7     Assets and Liabilities

Key Issues

·       General Government Net Worth is estimated to be $7 927.6 million as at 30 June 2022. Net Worth is estimated to increase over the Forward Estimates period to $8 718.6 million by 30 June 2025.

·       In accordance with the Australian Bureau of Statistics’ Government Finance Statistics reporting framework General Government GFS Net Debt excludes the impact of lease liabilities. GFS Net Debt is estimated to be $1 419 million as at 30 June 2022. GFS Net Debt is expected to increase to $3 284.9 million as at 30 June 2025.

·       General Government Net Debt is estimated to be $1 704.4 million as at 30 June 2022.

·       The General Government Superannuation liability is estimated to be $9 895 million as at 30 June 2022.

·       The Government continues to meet the cash cost of the defined benefit superannuation schemes on an emerging basis ($296 million in 2021‑22). The cash cost to the Budget is estimated to increase over the next 12 years, with cash payments anticipated to peak in 2033‑34 ($444.7 million).

·       The present value of superannuation liabilities is particularly sensitive to discount rate movements, although these valuation movements do not impact on the emerging cash costs that require funding. The 2021‑22 Budget projections are based on a discount rate of 1.5 per cent.


 

Balance Sheet

The Balance Sheet presented in this chapter provides assets and liabilities estimated as at 30 June 2022 to 30 June 2025 and reports key indicators for the same period. By providing information on the nature of assets and liabilities held by the Government, this Statement gives an indication of the State’s financial strength.

The key measures presented in the Balance Sheet are Net Worth, Net Financial Worth, Net Financial Liabilities, Net Debt and GFS Net Debt.

Table 7.1 details the estimated General Government Sector Balance Sheet as at 30 June from 2021 (including 2021 Preliminary Outcome) to 30 June 2025.


 

Table 7.1:         General Government Balance Sheet as at 30 June

 

2021 

2021 

2022 

2023 

2024 

2025 

Preliminary

Forward 

Forward 

Forward 

 

Budget 

Outcome

Budget 

Estimate 

Estimate 

Estimate 

$m 

$m 

$m 

$m 

$m 

$m 

Assets

Financial assets

Cash and deposits

1 160.4 

1 468.1 

1 144.0 

1 152.5 

1 390.8 

1 444.9 

Investments1

420.3 

202.9 

311.0 

360.8 

233.9 

200.9 

Equity investment in PNFC and PFC sectors

4 721.8 

4 874.7 

4 928.6 

5 077.3 

5 045.3 

5 073.4 

Other equity investments

124.8 

90.4 

140.9 

201.4 

256.9 

262.4 

Receivables

326.5 

348.3 

345.4 

342.2 

339.3 

336.7 

Other financial assets

585.3 

516.9 

442.6 

450.5 

466.3 

498.4 

7 339.1 

7 501.2 

7 312.6 

7 584.6 

7 732.5 

7 816.7 

 

 

 

 

 

Non-financial assets

 

 

 

 

 

Land and buildings2

7 470.8 

7 468.6 

7 771.9 

8 031.2 

8 374.4 

8 645.6 

Infrastructure3

6 405.0 

6 107.2 

6 454.9 

6 930.0 

7 461.0 

8 010.9 

Plant and equipment

291.9 

285.3 

313.8 

334.0 

346.5 

348.8 

Heritage and cultural assets

452.0 

439.9 

452.2 

464.5 

476.8 

489.1 

Investment property

3.3 

3.4 

3.3 

3.3 

3.3 

3.3 

Intangibles

71.9 

63.9 

72.6 

87.5 

107.6 

120.0 

Assets held for sale

16.7 

5.7 

1.1 

.... 

.... 

.... 

