2012-13 Government Mid-year Financial Projections Statement

Financial ProjectionsStatement of RisksThe inherent uncertainties associated with producing forecasts for an approximately$239 billion economy and $25 billion recurrent budget means that there will always bedifferences between the key aggregates forecast at mid-year and the final audited results.This Statement of Risks provides an overview of the known issues that have the potentialto materially affect the financial projections contained in this mid-year review.A brief analysis of the historical differences between the ‘current year’ estimatescontained in previous mid-year reviews and the actual outcomes, for a number of keyaggregates, is shown below.General government revenue has been underestimated in nine out of the last ten yearsby an average 3.9% per annum. For one year, 2008-09, revenue was overestimatedby 3.0% (reflecting the impact of the Global Financial Crisis in that year). A 3.9%variance in the revenue estimate for 2012-13 in this mid-year review equates to$987 million.General government expenses have been underestimated in five out of the last tenyears by an average 1.2% per annum. For the other five years, expenses wereoverestimated, on average, by the same margin of 1.2% per annum. A 1.2% variancein the expense estimate for 2012-13 in this mid-year review equates to $302 million.Over the last ten years, general government operating balances have varied betweenmid-year review estimates and final outcomes by between an $868 millionoverestimation (2008-09) and a $963 million underestimation (2005-06), reflectingthe revenue and expenditure variability noted above.The State’s Asset Investment Program (AIP) was overestimated in each of the lastten years by an average 11.6% per annum. An 11.6% variance in the AIP estimate for2012-13 in this mid-year review equates to $849 million.Revenue EstimatesThe revenue estimates are sensitive to changes in key economic parameters, including the$US/$A exchange rate, commodity prices (especially iron ore), house prices, employmentand wages. The approximate sensitivity of the estimates to changes in these parameters isoutlined in the following table.31