Australian federal budget

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An Australian federal budget is a document that sets out the estimated revenues and expenditures of the Australian Treasury in the following financial year, proposed conduct of Australian government operations in that period, and its fiscal policy for the forward years. [1] Budgets are called by the year in which they are presented to Parliament and relate to a financial year that commences on the following 1 July and ends on 30 June of the following year, so that the 2018 budget brought down in May 2018 relates to the 2018/19 financial year (1 July 2018 – 30 June 2019, FY2019).

Fiscal policy use of government revenue collection and spending to influence the economy

In economics and political science, fiscal policy is the use of government revenue collection and expenditure (spending) to monitor and influence a nation's economy. It developed out of the Great Depression, when the laissez-faire approach to economic management was ended and government intervention became the means of influencing macroeconomic variables. Fiscal and monetary policy are two sister strategies that are used by the government and the central bank in order to reach a county's economic objectives. The theories of the British economist John Maynard Keynes are the basis for fiscal policy. According to Keynesian economics, when the government changes the levels of taxation and government spending, it influences aggregate demand and the level of economic activity. This influence enables the fiscal authority to target the inflation and to increase employment. Additionally, it is designed to try to keep GDP growth at 2%-3% and the unemployment rate near the natural unemployment rate of 4%-5%. This implies that fiscal policy is used to stabilize the economy over the course of the business cycle.


Revenue estimates detailed in the budget are raised through the Australian taxation system, with government spending (including transfers to the states) representing a sizeable proportion of the overall economy. Besides presenting the government's expected revenues and expenditures, the federal budget is also a political statement of the government's intentions and priorities, and has profound macroeconomic implications.

Taxation in Australia

Income taxes are the most significant form of taxation in Australia, and collected by the federal government through the Australian Taxation Office. Australian GST revenue is collected by the Federal government, and then paid to the states under a distribution formula determined by the Commonwealth Grants Commission.

Economy of Australia national economy

The economy of Australia is a large mixed-market economy, with a GDP of A$1.69 trillion as of 2017. In 2018 Australia became the country with the largest median wealth per adult. Australia's total wealth was AUD$8.9 trillion as of June 2016. In 2016, Australia was the 14th-largest national economy by nominal GDP, 20th-largest by PPP-adjusted GDP, and was the 25th-largest goods exporter and 20th-largest goods importer. Australia took the record for the longest run of uninterrupted GDP growth in the developed world with the March 2017 financial quarter, the 103rd quarter and marked 26 years since the country had a technical recession.

Australia follows, to a great extent, the conventions of the Westminster system. For example, the prime minister must have the support of a majority in the House of Representatives, and must in any case be able to ensure the existence of no absolute majority against the government. In relation to the budget, that requires that if the House fails to pass the government's budget, even by one dollar, then the government must either resign so that a different government can be appointed or seek a parliamentary dissolution so that new general elections may be held in order to re-confirm or deny the government's mandate.

Westminster system democratic parliamentary system of government

The Westminster system is a parliamentary system of government developed in the United Kingdom. This term comes from the Palace of Westminster, the seat of the British Parliament. The system is a series of procedures for operating a legislature. It is used, or was once used, in the national and subnational legislatures of most former British Empire colonies upon gaining responsible government, beginning with the first of the Canadian provinces in 1848 and the six Australian colonies between 1855 and 1890. However, some former colonies have since adopted either the presidential system or a hybrid system as their form of government.

Prime Minister of Australia executive head of the Government of Australia

The Prime Minister of Australia is the head of government of Australia. The individual who holds the office is the most senior Minister of State, the leader of the Federal Cabinet. The Prime Minister also has the responsibility of administering the Department of the Prime Minister and Cabinet, and is the chair of the National Security Committee and the Council of Australian Governments. The office of Prime Minister is not mentioned in the Constitution of Australia but exists through Westminster political convention. The individual who holds the office is commissioned by the Governor-General of Australia and at the Governor-General's pleasure subject to the Constitution of Australia and constitutional conventions.

Australian House of Representatives Lower house of Australia

The House of Representatives is the lower house of the bicameral Parliament of Australia, the upper house being the Senate. Its composition and powers are established in Chapter I of the Constitution of Australia.


The process of putting together the budget begins in November when the Central Budget Management System (CBMS) [2] is updated with the latest estimates, and the senior ministers' review, where the Prime Minister, Treasurer, and Minister for Finance meet to establish the policy priorities and strategy for the coming financial year.

Treasurer of Australia Australian government minister in charge of economic policy

The Treasurer of Australia is the minister in the Government of Australia responsible for government expenditure and revenue raising. The Treasurer plays a key role in the economic policy of the government. The current holder of the position is Josh Frydenberg, whose term began on 24 August 2018.

The outcome of the senior ministers' review determines how the different portfolios will prepare their budget submissions for cabinet. Agencies within each portfolio do not submit a request for new funding, because their potential savings within the agency are unfounded. After Finance has agreed to the costings, the submissions are circulated for coordination comments and lodged with the cabinet office by late February.