Lease - right‑of‑use assets4

412.1 

310.4 

275.2 

243.9 

231.9 

198.1 

Other non-financial assets

48.2 

99.9 

99.8 

101.4 

102.3 

103.8 

15 171.9 

14 784.1 

15 444.7 

16 195.8 

17 103.8 

17 919.5 

 

 

 

 

 

Total Assets

22 510.9 

22 285.4 

22 757.3 

23 780.4 

24 836.3 

25 736.2 

 

 

 

 

 

Liabilities

 

 

 

 

 

Borrowings

3 013.5 

1 811.2 

2 874.1 

3 780.5 

4 449.4 

4 930.6 

Lease liabilities4

422.1 

318.9 

285.4 

251.8 

234.8 

193.7 

Superannuation5

11 481.0 

9 064.3 

9 895.0 

9 843.6 

9 775.4 

9 681.4 

Employee entitlements

800.0 

814.9 

831.8 

849.7 

869.2 

889.0 

Payables

191.7 

190.1 

199.9 

201.1 

203.2 

204.9 

Other liabilities

590.0 

703.2 

743.5 

840.6 

1 072.9 

1 118.0 

Total Liabilities

16 498.3 

12 902.6 

14 829.7 

15 767.3 

16 604.9 

17 017.5 

 

 

 

 

 

Net Assets

6 012.7 

9 382.8 

7 927.6 

8 013.0 

8 231.4 

8 718.6 

 

 

 

 

 

 

 


 

Table 7.1:         General Government Balance Sheet as at 30 June (continued)

 

2021 

2021 

2022 

2023 

2024 

2025 

Preliminary

Forward

Forward

Forward

 

Budget

Outcome

Budget

Estimate

Estimate

Estimate

$m 

$m 

$m 

$m 

$m 

$m 

Equity

Accumulated funds

1 550.5 

4 880.5 

 3 326.2 

 3 247.3 

 3 308.5 

 3 480.6 

Asset revaluation reserve

5 296.3 

5 301.5 

 5 581.9 

 5 863.9 

 6 181.3 

 6 498.6 

Other revaluation

(834.1)

(799.2)

(980.4)

(1 098.1)

(1 258.4)

(1 260.6)

Total Equity

6 012.7 

9 382.8 

7 927.6 

8 013.0 

8 231.4 

8 718.6 

 

 

 

 

 

KEY FISCAL AGGREGATES

 

 

 

 

 

 

 

 

 

 

 

 

 

NET WORTH6

6 012.7 

9 382.8 

7 927.6 

8 013.0 

8 231.4 

8 718.6 

 

 

 

 

 

NET FINANCIAL WORTH7

(9 159.2)

(5 401.3)

(7 517.1)

(8 182.7)

(8 872.4)

(9 200.9)

 

 

 

 

 

NET FINANCIAL LIABILITIES8

13 881.0 

10 276.0 

12 445.7 

13 260.1 

13 917.7 

14 274.2 

 

 

 

 

 

NET DEBT9

1 854.8 

459.1 

1 704.4 

2 519.1 

3 059.5 

3 478.6 

 

 

 

 

 

 

 

GFS NET DEBT10

1 432.8 

140.2 

1 419.0 

2 267.3 

2 824.7 

3 284.9 

 

 

 

 

 

 

 

Notes:

1.    Variations in Investments primarily reflect the timing of loan advances by the Department of State Growth.  In 2022 and 2023 it also reflects the drawdown of the TT-Line Vessel Replacement Fund.

2.    The increase in Land and buildings reflects the impact of the implementation of the Government’s infrastructure investment program including increased capital funding for schools, housing, prison infrastructure and hospital redevelopment projects. Further information on infrastructure investment is provided in chapter 6 of this Budget Paper.

3.    The increase in Infrastructure primarily reflects additional expenditure on Roads through the Government’s infrastructure investment program. Further information on infrastructure investment is provided in chapter 6 of this Budget Paper.

4.    The decrease in Lease - right-of-use-assets and Lease liabilities in 2022 primarily reflects revised estimates based on 30 June 2020 actuals.

5.    The decrease in Superannuation reflects the latest actuarial advice provided by the State’s Actuary and includes a change in the discount rate from 1.0 per cent in 2020‑21 to 1.5 percent in 2021‑22.

6.    Net Worth represents Total Assets less Total Liabilities.

7.    Net Financial Worth represents Total Financial assets less Total Liabilities.

8.    Net Financial Liabilities represents Total Liabilities less Financial assets, excluding Equity investment in PNFC and PFC sectors.

9.    Net Debt represents Borrowings plus Lease liabilities, less the sum of Cash and deposits and Investments. This measure incorporates the impact of recognising Lease liabilities on the Balance Sheet.

10.  GFS Net Debt represents Borrowings less the sum of Cash and deposits and Investments. This is equivalent to Net Debt based on the Australian Bureau of Statistics Government Finance Statistics reporting framework, and excludes the impact of Lease liabilities.


