THE COMMONWEALTH BUDGET

Delivery of the 2001–02 Budget

The 2001–02 Budget further consolidated the outcomes-outputs based accrual budgeting framework. Delivering this third accrual Budget without undue pressure on Finance staff was the result of good planning processes. Importantly, it was also a positive measure of how effectively Finance, the Department of the Treasury (Treasury) and other agencies were able to work together. This was the 101st Budget delivered by the Commonwealth since Federation.

Budget Group provided the Government with accurate and comprehensive estimates updates at three stages of the Budget process:

• the Mid-Year Economic and Fiscal Outlook (MYEFO), which was released publicly on 15 November 2000;
  
  
• an update prior to the start of Budget consideration by the Expenditure Review Committee (ERC) of Cabinet;
  
  
• the final update published in the May Budget.

The Budget management workload was reflected in the 2001–02 Measures document, which was the largest such document in any Budget since its introduction 5 years ago. Finance coordinates and drafts the expenses and non-tax revenue components of this statement.

The Budgeting Framework

Finance is committed to continuously refining the budgeting framework, ensuring it delivers maximum benefits and a whole-of-government perspective. To this end, the presentation of Budget Statement 6, describing expenses and net capital investment, was changed from a portfolio to a functional and sub-functional basis. As a result this statement categorises areas of Government activity by functions, which remain relatively stable over time, and details the resources directed by the Commonwealth towards them. To give an example, the education function includes the delivery of education services through higher education, vocational education and training, government and non-government schools and student assistance programmes. This was the first time information had been presented in this way since accrual budgeting was implemented in 1999. This presentation reflected feedback and consultation on the Budget papers and was well received by Ministers, the Parliament and other readers of the Budget documents.

During 2000–01 the Department revised its explanatory and guidance material on outcomes and outputs, and published this on the Finance website. The updated material presents concise budgeting information for Government agencies, including advice on specifying outcomes and outputs and developing robust performance management information. Portfolio Budget Statements Guidelines were released earlier in the Budget process than in previous years, to assist agencies in refining their outcome structures.

The Department continued its work in ensuring a consistent approach to the budgetary framework across the Commonwealth public sector through formal dialogue with agencies in the monthly Chief Financial Officers' (CFO) forum, and the establishment of a smaller Budget Consultative Committee to deal with strategic budgetary issues.

The Accrual Information Management System (AIMS), implemented in late 1998, underpins the delivery of the Commonwealth's Budget and the preparation of the MYEFO. A review of the system, completed in November 2000, concluded that the system was meeting stakeholders' business requirements but agency use could be further improved by enabling Internet communications and better reporting tools. A replacement system for AIMS is planned for the 2004–05 Budget.

Contributing to Significant Policy Development

The development of the Defence White Paper, Defence 2000—Our Future Defence Force, involved an intense consultation process between Finance, the Department of Defence (Defence) and the Treasury in costing the capability options outlined in the White Paper. As recognised in the White Paper, the Defence spending figures are the most specific long-term Defence funding projections provided in more than 25 years. Finance's work with Defence to establish a new financial management framework for that organisation is a key element in this major new initiative. The Defence financial and management plan—integral to the accountability commitment—was presented to Ministers for the first time in the 2001–02 Budget process.

In January 2001 the Government launched Backing Australia's Ability, a $2.9 billion package of measures promoting Australian innovation and research. Finance played a central role in this policy development, through examining the proposals and costings, and advising Ministers on its budgetary impact. Finance also has an ongoing role as a member of the implementation committee that reports to Ministers on the progress of the measures.

In February 2001, Finance established a small team to contribute to the Welfare Reform Taskforce, established to advise the Government on approaches to reform Australia's welfare system. The Finance team worked with other stakeholder agencies to develop the Australian's Working Together package.

In 2000–01, Finance further strengthened its capacity to advise the Government on fiscal implications of longer-term emerging issues. The Department's Long-term Budget Policy Unit, established in 1999, focused its research during the financial year on the ageing of the population projected over the next 50 years and policy areas impacted by demographic change, especially health, retirement income, employment and immigration. The Unit collaborated with other agencies in whole-of-government policy development, and established links with universities and 'think tanks' through a new seminar series on long-term economic and fiscal policy issues.

Output Pricing Reviews

Finance initiated a programme of pricing reviews in 1999–2000 in response to the accrual budgeting framework's focus on output prices rather than input costs. As part of this programme 19 pricing reviews of Government agencies, including Finance, were undertaken, continued or completed in 2000–01.

The pricing review process assists agencies in establishing more reliable costs for their outputs. The result is that they are more clearly informed on the accountability of resources under their control and internal decision making. A number of agencies that completed pricing reviews have advised Finance that this process assisted them in improving financial management outcomes. Some of these agencies also upgraded their costing and reporting systems and enhanced their financial management arrangements following their pricing review.

The 21 pricing reviews (which include reviews conducted since 1999–2000 and continuing ones) conducted to date have resulted in overall net savings which improved the fiscal balance by $177.5 million for the Budget and forward years. In some instances, pricing reviews have led to an increase in the price of departmental outputs. Pricing reviews also provide Ministers with more information on the major drivers of the price of outputs.

Another 16 agencies are expected to undertake output pricing reviews during 2001–02. To offer further assistance, Finance has strengthened its pricing reviews database and the suite of diagnostics covering a range of common Government activities. These tools will assist agencies which are undertaking pricing reviews and benchmarking public sector activities.

What are Pricing Reviews? pop-up window | Text-only

Review of the Accrual Budget Documentation

The Joint Committee of Public Accounts and Audit (JCPAA) is inquiring into the effectiveness of, and options for enhancing, the format of the current Budget documentation including the Portfolio Budget Statements (PBS), Annual Reports and the PAES, for the purposes of Parliamentary scrutiny.

Finance lodged a submission with the JCPAA on 8 June 2001 addressing a number of issues of particular interest to the Committee. The Department also attended a public hearing on 22 June 2001. At 30 June 2001, Finance was preparing responses to a number of follow-up questions from the Committee.