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5. Assets and Liabilities Administered on Behalf of Government

This section analyses assets used to conduct operations and the operating liabilities incurred as a result, which the Treasury does not control but administers on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

5.1 Administered — Financial Assets

2018

2017

$’000

$’000

Note 5.1A: Loan and Other Receivables

Loans

Loans to States and Territories

47,855

47,855

IMF new arrangements to borrow loan

447,234

684,197

Total loans

495,089

732,052

Other receivables

Guarantee Scheme for Large Deposits and

Wholesale Funding contractual fee receivable1

-

(1,113)

Guarantee Scheme for Large Deposits and

Wholesale Funding fee receivable

-

-

Guarantee of State and Territory

Borrowing contractual fee receivable1

12,047

26,455

Guarantee of State and Territory

Borrowing fee receivable

551

992

Net GST receivable from the ATO

630

120

IMF related moneys owing

507

28

Dividends receivable

888,921

1,286,000

Other receivables

6,369

14,841

Total other receivables

909,025

1,327,323

Total loans and other receivables (gross)

1,404,114

2,059,375

Receivables are expected to be recovered in

No more than 12 months

899,140

1,363,624

More than 12 months

504,974

695,751

Total receivables (gross)

1,404,114

2,059,375

Receivables (gross) are aged as follows

Not overdue

1,404,114

2,059,375

Total receivables (gross)

1,404,114

2,059,375

  1. Refer to Note 5.2C for corresponding liability.

Accounting Policy

Refer to Note 7.3 (Administered Financial Instruments) for details on accounting treatment.

2018

2017

$’000

$’000

Note 5.1B: Investments

International financial institutions

Asian Development Bank

583,862

555,361

Asian Infrastructure & Investment Bank

599,269

383,879

European Bank for Reconstruction

and Development

98,676

93,016

International Bank for Reconstruction

and Development

315,724

303,370

International Finance Corporation

64,036

61,530

Multilateral Investment Guarantee Agency

8,390

8,062

Total international financial institutions

1,669,957

1,405,218

Australian Government entities

Reserve Bank of Australia

24,963,000

21,469,000

Australian Reinsurance Pool Corporation

425,893

455,826

Total Australian Government entities

25,388,893

21,924,826

Other Investments

IMF quota

12,492,682

11,882,842

Total other investments

12,492,682

11,882,842

Total Investments

39,551,532

35,212,886

Investments are expected to be recovered in more than 12 months.

Accounting Policy

Administered investments

Development banks

Investments in development banks are classified as ‘monetary — available for sale financial assets’ refer Note 7.3. As such, the foreign currency value of investments is translated into Australian dollars (AUD) using relevant foreign currency exchange rates at balance date.

Australia holds shares in the World Bank Group (WBG), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD) and the Asian Infrastructure Investment Bank (AIIB).

Principal activities:

The WBG was established in 1944 and comprises the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The World Bank, alongside the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID), form the World Bank Group.

The IBRD provides financing and technical assistance to middle income countries and creditworthy poor countries. The IDA provides grants, concessional finance and technical assistance to low income countries. The IFC supports the development of the private sector by providing direct finance to private sector operations. MIGA provides guarantee services for projects, which reduce the risks for other co-financing partners including the private sector. ICSID provides international facilities for conciliation and arbitration of investment disputes.

The ADB was established in 1966 and has a mandate to reduce poverty and promote economic development in its developing member countries in Asia and the Pacific. The ADB does this by financing (through a mix of loans, grants, guarantees and co-financing activities with both other donors and the private sector) public sector and private sector activities. It also provides technical assistance to developing member countries so they can improve their policy and business investment environments. A significant portion of the ADB’s activities are focused on the infrastructure, transportation and energy sectors.

The EBRD was established in 1991 to assist former communist eastern European countries committed to the principles of multi-party democracy, pluralism and market economies, to develop their private sector and capital markets. The EBRD currently operates in more than 30 countries from Central and Eastern Europe to Central Asia and the Southern and Eastern Mediterranean region. It provides project financing for banks, industries and businesses, both new ventures and investments in existing companies. It also works with publicly owned companies, to support privatisation, restructuring state owned firms and improvement of municipal services.

The AIIB was established on 25 December 2015. The AIIB focuses on the development of infrastructure and other productive sectors in Asia. The AIIB also aims to promote interconnectivity and economic integration in the region by working in close collaboration with other multilateral and bilateral development institutions.

International Monetary Fund

The IMF is an organisation with 189 member countries, working to ensure the stability of the international monetary system - the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other. The IMF does this through: surveillance, including annual economic assessments of member countries; technical assistance to member countries; and by making resources available (with adequate safeguards) to members experiencing balance of payments difficulties.

Quota subscriptions which are denominated in SDR’s represent a member’s shareholding in the IMF and generate most of the IMF’s financial resources.

Australian Government entities

Administered investments in controlled corporate entities are not consolidated because their consolidation is relevant only at the whole of government level.

The Australian Government’s investment in controlled corporate entities and companies in the Treasury portfolio are measured at their fair value as at 30 June 2018. Fair value has been taken to be the net assets of the entities, adjusted for the discount of employee benefit obligations with reference to the yield on Australian Government bonds for the Reserve Bank of Australia, as at balance date. These entities are listed below:

Reserve Bank of Australia

The Reserve Bank of Australia is Australia’s central bank. Its duty is to contribute to the maintenance of price stability, full employment, and the economic prosperity and welfare of the Australian people. It does this by setting the cash rate to meet a medium-term inflation target, working to maintain a strong financial system and efficient payments system, and issuing the nation’s banknotes. The Bank provides selected banking services to the Australian Government and its agencies, and to a number of overseas central banks and official institutions. Additionally, it manages Australia’s gold and foreign exchange reserves.

