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.