The Budget is an opportunity for the Government to inform the Parliament, and therefore the broader public, about matters including:


	the expected performance of the international and Australian economy
	the Government’s economic and fiscal strategy
	specific policy decisions the Government has made.


Budget Night is typically the most important annual policy statement by the Government

Daniel Weight

Dinty Mather

English

Analysis and Policy Observatory (APO)

  
RESEARCH PAPER SERIES, 2014–15 11 MAY 2015 
The Budget: a quick guide 
Daniel Weight and Dinty Mather 
Economics Section 
 
The Budget is an opportunity for the Government to inform the Parliament, and therefore the broader public, 
about matters including: 
• the expected performance of the international and Australian economy 
• the Government’s economic and fiscal strategy 
• specific policy decisions the Government has made. 
Budget Night is typically the most important annual policy statement by the Government. 
What happens on Budget Night? 
Budget Night is when the Treasurer tables the annual Appropriation Bills for the forthcoming year in the House 
of Representatives, and delivers the second reading speech on those Bills. Since 1994, the Appropriation Bills 
have generally been tabled on the second Tuesday in May. The Budget Speech is usually delivered at 7.30 pm. 
With the Appropriation Bills, the Treasurer also tables other Budget related materials. 
The Budget Papers and related materials 
The main budget materials are the four key Budget Papers: 
• Budget Paper No. 1: Budget Strategy and Outlook 
• Budget Paper No. 2: Budget Measures 
• Budget Paper No. 3: Federal Financial Relations 
• Budget Paper No. 4: Agency Resourcing. 
The Budget Papers include information that is required by the Charter of Budget Honesty to be presented with 
the tabling of the annual Budget. For each portfolio, a Portfolio Budget Statement must also be tabled in the 
Parliament.  
With the Budget Papers, the Government also publishes: 
• the Budget Speech 
• a Budget Overview 
The Government may also publish and table additional statements or materials with the Budget Papers. The 
main type of additional statement that Governments have tabled is a Ministerial Statement. 
The Budget Papers and related materials are made available on the internet at www.budget.gov.au when the 
Treasurer commences the Budget Speech.  
ISSN 2203-5249 
 
 
 
 
What happens after Budget Night? 
On the Thursday immediately following Budget Night, the Leader of the Opposition will deliver the Opposition’s 
Budget Reply Speech.   
Upon being tabled in the House of Representatives, the particulars of the expenditure proposed in the Budget 
are referred to the Senate for consideration. This enables the Senate to commence its scrutiny of the Budget in 
the Senate Estimates process.  
Further information 
• Department of the Senate, Senate Brief No. 5: Consideration of Estimates by the Senate's Legislation 
Committees 
What’s in the Budget Papers and related materials? 
Budget Speech 
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 state the reasons why the 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. 
Budget Overview 
The Budget Overview provides a summary of the Budget. 
Budget Paper No. 1: Budget Strategy and Outlook 
Budget Paper No. 1 provides high level information on the overall economic outlook internationally and for 
Australia, and the Commonwealth’s fiscal position. It contains: 
• 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 
• the Government’s fiscal strategy 
• forecasts of revenues and expenditures and their composition 
• the forecast budget surplus or deficit position 
• 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 position. 
Budget Paper No. 1 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 Commonwealth Government. 
Budget Paper No. 2: Budget Measures 
Budget Paper No. 2 contains information about measures the Government intends to take to implement its 
policy decisions. Each measure is classified according to what aspect of the Commonwealth’s finances it affects 
as follows:  
• revenue measures 
• expense measures 
• capital measures. 
The description of each measure will have a ‘costing’ attached to it. The costing for a measure is the expected 
effect of the measure on the Commonwealth’s finances. It does not include the broader economic effect of the 
policy decision on the Australian community. The costing of each measure 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.   
 
