Major fiscal aggregates

Based on the GFS framework, the major fiscal aggregates presented in the Australian Government’s financial reports include:

  • net operating balance – is an accrual measure that shows whether the Government has to borrow from financial markets to cover its operating activities.
  • fiscal balance – is an accrual measure that shows whether the Government has to borrow from financial markets to cover its operating activities and net investments in non‑financial assets used in the provision of goods and services.
  • underlying cash balance – is a cash measure that shows whether the Government has to borrow from financial markets to cover its operating activities and net investments in non-financial assets used in the provision of goods and services.
  • headline cash balance – is a cash measure that shows whether the Government has to borrow from financial markets to cover its operating activities, net investments in non‑financial assets used in the provision of goods and services, and net investment in financial assets for policy purposes.
  • net debt – a common measure of the strength of the Government’s financial position comprising liquid financial assets and interest bearing liabilities.
  • net worth – is equal to assets minus liabilities and is a measure of the strength of the government’s financial position. It is a broader measure than net debt.
  • net financial worth – is equal to financial assets minus liabilities and is a measure of the strength of the Government’s financial position but avoids valuation issues with non‑financial assets in the net worth measure.

See Finance Advice Paper - General Principles for Recognition of Expenditure in Budget Aggregates for the principles used in the presentation of government expenditure in the Australian Government’s budget financial statements and the consolidated financial statements. Further information on equity investments and concessional loans are provided in the following documents which are presented in a Q&A format:

Net operating balance

Net operating balance (NOB) is an accrual measure that shows whether the Government has to borrow from financial markets to cover operating activities. If this measure is in surplus, this indicates that the Government’s revenue (mainly taxation) is sufficient to fund operating expenses, which is a measure of the sustainability of the existing level of government goods and services. GFS revenue and expenses excludes changes in assets and liabilities that the Government can’t control, such as:

  • net write-downs of assets;
  • assets recognised for the first time;
  • actuarial revaluations;
  • net foreign exchange gains;
  • net swap interest received; and
  • market valuation adjustment for issued securities

Fiscal balance

The fiscal balance is an accrual measure that shows whether the Government has to borrow from financial markets to cover operating activities and net investments in non-financial assets used in the provision of goods and services. If this measure is in deficit, this indicates that the Government is drawing on resources of other sectors in the economy to finance its provision of goods and services. This is sustainable if NOB is in balance/surplus as the government is only seeking the financing of investments in productive non-financial assets.

Fiscal balance is calculated as NOB less net investment in non-financial assets. The capital adjustment is net purchases less sales of fixed assets such as equipment and intangible assets such as spectrum. It also removes depreciation included in NOB to avoid any double counting.

Underlying cash balance

The underlying cash balance (UCB) is a cash measure that shows whether the Government has to borrow from financial markets to cover its operating activities and net investments in non‑financial assets used in the provision of goods and services. If this measure is in deficit, this indicates that the Government is drawing on resources of other sectors in the economy to finance its provision of goods and services.

The UCB is calculated as net AAS cash receipts from operations (excluding net Future Fund earnings until 2019-20), plus financing adjustments (to remove cash flows more appropriately viewed as financing in GFS), plus capital adjustments (net investment in non‑financial assets). Financing adjustments include:

  • net interest on swap transactions; and
  • certain public debt interest (PDI) transactions.

Headline Cash Balance

The headline cash balance is a cash measure that shows whether the Government has to borrow from financial markets to cover its operating activities, net investments in non‑financial assets used in the provision of goods and services and net investment in financial assets for policy purposes. If this measure is in deficit, this indicates that the Government is drawing on resources of other sectors in the economy to finance its provision of goods and services and public policy investments.

The Government can provide equity and loan funding for public policy reasons rather than for cash management. This includes net equity and loan payments to government economic corporations (such as NBN) and other economic sectors. This funding results in higher government borrowing and is therefore included in the headline cash balance. The Future Fund and the Australian Office of Financial Management invest for cash management purposes and their investments are not included in the headline cash balance.


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