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Results and analysis

Analysis of performance against purpose: promoting fiscal sustainability

The Treasury assisted the Government in implementing its fiscal strategy by managing budget processes, and advising on the overall budget strategy and priorities. Consistent with the fiscal strategy, and supported by economic, tax and fiscal modelling, the Budget continued to be projected to return to surplus in 2020-21 in all budget updates, with the 2018-19 Budget now forecasting a return to balance in 2019-20. Reports released in 2017-18 included the 2018-19 Budget, the 2017-18 Mid-Year Economic and Fiscal Outlook (MYEFO) and the 2016-17 Final Budget Outcome (FBO). These documents were produced in partnership with the Department of Finance and in accordance with the Treasurer’s obligations under the Charter of Budget Honesty Act 1998.

The Treasury continued to provide advice to the Government on Australia’s tax and superannuation systems, and delivered an extensive legislative program of changes in 2017-18, including the personal income tax reform package announced in the 2018-19 Budget.

The Treasury advised the Government on economic and social policies relating to education, employment, immigration, families, health, ageing, disability, Indigenous and justice issues, defence and national security, transport infrastructure, industry, environment, energy and resources, agriculture, communications and regional matters. This advice informed the Government’s decisions on the economic and social policy reforms announced in the 2018-19 Budget.

In addition, the Treasury made financial support payments to the states and territories (states) in accordance with the Intergovernmental Agreement on Federal Financial Relations (IGAFFR).

Results against purpose: promoting fiscal sustainability

Performance criterion

Coordinating the preparation of the Australian Government Budget and other documents.

Requirements of the Charter of Budget Honesty Act 1998 are met.

Target

Documents are produced in accordance with timeframes and other requirements of the Charter of Budget Honesty Act 1998.

Timely production of regular fiscal reports (i.e. the Budget, MYEFO and FBO).

Source

Portfolio Budget Statements 2017-18, Program 1.1, page 37. Corporate Plan 2017-18, page 3.

Results

In 2017-18 the following Australian Government budget documents were prepared and released in accordance with the Charter:

  • 2016-17 FBO was released on 26 September 2017;
  • 2017-18 MYEFO was released on 18 December 2017; and
  • 2018-19 Budget was released on 8 May 2018.

Performance criterion

Government measures to improve fiscal sustainability are legislated and implemented in a timely manner.

Target

Measured by the regular assessment of progress and milestones.

Source

Corporate Plan 2017-18, page 3.

Results

Government measures to improve fiscal sustainability were implemented and legislated across multiple portfolios in 2017-18. The Treasury continued to work closely with the Australian Taxation Office (ATO) and other stakeholders on minor implementation matters associated with the 2016-17 superannuation tax package, for example treatment of reversionary transition to retirement income streams. The major elements of the package were legislated prior to the reporting period and came into effect on 1 July 2017.

Performance criterion

Payment to the States and Territories are made with regard to the arrangements specified in the IGAFFR and other relevant agreements. Payments to State and Territory Governments.

Target

The Treasury will make timely and accurate payments to the States and Territories that reflect the requirements, the amounts and timeframes set out in the IGAFFR and other relevant agreements. The Treasury will provide advice to States and Territories on the components of each payment before it is made.

The Treasury will provide GST revenue data to the States and Territories on a monthly, quarterly and annual basis, and will maintain a schedule of estimates of annual net GST receipts, in accordance with the requirements of the IGAFFR.

Payments are timely, accurate and made in accordance with the terms in the relevant agreement and the requirements of the IGAFFR.

Source

Portfolio Budget Statements 2017-18, Program 1.4 to 1.9, page 41.

Corporate Plan 2017-18, page 3.

Results

The Treasury made payments to the states on the 7th and 21st of each month (or the next business day), as well as an extraordinary payment on 29 June, in accordance with the IGAFFR and other agreements between the Commonwealth and the states. As required by the IGAFFR, the Treasury provided advice to the states on the components of each payment before it was made.

Specific purpose payments amounted to $53.78 billion (including $19.49 billion relating to Quality Schools, which is administered by the Department of Education under the Australian Education Act 2013) and payments of general revenue assistance amounted to $64.49 billion.

Implementation of the National Partnership Agreement on Asset Recycling continues with states that agreed schedules with the Commonwealth Treasury, including New South Wales, Australian Capital Territory and the Northern Territory. In 2017-18, the Commonwealth provided payments totalling $847.8 million to the states under this national partnership. The agreement is on track and due to expire on 30 June 2019.

