Government Finance Statistics, Annual methodology

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Reference period
2017-18 financial year

Explanatory notes


1 The main functions of government are the provision of non-market services, the regulation of economic and social conditions, and the redistribution of income between sections of the community. These activities are primarily financed by taxation and are carried out by entities in the general government sector. In addition to this core activity, governments can also own or control enterprises that sell goods or services to the public and which operate largely on a market basis (public non-financial corporations) or engage in financial intermediation (public financial corporations).

2 The term 'Government Finance Statistics' refers to statistics that measure the financial activities of governments and reflect the impact of those activities on other sectors of the economy. The Australian system of Government Finance Statistics (GFS), which is used to derive the statistics presented here, is designed to provide statistical information on public sector entities in Australia classified in a uniform and systematic way.

3 GFS enables policy makers and users to analyse the financial operations and financial position of the public sector by the level of government, institutional sector or set of transactions. The system of GFS is based on international standards set out in the System of National Accounts, 2008 (2008 SNA) and the International Monetary Fund's (IMF) Government Finance Statistics Manual (GFSM).

4 The IMF published a revised Government Finance Statistics Manual (GFSM 2014), and the ABS GFS manual was updated to reflect the new international standards. These changes are presented in the Australian System of Government Finance Statistics: Concepts, Sources and Methods, 2015 (AGFS15) and have been implemented for data reported for periods from 1 July 2017 onwards.


5 The system of GFS provides details of revenues, expenses, cash flows and assets and liabilities of the Australian public sector and comprises units which are owned and/or controlled by the Commonwealth, state and local governments. These units are grouped as follows:

  • Total public sector
    • Non-financial public sector
      • General government
      • Public non-financial corporations
    • Public financial corporations

General government

6 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.

7 This institutional sector covers the departments of the Commonwealth 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. Some of these bodies may be called 'corporations', but they are still considered part of the general government sector if they perform general government functions. Public universities are also considered part of the general government sector.

8 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 also classified as general government units.

    Public non-financial corporations

    9 The main function of public non-financial corporations (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.

    10 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.

    11 PNFCs vary in their degree of 'commercialisation', 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 state rail authorities, and local bus and transport operations.

      Non-financial public sector

      12 The non-financial public sector is a subsector formed by the consolidation of the general government and public non-financial corporations sectors.

        Public financial corporations

        13 Public financial corporations (PFCs) are government owned or controlled enterprises which engage in financial intermediation (i.e. trade in financial assets and liabilities), such as the Reserve Bank of Australia, government owned borrowing authorities and insurance offices and home lending schemes.

          Total public sector

          14 The total public sector is the consolidated total of the general government, public non-financial corporations and public financial corporations sectors.

            Levels of government

            15 The public sector comprises all organisations owned or controlled by any of the three levels of government within the Australian political system; national (which includes Commonwealth and control n.f.d.), state and local. In this release, statistics including all three levels are called 'All levels of government'.

              Commonwealth Government

              16 The Commonwealth 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 Commonwealth 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. The Commonwealth Government distributes part of this revenue to other levels of government, principally the states.

                State governments

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

                  Local governments

                  18 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.

                  19 Local governments also provide transport facilities, 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 Commonwealth Government and their parent state governments. The Australian Capital Territory (ACT) has no separate local government.

                    Control n.f.d.

                    20 The control n.f.d. sector contains units where jurisdiction is shared between two or more governments, or the classification of a unit to a jurisdiction is otherwise unclear. The main type of units currently falling into this category are the public universities.


                      21 The main GFS classifications are:

                      • Economic Type Framework
                      • Type of Asset and Liability Classification
                      • Classification of the Functions of Government - Australia
                      • Taxes Classification
                      • Source/Destination Classification.

                      Economic type framework

                      22 The Economic Type Framework (ETF) is the main classification of stocks and flows. Stocks refer to the holdings of assets and liabilities at a point in time, ideally valued at current market prices. Flows are economic events and other occurrences, recorded in the period in which they occur, that cause changes in the value of stocks through the creation, transformation, exchange, transfer or extinction of value. Thus, the stock of assets and liabilities recorded at the beginning of a period changes as a result of flows during the period, moving to new levels at the end of the period.

                      23 The framework resembles a set of financial statements, with sections for an operating statement, a cash flow statement and a balance sheet. In addition, there are sections to capture items like transactions in non-financial assets, revaluations, other changes in volume and other supplementary information.

                        Type of asset and liability classification

                        24 The Type of Asset and Liability Classification (TALC) is a classification used for the identification of non-financial and financial assets and liabilities for GFS output purposes. TALC is primarily used to distinguish between fixed produced assets (e.g. dwellings and structures) and non-produced assets (e.g. land).

                          Classification of the functions of government - Australia

                          25 The Classification of the Functions of Government - Australia (COFOG-A) is used to group operating expenses and expenditure by government function or purpose (education, health, etc.) to facilitate the study of the broad function of public sector spending and the effectiveness of this spending in meeting government policy objectives. COFOG-A replaces Government Purpose Classification (GPC) that was used under the old AGFS standards.