 

Assets

Total Assets are estimated to be $22 757.3 million as at 30 June 2022, an increase of $246.4 million from the 2020-21 Budget estimate of $22 510.9 million as at 30 June 2021. The increase primarily reflects an increase in Land and buildings of $301.1 million, Equity investment in the PNFC and PFC sectors of $206.8 million and Infrastructure of $49.9 million. These increases are partially offset by decreases in Other financial assets of $142.7 million, Lease - right‑of‑use assets of $136.9 million and Investments of $109.3 million.

Equity Investment in PNFC and PFC Sectors

This consists of the Government’s investment in the net assets of the Public Non‑Financial Corporations and Public Financial Corporations sectors.

The Government’s equity investment is estimated to be $4 928.6 million as at 30 June 2022, an increase of $206.8 million from the 2020-21 Budget of $4 721.8 million as at 30 June 2021. This reflects an increase in the net assets of the PNFC Sector of $132 million which is primarily due to increases in net assets including additional Government equity contributions to TT‑Line Company Pty Ltd, Tasmanian Irrigation Pty Ltd and Macquarie Point Development Corporation. There is also an increase in net assets of the PFC Sector of $74.8 million primarily due to an increase in net assets held by the Motor Accidents Insurance Board.

Chart 7.1 illustrates the components of the Government’s equity investment holdings.

Chart 7.1:         Equity Investment in PNFC and PFC Sectors as at 30 June 2022

Title: Equity Investment in PNFC and PFC Sectors as at 30 June 2022 - Description: The chart shows that the largest component of the Government's Equity Investment holdings is in the Electricity sector (50.6%), followed by the Financial sector (22.4%) and the Transport sector (12.5%).


 

Other Equity Investments

Other equity investments primarily consist of equity invested in the Tasmanian Water and Sewerage Corporation Pty Ltd. Other equity investments is estimated to be $140.9 million as at 30 June 2022, an increase of $16.1 million from the 2020-21 Budget Estimate of $124.8 million. Table 7.2 provides a breakdown of Other equity investments. 

Table 7.2:         Other Equity Investments as at 30 June

 

2021 

2021 

2022 

2023 

2024 

2025 

Preliminary 

Forward 

Forward 

Forward 

 

Budget 

Outcome 

Budget 

Estimate 

Estimate 

Estimate 

$m 

$m 

$m 

$m 

$m 

$m 

 

 

 

 

 

 

 

Equity investment in TasWater

90.0 

60.0 

100.0 

150.0 

200.0 

200.0 

Other1

34.8 

30.4 

40.9 

51.4 

56.9 

62.4 

124.8 

90.4 

140.9 

201.4 

256.9 

262.4 

 

 

 

 

 

 

 

Note:

1.    Other is primarily comprised of the balance of HomeShare investments held by the Department of Communities Tasmania.

Other Financial Assets

Other financial assets primarily consists of Income tax equivalents receivable and Prepayments as outlined in Table 7.3. Income tax equivalents receivable relates to the tax equivalents paid by the State’s PNFC and PFC sectors to the GGS.

Prepayments is estimated to be $17.9 million as at 30 June 2022, which is a decrease of $29.3 million from the 2020-21 Budget estimate of $47.2 million. The 2021 Budget for Prepayments included one off payments such as for the Tasmanian Government Radio Network, which are no longer included in 2022.

Other is estimated to be $400 000 as at 30 June 2022, which is a decrease of $13.8 million from the 2020‑21 Budget estimate of $14.2 million. The movement reflects a $12.8 million decrease in contract assets held. Contract assets relate to guaranteed Australian Government funding which is not paid in that financial year.

Table 7.3:         Other Financial Assets as at 30 June

 

2021 

2021 

2022 

2023 

2024 

2025 

Preliminary 

Forward 

Forward 

Forward 

 

Budget 

Outcome 

Budget 

Estimate 

Estimate 

Estimate 

$m 

$m 

$m 

$m 

$m 

$m 

 

 

 

 

 

 

 

Income tax equivalents receivable

523.9 

492.4 

424.2 

432.0 

447.7 

479.8 

Prepayments

47.2 

16.7 

17.9 

18.1 

18.3 

18.5 

Other

14.2 

7.8 

0.4 

0.4 

0.3 

0.2 

585.3 

516.9 

442.6 

450.5 

466.3 

498.4 

 

 

 

 

 

 

 

Non‑Financial Assets

Non‑financial assets include the value of Crown Land and other land holdings, including national parks and conservation areas, schools, hospitals and other buildings held by the Government for the provision of goods and services. Non‑financial assets also includes Plant and equipment, Intangibles, Assets held for sale, Lease - right‑of‑use assets and Other non‑financial assets.

