Frequently asked questions

Heading questions and a decorative image

General

1. What does the PBO do?

The Parliamentary Budget Office (PBO) was established in 2012 to inform the Parliament by providing independent and non-partisan analysis of the budget cycle, fiscal policy and the financial implications of proposals.

We do this in three main ways:

•    by responding to requests made by parliamentarians for costings of policy proposals or for analysis of matters relating to the budget
•    by publishing a report after every election that provides transparency around the fiscal impact of the election commitments of major parties
•    by conducting and publishing research that enhances the public understanding of the budget and fiscal policy settings.
2. Does the PBO make policy recommendations?

No. The PBO does not provide policy recommendations in its responses to requests from parliamentarians or in its research reports.

PBO costings focus on providing an assessment of the fiscal impact of a policy proposal. They do not contain advice as to the merits or otherwise of the policy proposal.

PBO research reports seek to highlight budget-related issues and trends to improve an understanding of budget and fiscal policy matters, but do not make policy recommendations.
3. What is the PBO’s relationship with the government (ministers and departments)?

The PBO works for the Parliament and is independent of the government and the Australian Public Service.  The Parliamentary Budget Officer is a statutory officer appointed by the Parliament who reports to the Parliament’s Presiding Officers (the Speaker of the House of Representatives and the President of the Senate).  The Presiding Officers cannot direct how the PBO performs its functions.

The PBO is one of four parliamentary departments that work directly for the Parliament.  The other parliamentary departments are the Department of the Senate, the Department of the House of Representatives, and the Department of Parliamentary Services.

While the PBO is an independent agency, we work closely with government departments and agencies to ensure that the information we provide to parliamentarians and our published research is accurate and well-informed.  A memorandum of understanding has been agreed between the Parliamentary Budget Officer and the heads of government departments that governs our access to information.
4. Who is the PBO accountable to?

The PBO is accountable to the Parliament of Australia. The Parliamentary Budget Officer reports to the Parliament’s Presiding Officers (the Speaker of the House of Representatives and the President of the Senate) in relation to the management of the PBO, and our operations and work plan are overseen by the Joint Committee of Public Accounts and Audit (JCPAA). The PBO is also subject to scrutiny by the Senate Finance and Public Administration Committee three times a year as part of regular Senate estimates hearings.

In addition to regular scrutiny through the estimates hearings, the JCPAA may request an independent review of the PBO to be conducted following a general election. There have been two such reviews to date, the first a performance review conducted by the Australian National Audit Office following the 2013 general election, and the second a review by independent reviewers Ian Watt and Barry Anderson following the 2016 general election. Links to these reviews are available on the PBO website.
5. Are there similar organisations to the PBO in other countries? What about in State parliaments?

Yes.  The Australian PBO is one of many similar ‘independent fiscal institutions’ that have been established around the world.  These include institutions like the Netherlands Bureau for Economic Policy Analysis (established in 1945), the Congressional Budget Office in the United States (established in 1974), the Korean National Assembly Budget Office (established in 2003), the Canadian Parliamentary Budget Office (established in 2008), and the Office for Budget Responsibility in the United Kingdom (established in 2010).

At June 2018, 26 out of 35 OECD countries had established an independent fiscal institution.  These organisations have a variety of mandates and functions, but they all share an objective of increasing transparency around national budgets.  To find out more about these organisations visit our Related information page.

In addition to organisations established overseas, PBOs have been established, or are being considered, by some Australian state governments.  New South Wales established a part-time PBO in 2011, with the office functioning for around nine months in the lead-up to and following the state election (which is a four-year fixed term).  Victoria has established a full-time PBO with the first Parliamentary Budget Officer appointed in April 2018.  South Australia established a Parliamentary Budget Advisory Service in the lead-up to the 2017 state election, which has since been disbanded.
6. Does the PBO have a role in the preparation of the budget?

No. The budget is the Government’s economic statement which it prepares with the assistance of government agencies and is handed down by the Treasurer. While the PBO has developed considerable expertise in budget matters, we work for the Parliament rather than for the government of the day. We provide the Parliament with information about the budget, either at the request of parliamentarians or parliamentary committees, and through our research reports.

Questions about the budget in general should be directed to the Commonwealth Treasury. Questions about specific budget proposals should be directed to the relevant Commonwealth Government department.
7. Where can I find PBO research reports and what regular publications does the PBO release?

PBO research reports can be found on the Research reports page of the PBO website.  On this page you can find PBO research reports that have analysed various aspects of the budget, including the research reports that the PBO prepares on a regular basis, such as:

•    the Budget medium-term projections, which provide detailed analysis and projections of receipts and payments over the forward estimates and the medium-term period.  The purpose of these reports is to better understand the factors that are leading to changes in the budget aggregates over the medium term.
•    the National fiscal outlook, which looks at the budget position of the Commonwealth and the states and territories together.

