8 May 2017
PDF version [320KB]
The Commonwealth Budget is typically the most important
annual policy statement by the Government.
This Quick Guide identifies information and key concepts that
are used in the Budget Papers and related materials, and other resources that
are available to analyse the Budget.
What occurs on Budget night?
What occurs after Budget night?
What is in the Budget Papers and
Budget Paper No. 1: Budget Strategy
Budget Paper No. 2: Budget Measures
Budget Paper No. 3: Federal Financial
Budget Paper No. 4: Agency Resourcing
Portfolio Budget Statements
Key concepts used in the Budget
Consolidated Revenue Fund and
Legislation relating to the financial
management of the Commonwealth
Other Budget related reports not
released on Budget night
Mid-year Economic and Fiscal Outlook
Final Budget Outcome
Pre-election Economic and Fiscal
on Budget night?
Budget night is when the Treasurer tables the annual
Appropriation Bills in the House of Representatives for the forthcoming year,
and delivers the second reading speech on Appropriation Bill (No. 1). Since
1994, the Appropriation Bills have typically been tabled on the second Tuesday
in May. The second reading speech on Appropriation Bill (No. 1) commences at 7.30
Along with the Appropriation Bills, the Government also tables
the Budget Papers and related materials. The
Budget Papers and related materials are made available on the internet at www.budget.gov.au when the Treasurer
commences the second reading speech on Appropriation Bill (No. 1).
after Budget night?
On the Thursday immediately following Budget Night, a second
reading speech on annual Appropriation Bill (No. 1) is delivered by
the Leader of the Opposition. The speech is often referred to as the Leader of
the Opposition’s Budget reply speech.
The particulars—or details—of the expenditure proposed in
the Budget are referred by the House of Representatives to the Senate for
consideration by the Senate. This enables the Senate to commence its scrutiny of
the Budget in the Senate Estimates process, despite the Senate having not yet
received the annual Appropriation Bills from the House of Representatives.
What is in the Budget Papers and related materials?
The Budget Papers comprise:
- the Budget Speech
the Budget Overview
- Budget Paper No. 1: Budget Strategy and Outlook
- Budget Paper No. 2: Budget Measures
- Budget Paper No. 3: Federal Financial Relations and
- Budget Paper No. 4: Agency Resourcing.
Additionally, for each portfolio the Government produces a
Portfolio Budget Statement. The Government may also table one or more
Ministerial Statements with the Budget Papers.
The contents of the Budget Papers and related materials are
The Budget Speech is a copy of the second reading
speech for the Appropriation Bill (No. 1). The Treasurer will use the second
reading speech to set out the reasons why the annual Appropriation Bills should
be passed by the Parliament. Treasurers have used the second reading speech to
update the Parliament about the prevailing economic circumstances, and to
announce important or major policy decisions that the Government has made.
The Budget Overview provides a summary of what the
Government considers to be the main or important aspects of the Budget.
Budget Paper No. 1: Budget Strategy and Outlook
Budget Paper No. 1: Budget Strategy and Outlook provides
high-level information about the overall economic outlook, and the
Commonwealth’s fiscal position. Specifically, it provides:
- information about the international and domestic economic
outlook, including numerical estimates of key parameters such as gross domestic
product growth, employment, and the consumer price index
- a statement of the Government’s fiscal strategy and the fiscal
outlook of the Commonwealth
- estimates of the revenues and expenditures of the Commonwealth, and
- information on the proposed capital investment of the
information on the assets, liabilities—including contingent
liabilities, or ‘risks’—and debt held or owed by the Commonwealth, and
- historical information about the Commonwealth’s fiscal and debt
Budget Paper No. 1: Budget Strategy and Outlook also
contains technical details about the presentation of the financial information
of the Commonwealth, including how individual entities are classified for
accounting purposes, and the budgeted financial statements for the whole of the
Paper No. 2: Budget Measures
Budget Paper No. 2: Budget Measures contains
information about the budget measures—or actions— the Government intends to
take. Each budget measure is classified according to what aspect of the
Commonwealth’s finances it mostly affects, with:
- a revenue measure mostly affecting the revenues of the
- an expense measure mostly affecting expenses of the Commonwealth,
- a capital measure mostly affecting the capital—or assets—held by the
The description of each measure will have a costing attached
to it. The costing will show whether the measure is expected to have:
- a positive effect
- nil effect, or an uncertain, or an unquantifiable effect, or
- a negative effect
on the revenues or expenses for the Commonwealth, or the
amount of assets and liabilities held by the Commonwealth, as the case may be.
|Example: If the Government announces
a measure to build a new computer system, because the computer system will—once
completed—be an asset for the Commonwealth, the measure will be classified as a
capital measure. The measure will have a positive costing associated with it as
the decision will result in an increase in the assets held by the Commonwealth.
