The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

26 September 2008

NO.104

Final Budget Outcome 2007-08 and Transfer of Surplus

The Australian Government general government sector recorded an underlying cash surplus of $19.7 billion (1.7 per cent of GDP) for 2007-08.

The surplus was $2.9 billion (0.2 per cent of GDP) higher than expected at the time of the 2008-09 Budget, as a result of lower than anticipated spending of $3.2 billion, and lower cash receipts of $0.4 billion.

Total tax receipts were $160 million below the estimate at the 2008-09 Budget, primarily due to lower than expected receipts from company taxes and GST, which were largely offset by higher than expected receipts from individuals tax and superannuation funds tax.

Lower spending was due to one-off factors including an overstatement of the expenses for the Department of Education, Employment and Workplace Relations and underspends across programs, including various health programs, residential care, Exceptional Circumstances subsidies and provision of GST revenue to the States and Territories.

As a result of its strong fiscal position, the Government is in a position to invest around $15 billion of the 2007-08 surplus in its three nation building funds, after taking into account within-year cash management requirements.

The higher surplus will also provide additional resources to the Australian Office of Financial Management to invest in high-quality, AAA rated residential mortgage-backed securities as part of the Government's commitment to strong and effective competition in Australia's mortgage market.

The three nation building funds will have a combined balance of more than $26 billion by 1 July 2009 for capital investment in the future infrastructure, education and health needs of the nation.

The Government will allocate $7.5 billion from the 2007-08 surplus to the Building Australia Fund. This contribution, combined with proceeds from the second instalment of the sale of Telstra 3 and the Communications Fund, will provide $12.6 billion for future investment in our roads, railways, ports and communications infrastructure.

The Government will also allocate $2.5 billion to the Education Investment Fund, which when combined with assets from the Higher Education Endowment Fund, will provide $8.7 billion for investment in our higher education and vocational training institutions.

The final $5 billion from the 2007-08 surplus allocation will be invested in the Health and Hospitals Fund.

Legislation establishing the funds is expected to be passed by 1 January 2009, with both the capital and earnings of these funds available for investment from 1 July 2009. Spending from the funds on specific projects will be subject to rigorous evaluation assessed by independent bodies.

These arrangements will ensure that substantial funding is available to make critical nation building investments in infrastructure, education and health that will strengthen our economy for the future.

An electronic version of the Final Budget Outcome 2007-08 can be found at http://www.budget.gov.au/

CANBERRA
26 September 2008