The PBO’s regular publications also include chart packs and other budget analyses.  These provide a graphical summary of the budget and provide an update of the fiscal impact of unlegislated measures where these have a material effect on the budget estimates.
8. What is the PBO’s role around elections and what is the PBO’s post-election report?

The PBO has particular roles around election times.

Successive governments have accepted that, during the period preceding an election for the House of Representatives (the House), the government assumes a ‘caretaker role’.  The caretaker period begins at the time the House is dissolved and continues until the government is returned or, if there is a change of government, until the new government is appointed.

During the caretaker period any costing requests received by the PBO from a parliamentary party, along with the costing responses, must be publicly released.

Following the election, the PBO examines the fiscal cost of every election commitment for all of the major parliamentary parties and, within 30 days of the end of the caretaker period, we publish a post-election report.  This post-election report presents, for each major parliamentary party, the aggregate impact that its election commitments are estimated to have on the budget over the forward estimates period.  It also presents estimates of the fiscal cost of each election commitment announced by the major parliamentary parties.

From the next election, the post-election report will be extended to include an estimate of the financial impact of election commitments over the medium term.  It will also be extended to allow minor parties (ie those with fewer than five members prior to a general election) to have their election commitments included in the post-election report.  Minor parties will need to elect to be included in this report, and the assessment for minor parties will be published as an addendum to the main report, which may be released after the main report.

Policy costings

9. What is a policy costing?

A costing prepared by the PBO is an assessment of the financial impact of a proposed policy change on the Commonwealth Government budget. It estimates how much a policy proposal, if implemented, would change the budget surplus or deficit as presented in the government’s most recent budget or other mid-year update.

For further information on costings, see What is a Parliamentary Budget Office Costing?, which provides a conceptual explanation of what a costing is, what it is designed to capture, and how a costing estimate is generated. This paper is available on the Information papers page of the PBO website.
10. Who can ask for a PBO costing?

The PBO works for the Parliament.

We are available to provide costing and budget analysis services to parliamentarians and to parliamentary committees. Requests for advice must be made by individual parliamentarians or by parliamentary committees.

Members of the public cannot request policy costings or analysis of the budget from the PBO. However, the PBO makes a wide range of material available to improve transparency around the budget and inform public discussion of the budget and fiscal policy settings. All of the PBO’s research reports, submissions to parliamentary inquiries, publicly released costings, post-election reports, and information papers are available on the Publications page of the PBO website.
11. Does the PBO cost all the policy proposals it receives?

The PBO strives to cost all the policy proposals it receives from parliamentarians and we estimate the financial implications of many complex policy proposals each year. Often the PBO seeks further clarification on the specification of the policy from the requesting parliamentarian and the costing can be completed after the clarifications are received. On rare occasions we may determine that we are unable to cost a proposal. On these occasions, we explain the reasons for our conclusion in a letter to the requesting parliamentarian and may include information that provides some assistance. Matters that inform our assessment of whether or not we can cost a policy proposal include whether:

•    the data are available. The PBO has very good access to a broad array of information to use in completing its costings. However, on occasion, required data may not be available and gaps cannot be filled with reliable, objective assumptions. In this case we may respond to a costing request by saying that the financial implications of the proposal are unquantifiable.
•    the PBO has (or could obtain) sufficient subject matter expertise to reliably estimate the financial impact of the policy proposal.
•    there are any confidentiality or national security constraints.
•    preparing a response would be an efficient use of PBO resources.

Part of the PBO’s purpose is to help level the playing field for all parliamentarians by providing access to publicly funded costing and budget analysis services. In considering the matters above, the PBO also takes into account how government agencies would respond to such a request.
12. Who provides the policy specifications and assumptions used in a PBO costing?

The policy specification that the PBO uses to cost a policy proposal is that provided by the parliamentarian who made the policy costing request. They must specify all the policy detail necessary for us to cost the proposal.

On the other hand, all decisions relating to how we undertake a costing, the model we use, data, assumptions and methodology, are made by the PBO, exercising our best professional judgement. These are all matters that are determined independently by the PBO. While we may seek advice from a wide range of different sources on costing matters, the final decisions on how to cost policy proposals are all made by the PBO.
13. Where does the PBO get its models and data from?

The PBO has access to a wide range of data sources. Much of the data we use is publicly available information from sources such as the Australian Bureau of Statistics or Data.gov.au and some of the information we use is confidential information from government sources. For example, by legislation, we have access to the full range of de-identified tax return data from the Australian Taxation Office, and under a memorandum of understanding (MOU) arrangement with the heads of government departments, we are able to access a wide range of data, from financial information like program expenditure estimates through to de-identified information on payments and transfers at the individual level from administrative databases.