A costing is an estimate or forecast of the expected
effect of the measure on the Commonwealth’s finances only. A costing does not
include any broader effects of the policy decision on the Australian economy or
Example: Imagine the Government
announces an economic reform that is expected to improve the performance of the
Australian economy, but the Government does not expect the implementation of
that reform to have any direct effect upon the Commonwealth’s finances. The
reform will, however, provide broad economic benefits for businesses and
households in Australia.
The Government’s decision to implement
the reform will be announced in the Budget, but it will have a costing that indicates
it has nil effect on the finances of the Commonwealth, despite the broader
benefits that it is expected to provide to business and households.
A costing only shows the incremental change to the
Commonwealth’s finances from that decision, not the total amount of funding or
expenditure related to that policy area or activity.
Costings are generally presented on an accrual accounting
Budget Paper No. 3: Federal Financial Relations
Budget Paper No. 3: Federal Financial Relations mostly
contains information about grants of financial assistance made by the
Commonwealth to the States and Territories. There are two categories of
financial assistance that the Commonwealth may make:
- specific purpose payments, which are monies provided by the
Commonwealth on the condition that the states and territories spend those
monies on specified purposes such as health, education, or roads, or use them
to fund local governments.
- general revenue assistance, which are monies provided by the
Commonwealth to the states or territories without any conditions on how those
monies may be spent.
The main type of general revenue assistance is the revenue
from the Goods and Services Tax. Budget Paper No. 3: Federal
Financial Relations provides estimates of the amount of GST revenue that
will be collected, and estimates of how much each state and territory will
receive from the GST.
No. 4: Agency Resourcing
Budget Paper No. 4: Agency Resourcing mostly deals
with the various types of appropriations that are used by the Government to
fund entities and activities. Budget Paper No. 4: Agency Resourcing
- for each entity, and for each outcome of each entity, the amounts
and types of appropriation that are expected to be utilised in the forthcoming
- for each piece of legislation that provides for a special
appropriation, the amount of money expected to be drawn against that
appropriation in the forthcoming year, and
- for each special account, the expected transactions on that
special account, and the expected balance of that special account.
Budget Paper No. 4: Agency Resourcing also shows the
expected level of staffing for each entity.
Portfolio Budget Statements
A Portfolio Budget Statement is a statement that is tabled
by the relevant portfolio Minister in support of the appropriation for that
portfolio proposed in the Budget Papers. Portfolio Budget Statements are made
available on departments’ websites at the same time as the Budget Papers are
The Portfolio Budget Statement provides more detail on the
proposed activities and expenditures of each entity in the Minister’s portfolio
for the Budget year and the forward estimate years. Portfolio Budget
Statements contain an overview of the portfolio, with separate sections for
each Commonwealth entity within that portfolio.
Example: The Australian Tax
Office is an entity within the Treasury Portfolio. Therefore, the Treasury
Portfolio Budget Statement will include a section relating to the Australian
For each Commonwealth entity, the Portfolio Budget Statement
- a statement that shows the financial resources proposed to be
made available to that entity from all sources
- a reconciliation showing the expected impact of the Government’s
announced measures on that entity
- the outcomes that the Government intends that entity to pursue
- a description of the programmes that will contribute to each of
the entity’s outcomes, an estimate of the expenses expected to be incurred in
delivering each programme, and performance indicators against which the
Government intends the performance of each programme to be measured, and
- the budgeted financial statements of that entity.
Where it is relevant to the activities of an entity, a
Portfolio Budget Statement will also include other material, such as
information about the balances of, and transactions on, any special accounts within
If additional Appropriation Bills are introduced during the
year, the Government will release a Portfolio Additional Estimates Statement
or a Portfolio Supplementary Additional Estimates Statement for each
portfolio that has its appropriation changed. These statements will update the
information in the most recent Portfolio Budget Statement.
The Government may also table one or more Ministerial Statements.
Typically, ministerial statements released with the Budget group together
information related to one theme or issue.
|Example: If the Government
wants to show how much it is doing to assist regional or remote parts of
Australia, it may release a Ministerial Statement that brings together activities
across all portfolios that the Government believes assist regional and remote
The standing orders of the House of Representatives provide
an opportunity for the relevant Minister to speak on Ministerial Statements,
and afford the Opposition an opportunity of a reply.
concepts used in the Budget Papers
It is useful to explain important concepts used in the Budget
Accrual accounting and cash accounting
Accrual accounting is a method of accounting that records
revenues when they are earned and expenses when they are incurred, regardless
of when any cash is received or paid.
|Example: The decline in value
of an asset as it wears out—known as depreciation—is recognised as an expense
for an entity as it occurs, even though no cash payment is required at that
Cash accounting is a method of accounting that records
receipts and payments of cash when they occur.
