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Budget outcome 1977-78



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E M B A R G O IMMEDIATE . ' '

; . STATEMENT By THE .TREASURER.AMD ACTING MINISTER FOR F I N A N C E , THE HON. JOHN HOWARD, MP ' ' . . . .

· ' BUDGET OUTCOME 1977-78 ' ' ·' ' ' " '

. _ . . . . .. The T r e a s u r e r ;and. Acting Minister, for Finance, the. H o n . -

i · · ; · - . r · ; John-Howard / ·Îœ.Ρ , ν today,‘ released -the Statement: of Financial·

Transactions for 1977-78. . .

j · ·.'>

. This ..Statement revealed r that, .the budget def icit in 1977-78 .

i v/as $3,332 million, an increase of $1,115 million over the

. budget estimate in August 1977 of $2.^217 million. · ·

Mr Howard said that total budget outlays in 1977-78 exceeded

the budget estimate by approximately $140 million but total

• receipts fell short of the budget estimate by $975 million.

. . The .Treasurer said-he. had first -foreshadowed these developments

in his joint statement with Mr Robinson of 17. January 197-8.

EXPENDITURE

Mr Howard s t r e s s e d :that although there had been a significant

: increase in the actual budget deficit over that forecast in

August 1977 that should not obscure the fact that the Government

_ had -.ag.ain.,kept ..its own spending, under very firm restraint -

throughout 1977-78. .

2 · .

.Total expenditure for 1977-78 was $26,796 m i l l i o n , only . -

. : 0.. 5 per cent over budget estimate, or 11.1 per cent over. " .

1976-77.. . . . .

The attached Statement permits, for each broad functional .

. . . category of outlays, comparisons of actual outcomes with

budget e s t i mates. As could be expected, given the large .

„ expenditures involved, there were significant over-runs in .

.some areas and significant shortfalls in others. .

Included among these developments was the need to provide .

$44 million over and above what was provided in the Budget

for natural disaster relief payments. In a ddition, several .

post-Budget decisions had the effect of adding to expenditure

in 1977-78, including those relating to the provision of

assistance to beef producers ($85 m i llion)> for mining

operations at Mary Kathleen and Mt Lye11 ($12 million in

total) and the introduction of the sole fathers benefit .

($8 m i l l i o n ) . . . . .

Leaving aside these post-Budget developments, the major

over-run occurred in respect of pensions and welfare

payments (up $244 million, including an additional $155 million

for unemployment and sickness benefits). Other over-runs

occurred in respect of expenditure on the National Employment

and Training System, or NEATS ($31 m i l l i o n ) ; Home Savings

Grants ($14 million) and overseas loan flotation expenses

($13 m i l l i o n ) . .

3 .

These and other over-runs were largely offset by shortfalls,

compared with Budget estimates, in respect of Medibahk medical

payments . (down $9.1 million) and public debt interest payments

(down $78 million), together with smaller shortfalls in respect

of a large number of programs (including student assistance, .

pharmaceutical benefits,.decentralisation assistance). . ,

RECEIPTS

.Mr . . Howard ..said, that in .1977-78 total receipts amounted to . . . '

$23,465 m i l l i o n , some 4.0 per cent less than budget estimate

but an increase of 9.7 per cent over 1976-77. . ' · ' ■

The largest.absolute shortfall, $403 million, occurred in ■ ' ·

collections from other (non-PAYE) individuals and related .

mainly to collections from provisional taxpayers. . 1

The large shortfall in collections on assessments of individuals

resulted mainly from a change i n the pattern of distribution of": ■:

income of taxpayers subject to provisional tax - causing the

overall rate of tax payable on assessment to be considerably .

lower than had been estimated - and from a much higher level of -"

.self-assessment, particularly by primary" producers, which . , ,

reflected the ..decline in primary producers’ incomes in 1977-78 .·. · . ,

and followed the post-Budget changes in the averaging provisions;■

Other causes of the shortfall were unavoidable delays in the

issue of assessments occasioned by the postal strike and

procedural problems encountered in the assessment and collection

of tax affected by tax avoidance schemes. These were contributing

factors to the increase in tax outstanding at the end of the year,

which is about $100 million higher than had been allowed for in

the Budget estimate. It is thought that more than $100 million

of the end-of-year outstandings is due to disputed tax avoidance

schemes.