We use the MOU arrangement to obtain many of the models we use to cost policy proposals. We also build our own costing models. Whenever we use a model we have obtained from a government agency, we review that model to verify that we understand how it operates and to ensure that it does what we need. The models we obtain from government agencies range from those that relate to particular budget measures through to models of major parts of the budget, such as personal income tax, company tax, social security, schools, higher education, child care, indirect taxes, and superannuation. Where we modify or improve on these models, we share the enhanced models with the agencies concerned.
14. Are PBO costings comparable to costings included in the budget?

The PBO prepares its costings of policy proposals using the same budget rules and costing conventions as the government uses in preparing the budget. All PBO costings are prepared using the most recent budget estimates as the costing baseline, and using comparable models and data.

Our costings may differ from those produced by government agencies from time to time, particularly where a costing requires judgement about things like behavioural responses to the policy. In most cases, government agencies would have to make judgements about the same things in order to cost the same policy and it is possible that our judgements may differ from theirs to some degree. Where we are required to make such judgements, we base them on the available evidence, in some cases informed by consultations with outside experts, with the final decision reflecting our best professional judgement. We are open and transparent about the judgements we have made in our costing advice.
15. What checks are there on the accuracy of PBO costings?

The PBO undertakes rigorous internal quality assurance checks of its costings as well as checking, wherever possible, against benchmarks such as previous costing estimates and budget costings of similar policies. We also undertake evaluations of selected past costings and of key models to review our costing models with the benefit of additional information or data on actual outcomes. These evaluations are undertaken using both PBO staff and external input.
16. Do PBO costings take behavioural impacts into account?

The costings prepared by the PBO estimate how much a policy proposal, if implemented, would change the budget outcome as presented in the most recent budget or other fiscal update.  Our costings take into account the expected response of individuals or businesses affected by a proposed policy change to that change (ie behavioural responses) wherever those responses are likely to have a significant impact on the cost of a proposal.

The types of direct behavioural impact that the PBO regularly takes into account in its costings include, but are not limited to:

•    the change in demand for a good or service arising from a change in its price (the own price elasticity)
•    the change in demand for alternative goods or services as a result of the change in the price of a nominated good (substitution effects)
•    take up rates, that is what proportion of people (or other entities) who are eligible to benefit from a particular policy opt to take up that benefit
•    avoidance or minimisation behaviours, where people (or other entities) modify the transactions they undertake in order to increase or decrease the extent to which they are subject to a policy proposal
•    timing of transactions, where people (or other entities) change the timing of transactions (either bringing them forward or deferring them until a later time) they enter into in order to benefit from a policy change.

Further details of the PBO approach to including behavioural effects in costings of policy proposals can be found in the PBO information paper What is a Parliamentary Budget Office costing?, available on the Information papers page of the PBO website.
17. Do PBO costings take broader economic effects into account?

Most PBO costings capture the direct behavioural responses to policy change of people (or other entities) who are directly affected by the policy. In most cases, however, they do not include impacts that could arise due to the effects of a policy proposal on the wider economy, for instance through a change in prices, wages, investment or productivity that can change the rate of growth of the economy. These impacts are sometimes referred to as ‘broader economic’, ‘second round’, or ‘indirect’ effects. In the United States, the inclusion of these effects is referred to as ‘dynamic scoring’.

The PBO’s approach is consistent with the approach undertaken in the United States, United Kingdom, Canada and New Zealand, and with the approach taken in most costings presented by the Commonwealth Government in the budget.

While there is no question that broader economic effects do arise in response to some significant policy changes, there is generally considerable uncertainty about the magnitude, direction and timing of those effects and their subsequent impact on the budget.

In most cases, the PBO’s approach to the broader economic effect of policy proposals is to include a qualitative statement when a policy proposal could have material broader economic impacts that may affect budget outcomes and cannot be estimated. We consider incorporating quantitative estimates of broader economic impacts into policy costings in limited circumstances where there is compelling evidence of the direction, size and timing of a material economy wide impact, where the way the proposal would be funded has been made clear, and where the broader economic impact can be estimated in a cost effective manner.

Further details of the PBO approach to the broader economic effects of policy proposals can be found in the PBO information paper Including broader economic effects in policy costings, available on the Information papers page of the PBO website.
18. Why may the PBO cost of a policy proposal change over time?

Policy costings are estimated at a point in time, using the data, models and judgements that are available at that time.  These determinants of the cost of a policy proposal can change over time, changing the estimated cost of a policy proposal, sometimes substantially.

