Box 1 - Operating Allowances
The operating allowance is the amount the Government sets aside for new discretionary spending and revenue initiatives in the current and future Budgets.
The operating allowance for Budget 2013 has been set at $900 million, increasing to $1 billion in Budget 2014 and growing thereafter at 2 per cent per Budget. This represents a slight increase in the allowance for this Budget, but a decrease for all future Budgets, compared to what was signalled in the 2013 BPS (Table 1).
| $millions | Budget 2013 | Budget 2014 | Budget 2015 | Budget 2016 |
|---|---|---|---|---|
| Revised operating allowance | 900 | 1,000 | 1,020 | 1,040 |
| Previous operating allowance as signalled in the BPS | 800 | 1,190 | 1,214 | 1,238 |
| Reduction/ (increase) in spending | (100) | 190 | 194 | 198 |
Less spending will mean bigger surpluses and more ability to pay down debt. By the end of the forecast period, in 2016/17, the operating balance and the residual cash balance will be almost $500 million bigger than they otherwise would have been, as the result of reducing allowances (Table 2).
| $millions | 2013/14 | 2014/15 | 2015/16 | 2016/17 |
|---|---|---|---|---|
| Budget 2013 | (100) | (100) | (100) | (100) |
| Budget 2014 | 190 | 190 | 190 | |
| Budget 2015 | 194 | 194 | ||
| Budget 2016 | 198 | |||
| Increase/ (reduction) in the operating balance and residual cash | (100) | 90 | 284 | 482 |
The revised operating allowances show the Government's ongoing spending restraint, particularly when compared to operating spending earlier in the 2000s (Figure 7).
Keeping to these operating allowances will require continuing reprioritisation of spending from lower-priority into higher-priority areas, and require government departments to keep finding efficiencies as part of their Four-year Plans.
- Figure 7 - New operating spend per Budget
- Source: The Treasury
Note: Excludes revenue initiatives.