The Budget Papers use a mix of both accrual accounting and
Administered and departmental items
An administered item is an item that a Commonwealth entity
administers on behalf of the Commonwealth as a whole. An administered item may
be an expenditure, a revenue, or an asset. A Commonwealth entity does not have
discretion about what it can do with an administered item, and must use that
item in the way the Government directs. Administered items mostly relate to
outcomes and programmes that are managed by an entity.
Departmental items are expenditures, revenues, or assets
over which a Commonwealth entity has discretion about how it may be used. Departmental
items are mostly used for the running of entities, such as for paying and
Fiscal balance, net operating
balance, and underlying cash balance
Fiscal balance is an accrual accounting measure of the
balance between the revenues and expenses of the Commonwealth, including the
net capital investment of the Commonwealth. Net operating balance is a
narrower accrual measure of the balance between the revenues and expenses of
the Commonwealth, but does not include the net capital investment of the
Underlying cash balance is a cash accounting measure
of the balance between the receipts and payments of the Commonwealth and net
cashflows for investment in non-financial assets. It is the preferred measure
of showing the surplus or deficit of the Commonwealth in any one year.
General Government Sector, Public
Non-financial Corporations sector and Public Financial Corporations sector
Commonwealth entities are classified according to their activities
and objectives into one of three sectors.
Most Commonwealth entities do not seek to make a profit, and
are classified as General Government Sector entities. Where a Commonwealth
entity provides goods and services and seeks to make a profit, it will be
classified as either a Public Non-financial Corporation or a Public Financial
Corporation, depending upon whether or not it provides financial services.
Example: Imagine the Government
established a corporation that had the purpose of providing loans for a certain
purpose on commercial terms, and the Government expected that entity to make a
The corporation would be classified as
a Public Financial Corporation in the Budget.
Most material in the Budget relates to the activities of entities
in the general government sector only.
Outcomes and programmes
An outcome is the purpose for which monies are appropriated
to a Commonwealth entity.
A programme is an activity that is undertaken by a Commonwealth
entity to achieve an outcome. For each outcome, there may be one or more programmes.
Retained revenue receipts
Section 74 of the Public Governance,
Performance and Accountability Act 2013 provides a mechanism where
certain amounts received by entities may be retained by that entity. The
categories of revenues mostly relate to amounts likely to be received by the
entity to defray the cost of providing a good or service. Examples may include
application or processing fees.
The exact categories of monies that agencies are able to
retain are set out in the Rules made under the Public Governance,
Performance and Accountability Act 2013.
and policy decisions
In places in the Budget Papers, a distinction is made
between those changes to the Commonwealth’s finances that occur because of parameter
variations, and those changes that occur because of policy decisions.
A parameter variation is a change to the finances of the Commonwealth
that is outside the direct control of the Government. Parameter variations mostly
occur because of changes in the broader Australian or international economy,
and changes to the composition or demographics of the Australian population.
Example: Companies pay tax on
their profits. If, in a given year, company profits are lower than previously
anticipated, Commonwealth tax receipts from companies are also likely to be
Such a reduction in company tax receipts
would be recorded as a parameter variation in the Commonwealth Budget.
Parameter variations may affect both the receipts and
payments of the Commonwealth.
|Example: Unemployment benefits
are available to any person who is unemployed within the meaning of the Social
Security Act 1991. If there are more people unemployed in a given year,
payments of unemployment benefits will be greater.
The reasons for, and magnitude of, parameter variations are
mostly set out in the economic and financial information contained in Budget
Paper No. 1: Budget Strategy and Outlook.
The term policy decision denotes the cumulative effect of
all changes to the finances of the Commonwealth that arise because of the budget
measures—or actions—of the Government. Each individual budget measure is set out
in Budget Paper No. 2: Budget Measures. The magnitude of the cumulative
effect of the Government’s policy decisions are set out in the financial
information contained in Budget Paper No. 1: Budget Strategy and Outlook.
A special account is an amount of money that that is held in
the Consolidated Revenue Fund and is earmarked for a specific purpose, and
which may only be released when the criteria for release are satisfied.
Special accounts are mostly used to provide transparency
about how much the Government is providing to a specific purpose or activity,
or to quarantine amounts for specific purposes or activities.
Revenue Fund and appropriations
The Consolidated Revenue Fund is established by section 81
of the Constitution.
All monies received by the Commonwealth must be paid into the Consolidated
Revenue Fund. It is a constitutional requirement that, before the Government
may spend any monies, an Act of the Parliament providing for an appropriation
must authorise the release of the necessary monies from the
Consolidated Revenue Fund.
A Bill that proposes an appropriation may take two general
- an annual Appropriation Bill or
- a Bill that proposes a special appropriation.