 
The Budget: a quick guide 2 
 
Budget Paper No. 3: Federal Financial Relations 
Budget Paper No. 3 contains information about the two types of payments the Commonwealth makes to the 
states and territories.   
• ‘Specific purpose payments,’ which are monies provided by the Commonwealth on the condition that the 
states and territories spend them on specified purposes such as health, education, or roads, or use them to 
fund local governments 
• ‘General revenue assistance,’ which are monies provided to the states or territories without any conditions 
on how they can be spent.   
About one quarter of the monies spent each year by the Commonwealth are payments to the states and 
Territories. The main type of general revenue assistance is the revenue from the Goods and Services Tax.   
Budget Paper No. 4: Agency Resourcing 
Budget Paper No. 4 paper mostly deals with appropriations. The introduction provides an explanation of key 
concepts used in the Appropriation Bills. The tables provide information on the individual amounts appropriated 
to each Commonwealth entity. Budget Paper No. 4 also contains information on ‘Special Accounts,’ which are 
amounts of money earmarked for specific activities or purposes. 
Portfolio Budget Statements 
Each portfolio must prepare a Portfolio Budget Statement. A Portfolio Budget Statement contains sections for 
each Commonwealth entity within the portfolio.   
Example: The Australian Tax Office (ATO) is an entity within the Treasury Portfolio. Therefore, the Treasury Portfolio 
Budget Statement will include a section relating to the ATO.  
For each Commonwealth entity, the Portfolio Budget Statement will show: 
• the budgeted financial statements for the entity 
• each individual ‘outcome’ of the entity 
• the program or programs that are aimed at achieving each outcome 
• the total resources available for each Commonwealth entity. 
Portfolio Budget Statements are made available on departments’ websites at the same time as the Budget 
Papers are released.  
Ministerial Statements 
The Government may release a Ministerial Statement on any topic, and in any form, that it chooses. Typically, 
ministerial statements group together information related to one theme or issue, and are released under the 
name of the relevant portfolio Minister. 
Other related reports not released on Budget Night 
Under the Charter of Budget Honesty, additional budget reports must be publicly released and tabled in 
Parliament through the year:  
• the Treasurer must release the Mid-Year Economic and Fiscal Outlook (MYEFO) report within six months of 
the Budget, or by the end of January in a given year, whichever is later. The MYEFO report must update any 
information that has changed from the Budget during the year  
• the Treasurer must also produce a Final Budget Outcome (FBO) within three months of the end of each 
financial year. The FBO must contain the fiscal outcomes for the Commonwealth for the relevant year.  
Every five years the Treasurer must also release and table in Parliament an Intergenerational Report (IGR). The 
IGR must assess the sustainability of current Government policies over 40 years.  
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 (PEFO) report. The PEFO must update any 
information that has changed from the last budget update. 
 
 
The Budget: a quick guide 3 
 
If additional Appropriation Bills are introduced during the year, the Government will release a Portfolio 
Additional Estimates Statement or a Portfolio Additional Estimates Statement for each portfolio that has its 
appropriation changed. These statements will update the information in the Portfolio Budget Statement.  
Further information 
• Australian Government Budget 2015–16 website 
• Department of Finance, ‘Portfolio Budget Statements and Portfolio Additional Estimates Statements’ 
Consolidated Revenue Fund and appropriations 
Consolidated Revenue Fund 
The Consolidated Revenue Fund is established by the Constitution. All monies received by the Commonwealth 
must be paid into the Consolidated Revenue Fund, and may not be withdrawn from the Consolidated Revenue 
Fund without an ‘appropriation’ by the Parliament. 
Appropriations 
The legal authorisation by the Parliament for the release of monies from the Consolidated Revenue Fund is 
known as an ‘appropriation,’ and is required before any monies may be spent by the Government. A request for 
the release of monies is made by the introduction of a Bill into the House of Representatives that ‘proposes an 
appropriation.’ A Bill that proposes an appropriation may take two general forms: 
• an ‘annual Appropriation Bill;’ or 
• a Bill that includes a ‘special appropriation’. 
Annual Appropriation Bills 
An annual Appropriation Bill will typically provide for expenditure across a broad range of purposes, but the 
amount proposed to be appropriated will be finite. Each year, there are at least three annual Appropriation Bills: 
• Appropriation Bill (No. 1) 
• Appropriation Bill (No. 2)  
• Appropriation (Parliamentary Departments) Bill. 
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 Government. The Senate has 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’ 
Australian Senate Practice, Chapter 13, ‘Financial Legislation’.  
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 separate from the Executive 
Government. 
Annual Appropriation Bills provide for around 20 per cent of the Commonwealth’s expenditure each year. 
Special appropriations 
A Bill may also propose to appropriate an unlimited amount of money but only make it available for a specific 
purpose. 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 appropriated from the Consolidated Revenue Fund where certain criteria 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. 
 
 
The Budget: a quick guide 4 
 
Example: The Paid Parental Leave Act 2010 says under what circumstances a person is entitled to parental leave 
pay. To change the amount that is appropriated under that Act, an amendment to that Act is needed to change the 
eligibility criteria for parental leave pay. 
Special appropriations provide for around 80 per cent of the Commonwealth’s expenditure each year. 
Further information 
• Department of Finance, ‘Introduction to appropriations’ 
• Department of the Senate, Odgers’ Australian Senate Practice, Chapter 13, ‘Financial Legislation’  
Revenue and Expenditures 
The Commonwealth’s budget surplus or deficit position is determined by the balance between receipts and 
payments. The Commonwealth chooses to report its budget surplus or deficit in cash accounting terms through 
a measure known as the underlying cash balance. Many other jurisdictions, such as several of the states and 
territories, use the alternate accrual accounting measure known as the fiscal balance.  
Revenue by type 
The revenues of the Commonwealth come mostly from taxes. Non-taxation revenues include monies from the 
sale of goods and services, dividends, and interest. In 2014–15, total Commonwealth revenues were anticipated 
to be $385.8 billion. Chart 1 shows the anticipated composition of Commonwealth revenues for 2014–15.  
Chart 1: Government revenue by type, 2014–15 ($’billion)  
Source: 2014–15 Mid-Year Economic and Fiscal Outlook, Table 3.12. 
The amounts received by the Commonwealth as tax receipts will vary from year to year because of changes 
occurring in the economy.   
Example: Companies pay tax on their profits. If company profits are lower, Commonwealth tax receipts from 
companies are also likely to be lower.  
Changes to revenues because of factors outside the direct control of the Government are an example of a 
parameter variation. 
Expenditure by function 
In 2014–15, total anticipated expenditure by the Commonwealth was anticipated to be $422.9 billion. Chart 2 
shows the anticipated Commonwealth expenditure by function for 2014–15. 
 181.4  
 82.5  
 56.8  
 25.4  
 9.1  
 6.8  
 23.9  
Personal income tax
Taxes paid by companies and
superanuation funds
Goods and Services Tax (GST)
Excise duties (alcohol, fuel, tobacco)
Customs duties
Other taxes
 Non-taxation revenue
 