Land and buildings is estimated to be $7 771.9 million as at 30 June 2022, an increase of $301.1 million on the 2020-21 Budget estimate of $7 470.8 million as at 30 June 2021. Land and buildings is estimated to increase by $873.7 million to $8 645.6 million as at 30 June 2025. This primarily reflects increased capital expenditure on schools, housing, hospital and prison assets undertaken by the Department of Education, Department of Communities Tasmania, Department of Health, and Department of Justice.

Infrastructure is estimated to be $6 454.9 million as at 30 June 2022, an increase of $49.9 million on the 2020-21 Budget estimate of $6 405 million as at 30 June 2021. Infrastructure is estimated to increase by $1 556 million to $8 010.9 million as at 30 June 2025, which primarily reflects capital expenditure on road and bridge infrastructure assets by the Department of State Growth.

Other non-financial assets is estimated to be $99.8 million as at 30 June 2022, an increase of $51.6 million on the 2020-21 Budget estimate of $48.2 million as at 30 June 2021. This increase primarily relates to additional inventories held by the Department of Health.

The increase in Land and buildings and Infrastructure over the 2021‑22 Budget and Forward Estimates period reflects the implementation of the Government’s infrastructure investment program. Further information on infrastructure investment is provided in chapter 6 of this Budget Paper.

Leases

Australian Accounting Standard AASB 16 Leases came into effect from 1 July 2019. The Standard results in the recognition of a right‑of‑use asset together with a corresponding lease liability on the GGS Balance Sheet.

Table 7.4 outlines leases by category. A corresponding liability is recognised which means there is minimal impact on Net Worth for the General Government Sector.

Lease - right‑of‑use assets is estimated to be $275.2 million as at 30 June 2022. This consists of $260.3 million for Land and buildings which primarily represents the leasing of Government office accommodation held by Finance‑General and $14.9 million for Plant and equipment which primarily represents leases held by the Department of Police, Fire and Emergency Management.


 

Table 7.4:         Leases by Category as at 30 June1

 

2021 

2021 

2022 

2023 

2024 

2025 

Preliminary

Forward 

Forward 

Forward 

 

Budget 

Outcome

Budget 

Estimate 

Estimate 

Estimate 

$m 

$m 

$m 

$m 

$m 

$m 

Lease - right‑of‑use assets

 

 

 

 

 

 

Land and buildings

379.7 

292.8 

260.3 

229.0 

219.5 

186.5 

Plant and equipment

32.4 

17.6 

14.9 

14.9 

12.4 

11.6 

412.1 

310.4 

275.2 

243.9 

231.9 

198.1 

Lease liabilities

 

 

 

 

 

 

Land and buildings

367.1 

299.4 

268.7 

235.6 

220.9 

181.8 

Plant and equipment

54.9 

19.5 

16.7 

16.3 

13.9 

11.9 

422.1 

318.9 

285.4 

251.8 

234.8 

193.7 

 

 

 

 

 

 

 

Note:

1.    While the value of the right-of-use assets will equal lease liabilities on initial recognition, differences arise over the term of the lease, as lease liabilities decrease based on the principal component of the cash-based lease repayment, while right-of-use assets are generally depreciated on a straight line basis over the term of the lease.

Liabilities

Total Liabilities is estimated to be $14 829.7 million as at 30 June 2022 a decrease of $1 668.6 million from the Budget of $16 498.3 million as at 30 June 2021. The movement is primarily due to a decrease in the Superannuation liability of $1 586 million which reflects the increase in the discount rate used by the State Actuary to value the liability.

