Source: https://www.treasury.tas.gov.au/BudgetPapersHTML/Budget2018/BP1/2018-19-BP1-7-Assets-and-Liabilities.htm
Timestamp: 2019-09-16 12:40:24
Document Index: 636317361

Matched Legal Cases: ['art 7', 'art 7', 'art 7', 'art 7', 'art 7', 'art 7', 'art 7', 'art 7']

2018-19 Budget Paper 1 - Chapter 7 - Assets and Liabilities
· General Government Net Worth is estimated to be $11 593.3 million as at 30 June 2019. Net Worth is estimated to increase over the Forward Estimates period to $12 949.3 million by 30 June 2022.
· General Government Net Debt is estimated to be negative $329.6 million as at 30 June 2019, a deterioration of $122.2 million on the 2017‑18 Budget estimate of negative $451.8 million as at 30 June 2018. General Government Net Debt is expected to be negative $51.6 million as at 30 June 2022.
· The most significant liability on the General Government Balance Sheet is the General Government Superannuation liability, which is estimated to be $6 868.1 million as at 30 June 2019.
· The Government continues to meet the cash cost of the defined benefit superannuation schemes on an emerging basis ($284.5 million in 2018‑19). While forecast to be manageable, a key ongoing Budget risk is that the cash cost to the Budget will increase significantly in the coming years, with cash payments anticipated to increase over the next 14 years, peaking in 2032‑33 ($437.8 million).
· The present value of superannuation liabilities is particularly sensitive to discount rate movements, although these movements do not impact on the cash costs that require funding. The 2018‑19 Budget projections are based on a discount rate of 4.25 per cent, which is a decrease of 0.5 of a percentage point from the discount rate used for the 2017‑18 Budget.
The Balance Sheet presented in this chapter provides assets and liabilities estimated as at 30 June 2018 to 2022 and reports key indicators for the same period. This includes an Estimated Outcome for the current year. By providing information on the nature of assets and liabilities held by the Government, this Statement gives an indication of the State’s financial strength.
Table 7.1 details the estimated General Government Sector Balance Sheet as at 30 June from 2018 to 2022.
5 417.4
5 464.7
5 535.4
7 760.5
7 643.6
7 746.6
7 886.5
6 270.9
6 988.5
7 311.5
4 916.2
5 552.8
6 086.8
12 020.2
13 414.7
13 861.9
14 319.4
19 780.7
21 058.4
21 608.5
22 206.0
6 786.2
6 933.0
6 981.9
8 535.8
9 087.3
9 188.6
11 244.9
11 971.0
12 949.3
6 018.7
6 187.9
6 341.8
6 571.5
5 783.1
6 078.0
6 377.8
( 1 155.1)
( 1 443.7)
( 1 442.0)
( 1 370.1)
6 192.7
6 867.2
6 906.8
3. Net Financial Liabilities represents Total Liabilities less Financial Assets, excluding Equity investment in PNFC and PFC sectors.
Total Assets are estimated to be $20 392.9 million as at 30 June 2019, an increase of $529.1 million from the 2017‑18 Budget estimate of $19 863.8 million as at 30 June 2018. The increase primarily reflects an increase in Land and buildings of $369.8 million and Infrastructure assets of $443.4 million which is partly offset by a decrease in the Equity investment in PNFC and PFC sectors of $255.7 million.
This consists of the Government’s investment in the net assets of the Public Non‑Financial Corporations and Public Financial Corporations sectors.
The Government’s equity investment is estimated to be $5 398.3 million as at 30 June 2019, a decrease of $255.7 million from the 2017‑18 Budget estimate of $5 654 million as at 30 June 2018. This primarily reflects a decrease in the net assets of the PNFC Sector. The decline in PNFC Sector net assets is a result of a decrease for electricity entities of $374 million which is primarily due to the impact of 2017 net asset balances that were not known at the time of the 2017-18 Budget and are reflected in the 2018 Estimated Outcome. This decrease is partly offset by an increase for TT‑Line Company Pty Ltd of $79.9 million, reflecting the return of $80 million (plus interest) that was previously held in the TT‑Line Vessel Replacement Fund.