 
The Budget: a quick guide 5 
 
Chart 2: Expenditure reported by function, 2014–15 ($’billion)  
Source: 2014–15 Mid-Year Economic and Fiscal Outlook, Table 3.22. 
Where a program requires monies to be spent whenever certain criteria are met, the Government may have no 
direct control over the total cost of the program.  
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.  
Programs that provide monies whenever criteria certain are met are often known as ‘demand-driven programs’ 
Changes to the amount expended under demand-driven programs from year to year are another example of a 
parameter variation.  
‘Other purposes’ expenditure is largely made up of payments to states and territories. In 2014–15, total 
payments to the states and territories were anticipated to be $102.1 billion. The anticipated composition of 
payments to the states and territories in 2014–15 is shown at Chart 3 below. 
149.9 
80.3 
67.1 
31.2 
25.7 
25.0 
10.5 
7.3 
7.1 5.0 
4.5 
3.6 2.8 2.8 
Social security and welfare
Other purposes
Health
Education
General public services
Defence
Other economic affairs
Transport and communication
Fuel and energy
Housing and community amenities
Public order and safety
Recreation and culture
Agriculture, fisheries and forestry
Mining, manufacturing and
construction
 
 
The Budget: a quick guide 6 
 
Chart 3: Payments to the states and territories by function, 2014–15 ($’billion) 
Source: 2014–15 Mid-Year Economic and Fiscal Outlook, Table 3.25.  
Further information 
• Australian Bureau of Statistics, Government Finance Statistics, Australia, 2012–13 (cat. no. 5512.0) 
• Australian Bureau of Statistics, ‘Taxation Revenue, Australia, 2012–13’ (cat. no. 5506.0) 
• Australian Tax Office, ‘Taxation statistics 2012–13’ 
• Parliamentary Budget Office, ‘Research Reports’  
• The Treasury, ‘Treasury’s medium-term economic projection methodology’ 
  
 
 
The Budget: a quick guide 7 
 54.9  
 17.3  
 16.6  
 5.6  
 7.7  General revenue assistance (mostly GST
revenue)
Specific purpose payments for education
Specific purpose payments for health
Specific purpose payments for transport
and communication
All other specific purpose payments
 
Appendix: Key concepts used in the Budget 
Accrual accounting  
Accrual accounting is a method of accounting that records revenues when they are earned and expenses when 
they are incurred, regardless of when cash is received or paid.   
Cash accounting 
Cash accounting is a method of accounting that records receipts and payments of cash when they occur.   
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. 
Departmental and administered 
An administered item is an item that a Commonwealth entity administers of behalf of the Commonwealth as a 
whole. An administered item may be an item of expenditure, a revenue, or an asset. A Commonwealth entity 
has no discretion about what it can do with an administered item. 
Departmental items are expenditure, revenues, or assets over which a Commonwealth entity has discretion 
about how it may be used. 
Fiscal balance 
Fiscal balance is an accrual accounting measure of the balance between the revenues and expenses of the 
Commonwealth.  
Non-corporate Commonwealth entities and corporate Commonwealth entities 
Under section 11 of the Public Governance, Performance and Accountability Act 2013, all Commonwealth 
entities are classified as either ‘non-corporate Commonwealth entities’ or ‘corporate Commonwealth entities.’ 
Non-corporate Commonwealth entities are legally part of the Commonwealth, such as departments, or courts 
and tribunals. Corporate Commonwealth entities are legally corporations, which give them a separate legal 
identity to that of the Commonwealth.  
Outcomes and programs 
An outcome is the purpose for which monies are appropriated to non-corporate Commonwealth entities. A 
program is an activity that is undertaken by a Commonwealth entity to achieve an ‘outcome.’ For each outcome, 
there will be one or more programs. 
Parameter variation 
A parameter variation is a change to the revenues or expenses of the Commonwealth that is outside the direct 
control of the Government.  
Underlying Cash Balance 
Underlying cash balance is a cash accounting measure of the balance between the receipts and payments of the 
Commonwealth. It is the Government’s preferred measure of the surplus or deficit of the Commonwealth. 
© Commonwealth of Australia 
 
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