- The Budget process
- Budget (May)
- Mid-year Economic and Fiscal Outlook (November)
- Pre-election Economic and Fiscal Outlook (prior to election)
- Parliamentary Budget Office (PBO)
The Australian Government Budget provides a picture of Australia's forecast financial performance and the government's fiscal policy for the forward years. The Budget includes estimates of government revenue and expenses for the Commonwealth over a specified period.
The Budget process is the decision-making process for allocating public resources to the government’s policy priorities. It is through the Budget process that the government gains the Parliament’s authority to spend relevant money through the passage of the annual appropriation acts and other legislation that establishes special appropriations. The government then allocates this money to departments of state and other Commonwealth entities. The Commonwealth public sector must effectively manage the finite resources within its control. The Government’s ability to deliver on its policy commitments and achieve its objectives relies on effective budgeting.
The Charter of Budget Honesty Act 1998 (The Charter) sets out principles and requirements that guide the government’s management of fiscal policy. The Charter requires the government to:
- set out its medium-term fiscal strategy, along with its shorter-term fiscal objectives and targets, which are published in the Budget Papers and in the MYEFO report
- report on estimates for the General Government Sector (GGS) according to an annual reporting cycle, including economic assumptions underlying Budget estimates
- report against specified external reporting standards
- list all proposals for changes to revenue, current and capital expenditure in the forthcoming reporting cycle.
For the purposes of the Budget process, the PGPA Act requires accountable authorities to prepare Budget estimates in accordance with any directions issued by the Finance Secretary (s36).
The annual Budget process begins in November or December when the Expenditure Review Committee of Cabinet (ERC) considers portfolio minister’s new proposals and expected major pressures, and establishes the Budget’s priorities. From February to April the ERC develops the Budget against the background of the Government’s political, social and economic priorities.
Finance has an obligation to ensure that the Budget estimates related to expenditure or capital that are presented to the government are reliable, and meet the requirements of the Charter.
Finance is responsible for ensuring Budget estimates, processes and documentation are prepared and delivered in an accurate and timely manner. This requirement is one of Finance’s deliverables (set out in Finance’s Portfolio Budget Statements).
All Commonwealth entities are required to keep their estimates and actuals reporting up-to-date in both their internal records system and Central Budget Management System (CBMS), to ensure that all public reporting is accurate and consistent. Estimates often need to be amended in line with new Budget decisions, changes in whole-of-government parameters (such as the Consumer Price Index or currency exchange rates variations), or changes to the Machinery of Government (MoG).
Portfolio Ministers can bring forward policy proposals for consideration by government during the annual Budget process.
Annual forecasts are published at the portfolio and entity level (Portfolio Budget Statements) and GGS-level (Budget Papers ). These documents provide estimated GGS aggregates and more detailed estimates for each entity. The PB Statements are prepared by each portfolio entity, while the Budget Papers are prepared by the Treasury and Finance and set out the details of the Budget for the parliament and for the Australian public.
The Budget Papers support the Budget-related decisions of government, providing the fiscal outlook for the Australian economy and highlighting major new initiatives of the government. A high-level summary of information contained in each of the Budget Papers is presented below.
- Budget Paper No. 1 — Budget Strategy and Outlook provides an overview of the economic and fiscal outlook, summarises the Government’s fiscal strategy, and outlines key Budget priorities.
- Budget Paper No. 2 — Budget Measures provides comprehensive information on all government decisions that involve changes to its revenue, expense and investing activities since the last MYEFO.
- Budget Paper No. 3 — Federal Financial Relations includes information on revenue provision and payments (GST and specific purpose payments), as well as an overview of fiscal developments in the states and territories.
- Budget Paper No. 4 — Agency Resourcing shows, for each entity, estimated expenses for each special appropriation Act, estimated balances and flows for all special accounts, estimated resourcing by type of appropriation, and estimated average staffing levels in the public sector.
- Intergenerational report provides a basis for considering the Commonwealth’s fiscal outlook over the long term (40 years), including identifying emerging issues associated with demographic changes. It is published every three to five years.
The Charter requires that the government produce a Budget and Mid-Year Economic and Fiscal Outlook (MYEFO) report by the end of January each year, or within six months after the last Budget has been presented to the parliament, whichever is later. MYEFO provides updated information on the Government’s fiscal position and compares estimated expenditure to actual expenditure. Typically, MYEFO is released in November. Since the first MYEFO report in 1997–98, the Treasurer and the Finance Minister have issued the report as a joint statement.
MYEFO estimates include any government decisions made since the previous Budget that affect expenses, revenues and capital estimates. MYEFO also updates the budgetary position, including Budget aggregates, by incorporating any changes to economic parameters.
The purpose of MYEFO is to provide updated information to allow assessment of the Government's fiscal performance against the fiscal strategy set out in Budget Paper No. 1. MYEFO updates key information contained in the most recent Budget and contains a detailed statement of tax expenditures. An appendix to MYEFO report summarises all policy decisions taken since the Budget was brought down, including their estimated financial consequences.
The information in the report takes into account, to the fullest extent possible, all government decisions and all other circumstances that may have a material effect on the fiscal and economic outlook.
Entities can propose new or amended proposals, using the same process as for Budget proposals, however, the expectation is that these should only be proposed if the need is urgent, unavoidable, and cannot be considered by the government as part of the next Budget.
Budget estimates are also updated before an election, in a report called the Pre-election Economic and Fiscal Outlook (PEFO) . PEFO makes public any decision of Government since the last economic update was published. The update ensures that the government, the opposition, the parliament and the public know the country’s fiscal position before the election.
In contrast to the other financial reports published each year by the government, the PEFO is prepared independently by the Secretaries of the Departments of Finance and the Treasury and is released under their names without consulting with the government. They also publish costings prepared by the Treasury and Finance on election commitments that have been requested by political parties in the lead up to a federal election.
The role of the PBO is to inform the Parliament by providing independent and non-partisan analysis of the budget cycle, fiscal policy and the financial implications of proposals.
During the caretaker period for a general election the PBO prepare costings of publicly announced polices on request by authorised members of Parliamentary parties or independent members.
Further information on the Budget process can be found in Part III of the Resource Management and Budget Training.