Borrowings

The level of Borrowings is estimated to be $2 874.1 million as at 30 June 2022, which is a decrease of $139.4 million from the 2020-21 Budget estimate of $3 013.5 million as at 30 June 2021. The decrease is primarily due to the lower than budgeted cash deficit for 2020-21. Borrowings is expected to increase by $2 056.5 million to a balance of $4 930.6 million as at 30 June 2025 primarily due to the General Government Sector cash deficits over the Forward Estimates. The breakdown of borrowings is outlined in Table 7.5.

Table 7.5:         Borrowings by Category as at 30 June

 

2021 

2021 

2022 

2023 

2024 

2025 

Preliminary

Forward 

Forward 

Forward 

 

Budget 

Outcome

Budget 

Estimate 

Estimate 

Estimate 

$m 

$m 

$m 

$m 

$m 

$m 

Borrowings

 

 

 

 

 

 

Australian Government Debt

36.4 

34.7 

31.7 

28.7 

25.7 

22.7 

Other borrowings

2 977.0 

1 776.5 

2 842.4 

3 751.8 

4 423.7 

4 908.0 

3 013.5 

1 811.2 

2 874.1 

3 780.5 

4 449.4 

4 930.6 

 

 

 

 

 

 

 

General Government Superannuation Liability

The Government’s superannuation liability is an estimate of the obligations of the State with respect to liabilities arising from the current and former members of unfunded or partially funded Public Sector defined benefit superannuation schemes, which were closed to new members with effect from May 1999.

The superannuation liability is an estimate of the net present value of the Government’s share of meeting current and future benefit payments for scheme members. The superannuation liability differs from other financial liabilities, such as Borrowings, which can be called on for repayment in full at any point in time.

The superannuation liability has arisen over many decades because benefits are funded on an emerging basis when scheme members become entitled to a pension or lump sum benefit. That is, the Government’s portion of the final benefit is paid when it falls due, with the remaining part of the benefit being funded from the scheme’s assets. The major schemes currently operating in the General Government Sector that have an unfunded liability are those established under the Public Sector Superannuation Reform Act 2016, the former Parliamentary Superannuation Act 1973, the former Parliamentary Retiring Benefits Act 1985 and the Judges’ Contributory Pensions Act 1968.

The General Government Superannuation liability is estimated to be $9 895 million as at 30 June 2022, which is comprised of the estimated present value of the liability of $11 850.1 million less the estimated fair value of plan assets of $1 955.2 million.

Table 7.6:         General Government Superannuation Liability as at 30 June

 

2021 

 

  Budget 

2021 

Preliminary
Outcome 

2022 

 

  Budget 

2023 

Forward 
Estimate 

2024 

Forward 
 Estimate 

2025 

Forward 
Estimate 

 

$m 

$m 

$m 

$m 

$m 

$m 

 

 

 

 

 

 

 

Present value of superannuation liability

13 323.5 

11 227.1 

11 850.1 

11 726.6 

11 581.6 

11 402.2 

Fair value of plan assets

(1 842.4)

(2 162.8)

(1 955.2)

(1 883.0)

(1 806.1)

(1 720.9)

 

 

 

 

 

 

 

Total

11 481.0 

9 064.3 

9 895.0 

9 843.6 

9 775.4 

9 681.4 

 

 

 

 

 

 

 

 

Chart 7.2 projects the General Government Superannuation liability (net of plan assets) over the total life of the defined benefit schemes to 30 June 2082.

Chart 7.2:         General Government Superannuation Liability Projection 30 June 2022 to 30 June 2082

Title: General Government Superannuation Liability Projection, 30 June 2022 to 30 June 2082 - Description: The chart shows that the General Government Superannuation Liability gradually declines over the total life of the defined benefit scheme to 30 June 2082.

Chart 7.3 shows the estimated employer contribution payments, made up of both pension and lump sum benefit costs, over the period 2021-22 to 2081-82.

Chart 7.3:         Defined Benefit Superannuation Costs, 2021-22 to 2081‑82

Title: Defined Benefit Superannuation Costs, 2021-22 to 2081-82 - Description: The chart shows that estimated employer contribution payments, made up of lump sum and pension payments, are predicted to peak in 2035-36 and then gradually decline to 2081-82.

Current projections show the emerging cost of the General Government Superannuation Liability will increase by 50.2 per cent over the next 12 years, peaking in 2033‑34. The estimated cost to the Budget is based on the most recent actuarial estimates. The current estimated peak cost of $444.7 million represents a decrease of 6.5 per cent from the estimated peak cost of $475.6 million included in the 2020-21 Budget.

