At a glance

This guide is for anyone wanting a quick overview of how to read a Parliamentary Budget Office (PBO) costing, including parliamentarians and their staff, journalists and members of the public.

Every budget has a 'baseline' that extends over 4 years. The baseline is the total cost of all the pre-existing policies. When policies change, the costs change. A costing shows how much that change is.

Any parliamentarian (or parliamentary committee) can request a costing from the PBO, and we can help in developing requests, as well as responding to them.

A parliamentarian requesting policy costings from the PBO may request that a costing be treated as either public or confidential when they lodge the request (except during the caretaker period).

Parliamentarians can also request analysis of the budget from the PBO. These requests can ask for any information about the budget or fiscal policy setting. We will respond to the requests subject to any limitations on data access and use.

The rest of this guide covers in more detail what a costing is, the process of requesting a costing and how to read a costing from the PBO.

More information on how to make a costing and budget analysis request can be found on our website. To get started, go to the For parliamentarians section where you will find key information and contacts.

What is a PBO costing?

A costing is an assessment of how much a policy proposal, if implemented, would change the budget surplus or deficit.

A PBO policy costing:

• is an impartial and independent estimate of the financial impact of a policy proposal on the budget, produced on a comparable basis to a costing that the government might publish in the budget
• is not an assessment of the merits of a policy, and does not provide policy advice or recommendations
• does not assess any economic impacts except those on the Australian Government budget, and does not assess the non-financial impacts of a policy.

What does a costing capture?

Our costings reflect the direct impacts on the budget, including the expected response of directly affected individuals or businesses to the proposed policy change (called 'behavioural responses'). This can include:

• the change in quantity demanded for a good or service due to a change in price (sometimes called the 'price elasticity of demand')
• the change in demand for alternative goods or services (sometimes called 'substitution effects')
• the proportion of people (or businesses) eligible to benefit from the policy who choose to opt in or apply for the benefit (the 'take-up rate')
• changes to the timing of transactions (either bringing them forward or deferring them until a later time), in order to benefit from or to avoid a policy change
• any other avoidance or minimisation behaviours, where people or entities modify their behaviour in order to increase or decrease the extent to which they are subject to a policy proposal.

Costings do not reflect the broader economic effects of a policy (that is, impacts which arise due to the effects of the policy on the wider economy). For example, a costing would not reflect the financial impact of a change in economic growth, which might arise where a policy has a material effect on prices, wages, investment, or productivity.

Some costings are complex and are based on multiple models and assumptions. Other costings are simpler and allocate a fixed amount of money to a program. For these simpler costings the maximum amount of government spending on the program will not change, even if costs are higher than expected. These are known as 'capped costings'. The PBO does not assess whether the funding provided is enough to meet the stated policy objective.

The costing process

Any parliamentarian (or parliamentary committee) can request policy costings from the PBO.

When the PBO receives a costing request, we consult with the parliamentarian to ensure we clearly understand the policy and that it is comprehensively specified. The PBO will undertake research on the policy topic, lodge a request for any confidential data needed from other agencies to model the policy, and proceed to build or update the costing model (we can often re-use or adapt models where a similar policy has been costed before). Finally, the PBO will write up the key information and results in a costing minute, which is provided to the parliamentarian.

Are costings confidential?

Parliamentarians may request that a costing be treated as either public or confidential when they lodge the request. The PBO cannot disclose any information about a confidential request unless the parliamentarian who made the request later says that it is not to be treated as confidential and/or releases the PBO costing response in full.

The only exception is where costing requests are lodged with the PBO during the caretaker period – these must be publicly released by the PBO.

All PBO costing responses not subject to the confidentiality provisions are published on the Costings page of the PBO website.

Are PBO costings different to the costings in the Government’s budget?

PBO costings are generally comparable to those prepared by government agencies for the budget (usually either by the Department of the Treasury or the Department of Finance).

The PBO uses the same budget rules, economic parameters and costing conventions, as well as comparable models and data. However, sometimes the PBO may make different assumptions from government, and this may result in different costing estimates.

PBO costings always include:

• budget impacts over the full medium term (the budget year plus the next 10 years, rather than only the next 3 years, known as the 'forward estimates')
• an assessment of how policy changes would impact public debt interest payments.

Not just costings

In addition to policy costings, parliamentarians can also request analysis of the budget from the PBO. These requests can ask for any information about the budget or fiscal policy settings. For example:

• the amount of money allocated to a particular program, including spent and available funds
• a breakdown of the components of spending on government programs or of revenue measures and the projected budget impacts in each year.

For an example of a costing minute, please download the full guidance - Guide to reading PBO costings [PDF 329 KB]