The financial system is a set of financial institutions, each of which promotes the formation and use of appropriate funds, and public bodies and institutions that carry out financial activities within their competence. The existence of different institutions within the financial system is due to the fact that finances cover the entire economy and the social sphere.

Australia's financial system has three links: the finances of the federal, state, and local governments. In turn, the financial system of each link consists of the budget and finances of state-owned enterprises owned or controlled by the administration.

In Australia, 97 percent of the funds raised and redistributed by the state go through the federal, state, and local government budgets.

The finances of the Australian federal government account for about 80 percent of the revenue generated and cover more than 50 percent of all expenditures.

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Federal government spending

The most important item of expenditure of the federal government is spending on defense and maintenance of the administrative apparatus.

The second important group of federal expenditures is the cost of social security and insurance. The main items in this group are old-age or disability pensions, unemployment and disease benefits, child benefits, etc.

The economy also remains an important item of expenditure in the federal budget, although the share of this article is steadily declining. Most of the allocations go to two industries - agriculture and industrial infrastructure. The state plays an active role in stimulating exports, especially manufactured goods.

The role of federal finance in the development of industrial infrastructure is great. In the context of the Australian continent, the creation of a network of roads of national importance, the construction of irrigation facilities, electricity facilities require huge capital investments, which are often not available to private capital, have a long payback period, also not stimulating private investment.

A distinctive feature of Australia's financial system is the federal government's high share of subsidies and grants to state and local governments (between 25 and 30 percent in some years).

It should be said that there are certain regulations in the Forex industry as well. For example, ASIC regulated Forex brokers are required to be taxed at some point by the government.

Federal government revenues 

Four-quarters of the revenue raised by state governments at all levels is redistributed through federal finances. Revenues of the federal budget by 92-96% are formed from tax revenues, among which the main are income tax on the population, corporate income tax, excise taxes, sales tax.

Income tax in Australia, as in other capitalist countries, plays a crucial role in budget revenues.

Income tax on the population in Australia is levied in two ways: "at the source" (in this case, the tax is deducted from the wages of workers and employees of the accounting of a private or public enterprise and is transferred to the financial authorities), on the tax return (this method is used when taxing the income of persons of free professions - artists, writers, theatre and film figures, doctors).

The second and third largest sources of revenue for federal agencies are indirect taxes - excise taxes and sales tax.

The "other taxes" group contains about a dozen different taxes and fees, including taxes on interest and dividends, inheritance tax, gift tax, postal fees, agricultural tax, payroll tax, deductions to special insurance funds for child benefit, and some others.

State finances 

State spending is dominated by spending on education, on the economy - mainly electricity, gas, water, transportation, and health care. The states also bear a significant portion of social security and insurance costs.

The income portion of state budgets is 60 percent generated by federal government subsidies, reflecting Australia’s high level of financial centralization. The rest of the income is almost exclusively made up of taxes, which are dominated by a payroll tax (contributions to social security and security funds), fees and licenses for registration and use of personal transport postal fees, gambling taxes. State governments are actively using finance to attract new investment.

Local government finances 

The local government of Australia has the main economic functions: the construction and operation of industrial infrastructure, primarily roads, housing, and utilities. About two-thirds of local government expenditures are spent on this purpose. Their income is 60% formed by real estate taxes. Because of the limited local government financial base, state and federal government subsidies play an important role.

State-owned enterprise finances

In Australia, public ownership is not widespread in only four industries - communications, air and sea transport, trade. They are almost all concentrated in low-profit infrastructure industries, without which the national economy cannot function. The low profits of state-owned enterprises are also explained by the policy of the state, which releases products to monopolies at low prices, and buys at inflated prices. 

Public debt

Since its inception, public borrowing and public debt have been a feature of Australia's economic development. Loans received in the UK were the main means of financing all social and economic activities carried out by governments. In the 21st century, the intensive development of the Australian economy became increasingly important for domestic sources of financing, particularly taxes and revenues from state-owned enterprises.

All three administrative units have the right to carry out their own emission operations. In Australia, however, it is the federal government's issuance of securities to cover the state budget deficit, which thus raises up to three-quarters of the debt. Therefore, when they talk about the issuance of securities by the federal government or about securities not paid for by the federal government, they mean a release designed to cover the deficit not only of the federal budget but also of the large extent of the state budgets.

The main types of securities issued by the Federal Government are non-market-free bonds, treasury tickets, and bills designed to cover short-term, such seasonal, budget needs, and special bonds, which are usually issued in connection with expenses that are targeted. All issues in terms of currency repayment and placement are divided into two types: issued in Australian and foreign currency.