Chart 7.1 illustrates the components of the Government’s equity investment holdings.
Chart 7.1: Equity Investment in PNFC and PFC Sectors as at 30 June 2019
Other financial assets primarily includes Income tax equivalents receivable and Prepayments. Other financial assets is estimated to be $802.9 million as at 30 June 2019, a decrease of $12.5 million on the 2017‑18 Budget estimate of $815.4 million as at 30 June 2018. The decrease primarily reflects a $17.1 million decrease in the Income tax equivalents estimate and an increase of $4.6 million in Prepayments.
Income tax equivalents receivable
Land and buildings is estimated to be $6 635.1 million as at 30 June 2019, an increase of $369.8 million on the 2017‑18 Budget estimate of $6 265.3 million as at 30 June 2018. Land and buildings is estimated to increase by $676.4 million to $7 311.5 million as at 30 June 2022. This primarily reflects increased capital expenditure on schools, housing and hospital assets undertaken by the Department of Education, Department of Communities Tasmania and Department of Health.
Infrastructure is estimated to be $5 259.9 million as at 30 June 2019, an increase of $443.4 million on the 2017‑18 Budget estimate of $4 816.5 million as at 30 June 2018. Infrastructure is estimated to increase by $826.9 million to $6 086.8 million as at 30 June 2022, which primarily reflects capital expenditure on road infrastructure assets by the Department of State Growth.
The increase in Land and buildings and Infrastructure over the 2018‑19 Budget and Forward Estimates period reflects the implementation of the Government’s infrastructure investment program. Further information regarding infrastructure investment is provided in chapter 6 of this Budget Paper.
Total Liabilities is estimated to be $8 799.6 million as at 30 June 2019, increasing over the Forward Estimates period, with estimated Total Liabilities of $9 256.6 million as at 30 June 2022.
The estimated Borrowings of $748.9 million as at 30 June 2019 includes an estimated end of year borrowing of $507.5 million to be undertaken on 30 June 2019. The end of year borrowing has no impact on the Government’s Net Debt as the same amount will be borrowed and invested overnight on 30 June with the Tasmanian Public Finance Corporation, grossing up the amount of cash held and borrowings.
Other liabilities (which includes Tasmanian Risk Management Fund liabilities) is estimated to be $398.4 million as at 30 June 2019, a decrease of $11.3 million compared to the 2017‑18 Budget of $409.7 million as at 30 June 2018. The decrease primarily reflects the impact of 2017 actual balances that were not known at the time of preparing the 2017‑18 Budget.
The Government’s superannuation liability is an estimate of the obligations of the State with respect to liabilities arising from the current and former members of unfunded or partially funded Public Sector defined benefit superannuation schemes, which were closed to new members with effect from May 1999.
The superannuation liability is an estimate of the net present value of the Government’s share of meeting current and future benefit payments for scheme members. The superannuation liability differs from many other financial liabilities, such as Borrowings, which can be called on for repayment in full at any point in time.
The superannuation liability has arisen over many decades because benefits are funded on an emerging basis when scheme members become entitled to a pension or lump sum benefit. That is, the Government’s portion of the final benefit is paid when it falls due, with the remaining part of the benefit being funded from the scheme’s assets. The major schemes currently operating in the General Government Sector that have an unfunded liability are those established under the Public Sector Superannuation Reform Act 2016, the former Parliamentary Superannuation Act 1973, the former Parliamentary Retiring Benefits Act 1985 and the Judges’ Contributory Pensions Act 1968.
General Government Superannuation is estimated to be $6 868.1 million as at 30 June 2019, which is comprised of the estimated present value of the liability of $8 747.2 million less the estimated fair value of plan assets of $1 879.2 million.
8 673.0
8 747.2
8 801.7
8 839.0
(1 886.8)
(1 879.2)
(1 868.7)
(1 851.1)
(1 824.0)
Chart 7.2 projects the General Government Superannuation liability (net of plan assets) over the total life of the defined benefit schemes to 30 June 2080.
Chart 7.2: General Government Superannuation Liability Projection, 30 June 2019 to 30 June 2080
· Discount rate ‑ 4.25 per cent;
· Investment earnings ‑ 4.25 per cent.