. 4 .

vA -.shortfall οΐ $356 ^million occurred in net PAYE income .

tax collections. In the m a i n , this was due to PAYE refunds

b e i n g . $300 million above the Budget estimate.

This appeared to reflect both increased part-time and part- .

year employment in 1976-77, with the tendency to over­

deduction in ;,that year , which that implied and the fact that : '·

many . taxpayers seem to.prefer to ensure large refunds -at .

the. end of. the year by over deduction during the* year. These

factors added to the difficulties in estimating the effects,

on refunds in 1977-78 of the first full year of operation .

of the Hayden rebate scheme.

Collections of customs duty for imports were down $183 million

on the Budget estimate. Imports were lower than estimated at

that time and the ratio of duty to dutiable imports also

showed a shortfall on the estimate.

Sales tax receipts were $107 million below Budget estimates,

primarily reflecting lower sales of goods in the 27% per cent

rate c l a s s , which includes motor vehicles, than foreseen at

Budget t i m e . .

The Treasurer noted that company tax collections were

$97 million above the Budget estimate on account of stronger

growth in company income for 1976-77 than earlier estimated.

5 .

FINANCING TRANSACTIONS _ .

Government securities remained attractive to investors in

1977-78 with public loan raisings in Australia contributing

$1,209 million to the financing of the deficit; Australian

Savings Bonds and Special Bonds comprised a net $401 million

of this tot a l . Loan raisings were offset to a small extent

by a rundown of $7 million in the value of Treasury Notes

on i s s u e . ’ ^ . .

. · · . X . · . ■ " " * ■ . -· · “ .

Net overseas borrowings by the Government amounted to

$1,612 million compared with $357 million in 1976-77.

For the rest, borrowings from the Reserve Bank totalled a

net $200 million while miscellaneous financing transactions

and net use of cash balances amounted to a'further $317 million

ECONOMIC STRATEGY

Mr. Howard noted that, notwithstanding the larger deficit

than had been initially estimated, preliminary estimates .

suggested that the growth in the volume of money' (M3) had

been held very close to the range of 8 - 10 per cent referred

to in the Budget Speech. . , ·

This outcome was obviously to be welcomed although, clearly,

it would have been preferable to have achieved it via a lower

deficit, a smaller debit on private sector foreign exchange

transactions and a smaller public sector demand on the

monetary system through the private non-bank take-up of

Government securities. .

As things turned out, monetary growth at appropriate rates

owed much to the successful conduct of monetary, policy itself ,

including the achievement of very high sales of Government

• ^securities during the y e a r . - . ·

On. present e-stimates the increase in holdings of bonds by

the non-bank -public was equivalent to more than half the

Budget's direct contribution to domestic liquidity.

This development in turn owed much to the major success .

story of the year - the more rapid than expected reduction

in the inflation rate and its favourable consequences for

interest rates and expectations in financial markets generally.

I

Price statistics for the June quarter are not yet available. ’ ’

However, over the year to the March quarter 1978 the increase

in the deflator for major components of national expenditure

was 8.2 per cent compared with 11.1 per cent over the year

to the March quarter 1977; other price aggregates showed,

similar trends.

This more rapid, than expected drop in inflation was also

instrumental in lifting the deficit outcome above the Budget

e s t i m a t e .