In 2021‑22, defined benefit superannuation costs are estimated to be 3.9 per cent of Cash receipts from operating activities in the General Government Sector. Defined benefit superannuation costs, as a percentage of General Government cash receipts, is estimated to peak at 4.3 per cent in eight years (2029‑30), followed by a decrease to 3.4 per cent in 15 years (2036-37) and 2.6 per cent in 20 years (2041-42).

Table 7.7 shows the estimated nominal cash flows required to meet the emerging cost of superannuation benefits payable to members. This represents the estimated total cost of benefits payable and includes the General Government share, together with the share of benefits that are funded from Plan Assets.

Table 7.7:         Undiscounted Defined Benefit Obligations Payable to Employees of the General Government Sector

 

2021 

 

Estimate 

 

$m 

Estimated total benefit payments to be made in the period

 

No later than 1 year

 429.3 

Later than 1 year and no later than 2 years

 424.3 

Later than 2 years and no later than 5 years

1 327.5 

Later than 5 years and no later than 10 years

2 499.9 

Later than 10 years and no later than 15 years

2 685.1 

Later than 15 years and no later than 20 years

2 539.7 

Later than 20 years and no later than 25 years

2 228.8 

Later than 25 years and no later than 30 years

1 860.8 

Later than 30 years and no later than 35 years

1 419.3 

Later than 35 years and no later than 40 years

 951.1 

Later than 40 years and no later than 45 years

 535.0 

Later than 45 years and no later than 50 years

 237.0 

Undiscounted defined benefit obligation

17 137.8 

 

 

After 50 years there is expected to be a reducing level of cash for a further 25 years totalling approximately:

 90.4 

 

 

Actuarial Assumptions and Sensitivity Analysis

Independent actuarial assessments are prepared by the State Actuary to provide reporting and disclosure information, relating to the General Government Superannuation liability, in respect of current and former employees who have defined benefits arising from membership of the closed defined benefit superannuation schemes.


 

The actuarial assumptions are used for the variables that will determine the ultimate cost of providing long‑term superannuation benefits. Actuarial assumptions must be unbiased (i.e. neither imprudent nor excessively conservative) and should reflect the economic relationships between factors such as inflation, rates of salary increase, the return on scheme assets and discount rates.

Table 7.8 shows the key assumptions used by the State Actuary in preparing the 2020-21 Budget, the 2020‑21 Preliminary Outcome and the 2021-22 Budget and Forward Estimates.

Table 7.8:         Actuarial Assumptions

 

2021 

Budget 

2021 
Preliminary  Outcome 

2022

Budget

 

%

%

%

 

 

 

 

Discount rate

1.0 

2.15 

1.5 

Salary increase rate

3.0 

3.0 

3.0 

Pension increase rate

2.25 

2.25 

2.25 

Asset earnings rate

1.0 

2.15 

1.5 

 

 

 

 

 

It is important to recognise that the actuarial estimate is a snapshot of a scheme’s estimated financial position at a particular point in time, and that the actuarial results do not predict a scheme’s future financial position or its ability to pay benefits in the future. Over time, a scheme’s total cost will depend on a number of factors, including the value of benefits the scheme pays, the number of people paid benefits (for example mortality and marital status are estimated), scheme expenses and the investment earnings on any assets invested to meet future benefits. These factors will change over the life of the scheme.

The 2020-21 Budget estimate was based on a discount rate of 1.0 per cent, which was calculated using the 10 year Government Bond rate at the time of budget development, rounded to the nearest 0.5 per cent. Since the 2020-21 Budget, bond rates have increased and as a result, the discount rate applied to determine the Superannuation liability for the 2021-22 Budget has increased to 1.5 per cent, which is again based on the current 10 year Government Bond rate, rounded to the nearest 0.5 per cent.

The discount rate used for the 2020-21 Preliminary Outcome valuation is 2.15 per cent. This discount rate is determined by the State Actuary to ensure it complies with the requirements of the Australian Accounting Standard AASB 119 Employee Entitlements.

There is a strong inverse relationship between the discount rate and the valuation of the liability. Chart 7.4 shows the impact of an increase or decrease of 0.5 per cent in the average discount rate used to value the General Government Superannuation liability. The base rate column represents the estimated present value of the superannuation liability (gross) as at 30 June in each year valued by the State Actuary using a discount rate of 1.5 per cent.

