Bills Digest No. 217  1997-98 Appropriation Bill (No. 1) 1998-99


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer and Copyright Details

Passage History

Appropriation Bill (No. 1) 1998-99

Date Introduced: 12 May 1998

House: House of Representatives

Portfolio: Finance and Administration

Commencement: On Royal Assent.

Purpose

To appropriate $30 863 585 000 from the Consolidated Revenue Fund (CRF) for the ordinary annual services of the government for the 1998-99 financial year.

Background

This Bill forms part of a three-part package relating to government finance and covers expenditure for the ordinary annual services of the government. The other parts of the package are:

  • Appropriation Bill (No. 2) 1998-99 which covers expenditure on:
  • capital works and services:
  • payments to the States and Territories
  • expenditure on any new programs not covered by other legislation
  • Appropriation (Parliamentary Departments) Bill 1998-99 which covers expenditure by the five parliamentary departments.

Introduction

The Executive Government of the Commonwealth cannot expend moneys unless Parliament has authorised that expenditure.(1) Authorised expenditure is obtained through appropriation legislation.

Budget Process

Appropriation Bills Nos. 1 and 2 and Appropriation (Parliamentary Departments) Bills are now introduced in May. If needed, Appropriation Bills Nos. 3 and 4 (corresponding to Appropriation Bills Nos. 1 and 2) and Appropriation (Parliamentary Departments) Bill No. 2 are introduced during the financial year to provide funding for cost overruns or new programs. They are commonly referred to as additional estimates Bills.

When past Budgets were handed down in August, enactment of those Budget Bills did not usually take place until November. As all appropriation Bills lapse on 30 June, further measures were required to make funds available from 30 June to November (or until the Bills were enacted). To address this possible 'gap' in funds, Supply Bills were passed at the end of the previous financial year in order to maintain the status quo in the objects of government expenditure authorised in the preceding financial year.

Now that the Budget is handed down in May, Supply Bills are no longer required. The Bills pass through both Houses by the end of June and begin life from the start of the new financial year - lapsing on 30 June at the end of the financial year.

The Budget process now results in a reduced time frame for debate when compared to the August Budgets of the past.(2)

As a general rule, the Senate may not amend proposed laws appropriating revenue or moneys for the ordinary annual services of the government.(3) However, the Senate may amend an appropriation Bill which does not deal with the ordinary annual services of the government, provided such amendment does not increase any proposed charge or burden on the people.(4) As mentioned above, the purpose of this Bill is for the ordinary annual services of the government.(5)

General Economic Forecasts

The Budget is based on a number of economic assumptions. In 1998-99, the underlying budget balance is estimated to be in surplus by $2.688 billion, or 0.5% of Gross Domestic Product (GDP).(6)

The Budget includes the following annual growth rate estimates for 1998-99:

  • Real GDP: 3%
  • Employment: 1.75%
  • Average Earnings: 4.25%
  • CPI: 2.5%.(7)

GDP is forecast to grow by 3% in 1998-99, following estimated growth of 3.75% in 1997-98. The economic crisis in Asia has slowed Australia's GDP growth rate estimate. It is anticipated that the Asian crisis will effect confidence, resulting in a downturn in business growth and consumer spending.(8)

Employment growth is expected to remain firm. The unemployment rate is forecast to fall to around 7.75% in the June quarter 1999.

A rise in underlying inflation is forecast, though it is expected to remain within the 2% to 3% band. Some moderation in wage growth is forecast.

The current account deficit is forecast to rise to $31 billion, or 5.25% of GDP, in 1998-99. This compares with 3.4% of GDP in 1996-97 and an estimated 4.5% of GDP in 1997-98.(9)

Revenue Forecasts

In 1998-99 total revenue is estimated to increase by 6.5% over estimated revenue of the previous year, with the ratio of revenue to GDP increasing to 25.0% from 24.9%.

This amounts to total estimated revenue for 1998-99 of $144.258 billion - up by $8.810 billion on the previous year.

The main increases in estimated revenue will come from:

  • PAYE taxpayers - an additional $5.18 billion (8.4%)
  • Indirect taxes - an additional $1.2 billion (3.8%)
  • Non-tax revenue - an additional $1.465 billion (31.7%) due mainly to a surge in dividend revenue expected to flow from the Reserve Bank.(10)

Outlays Forecasts

In 1998-99 total underlying outlays are estimated to increase by 3.6% over total estimated underlying outlays of the previous year.(11)

Total underlying outlays amount to $141.5703 billion - up by $4.9669 billion on the previous year.

