outcome 1978-79



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MINISTER FOR FINANCE

G..7. 7 ?

EMBARGO NO: 52

COMMONWEALTH BUDGET OUTCOME 1978-79

Joint Statement by the Treasurer (The Hon John Howard, MP) and

the Minister for Finance (The Hon Eric Robinson, M P ).

The Statement of Financial Transactions for June, which was

released today» showed that the Commonwealth ended 1978-79 with

an overall deficit of $3453 million. This was $640 million

above the budget estimate but within the figure of about

$35 00 million foreshadowed by the Treasurer in May.

A copy of the June Financial Statement is attached; in summary

the outcome was as follows:

Budget Actual Difference

Estimates Results $m $m Per cent

Outlays 28870 29017 + 148 + 0.5

Receipts 26057 25565 -492 - 1.9

Deficit 2813 3453 +640

Total outlays were again held to a level very close to the

budget estimate; the bulk of the increase in the deficit was

attributable to.revenue shortfalls - in particular, in

collections of personal income tax by assessment and company

tax. Both of these reflected over-estimates of 1977-78 incomes

on which 1978-79 tax was levied and both were affected by

greater than anticipated tax avoidance.

OUTLAYS

The net increase in total outlays compared with the budget

estimate was $ 148 million. This represents an overrun of

only 0.5 per cent and continues the good record of the present

Government in holding total outlays very close to budget

estimates:

2

Change on Budget Estimate Per cent

1975-76 -0.3

1976-77 -0.8

1977-78 +0.5

1978-79 +0.5

As always, the net overrun of $148 million in 1978-79 masks a

number of individual variations - increases and decreases — from

the budget estimates. !

The largest overrun occurred in respect of unemployment and

sickness benefits, which exceeded the budget estimate by $109

million because of greater than assumed numbers of unemployment

beneficiaries and a higher than estimated average rate of benefit.

Other large overruns included the following;

. Defence equipment and stores - up $77 million mainly on

account of increased billings for the purchase of patrol

frigates and higher than estimated prices for supporting

equipment and stores, particularly fuels.

. Public debt interest - up $64 million, mainly reflecting

greater than expected sales of Treasury Notes.

. Medical benefits - up $34 million because, in the event,

the lag between the provision of medical services and the

submission of claims to the Commonwealth under the revised

medical benefit arrangements has been shorter than was

projected.

. Family allowances - up $27 million, essentially because

of the Government's post-budget decision not to proceed

with an income test on childrens income.

These and other overruns were partly offset by a decision by

Qantas to make advance repayments of $74 million in respect of

aircraft loans in 1978-79 and by a large number of relatively

smaller expenditure shortfalls, including in respect of hospitals

cost-sharing payments ($20 million), employment and apprentice­

ship training programs ($15 million), general pharmaceutical

benefits ($ 14 million) and the Tertiary Education Assistance

Scheme ( $ 1 0 million).

^hq^dlncrease of 8.3 per cent in total outlays in 1978-79 was the

smallest increase in any year since 1968-69. It is the

Government's firm intention to continue to maintain maximum

^restraint on budget expenditures in 1979-80.

3 J

RECEIPTS

Total receipts in 1978-79 amounted to $25,565 million, an ,

increase of 8.9 per cent over 1977-78 and $492 million, or

1.9 per cent, less than the budget estimate.

As noted earlier, the main shortfalls occurred in collections

of personal income tax on assessment ($193 million) and company

tax ( $ 1 8 6 million). A major contributing factor to these

shortfalls was the increased resort to tax avoidance schemes

during the year. It is estimated that this factor contributed

about $ 180 million to the receipts shortfall. In addition,

some categories of income during 1977-78 to which 1978-79

collections relate, turned out to have been lower than

estimated at the time of the Budget.

Collections of customs duty on imports Were $99 million less

than the Budget estimate. This reflected a lower ratio of

duty to imports than has been anticipated.

Excise duties were $40 million below the Budget estimate; }

shortfalls of collections of excises on alcoholic beverages

were partly offset by higher than anticipated crude oil levy

receipts.

Net PAYE collections were $57 million higher than the Budget

estimate. Gross PAYE collections were $ 107 million higher

reflecting, principally, a slightly higher increase in average

weekly earnings than assumed at the time of the Budget;

offsetting this PAYE refunds were $50 million higher than

estimated.

DEFICIT

The overall deficit of $3453 million in 1978-79 was $119 million

more than the deficit in 1977-78 and represented 3·4 per cent

of gross domestic product compared with 3·7 per cent in 1977-78.

Sales of securities in Australia contributed most to the

financing of the deficit. Of the net $20 36 million raised in

this way in 1978-79, $ 1047 million represented a net increase

in Treasury Notes on issue. Australian Savings Bonds sales

totalled a net $287 million. The remaining $702 million

represented proceeds from Treasury bond sales and other public

loan raisings.

4

Net overseas borrowings by the Government amounted to

f : $1349 million in 1978-79, $263 million less than in 1977-78.

Miscellaneous financing transactions contributed a further

$44 million. Borrowings from the Reserve Bank through net

issues of Treasury Bills amounted to $500 million.

Overall net borrowings and funds from miscellaneous financing

transactions exceeded the deficit by $476 million and, as a

consequence, Commonwealth cash balances were increased by this

amount.

ECONOMIC POLICY

While it has been clear for some time that the budget deficit

( \ would be significantly greater than the budget estimate, the

outcome remained disappointing to the Government. This is

because the continuing large deficit has delayed the

restoration of a better balance between the public and private

sectors, and has contributed to the high level of liquidity in

the private sector and to excessive growth in the monetary

aggregates.