                            Taxes classification

                            26 The Taxes Classification (TC) dissects this major form of government revenue according to type of tax collected.

                              Source/destination classification

                              27 The Source/Destination Classification (SDC) identifies the source or destination of selected flows and stocks between units within and outside the public sector. It is used in compiling consolidated statistics.

                                Sources and methods

                                Data sources

                                28 The statistics shown in this publication are based on information provided in, or underlying, the published accounting statements and reports of governments and their authorities. The valuation of stocks and flows in source data is generally in accordance with requirements specified in accounting standards, which do not require universal or continual application of market values. However, for the most part, the divergence between the accounting values and market values are not materially significant. Exceptions occur for some interest flows and depreciation.

                                29 For the Commonwealth and state governments the primary data sources are:

                                • public accounts and budget management systems of state treasuries and the Commonwealth Department of Finance
                                • annual reports of departments and authorities
                                • budget papers
                                • reports of the Auditors-General.

                                30 For local government, the main data sources are annual statements of accounts completed by local authorities. There are no local government bodies in the ACT.

                                31 The ABS has developed a model to estimate statistics on RECs by compiling and adjusting administrative data. RECs volume data are sourced from the REC Registry operated by the Clean Energy Regulator (CER). These data are converted to an accruals basis and classified by industry, sector and state of liable entity. The RECs volume data are also converted into current prices using RECs price data.


                                  32 To compile statistics about the financial activities of a particular level of government, or any other grouping of public sector units, transactions and debtor/creditor relationships between units within the chosen grouping (sector or subsector) have to be matched and eliminated to avoid double counting. The process of matching and eliminating these items within the chosen group is known as 'consolidation'.

                                  33 Consolidation is particularly important at the state government level where a significant proportion of total expenses/payments are financed by Commonwealth Government grants. Similarly, an appreciable part of the expenditure undertaken by state public non-financial corporations is financed by grants from state governments.


                                    34 Annual GFS data are revised on an annual basis. For this reason differences can occur between equivalent aggregates published in earlier issues of this publication.

                                      Understanding the statements

                                      35 The GFS conceptual framework is divided into a number of separate statements, each of which is designed to draw out analytical aggregates or balances of particular economic significance and which, taken together, provide for a thorough understanding of the financial positions of jurisdictions individually and collectively. These published statements are the operating statement, the cash flow statement, and the balance sheet.

                                        Operating statement

                                        36 The operating statement presents details of transactions in GFS revenues, GFS expenses and the net acquisition of non-financial assets for an accounting period. GFS revenues are broadly defined as transactions that increase net worth and GFS expenses as transactions that decrease net worth. Net acquisition of non-financial assets equals gross fixed capital formation, less depreciation, plus changes in inventories plus other transactions in non-financial assets. Two key GFS analytical balances in the operating statement are GFS net operating balance (NOB) and GFS net lending(+)/borrowing(-).

                                        37 GFS NOB is the difference between GFS revenues and GFS expenses. It reflects the sustainability of government operations. GFS net lending(+)/borrowing(-) is equal to NOB minus the net acquisition of non-financial assets. A positive result reflects a net lending position while a negative result reflects a net borrowing position.

                                          Cash flow statement

                                          38 The cash flow statement identifies how cash is generated and applied in a single accounting period. 'Cash' means cash on hand (notes and coins held and deposits held at call with a bank or other financial institution) and cash equivalents (highly liquid investments which are readily convertible to cash on hand at the investor's option and overdrafts considered integral to the cash management function).

                                          39 The cash flow statement reflects a cash basis of recording (the other statements are on an accrual accounting basis) where the information has been derived indirectly from underlying accrued transactions and movements in balances. In effect, the transactions are captured when cash is received or when cash payments are made. Cash transactions are specifically identified because they allow the compilation of the cash-based surplus(+)/deficit(-) measure and because the management of cash is considered an integral function of accrual accounting.

                                          40 The surplus(+)/deficit(-) is a broad indicator of a sector's cash flow requirements. When it is positive (i.e. in surplus), it reflects the extent to which cash is available to government to either increase its financial assets or decrease its liabilities (assuming that no revaluations or other volume changes occur). When it is negative (i.e. in deficit), it is a measure of the extent to which government requires cash, either by running down its financial assets or by drawing on the cash reserves of the domestic economy, or from overseas.

                                            Balance sheet

                                            41 The balance sheet is the statement of financial position at a specific point in time. It shows the stock of assets and liabilities and the GFS net worth. GFS net worth is an economic measure of 'wealth' calculated as assets less liabilities for the general government sector and as assets less liabilities less shares and other contributed capital for the PNFCs and PFCs sectors.

                                            42 Net financial worth is included as a memorandum item in the balance sheet presentation, which is the difference between total financial assets and total liabilities.