Changes in a costing estimate, whether estimated by the PBO or the government, can arise because of one, or a number, of the following factors:

•    there are changes to the growth rates or other economic parameters used in the costing as assessments of the outlook for the economy change, such as when the budget is released
•    new policies announced by the government change the baseline used for the policy costing
•    new data become available or historical data are revised
•    new information becomes available to inform the judgements used to make the assumptions that underpin a costing, such as a court ruling that alters the interpretation of a piece of legislation
•    additional years are added to the costing horizon
•    changes are made to the details of the parliamentarian’s policy specification, such as the start date for the proposal
•    changes are made to the methodology or model used to generate the costing as new information is used to improve costing models.

Government estimates of the impact of policy proposals also change over time, both as a policy proposal is being developed and, if adopted, after the estimated impact is announced in the budget.   In most cases, however, the only time that the financial impacts of government policy measures are reported is when they are first listed as a measure in the budget.  Subsequent changes in the cost of budget measures are incorporated in subsequent budgets but are not separately identified or transparently illustrated, even when the policy has not been legislated or implemented.  Rather, changes in the costs of all previously announced policy proposals are presented along with a wide range of other adjustments under an aggregate budget line item called ‘parameter and other variations’.  Only in situations where a policy comprises an entire program can the updated costs of the policy sometimes be tracked through the reporting of program costs.

The PBO is open and transparent in its advice to parliamentarians about the reasons why its policy costings for a particular policy proposal change over time.  Because costings can change, all PBO costings come with an ‘expiry date’, which is usually the date of the next budget or mid-year update, after which it would be prudent to re-examine the estimated cost of the policy proposal.

The published changes in the PBO’s estimates do not reflect upon the quality of PBO estimates relative to those published by government or have any bearing on the merits of the policy proposal itself.
19. Why doesn’t the PBO release its costing minutes when parties announce the policy?

The PBO is bound by legislation to keep information relating to most costing requests confidential. Outside of the caretaker period for a general election, the PBO cannot disclose any information about a confidential request unless the parliamentarian who made the request specifies that it is not to be treated as confidential and/or releases the PBO costing response in full. We publish a copy of all PBO costing responses that are not subject to the confidentiality provisions on the Costings page of the PBO website.
20. Where can I find the costing minutes that have been publicly released?

All publicly released PBO costings or budget analyses are available on the Costings page of the PBO website. The costings page includes costings that have been publicly released either because they were not requested on a confidential basis, or were released following advice from the parliamentarian that the request is no longer to be treated as confidential.

In addition, PBO costings of publicly announced election policies are available from the Post-election reports page on the PBO website. This page contains links to the PBO’s post-election reports for past elections. The post-election report presents the budget impacts of the election commitments of major parliamentary parties.
21. Does a PBO costing mean that the PBO endorses the policy it has costed?

No. The PBO provides impartial and independent estimates of the financial impact of policy proposals on the budget, as well as other factual information on the effects of a policy, if requested. It does not provide advice on the merits or otherwise of the policies that it examines.
22. What is the difference between a costing and budget analysis?

The PBO undertakes both policy costings and requests for budget analysis for parliamentarians.  A costing is an assessment of the fiscal impact of a policy proposal relative to the baseline published in the most recent budget or mid-year update.

Budget analysis is other information that the PBO can be asked to provide about the budget or fiscal policy settings.  Examples of budget analysis would include:

•    information about the amount of money allocated to particular programs, including the amount that has already been spent and the amounts yet to be spent
•    details of the profile of spending on government programs over time
•    details of the different sub-components of spending on government programs or sub-components of revenue measures.

Budget analysis could also include an assessment of the fiscal impact of a policy proposal relative to a different baseline from that presented in the most recent budget or mid-year update.  This could include an assessment of the fiscal impact of a proposed policy relative to an updated baseline, where the updated baseline takes into account the impact of a government policy that was announced or legislated after the most recent budget or mid-year update.
23. What is the difference between the forward estimates period and the medium term?

The forward estimates period is the period over which the government presents its budget estimates.  It includes the budget year, which commences on 1 July following the budget, and the following three years.  Within this period, the first two years are ‘forecast’ years, where estimates are based on detailed economic forecasts for the economy, and the second two years are ‘projection’ years where the estimates are based assumptions about the broader trends in the economy.

The medium-term estimates include the budget year and the following ten years.  Looking at a longer time period captures the impact of government policies that have significantly different impacts on the budget after the forward estimates period.  At the aggregate level, this gives a more complete picture of the sustainability of the budget.  The medium-term estimates are based on an internally consistent set of projections for growth in the economy.

The PBO prepares detailed projections of receipts and payments over the medium term to explain the main drivers of changes in the budget balance, net debt, and net financial worth that can be expected to arise from current government policy settings over a longer time period.  These are published each year in the PBO’s Medium-term projections reports, which are available from the Research reports page of the PBO website.