The Treasury also met its obligation to provide GST revenue data to the states on a monthly basis and maintained a schedule of estimates of annual net GST receipts.

Performance criterion

Fit‑for‑purpose economic and tax modelling.

Target

Outcomes are consistent with forecasts, allowing for unforeseeable events.

Source

Portfolio Budget Statements 2017-18, Program 1.1, page 38.

Results

The Treasury prepares forecasts of the economy and tax revenues, which are published in the Budget and MYEFO. Total taxation receipts grew by 10.2 per cent in 2017‑18, compared to estimated growth of 7.2 per cent in the 2017‑18 Budget. The largest contributor to the difference was company tax, primarily driven by higher than expected growth in corporate profits. Income tax withholding was also higher than expected, reflecting stronger employment growth.

Real GDP grew by 2.9 per cent in 2017-18, slightly stronger than the 2.75 per cent growth forecast in both the 2017-18 Budget and 2018-19 Budget.

Nominal GDP grew by 4.7 per cent in 2017-18, which was stronger than the 2017-18 Budget forecast of 4 per cent and the 2018-19 Budget forecast of 4.25 per cent. This was the result of the stronger than expected real GDP growth and higher than assumed prices for key commodities.

Performance criterion

Ongoing development of the Treasury’s modelling and forecasting capability, including economic and revenue forecasting tools and methods; improving the understanding of developments in the economy.

Target

Performance will be measured by achievement of agreed project milestones and outcomes, in particular for the economy-wide macroeconomic project and redevelopment of the retirement income and asset model project.

Source

Corporate Plan 2017-18, page 3.

Results

The Treasury increased investment in tax modelling capability and the capability of staff to undertake economic forecasting, analysis and advice. Specifically:

  • Development of a macroeconometric model of the Australian economy is underway. Engagement with academics, internal and external stakeholders has been continuous throughout the model development, including using an expert panel and consultants from a range of universities;
  • The retirement income and asset dynamic model (MARIA) has met project milestones (including external peer review completion). We continue to refine and enhance this model to enable long-term forecasting of retirement incomes and assets;
  • Development of a working version of the Over-Lapping Generations model for Australia (OLGA) that is fit for indicative fiscal policy analysis is undergoing peer review. We are continuing to add detail to OLGA to enable it to provide quantitative analysis;
  • Use of a Dynamic Stochastic General Equilibrium (DSGE) model to investigate fiscal sustainability issues;
  • Development of a working version of a multi-sector macroeconomic model for industry policy analysis that is at the peer review stage;
  • Ongoing work with an academic consultant on modelling to support global energy analysis; and
  • Refinement of medium term projections methodology for input into the published budget outlooks.

Performance criterion

Coordinating the Government’s legislative program for tax and superannuation, financial system, corporations, competition and consumer policy in accordance with the Government’s priorities.

Target

All Bills, regulations and supporting documents are produced in accordance with the relevant legislative requirements and guidance, including timeframes.

Source

Portfolio Budget Statements 2017-18, Program 1.1, page 38.

Results

The Treasury supported the Government to deliver its extensive legislative program in accordance with the relevant requirements and guidance.

This included the introduction of 113 Bills containing 160 measures into the 45th Parliament, as well as 66 regulations containing 81 measures made at Federal Executive Council meetings.

Key measures in 2017-18 included those aimed at reducing pressure on housing affordability, legislation for the National Housing Finance and Investment Corporation (NHFIC) and a wide range of measures on maintaining and improving the integrity of the tax system.

The Government also enacted enhancements through the following legislation to better protect consumers, encourage investment in innovation across the economy and improve financial system regulator capability.

  • Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017 — a new regime for crowd sourced funding for proprietary companies;
  • Treasury Laws Amendment (2018 Measures No. 2) Bill 2018 — includes the FinTech regulatory sandbox measure;
  • Treasury Laws Amendment (Australian Consumer Law Review) Bill 2018 — clarifies and strengthens consumer protections relating to consumer guarantees, unsolicited consumer agreements, product safety, false billing, unconscionable conduct, pricing and unfair contract terms; and
  • Corporations Amendment (Asia Region Funds Passport) Bill 2018 — provides a multilateral framework that allows eligible funds to be marketed across economies participating in the Asia Region Funds Passport with limited additional regulatory requirements.