Chart 7.4:         Sensitivity Analysis of the General Government Superannuation Liability as at 30 June

Title: Sensitivity Analysis of the General Government Superannuation Liability as at 30 June - Description: The chart demonstrates that there is a strong inverse relationship between the discount rate and the valuation of the liability and shows the impact of an increase or decrease of 0.5 per cent in the average discount rate used to value the General Government Superannuation Liability.

Changes in the discount rate assumption have a material impact on the valuation of the superannuation liability at any point of time. However, these movements do not impact on the cash flows required to meet the emerging cost of benefits paid to members. The asset earnings rate assumption does impact on the cash cost of employer contributions. A change in the asset earnings rate will directly impact on the value of Plan Assets.

Chart 7.5 shows the value of Plan Assets based on a number of different asset earning rate assumptions, ranging from the Budget assumption of 1.5 per cent up to 7 per cent. The chart shows that as the assets earning rate increases, the value of Plan Assets also increases.

Chart 7.5:         General Government Superannuation Plan Assets based on different Asset Earning Rates

Title: General Government Superannuation Plan Assets based on different Asset Earning Rates - Description: The chart demonstrates that the higher the asset earning rate, the higher the level of General Government Superannuation Plan Assets. Under all scenarios, asset levels decrease to fall to zero between 2056-57 and 2071-72. The seven per cent scenario shows a slight increase to 2030-31 before decreasing.

Total State Superannuation Liability

Total State Superannuation as at 30 June 2022 is estimated to be $10 614.4 million, which is comprised of the estimated present value of the liability of $12 705.5 million less the estimated fair value of plan assets of $2 091.1 million. Total State Superannuation includes government businesses.

Table 7.9:         Total State Superannuation Liability as at 30 June

 

2021 

 

  Budget 

2021 

Estimated 

Outcome 

2022 

 

  Budget 

2023 

Forward 
Estimate 

2024 

Forward 
Estimate 

2025 

Forward 
Estimate 

 

$m 

$m 

$m 

$m 

$m 

$m 

 

 

 

 

 

 

 

Present value of superannuation liability

14 284.9 

12 091.2 

12 705.5 

12 573.4 

12 418.1 

12 226.3 

Fair value of plan assets

(1 970.4)

(2 299.8)

(2 091.1)

(2 014.0)

(1 931.7)

(1 840.6)

 

 

 

 

 

 

 

Total

12 314.6 

9 791.5 

10 614.4 

10 559.4 

10 486.4 

10 385.6 

 

 

 

 

 

 

 


Chart 7.6 shows the impact of an increase or decrease of 0.5 per cent in the discount rate used to value the Total State Superannuation Liability. The base rate column represents the estimated present value of the superannuation liability (gross) as at 30 June in each year valued by the State Actuary using a discount rate of 1.5 per cent.

Chart 7.6:         Sensitivity Analysis of the Total State Superannuation Liability as at 30 June

Title: Sensitivity Analysis of the Total State Superannuation Liability as at 30 June - Description: The chart demonstrates that there is a strong inverse relationship between the discount rate and the valuation of the liability and shows the impact of an increase or decrease of 0.5 per cent in the average discount rate used to value the Total State Superannuation Liability.

Table 7.10 shows the estimated nominal cash flows required to meet the emerging cost of superannuation benefits payable to members. This represents the estimated total cost of benefits payable and includes the Total State share, together with the share of benefits that are funded from plan assets.

Table 7.10:       Undiscounted Defined Benefit Obligations Payable to Employees of the Total State Sector

 

2021 

 

Estimate 

 

$m 

Estimated total benefit payments to be made in the period

 

No later than 1 year

 459.7 

Later than 1 year and no later than 2 years

 454.3 

Later than 2 years and no later than 5 years

1 422.0 

Later than 5 years and no later than 10 years

2 678.4 

Later than 10 years and no later than 15 years

2 878.2 

Later than 15 years and no later than 20 years

2 722.7 

Later than 20 years and no later than 25 years

2 390.2 

Later than 25 years and no later than 30 years

1 996.0 

Later than 30 years and no later than 35 years

1 522.9 

Later than 35 years and no later than 40 years

1 020.6 

Later than 40 years and no later than 45 years

 574.1 

Later than 45 years and no later than 50 years

 254.3 

Undiscounted defined benefit obligation

18 373.5 

 

 

After 50 years there is expected to be a reducing level of cash for a further 25 years totalling approximately:

 97.0 

 

 

Tasmanian Risk Management Fund

Purpose of the Fund

The Tasmanian Risk Management Fund was established on 1 January 1999 to provide a whole‑of‑government approach to funding and managing the insurable liabilities of inner‑Budget agencies.