Mr. Howard said that, in. short, the increase in the deficit .

mainly reflected unanticipated revenue shortfalls. On the

. expenditure side, such additions as had emerged after the

• B u d g e t as a result· of new decisions or for reasons, such as

natural disasters, which could not have been foreseen had been

•"’ •partly ; offset by; reductions in other ' outlays : ■ ' · ·

The Treasurer said that this rigorous attitude towards public

expenditures., which...had been maintained throughout the year,

was continuing in the formulation of this year's B u d g e t .

As the Prime Minister had assured the Premiers two weeks a g o ,

the Government was not taking an attitude in relation to the

provision of funds to the States at that time that it did not

... intend to. take, in relation .to its own direct spending.

The result of this continuing attitude to expenditure

restraint would be seen in the Budget which he would be

. . . bringing down on 15 August next. . . . : . . . .

7 July 1978

COMMONWEALTH GOVERNMENT STATEMENT OF FINANCIAL TRANSACTIONS 1977-78 $ million

. Budget Month of 12 Months to 12 Months to

' · OUTLAYS *

. Estimate

1977-73

'JUNE 1978 3 0 .6 . 7 8 3 0 .6 .7 7 .

■ 2,343.0 ' 3 2 0 . 1 2 ,3 7 5 . 8 2,182.8

Education ... . . 2,371.0 , 1 8 2 . 2 2.355.1 2 ,1 6 0 . 1 · Health - ' 2,013.8 · 278.7 2,699.3 2 .5 8 8 . 1 Social Security 6 Welfare 7,247.9 • '675-9: 7,892.0 . 6,828.9 BousingUrban and Regional Development (nec) and ' 495.81 0 . 1 .5 0 8 . 1 589.1 the Enviroiunent 167.9 41.7 189.5 250.7 Culture 6 Recieation 2C0.9 13.8 258.7 255.7 Economic Services - iTransport t Coimunlcation ' . 844.2 . 6 7 . 8 853.2 989.8 Water Supply 6 Electricity * ' · ■ * 44.0 ' 3.8 ; .4 7 . 3 71.8 Industry Assistance and Development ' 243.0 · 88.8 ■ · 3 2 . 63 2 8 . 5 207.7 · labour and Employment · · . i . 5 ‘ 258.3" 286.2 ■ 282.7 - Other Economic Services CeneraJ Public Services - 100.0 8.5 . 99.7 89.6 Legislative Services · 71.8 7.9 75.1 6t.8 Lav, Order and Public Safety 136,4 ,5·3 . 1 3 6 . 3 1 2 6 . 6 Foreign.Affairs.and Overseas Aid ... ; . 571.3:, • 46.1 . 5 6 3 . 8 . 1515.6 I ' General and Sciencific Research (nec) 196.0 5.9 1 9 7 . 6 184.0 · Administrative-Services · . . . 855.6 / : 89.5 861.4 , 7 2 3 . 6 - Mot Allocated to Function - • Paywmta to or for the States and Local Government. 5,818.11 Authorities (nec) and Natural Disaster Relief 870.6 3 ,8 6 1 . 8 3,123.8 . Public Debt*Interest ' , r 1 . Allowance for Wage and Salary 1,727.3 ; 75.21,689.21,8 1 1 . 6 ■ :Lncreaaaa · · . - · - -90.0 -* * ■ * · t . Total Outlays ' · 26,656.2 •2,339.6 2 S.7 9 6 .-8 ' ■ 2 8 ,1 2 1 . 3RF.CEIPTSGeneral Taxation Revenue - Cur, teas Duty « . ,Inporto · . ». · i . . 