Australian Reinsurance Pool Corporation

ARPC is a Commonwealth public financial corporation established by the Terrorism Insurance Act 2003 to administer the terrorism reinsurance scheme, providing primary insurers with reinsurance for commercial property and associated business interruption losses arising from a declared terrorist incident.

Impairment of administered investments

Administered investments were assessed for impairment at 30 June 2018. No indicators of impairment were identified (2017: nil).

5.2 Administered — Payables

2018

2017

$’000

$’000

Note 5.2A: Grants

Public sector

COAG grants payable

283,233

793,507

Other grants payable

583

150

Total grants

283,816

793,657

Grants are expected to be settled in no more than 12 months.

Note 5.2B: Other payables

GST appropriation payable

1,734

-

IMF SDR allocation

5,860,428

5,574,346

IMF related monies owing

9,118

5,221

Suppliers

6,362

-

Total other payables

5,877,642

5,579,567

Other payables expected to be settled

No more than 12 months

17,214

5,221

More than 12 months

5,860,428

5,574,346

Total other payables

5,877,642

5,579,567

Note 5.2C: Unearned income

Guarantee of State and Territory borrowing

contractual guarantee service obligation1

12,047

26,455

Total unearned income

12,047

26,455

Total unearned income expected to be settled

No more than 12 months

5,887

10,505

More than 12 months

6,160

15,950

Total unearned income

12,047

26,455

  1. Refer Note 5.1A for corresponding receivable.

IMF Special Drawing Right Allocation

The SDR allocation liability reflects the current value in AUD of the Treasury’s liability to repay to the IMF the cumulative allocations of SDRs provided to Australia since joining the IMF. This liability is classified as ‘other payables’.

5.3 Administered — Interest Bearing Liabilities

2018

2017

$’000

$’000

Note 5.3A: Loans

IMF promissory notes1

9,899,480

9,494,540

Other promissory notes1

110,316

132,324

Total loans

10,009,796

9,626,864

Loans expected to be settled

Within 1 year

24,359

24,359

Between 1 to 5 years

25,875

50,233

More than 5 years

9,959,562

9,552,272

Total loans

10,009,796

9,626,864

  1. Promissory notes held by the Treasury are at face value and have no interest rate associated.

Accounting Policy

Promissory notes

Promissory notes have been issued to the IMF, the International Bank for Reconstruction and Development, the Asian Development Bank and the Multilateral Investment Guarantee Agency.

Where promissory notes have been issued in foreign currencies, they are recorded at their nominal value by translating them at the spot rate at balance date. The promissory notes are non-interest bearing and relate to the undrawn paid-in capital subscriptions. Foreign currency gains and losses are recognised where applicable.

5.4 Administered — Other Provisions

2018

2017

$’000

$’000

Note 5.4A: Other Provisions

NDRRA provision

898,753

704,917

Queensland

575,784

253,679

New South Wales

26,371

124,252

Victoria

58,227

108,118

Western Australia

150,811

88,227

Northern Territory

56,318

64,474

Tasmania

28,884

54,978

South Australia

2,358

11,189

Australian Capital Territory

-

-

Total other provisions

898,753

704,917

Other provisions expected to be settled

No more than 12 months

347,718

488,949

More than 12 months

551,035

215,968

Total other provisions

898,753

704,917

NDRRA provision

Total

$’000

$’000

As at 1 July 2017

704,917

704,917

Additional provisions made

188,168

188,168

Amounts used

(334,859)

(334,859)

Amounts reversed

-

-

Unwinding of discount or change in discount rate

340,527

340,527

Total as at 30 June 2018

898,753

898,753

Accounting Judgements and Estimates

Provisions

The Natural Disaster Relief and Recovery Arrangements (NDRRA) liability represents the Treasury’s best estimate of payments expected to be made to States and Territories as at balance date.

The estimate is based on information provided by States and Territories to the Department of Home Affairs (Home Affairs) the Commonwealth agency responsible for the administration of disaster relief. The estimates provided by States and Territories are based on their assessment of the costs expected to be incurred that would be eligible for assistance under current NDRRA Determination. Home Affairs perform their quality assurance processes in order to assess reasonableness of estimates provided by the States and Territories with regard to estimates eligibility under NDRRA.

The Treasury reviews the quality assured estimates to ensure they are consistent with government decisions and then calculates the provision by discounting the future cashflows. Given the nature of disasters, there is a level of uncertainty in the estimated reconstruction costs at the time of a disaster. This uncertainty decreases as reconstruction efforts progress to completion.

Contingent liabilities

The NDRRA provision at 30 June 2018 includes estimated payments for disaster events that occurred prior to 1 July 2018, except for new events that occurred during the 2017-18 financial year for which costs cannot yet be quantified reliably. There were four such events that are included in the NDRRA contingent liability. These include:

  • Upper Hunter Bushfire in January 2018 in NSW;
  • Lithgow Bushfire in February 2018 in NSW;
  • Potters Hill Bushfire in March 2018 in ACT; and
  • Eastern NSW Floods in March 2018 in NSW.

Estimates of all natural disasters are regularly reviewed and revised when new information becomes available.