Each year, annual Appropriation Bills provide for about 20 per
cent of the Commonwealth’s expenditure, and special appropriations provide for
about 80 per cent of the Commonwealth’s expenditure.
Annual Appropriation Bills
An annual Appropriation Bill will typically propose the
appropriation of a finite amount of money, but that money will be provided to a
broad range of entities and outcomes. The finite nature of such appropriations
means that the Executive Government must return to the Parliament periodically
and request the Parliament appropriate further monies for those entities and
Each year, there are at least three annual Appropriation
Bills. Appropriation Bill (No. 1) for a given year will propose to appropriate
monies for activities that are part of the ‘ordinary annual services’ of the
Executive Government. Appropriation Bill (No. 2) in a given year will propose
to appropriate monies for the ‘other’ annual services of the Executive. The
Senate enjoys different powers over Appropriation Bills for the ‘ordinary
annual services’ of the Executive Government and Appropriation Bills for the
‘other’ annual services of the Executive Government. The difference between the
two types of Appropriation Bill, and powers of the Senate over each, are
explained in more detail in Odgers’
The appropriation of monies for the operation of the
Parliament for a given year is proposed in a separate Appropriation
(Parliamentary Departments) Bill, reflecting that the Parliament is distinct
from the Executive Government.
Often the Government will require further monies during the
year, and will introduce additional Appropriation Bills. Additional
Appropriation Bills will be numbered consecutively.
If, in a given year, the Government does not intend to table
and pass through the Parliament a full Budget before the start of the financial
year, the Government may introduce Supply Bills that propose to appropriate a
small amount of money to ensure the continued operation of the Government until
a full Budget can be prepared.
A Bill may also propose to appropriate an unlimited amount
of money, but only make it available for a specific purpose or in specific
circumstances. Such an appropriation is known as a special appropriation.
Almost all of the Commonwealth’s substantial expenditure programs are now
provided for by special appropriations; with monies being automatically
released from the Consolidated Revenue Fund where the criteria applying to that
appropriation are met.
Example: Medicare is
established under the Health Insurance Act 1973. Section 125 of that
Act appropriates from the Consolidated Revenue Fund any amount of money
required for the payment of Medicare benefits.
To change the amount of money that will be provided by a
special appropriation, the criteria that must be met to use the special
appropriation need to be changed. Where those criteria are set out in
legislation, the Parliament must pass an amendment to that legislation.
|Example: The Paid Parental
Leave Act 2010 provides under what circumstances a person is entitled to
parental leave pay. To change the amount that is paid under that Act, an
amendment to that Act is needed to change the eligibility criteria for parental
relating to the financial management of the Commonwealth
Charter of Budget Honesty
The Charter of Budget Honesty is a set of rules that
establish how the Commonwealth is to manage and report on its fiscal
performance. It is a schedule to the Charter of Budget
Honesty Act 1998.
Public Governance, Performance and
Accountability Act 2013
The Public Governance,
Performance and Accountability Act 2013 is the main Act that provides
for the financial management of the Commonwealth. The Public Governance,
Performance and Accountability Act 2013 allows certain matters to be dealt
with via delegated legislation, known as Rules.
Other Budget related
reports not released on Budget night
Additional budget reports must be publicly released and
tabled in Parliament from time to time.
Economic and Fiscal Outlook
Under the Charter of Budget Honesty, the Treasurer must
release the Mid-Year Economic and Fiscal Outlook report within six
months of the Budget, or by the end of January in a given year, whichever is later.
The Mid-Year Economic and Fiscal Outlook report must update any
information that has changed since the Budget.
Under the Charter of Budget Honesty, the Treasurer must
produce a Final Budget Outcome within three months of the end of each
financial year. The Final Budget Outcome must contain the fiscal outcomes for
the Commonwealth for the relevant year.
Under the Charter of Budget Honesty, every five years the
Treasurer must release and table in Parliament an Intergenerational Report.
The Intergenerational Report must assess the sustainability of current
Government policies over the next 40 years.
Economic and Fiscal Outlook
Under the Charter of Budget Honesty, within 10 days of the
calling of a general election the Secretaries of the Department of Finance and
the Treasury must release a Pre-Election Economic and Fiscal Outlook report.
The Pre-Election Economic and Fiscal Outlook must update any information
that has changed from the last budget update.
Under the Parliamentary Service Act 1999, within 30
days of the end of the caretaker period for a general election the Parliamentary
Budget Officer must release a Post-election Report that sets out
the Parliamentary Budget Officer’s estimates of the costings of the election commitments
made by political parties during the preceding election campaign.
All online articles accessed May 2017
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to firstname.lastname@example.org.
This work has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Parliamentary Library, nor do they constitute professional legal opinion.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Enquiry Point for referral.