1,315.0 . ; 104.4 1.131.8 1 ,1 5 2 . 2 Ccal Exports. 93.0 . 7.7 100.2 1 2 1 . 3 Excise Duty '' ■ ' ' * ■ · 2,792.5 231.9 2 ,7 3 3 . 8 2 ,8 8 5 . 8 Sales Tax . = 1,865.0 . 1 6 8 . 0 1 .7 5 7 . 8 1 .6 5 0 . 3 locc^e Tax - Individuals - Gross PAYE 10,635.0 956.3 1 0 ,5 7 8 . 3 9,811.3 ’ - Leas Refund» 640.0DR 1 5.1 DR 939.7DR 1.2B2.6DR. ' . - Met PAYE 9,995.0­2,889.0■ 941.4 254.89,638.8 . 8,528.9 • Other · , • 2,485.9 3,095.32,524.8 • Companies 2,998.0 206.9 2,828.5 “ Withholding Tax - Dividends 73.0 1 1 . 0 1 0 7 . 8 7 2 . 0 ' - Interest 30.0 2.9 14.4 ■ 2 8 . 8 Payroll Tax . 23.5 2.2 2 2 . 5 21.3 Estate Duty 80.2 9 . 8 9 5 . 6 6.6 7 6 . 2 Gift Duty 13.0 .5 tt.5 Steep Duty (ACT and NT) · 5.5 .5 . 5.4 8 . 9 Other Taxes, Fees and Fines . Looa Remissions 159.011.21 5 3 . 6 1 5 1 . 4 8.6DR .7DR 8.30R 8 .3DRTotal General Taxation Revenue 22,323.1 1,814.0 1 ,9 8 8 . 52 1 ,3 8 3 . 1 1 9,6 8 0 . 9 Interest# Rent and Dividends 8 8 7 . 5 1,8 0 9 . 3 1,6 2 6 . 2 Pet Receipts from Government Enterprise Transactions 228.0 98.6 2 2 8 . 2 84.7 Sale of Existing Assets · 74.2 3.3 8 7 . 8 30.1· . Total Receipt a - . 24,439.3' 2,897.9 2 3 ,8 6 8 . 6 21,381.8■ · SURPLUS (♦). DEFICIT (-) - 2,216.9 :♦ 158.3 - 3,331. 8 - 2 ,7 3 9 . 5FINANCING TRANSACTIONSBet overseas borrowings (a) ; Bet proceeds of Australian Savings Γ-onds and . !2 0 9 . 1 .1,6 1 1 . 9 3 5 7 . 3Special Bonds ' > 2 5 . 6 8 0 0 . 7 3 6 6 . 3 Bet change in Treasury Notes on Issue > 97.1 DR 6 .5DR 86.8DR Net proceeds of other loans raised in.Australia (b) )2,216.9 ! 9 .8 DR . 808.3 1,693.6 Borrowings from Reserve Bank 100.0DR 200.0 8 5 0 , 0 · Use of cash balances ) 2 8 5 .ODR 102.9 27.5 Other financing transactions in Australia s . 58.5 . 2 1 8 . 5 131.7 *Total financing transactions 2,216.9 153.3DR 3 ,3 3 1 . 8 2 .7 3 9 . 5(a) ‘ includes borrowings and repayments under credit arrangements for defence purchases in the United States ■ of America and on behalf of Qantos Airways Limited and the Australian National Airlines Commission.(b) Includes State Domestic raisings. ■AUDIT ACT 1901 (SECTION 49(1)) - STATEMENT ΟΓ RECEIPTS AND EXPENDITURE ' S millionBudget Estimate1977-79Month of JUNE 1 9 7 812 Months to 30.6.7812 Months to 30.6.77Consolidated Revenue Fund - Receipt» 24,404.3 2 ,5 2 6 . 6 23Λ52.8 2 1 ,8 3 5 . 6 Consolidated Revenue Fund - Expenditure 24,404.3 0 7 6 . 9 23.452.8 2 1 ,6 3 5 , 6Loan Fund - Expenditure 2,747.2 1,626.8 6 ,1 3 8 . 1 3 ,6 6 6 . 3UNFUNDED DEBT AND DANK BALANCES AT 30 JUNE 1978$ millionTreasury Bills Treasury Notes1 5 0 0 . 0 363.1R.V. COLESecretary to the Department of FinanceBank Balances3 3 9 . 2JOHN UOVARD Acting Minister for Finance 7 JULY 1978