The main Budget cuts to spending are linked to the following portfolios:

  • Employment, Education, Training and Youth Affairs - 12.5% cut from $13.1998 billion to $11.5443 billion
  • Primary Industries and Energy - 8.4% cut from $1.7961 billion to $1.6448 billion
  • Attorney General - 2.7% cut from.$1.0381 billion to $1.00099 billion.

The main Budget increases in spending are linked to the following portfolios:

  • Veteran's Affairs - 7.6% increase from $6.7394 billion to $7.2506 billion
  • Environment - 20.1% increase from $0.570 billion to 0.6852 billion
  • Prime Minister and Cabinet: 14.9% from $1.11269 billion to $1.2949 billion
  • Social Security: 8% from $41.5287 billion to $44.8478 billion.(12)

Fiscal Risks and Contingent Liabilities

The forward estimates of revenue and outlays in the Budget incorporate assumptions and judgements based on information available at the time of publication.(13)

Fiscal risks and contingent liabilities with a possible impact on the forward estimates greater than $20 million in any one year, or $40 million over the forward estimates period, are listed in Budget Paper No. 1 from pages 2-43 to 2-63.

One such listing is the Department of Defence's involvement in several cases covering a wide range of litigation where the cases either have not been heard, or damages and costs have yet to be awarded. The value of these claims is $49 million.

No allowance has been made for any possible contingent liability attaching to the Commonwealth with respect to upcoming litigation arising from the recent waterfront dispute.(14)

Main Provisions

Clause 4 authorises the Minister for Finance to issue $30 863 585 000 out of the CRF for the ordinary annual services of the Government in respect of the year ending 30 June 1999. The money is to be spent according to a detailed list in Schedule 2 of the Bill. The Schedule lists the spending breakdown by department and program.

Clause 6 authorises the Minister to issue additional funds if required to recover any salary increases.

Other provisions relate to:

  • payments to Agencies out of the money appropriated for the purposes of certain employment subsidy schemes or programs
  • payments to Agencies out of the Comcover Reserve.

Endnotes

  1. Commonwealth Constitution - section 83.

  2. May Budget - approximately 17 sitting days.

  3. August Budget - approximately 33 sitting days.

  4. While the Senate has no power to amend an appropriation bill for the purpose of the ordinary annual services of the government, this lack of power is mitigated by the condition that no matters extraneous to the ordinary annual services of the government may be 'tacked' to the Bill. However, if extraneous matter is tacked to an appropriation Bill, and no objection is taken in the Senate prior to assent, the resulting Act is not subject to invalidation by a court by reason of the tacking: Constitution sections 53, 54, 81, 83; Osborne v Commonwealth (1911) 12 CLR 321.

  5. The expression ordinary annual services of the government is used only in sections 53 and 54. It is not justiciable as those sections deal with proposed laws and not laws. Its interpretation is therefore a matter for the two Houses in their dealings with each other. The interpretation of the expression was settled by the Compact of 1965 agreement between the Senate and the government, and by agreed applications of the terms of that agreement since that time: see Odgers' Australian Senate Practice,. 276, 284-286.

  6. Commonwealth Constitution - section 53, Brown v West (1990) 91 ALR at 207.

  7. An appropriation, whether annual or standing, must designate the purpose or purposes for which the moneys appropriated might be expended. The principle was stated by Latham C.J. in Attorney-General (Vic) v Commonwealth, (1945) 71 CLR at p 253: '.....there cannot be appropriation in blank, appropriations for no designated purpose, merely authorising expenditure with no reference to purpose' and see The State of New South Wales v Commonwealth ('the Surplus Revenue Case') (1908) 7 CLR 179, at p 200, where Isaacs J. said: 'Appropriation of money to a Commonwealth purpose means legally segregating it from the general mass of the Consolidated Revenue Fund and dedicating it to the execution of some purpose which either the Constitution has itself declared, or Parliament has lawfully determined, shall be carried out'.

  8. Budget Paper No. 1 1998-99, 1-3.

  9. Ibid., 2-29.

  10. Ibid., 2-29.

  11. Ibid., 2-4.

  12. Ibid., 5-3.

  13. It is important to distinguish between appropriations and underlying outlays. Appropriations derive from Acts of Parliament which authorise the drawing down of Commonwealth money for the functions and activities of the Commonwealth.

  14. Underlying outlays = total appropriations - adjustments

  15. Budget Paper No. 1 1998-99, 4-4.

  16. Ibid, 2-43 (close of parliamentary business - 8 April 1998. Information supplied by departments and agencies - 31 March 1998).

  17. Bills Digest No. 201 1997-98, 15-19.

Contact Officer and Copyright Details

Ross Kilmurray
25 May 1998
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1998

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1998.



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