                                              Interstate comparisons

                                              43 The statistics in this publication have been compiled using standard definitions, classifications and treatment of government financial transactions to facilitate comparisons between levels of government and between states within a level of government.

                                              44 However, the statistics also reflect real differences between the administrative and accounting arrangements of the various governments and these differences need to be taken into account when making interstate comparisons. For example, only a state level of government exists in the Australian Capital Territory and a number of functions performed by it are undertaken by local government authorities in other jurisdictions.

                                              45 Interstate comparisons of data may also be significantly affected by differences in the mix of operations undertaken by state governments and local governments. For example:

                                              • water and sewerage undertakings maybe operated by state government, local government or a combination of both
                                              • government transport undertakings are operated exclusively by state authorities in all states except Queensland where bus transport is operated by the local government sector.

                                              Relationship to other information

                                              Uniform presentation framework

                                              46 Following the May 1991 Premiers' Conference, the Commonwealth Government and the state governments resolved to implement a uniform presentation framework in their budget documents. The purpose of the uniform presentation framework was to introduce uniformity into the presentation of GFS so that users of the information could make valid comparisons between jurisdictions.

                                              47 Since budget year 1992-93 the Commonwealth and state governments have presented information in their budget documents on the ABS GFS basis. The information presented in the budget documents of each jurisdiction generally conforms with the standards applied by the ABS. Jurisdictions may present the information based on their interpretation of the GFS classifications, but must provide a reconciliation of this information with information reflecting the ABS treatment on these issues. In 1999, the uniform presentation framework was revised from a cash to an accruals basis and the accrual uniform presentation framework was implemented beginning with most jurisdictions' Budgets for 2000-01.

                                                Accounting standards

                                                48 From 2008–09 onwards, Australian Accounting Standard Board 1049 Whole of Government and General Government Sector Financial Reporting (AASB 1049) replaced Australian Accounting Standard 31 Financial Reporting by Government (AAS 31) as the standard Governments should follow in the preparation of their financial statements. Information on AASB 1049 is available from the Australian Accounting Standards Board website

                                                49 A key feature of AASB 1049 is the requirement that where AGFS15 differs from the accounting standards, a reconciliation to the key GFS aggregates and an explanation must be presented. The key fiscal aggregates are the net operating balance, net borrowing / lending, cash surplus / deficit, and net worth. A functional statement of expenses should also be reported. AASB 1049 covers General Government and Whole of Government, but does not apply to individual government agencies. Whole of Government for each jurisdiction is referred to as Total public sector in GFS.

                                                50 There are a number of known differences between AASB 1049 and AGFS15. These differences include the treatment of provisions for doubtful debts and constructive obligations, treatment of dividends payable by Public Corporations, tax effect accounting, treatment of coins issued by government, measurement of concessional loans, and the treatment of finance leases.

                                                51 Data presented in this publication may differ from data published by Treasuries if:

                                                • Treasuries have not adjusted their data to a GFS basis
                                                • ABS has a different view on classification treatments applied by jurisdictions
                                                • ABS employs a different consolidation methodology to those used by jurisdictions
                                                • ABS applies reconciliation adjustments when it consolidates data for all jurisdictions and compares annual data with quarterly data used in compiling the national accounts
                                                • ABS includes data which were not available when a jurisdiction's GFS presentations were published (e.g. major asset sales).

                                                Australian equivalents to International Financial Reporting Standards

                                                52 The Australian equivalents to International Financial Reporting Standards (AIFRS) began to be progressively implemented in Australia from 1 January 2005. All Australian governments adopted AIFRS for financial reporting for the financial year 2005-06. As GFS data is sourced primarily from the same underlying accounting and budgetary systems that each jurisdiction uses for financial reporting, some impacts have been observed mainly in the accrual-based GFS statements. Details of the changes and the impacts on GFS are further discussed in the Technical Note - Impact of AIFRS in Government Finance Statistics, Australia, 2005-06 (cat. no. 5512.0).

                                                  Australian System of National Accounts (ASNA)

                                                  53 While GFS and ASNA share the same conceptual framework (SNA), there are methodological differences between GFS and ASNA analytical measures (for example net worth and net lending/borrowing). Descriptions of GFS/ASNA reconciliations are outlined in Chapter 17 Part C of Australian System of Government Finance Statistics: Concepts, Sources and Methods, 2015 (cat. no. 5514.0).

                                                    Data available on request

                                                    54 Accruals GFS data for the PNFC and PFC sectors are available from the ABS website.

                                                    55 Some GFS data are available back to 1961-62. Prior to 1998-99, however, GFS were compiled on a cash basis and are not directly comparable with data for 1998-99 onwards. The ABS has not established a quantitative measure of this break in series because the existing data sources do not permit this.

                                                    56 Generally, a charge is made for providing data available on request. Inquiries should be made to the National Information and Referral Service on 1300 135 070. The ABS Privacy Policy outlines how the ABS will handle any personal information that you provide to us.

                                                      Related publications

                                                      57 Users may refer to the following publications which contain related information:


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