The higher deficit has caused problems for economic policy but

it does not reflect any change in the underlying thrust of

policy.

Outlays were again held very close to the budgeted total and

, the shortfall on the receipts side reflected the difficulty of

estimating some of the volatile receipt items and increased

incidence of tax avoidance.

The Government, has, of course, taken the developments now

reflected in the actual Budget deficit for 1978-79 into

account in its actions for firmer fiscal and monetary policy

in recent months - most notably in the measures announced on

24 May and at the Premiers' Conference/Loan Council meeting

last week. These measures have placed the Government in a

position to achieve an appropriate and responsible budgetary

outcome for 1979-80.

CANBERRA 6 July 1979

Ju AUSTRALIA

MINISTER FOR FINANCE

C O MMON WEAL TH G O V E R N M E N T ' ST ATE M E N T OF FI NANC IAL T R ANSA CTIO NS 1978-79 $ m i l l i o n '

BUDGET 1

MONTH OF 12 MONTHS TO 12 MONTHS TO 1978-79 JUNE 1979 30.6.1979 30.6.1978

OUTLAYS

Defence · 2,500.9 311.6 2,606.4 2,376.5

Ed ucation 2,497.6 144.5 2,493.3 2,354.8

Health 2,913.5 226.4 2,901.4 2,698.4

Social Security and Welfare 8,014.7 645. 8 8,136.Ο 7,490.3

Housing . 363.3 3.0 CR 368.9 506.9

Urban and Regional Development (nec) and the E n vironment . 108.1 48.5 108.3 153.4

Culture and Recreation 284.2 12.7 280.2 261.0

Economic Services -Transport and Communication 769.3 61.9 722.6 854.0

Water Supply and Electricity 4.1 1.5 CR 5.6 45.1

Industry Assistance and Development ' ' 536.0 86.4 507.9 326.0

Labour and Employment 344.3 28.2 335. 1 285.9

Other Economic Services 99.0 9.3 100.6 93.5

General Public Services -Legislative Services . 68.8 7.9 70.2 75.0

Law, Order and Public Safety 172.5 17.9 172.8 135.4

Foreign Affairs and Overseas Aid 607.0 54.7 606.5 565.2

General and Scientific Research (nec) 229.0 19.9 227.6 197.9

Administrative Services 849.3 76 .0 831 .6 819.5

Not Allocated to Function -Payments to or for the States, the Northern Territory and Local Government Authorities (nec) 6,557.0 513.8 6,572.2 5,914.8

Public' Debt Interest 1,905.9 74.5 1,970.5 1,649.2

Allowance for Prospective Wage and Salary Increases 50.0 - - -

Unallocated Administrative Savings 5.0 CR - - -

TotaI Outlays 28,869.5 2,335.4 29,017.4 26,802.9

' RECEIPTS

Taxation Revenue - . Customs Duty -Imports 1,462.0 106.3 1,363.3 1,131.8

CoaI Exports 93.0 9.4 93.5 100.2

Excise Duty 3,885.0 320.5 3,844.8 2,733.8

Sa l es Tax 1,801.0 159.2 1,769.9 1,757.8

Income Tax - Individuals - Gross PAYE 11,331.0 1,199.0 11,437.6 10,578.5

- Refunds · 990.0 DR 13.3 DR 1,040.0 DR 939.7 DR

- Net PAYE 1-0,34 1.0 1,185.8 10,397.6 9,638.8

- Other 2,599.0 205.2 2 ,4θ6.2 2,490.2

- Companies 3,222 .Ό 200. 1 3,036.5 3,095.3

- Withholding Tax - Dividends 90.0 9.9 88. 1 87.7

-Interest 30.0 2.7 26.0 30.2

PayroI I Tax 16.0 1.2 16.2 22.5

Depa rt u re Tax 10.0 1.3 12.0 -

Estate Duty 70.0 7.2 82.1 95.6

Gift Duty 2.0 .2 1.4 6.6

Stamp Duty 5.5 .5 5.6 5.4

Other Taxes, Fees and Fines 151.2 1.2 150.8 158.3

Remissions 8.4 DR 1.5 8.3 DR 8.3 DR

Total Taxation Revenue 23,769.3 2,212.0 23,285.7 21,345.8

Interest, Rent and Dividends 1,921.6 494.9 1,921.7 1,813.2

Net Receipts from Government Enterprise Transactions 299.5 182.8 299.9 224.7

Sale of Existing Assets 66.7 4.0 57.6 85.8

’ Total Receipts 26,057.0 2,893.6 25,564.9 23,469.4

SURPLUS (+) DEFICIT (-) - 2,812.5 + 5 58.2 -3,452.5 -3,333.5

FINANCING TRANSACTIONS

Net overseas borrowings ) 18.9 DR 1,348.6 1,611.9

Net proceeds of Australian Savings Bonds and )

Spec i a I Bonds ) 77.2 286.8 400.7

Net change in Treasury Notes on Issue ) 70.0 1,046.8 6.5 DR

Net proceeds of.other loans raised in Australia ) 6.4 702.0 651.1

Borrowings from Reserve Bank ) 2,812.5 100.0 DR 500.0 359.5

Use of cash balances ) 628.7 DR 476.2 DR 102.9

Other financing transactions in Australia ) 35-8 44.5 213.9

Total Financing Transactions 2,812.5 558.2 DR 3,452.5 3,333.5

UNFUNDED DEBT AND BANK BALANCES AT TO JUNE 1979 $ million .

Treasury Bills 2,000.0 Treasury Notes 1,409.9 Bank BaIances 815.4

• I. Castles

Secretary to the Department of Finance 6 JULY 1979 ■

Eric L. Rob In son Minister for Finance