Government Finance Statistics, Australia

In the June quarter 2020:

• taxation revenue increased 2.5% to $141,370m
• expenses exceeded revenue resulting in a net operating balance of -$81,680m
• the GFS net lending(+)/borrowing(-) position was -$97,405m.
   

The table below includes the key public sector aggregates for the June quarter 2020 which will be included in the Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0). The key figures shown include Government Final Consumption Expenditure for total general government and Gross Fixed Capital Formation for total general government and total public corporations, seasonally adjusted in current prices and chain volume terms.

The following are the seasonally adjusted chain volume measures based on the previous quarter:

• public sector demand is expected to contribute 0.6 percentage points to the change in GDP in June quarter 2020.
• general government final consumption expenditure increased by $2,823m or 2.9% and is expected to contribute 0.6 percentage points to the change in GDP in June quarter 2020.
• general government gross fixed capital formation increased by $669m or 3.6%
• public corporations gross fixed capital formation decreased by $419m or -7.2%
• public gross fixed capital formation increased by $249m or 1.0% and is expected to contribute 0.1 percentage points to the change in GDP in June quarter 2020.
   

This release presents quarterly government finance statistics on an accrual accounting basis. All tables presented are for the general government sector, with the exception of Table 2 which presents data for the public non-financial corporations sector.

Detailed quarterly GFS are released for the current financial year only, other than in the September quarter, when the quarters of the previous financial year are presented. Users requiring data for earlier periods should consult the annual publication Government Finance Statistics, Australia (cat. no. 5512.0). The latest issue (2018-19) was released on 28 April 2020.

Government Finance Statistics are part of the broader suite of macroeconomic accounts produced by the ABS. They share their basic concepts with the National Accounts and Balance of Payments. The conceptual framework is agreed internationally and published by the International Monetary Fund. Macroeconomic statistics are compiled to enable macroeconomic analysis and the standards may differ from accounting standards in some regards.

COVID-19 impacted a range of Government Finance Statistics series in the June quarter 2020. Key policies and conceptual determinations are discussed in the article Economic measurement during COVID-19: Selected issues in the Economic Accounts. During the quarter there was minimal impact on the collection of data used to produce Government Finance Statistics. More information on the impacts of extreme events on the Australian economy are discussed in the Australian Statistician - Analytical series. Further ABS data measuring the impact of COVID-19 can be found via abs.gov.au/covid19.

A timing difference in recording the Boosting Cash Flow for Employers support program will cause a divergence between the Commonwealth Government Final Budget Outcomes and ABS published Statistics.

Introduction of an Analysis section focusing on key Government Finance Statistics analytical series.

Two spotlight articles are included in this release:

• Spotlight: Classifying COVID-19 policy interventions in macroeconomic statistics examines significant COVID-19 policies included in the June quarter 2020 Government Finance Statistics and how the ABS has classified them.
• Spotlight: Impacts of COVID-19 on taxation revenue looks deeper into the impacts of the COVID-19 pandemic on Commonwealth, State and Local Government taxation revenue.
   

The following Australian Accounting Standards Board (AASB) standard changes have been introduced in government financial reporting for periods from 1 July 2019 onwards, leading to increased divergence in certain circumstances between economic statistics publications and government financial reporting:

• Leases (AASB 16): The standard removes the distinction between operating and finance leases on the lessee side of financial reporting. The conceptual distinction between operating and finance leases still remains in economic statistics. GFS outputs are consistent with the historical treatment.
• Revenue recognition (AASB 15 & 1058): The standard requires revenue to be recognised when performance obligations are met in certain circumstances. In GFS the change primarily affects grant revenue received by state and territory governments from the Commonwealth. Recognition of grant revenue in GFS remains consistent with the historical treatment which is based on when jurisdictions have access to the funding as reported by the Commonwealth.
• Service Concession Arrangements (AASB 1059): The standard impacts ownership of non-financial assets. It applies a control concept to determine non-financial asset ownership. Non-financial asset ownership in GFS is determined based off a risk-reward concept consistent with the historical treatment which has been maintained in economic statistics.
   

In December 2015, the Commonwealth Government released the 2015-16 Mid-Year Economic and Fiscal Outlook (MYEFO) which included a reclassification of visa application charges (VAC). In MYEFO these charges are now treated as taxation revenue rather than sales of goods and services. This reclassification has been applied to the Government Finance Statistics (GFS), with no impact on total GFS revenue or the GFS net operating balance. The National Accounts statistics will maintain coherence with previously published data and classify this transaction as sales of goods and services. These treatments will remain in place until a review of the treatment of VAC across macroeconomic statistics has been completed.

For further information about these and related statistics, contact the National Information and Referral Service on 1300 135 070, email client.services@abs.gov.au or email public.finance@abs.gov.au. The ABS Privacy Policy outlines how the ABS will handle any personal information that you provide to us.

Total General Government net operating balance fell $97.9 billion (604.9%) through the year, a fall that is more than five times larger than the decline in September quarter 2009, during the global financial crisis.