Agencies are covered for the majority of insurable risks to which they are exposed or for which they choose to accept responsibility and the Fund agrees to cover, including:

·       personal injury (including workers’ compensation and personal accident);

·       property (including buildings and contents, business interruption, motor vehicles, machinery, marine hull, transit and fraud);

·       liability (including public and products, professional, and directors’ and officers’ liability);

·       medical liability; and

·       travel.

All classes are self‑insured by the Fund apart from marine hull and travel. These classes remain insured through the purchase of a commercial insurance policy, as this is more cost-effective than self‑insurance for these two categories of risk. From 1 July 2015, an Industrial Special Risks insurance policy has also been purchased to cover catastrophe risk for property assets for claims above $6.25 million.

Performance of the Fund

The Fund operates on a cost recovery basis with all inner‑Budget agencies making contributions each year in order to build up reserves to meet current and emerging costs. Contributions are based on advice from an independent actuary and are adjusted over time according to the claims experience of agencies.

Overall, total agency contributions increased from $82.6 million in 2020-21 to an estimated $107.6 million in 2021-22. The increase in contributions for 2021-22 is principally due to a significant increase in workers’ compensation contributions and to a lesser degree an increase in general property contributions. The workers’ compensation contribution increase is primarily as a result of materially higher claim costs in recent years, an increase in the number of claims, a lower discount rate, higher staffing costs and inflationary factors. Contributions for general property increased moderately reflecting an increase in the excess for the Industrial Special Risks insurance policy and unfavourable claims experience. While contributions also increased for all other categories of risk (with the exception of general liability risks), the increases were not significant in terms of quantum.

The Fund’s Actuary takes into account the level of assets and liabilities in each risk category when determining annual contributions. The net assets of the Fund are expected to increase over the Forward Estimates, mainly reflecting improvement in the funding position for the workers’ compensation risk and a rebuilding of the large claim funding reserve for property risk. There is also a significant pre-2001 medical liability risk provision. The provision is being maintained for medical liability risk as claims can take many years to be reported and settled. These reporting and settlement delays mean that the outstanding claims liability in this risk category is subject to considerable uncertainty.

Table 7.11:       Financial Position of the Tasmanian Risk Management Fund
as at 30 June

 

2021 

2021 

2022 

2023 

2024 

2025 

 

Budget 

Preliminary Outcome 

Budget 

Forward 
Estimate 

Forward 
Estimate 

Forward 
 Estimate 

$m 

$m 

$m 

$m 

$m 

$m 

 

 

 

 

 

 

 

Assets

Cash and cash equivalents

281.9 

283.2 

294.9 

316.8 

333.8 

350.5 

Receivables

2.4 

2.4 

2.4 

2.4 

2.4 

2.4 

284.2 

285.5 

297.3 

319.2 

336.2 

352.9 

Liabilities1

 

 

 

 

 

 

Personal injury

130.7 

156.8 

167.2 

175.9 

183.3 

189.8 

Property

6.9 

16.0 

5.0 

7.7 

7.2 

7.4 

Motor vehicle

0.2 

0.2 

0.3 

0.3 

0.3 

0.3 

Liability

4.5 

4.7 

4.8 

4.9 

5.0 

5.1 

Medical

123.0 

118.4 

122.0 

123.6 

126.0 

130.1 

Payables

1.6 

1.6 

1.6 

1.6 

1.6 

1.6 

267.0 

297.8 

300.8 

313.9 

323.4 

334.3 

 

 

 

 

 

 

 

Net Assets

17.3 

(12.3)

(3.6)

5.3 

12.9 

18.6 

 

 

 

 

 

 

 

Note:

1.    Liabilities are calculated by the Fund’s Actuary as at 31 December 2020.