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1301.0 - Year Book Australia, 2005  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 21/01/2005   
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Contents >> Government finance >> Public sector

The public sector can be divided into the institutional sectors described below, based on the characteristics of the organisations it comprises.

General government - The principal function of general government entities is to provide non-market goods and services (e.g. roads, hospitals, libraries) primarily financed by taxes, to regulate and influence economic activity, to maintain law and order, and to redistribute income by means of transfer payments.

This institutional sector covers the departments of the Australian Government, state governments and local government municipalities. It also includes agencies and government authorities under departmental administration which are engaged in the provision of public administration, defence, law enforcement, welfare, public education, and health. Also included are non-departmental bodies which independently perform the government functions of regulation (e.g. Nurses Registration Boards and the Maritime Safety Authority), provision of non-market services (e.g. the Australian Broadcasting Corporation), and redistribution of income (e.g. the Aboriginal and Torres Strait Islander Commission). Some of these bodies may be corporations, but they are still considered part of the general government sector if they perform general government functions.

Unincorporated government enterprises which provide goods and services to their governments and to the public at prices that are not economically significant are also included in this sector. In addition, government quasi-corporations which sell their output exclusively to other government units, while not in open competition with other producers, are classified as general government units.

Public non-financial corporations (PNFCs) - The main function of PNFCs is to provide goods and services which are predominantly market, non-regulatory and non-financial in nature, and financed through sales to consumers of these goods and services.

Enterprises in the PNFC sector differ from those in the general government sector in that all or most of their production costs are recovered from consumers, rather than being financed from the general taxation revenue of government. Some enterprises, however, do receive subsidies to make up for shortfalls incurred as a result of government policy, for example, in the provision of 'community service obligations' at concessional rates.

PNFCs vary in their degree of 'commercialism', from those which are quite heavily reliant on parent governments for subsidies, such as rail and bus transport undertakings, to those which are net contributors to government revenue. Governments may exercise control over PNFCs by either owning more than 50% of the voting stock or otherwise controlling more than half the shareholders' voting power, or through legislation, decree or regulation which empowers the government to determine corporate policy or to appoint the directors. Examples of PNFCs are Telstra, Australia Post, state rail authorities, and local bus and transport operations.

Public financial corporations (PFCs) - PFCs are government-owned or controlled enterprises which engage in financial intermediation (i.e. trade in financial assets and liabilities), such as central borrowing authorities, government banks and insurance offices, or home lending schemes.

Levels of government

The public sector comprises all organisations owned or controlled by any of the three levels of government within the Australian political system - national, state/territory and local.

Australian Government

The Australian (Commonwealth) Government, the national government, has exclusive responsibility under the Constitution for the administration of a wide range of functions including defence, foreign affairs and trade, and immigration. A distinctive feature of the Australian federal system is that the Australian Government levies and collects all income tax, from individuals as well as from enterprises. It also collects a significant portion of other taxes, including taxes on the provision of goods and services such as the Goods and Services Tax (GST). The Australian Government distributes part of this revenue to other levels of government, principally the states and territories.

State governments

State and territory governments (referred to as 'state' governments in tables in this chapter) perform the full range of government functions, other than those the Constitution deems the exclusive domain of the Australian Government. The functions mainly administered by state and territory governments include public order, health, education, administration, transport and maintenance of infrastructure. The revenue base of state and territory governments is narrower than that of the Australian Government and consists of taxes on property, on employers' payrolls, and on provision and use of goods and services. This revenue base is supplemented by grants from the Australian Government, which includes an allocation of GST revenue.

Local governments

Local government authorities govern areas typically described as cities, towns, shires, boroughs, municipalities and district councils. Although the range of functions undertaken by local governments varies between the different jurisdictions, their powers and responsibilities are generally similar and cover such matters as:

  • the construction and maintenance of roads, streets and bridges
  • water, sewerage and drainage systems
  • health and sanitary services
  • the regulation of building standards
  • the administration of regulations relating to items such as slaughtering, weights and measures, and registration of dogs.

Local governments also provide transport facilities, hospitals, charitable institutions, recreation grounds, parks, swimming pools, libraries, museums and other business undertakings. Local governments' own-source revenue is derived mainly from property taxes. They also rely on grants from the Australian Government and their parent state governments. The Australian Capital Territory has no separate local government.

Multi-jurisdictional

The multi-jurisdictional sector in the GFS contains units where jurisdiction is shared between two or more governments, or classifications of a unit to a jurisdiction is otherwise unclear. The main type of units currently falling into this category are the public universities.

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