This annual publication provides a national perspective on the fiscal outlook and a complete picture of the size of general government by examining outcomes across all levels of Australian government.

The net operating balance has been revised upwards by $24.9 billion (0.3 per cent of GDP) for the period 2017–18 to 2020–21.  This upward revision is driven by an increase in Commonwealth revenue.

Looking forward, the national net operating balance is projected to move from a surplus of 0.1 per cent of GDP in 2017–18 to a surplus of 2.1 per cent of GDP by 2021–22.  This projected increase is driven by the Commonwealth, largely stemming from increased personal income tax revenue due to a projected pick‐up in wages growth.

Further contributing to the improving net operating balance is subdued growth in expenses at both the Commonwealth and state levels.

On the revenue side, risks to the net operating balance include lower‐than‐expected receipts if economic outcomes are weaker than current economic projections. For example, more subdued wages growth would flow through to personal income tax receipts and a slower than expected property market would lead to lower transfer duty revenue.  Rising expenditure beyond projected levels is also a risk, noting in particular that this financial year will see a number of elections take place, increasing the possibility of new spending commitments arising.  Further, these projections do not factor in any decisions that have been taken since 2018–19 budgets.

States have primary responsibility for the delivery of infrastructure and make up the large majority of national net capital investment (95 per cent in 2017–18).  Net capital investment has seen a major upwards revision of $19.5 billion for the forward estimates compared to the previous outlook.  This is largely due to major infrastructure projects in New South Wales and Victoria.

Total state net capital investment is projected to increase rapidly over the forward estimates peaking at 1.1 per cent of GDP in 2018–19 before declining to 0.6 per cent of GDP in 2021–22.  This is primarily driven by the timing of New South Wales’ spending on infrastructure projects, which increases rapidly over the next two years and then declines as projects are completed.

States are borrowing to fund their investment with aggregate state net debt projected to more than double over the forward estimates to reach 5.2 per cent of GDP.  In contrast, Commonwealth net debt, which makes up 90 per cent of national net debt, is projected to decline over the latter part of the forward estimates driven by improving budget balances.

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