It is important to recognise that the actuarial estimate is a snapshot of a scheme’s estimated financial position at a particular point in time, and that the actuarial results do not predict a scheme’s future financial position or its ability to pay benefits in the future. Over time, a scheme’s total cost will depend on a number of factors, including the amount of benefits the scheme pays, the number of people paid benefits (for example mortality and marital status are estimated), scheme expenses and the amount earned on any assets invested to pay the benefits. These variables will change over the life of the liability. The variables are uncertain at the valuation date and are estimated by the State Actuary.
The superannuation liability is particularly sensitive to discount rate movements. Since 2009‑10, due to the volatility of the bond market and the long‑term nature of the liability, the Budget projections of the Superannuation liability do not use the current Australian Government long‑term bond rate. The 2018‑19 Budget projections are based on a discount rate of 4.25 per cent. This is a 0.5 percentage point change in the average discount rate used to value the General Government Superannuation liability from the 2017‑18 Budget of 4.75 per cent. Based on advice from the State Actuary, 4.25 per cent is the midpoint of the ten year and 15 year averages of the historical average yield of ten year Government bond rates.
There is a strong inverse relationship between the discount rate and the valuation of the liability. Chart 7.3 shows the impact of an increase or decrease of one per cent in the average discount rate used to value the General Government Superannuation liability. The base rate column represents the estimated present value of the superannuation liability (gross) as at 30 June in each year valued by the State Actuary using a discount rate of 4.25 per cent.
Chart 7.4 shows the estimated employer contribution payments, made up of both pension and lump sum benefit costs, over the period 2018-19 to 2079-80.
Chart 7.4: Defined Benefit Superannuation Costs, 2018‑19 to 2079‑80
Total State Superannuation as at 30 June 2019 is estimated to be $7 400.8 million, which is comprised of the estimated present value of the liability of $9 419.2 million less the estimated fair value of plan assets of $2 018.3 million. Total State includes Government Business Enterprises and State‑owned Companies.
9 338.9
9 478.1
9 512.2
9 519.2
(2 026.5)
(2 018.3)
(2 007.1)
(1 988.3)
(1 959.3)
7 312.3
7 523.9
7 559.9
Chart 7.5 shows the impact of an increase or decrease of one per cent in the discount rate used to value the Total State Superannuation Liability. The base rate column represents the estimated present value of the superannuation liability (gross) as at 30 June in each year valued by the State Actuary using a discount rate of 4.25 per cent.
· personal injury (including workers’ compensation and personal accident);
· liability (including public and products, professional, and directors’ and officers’ liability);
The Fund operates on a cost recovery basis with all inner‑Budget agencies making contributions each year in order to build up reserves to meet current and emerging costs. Contributions are based on advice from an independent actuary and are adjusted over time according to the claims experience of agencies.
The expected overall increase in contributions for 2018-19 is mainly due to increases in both workers’ compensation and medical liability contributions. The significant increase in workers’ compensation contributions is primarily as a result of higher claim costs in recent years, higher staff costs and a deterioration in the funding level of this risk category. The contribution for medical liability has increased moderately reflecting higher projected claim costs and incidence rates for both large and small claims in 2018-19. Contributions for motor vehicles and general property will also increase in line with inflation. These increases will be marginally offset by a substantial decrease in general liability contributions, which is mainly due to the continued favourable funding position of this risk category. Overall, total agency contributions are expected to increase from $60.2 million in 2017-18 to $67.5 million in 2018-19.
In terms of the financial position of the Fund, the actuary takes into account the level of assets and liabilities in each risk category when determining annual contributions. The net assets of the Fund are expected to increase over time mainly reflecting improvement in the funding position for the workers’ compensation risk, a rebuilding of the large claim funding reserve of $5 million for property risk and a significant pre-2001 medical liability risk provision. The provision is being maintained for medical liability risk as claims can take many years to be reported and many more years to reach a settlement. These reporting and settlement delays mean that the outstanding claims liability in this risk category is subject to considerable uncertainty.
Table 7.7: Financial Position of the Tasmanian Risk Management Fund