The Commonwealth government contributed majority of the fall, which reflects new economic support packages provided to businesses, workers, and households, in response to the COVID-19 pandemic.

Total State and local government net operating balance fell 346.4% through the year to -$14.2 billion. There was great diversity in fiscal performance among the states and between local governments.

State governments: the most significant falls were recorded in New South Wales, Victoria, and Queensland, mainly driven by an increase in spending on subsidies and health services.

Total expenditure rose 43.5% through the year to $252.3 billion, reflecting the introduction of economic support programs such as JobKeeper Payment, Boosting cash flow for employers, and other COVID-19 related payments. Total revenue fell 11.1% through the year to $170.6 billion, with taxation revenue falling significantly as a result of weak economic activity.

Taxation revenue fell 8.1% through the year, as a result of decreases in company tax, personal income tax, combined with payroll tax relief provided to businesses in response to the COVID-19 pandemic.

Public investment rose 0.2% through the year. The levels of public investment by the Commonwealth government and most state and local governments remained steady compared to June quarter 2019.

During June quarter 2020, General Government net worth declined $193.3 billion (61.3%) through the year as the increase in liabilities was greater than the increase in assets. Net financial worth decreased $256.9 billion (44.7%) through the year, with the Commonwealth government contributing to the majority of the fall. The large incurrence of liabilities is as a result of significant amounts of debt securities issued during the quarter and throughout the year to date.

The COVID-19 pandemic led to the fastest and largest fiscal response to an economic event in modern Australian history, with several hundred policy interventions announced across all levels of government. This article provides a summary of the conceptual classification of key COVID-19 policies that were in place in the June quarter 2020.

The ABS undertook extensive consultation with stakeholders and subject matter experts to determine appropriate classifications. These classifications are based on well-established conceptual frameworks (footnote 1), which ensure consistent recording of these policies across macroeconomic statistics, particularly in relation to Government Finance Statistics (GFS) and the National Accounts (NA).

The ABS classification of key COVID-19 policy interventions is summarised in Table 1 below (footnote 2).

The policies are grouped into five broad categories (footnote 3):

• Increased healthcare and frontline services spending
• Provision of assistance to households
• Provision of assistance to corporations, unincorporated enterprises and non-profit institutions
• Relaxation of tax and non-tax revenue obligations
• Capital injections, establishment of new, or extended, lending facilities and provision of guarantees
   

IMF (2020), "COVID-19: How to Record Government Policy Interventions in Fiscal Statistics", Special Series on Statistical Issues in Response to COVID-19, IMF publication, viewed at https://www.imf.org/en/Publications/SPROLLs/covid19-special-notes

The economic shock from the COVID-19 pandemic has reduced taxation revenue for all levels of government, reflecting a combination of the adverse effect of the pandemic on businesses and households, and the policy responses of governments that reduced households’ and corporations’ tax obligations. More information is included in the Classifying COVID-19 policy interventions in macroeconomic statistics spotlight article.

Through the year to June Quarter 2020, Commonwealth Government taxes fell 7.5% ($9.6 billion). The key contributors were as follows.

• 19.5% ($5.6 billion) fall in company income tax as a result of the adverse effect of the COVID-19 pandemic on businesses. The largest falls were in the tourism, banking, superannuation and insurance sectors.
• 2.2% ($1.4 billion) fall in personal income tax reflecting a fall in hours worked across the economy and weakness in capital gains taxes associated with subdued property and financial market conditions.
• 6.9% ($1.1 billion) decline in Goods and Services Tax (GST). This was due to reduced consumer spending in cafes, restaurants and takeaway food services, and clothing, footwear and personal accessory retailing.
• 15.2% ($0.8 billion) decline in excise and levies as lockdowns and restrictions on interstate travel significantly reduced transport activities.
   

State and local governments implemented a range of COVID-19 tax relief policies, including:

• payroll tax relief that either waived, refunded, deferred or reduced payroll tax obligations for businesses; and
• land tax relief for landlords where tenants had their rent waived or deferred.
   

State and local government taxation revenue fell 10.9% ($2.8 billion) through the year to June quarter 2020. The key contributors were as follows.

• 27.3% ($1.7 billion) fall in payroll taxes across all State and local governments, reflecting tax relief and payroll refund policies. The greatest falls were in New South Wales, Queensland and Victoria.
• 16.0% ($1.3 billion) fall in taxes on the provision of goods and services associated with reductions in stamp duty on conveyances and gambling taxes.
  • Stamp duties on conveyances fell across all State and local governments, with New South Wales, Queensland and Victoria experiencing the greatest falls. The weakness reflected declines in property sales and prices across all states.
  • Gambling taxes fell across all state and local governments, with Queensland, New South Wales, South Australia and Victoria experiencing the greatest falls. This decline was the result of COVID-19 restrictions across the country, which led to pubs, clubs and other licensed venues and casinos being closed for the majority of the June quarter.
     

This release previously used catalogue number 5519.0.55.001.