Note 1: Statement of significant accounting policies and forecast assumptions The following summary sets out the basis applied in the preparation and presentation of these updated estimated financial statements for the Victorian general government sector, which includes the budget year and the estimates for the three subsequent years (referred to as the budget and forward estimates).
Jobs in the 21st Century Jobs in the 21st Century – International Engagement Premier and Cabinet International and domestic engagement Victorian businesses will be connected to new opportunities through support for engagement and awareness amongst local employers and communities. This includes strengthening Victoria’s ongoing sisterstate relationships and establishing new relationships in India and Indonesia, further enhancing important cultural links and assisting the development of new business opportunities. This initiative contributes to the Department of Premier and Cabinet’s Strategic Advice and Government Support output. Development, Business and Innovation Victorian Government Business Offices New Victorian Government Business Offices will be opened in Latin America and Singapore to attract new investment to Victoria and assist Victorian businesses with new market opportunities. This initiative contributes to the Department of State Development, Business and Innovation’s: and Export Facilitation output; and Investment Attraction, Facilitation and Major Projects output. State Development, Business and Innovation/Premier and Cabinet Inbound and outbound trade mission program Building on existing trade missions and establishing a new inbound program, delegations will be brought to and from highgrowth export markets to showcase the global capabilities of Victorian businesses. This program includes initiatives to strengthen cultural connections and leverage opportunities in international markets. This initiative contributes to the Department of State Development, Business and Innovation’s: Trade and Export Facilitation output; and Investment Attraction, Facilitation and Major Projects output. This initiative also contributes to the Department of Premier and Cabinet’s Arts and Cultural Development output.
School Education – Primary output; and School Education – Secondary output. Asset initiatives Table A.5: Asset initiatives – Education and Early Childhood Development ($ million) 201415 201516 201617 201718 TEI School capital program (a) tbc tbc tbc tbc 38.0 Total asset initiatives .. .. .. .. 38.0 Source: Department of Treasury and Finance Note: (a) Estimated capital value only. The new schools will be undertaken under a public private partnership arrangement. Estimated annual expenditure to be confirmed upon contractual completion of public private partnership contracting arrangements. School capital program Funding is provided for two new schools as well as additional relocatable classrooms for schools with growing enrolments. The new schools that will be constructed as part of the New Schools Public Private Partnership project announced in the 201415 Budget are: Armstrong Creek Primary School; and Armstrong Creek Special School. This initiative contributes to the Department of Education and Early Childhood Development’s: School Education – Primary output; and School Education – Secondary output. Output initiatives Table A.6: Output initiatives – Environment and Primary Industries ($ million) 201415 201516 201617 201718 Building on reform of illegal puppy and kitten farms 2.3 1.5 1.3 1.0 Urban water reform 8.5 .. .. .. output initiatives 10.8 1.5 1.3 1.0 Source: Department of Treasury and Finance
The previous section considered the fiscal implications of independent variations in selected economic parameters. Typically, however, variations in economic parameters do not occur in isolation. For example, general economic conditions may differ from expectations, particularly in the event of an unanticipated economic or financial shock, causing most or all economic parameters to vary from forecasts. This section considers two examples where general economic conditions varied significantly from expectations, resulting in the broad sweep of economic parameters being different from forecast. In the first example, in 200607 growth was significantly stronger than anticipated while in the second example, in 200809 the onset of the global financial crisis resulted in most economic and financial variables being lower than initially forecast. The analysis confirms that the fiscal impact of variations in economic parameters can be significantly greater than indicated by the sum of each variable’s individual impact. This highlights the point that the relationships between economic parameters and fiscal aggregates are complex and heavily influenced by the specific nature and characteristics of a given economic shock. Such shocks affect Victoria’s fiscal position to varying degrees, but given the composition of Victoria’s revenue base, propertyrelated shocks are likely to have the largest impact on the fiscal situation. The State’s fiscal position in any year is the product of economic trends and policy changes in that and previous years. Similarly, an economic shock in a given year will affect fiscal outcomes in that and later years. The outcomes for a particular year will diverge from forecast values because of forecast errors and policy changes. This analysis highlights the critical impact that government policy decisions have on the result, which by nature cannot be captured by standard sensitivity analysis. 200607 – economic growth exceeding expectations Table B.2 presents a situation where economic growth was underestimated. It shows the largest forecast error in the macroeconomic variables was for employment. Real GSP was also underestimated, and there were relatively minor errors in the forecasting of prices and wages. Table B.2: Actual deviations of growth rates of key economic variables from 200607 Budget forecasts (per cent) 200607 200607 Forecast budget (a) actual error (b) Real GSP 3.3 3.8 0.5 Employment 1.3 3.1 1.9 Consumer price index 2.5 2.6 0.1