Cabinet (government) Group of high ranking officials, usually representing the executive branch of government

A Cabinet is a body of high-ranking state officials, typically consisting of the top leaders of the executive branch. Members of a cabinet are usually called Cabinet ministers or secretaries. The function of a Cabinet varies: in some countries it is a collegiate decision-making body with collective responsibility, while in others it may function either as a purely advisory body or an assisting institution to a decision making head of state or head of government. Cabinets are typically the body responsible for the day-to-day management of the government and response to sudden events, whereas the legislative and judicial branches work in a measured pace, in sessions according to lengthy procedures.

The Expenditure Review Committee (ERC), a committee of Cabinet, meets in March to consider all submissions. They decide which proposals will be funded and the level of funding each will receive. At the end of the ERC, the ad hoc revenue committee meets to make decisions on the revenue streams of the budget. A pre-budget review of the estimates is conducted after all decisions have been finalised to ensure that they are reflected in CBMS.

Cabinet of Australia council of senior federal ministers of Australia

The Cabinet of Australia is the Australian Government's council of senior ministers of the Crown, responsible to Parliament. Ministers are appointed by the Governor-General, on the advice of the Prime Minister, who serve at the former's pleasure. Cabinet meetings are strictly private and occur once a week where vital issues are discussed and policy formulated. The Cabinet is also composed of a number of Cabinet committees focused on governance and specific policy issues. Outside the Cabinet there is an Outer Ministry and also a number of Assistant Ministers, responsible for a specific policy area and reporting directly to a senior Cabinet minister of their portfolio. The Cabinet, the Outer Ministry, and the Assistant Ministers collectively form the full Commonwealth Ministry of the government of the day.

Budget documentation commences at the end of the ERC process. Agencies prepare two components: the portfolio budget statements and the mid-year economic and fiscal outlook.

The portfolio budget statements provide additional details and explanations of the budget and the statement of risks, which is included in Budget Paper No. 1.

The final budget is presented and tabled in Parliament by the Treasurer on budget night as part of the Second Reading of the Appropriation Bill (No. 1), which "appropriates money out of the Consolidated Revenue Fund for the ordinary annual services of the government". [3]

Charter of Budget Honesty Act

The budget has to be presented within the framework that has been established by the Charter of Budget Honesty Act (1998).

The charter provides for:

Budget night

Between 1901 and 1993 the practice was for the budget to be brought down in August, on the first Tuesday night of the Spring session. [4] Since 1994 the Treasurer has presented the budget on the second Tuesday in May. Exceptions have been made in: (i) 1996 as there was an election and a change of government in March, so the budget was brought down in August; (ii) 2016 when it was held on the first Tuesday in May to allow the government to potentially call a double dissolution election following the presentation of the budget; and (iii) 2019 when a federal election called for May 18 caused the budget to be brought forward to 2 April.

On budget day but before the presentation of the budget, the Treasurer spends the day behind locked doors briefing media and interest groups on various aspects of the budget. This is known as the budget lock-up. [5] Because of the market sensitive nature of some of the information which they are being provided, those invited to attend the briefings are not allowed access to the outside world until the budget has been presented in Parliament by the Treasurer, which normally commences at 7.30 pm.

In modern times, the budget has been broadcast live from Parliament House on the ABC and Sky News Australia. It is hosted on the ABC, without interruption from 7:30 pm to 8 pm, normally followed up with a report by a panel assessing the changes, benefits and flaws in the budget. Additional budget documents and materials are available on the government budget website for other interested parties.

A convention in Australian politics is that the Leader of the Opposition is given a "right of reply", which they deliver in Parliament two days after the government's budget speech, and which is also broadcast on television.

Budgetary policy developments

Large cyclical changes in cash receipts (in white) and payments (in black) reflect changes in the government's economic objectives. Historical Australian budget data1.jpg
Large cyclical changes in cash receipts (in white) and payments (in black) reflect changes in the government's economic objectives.

In comparison with similar economies, [nb 1] Australia's government spending is relatively low. For the twenty-year period from 1960 to 1980, the growth in spending roughly matched percentages in the much higher populated nations of Japan and the United States. [6]

In the first half of the 1980s, spending surged by approximately 3% of gross domestic product and the tax rate surpassed that of Ronald Reagan's administration. However, government accountability was a highly contentious issue in the late 1970s, and John Howard maintains that under Fraser "spending went up... at about two per cent per year in real terms... Reagan [didn't do] better than that". [7]

As the debate played out, the free-market politicians turned to attacking the political parties which were in power in the Australian states, and public sector medium enterprises came to be seen as inefficient. The economic term "current account deficit" was in vogue.

Riding on strong economic growth in the latter part of the 1980s, the Hawke Government brought forward an agenda for public sector reform that had been pioneered in the US. Declaring a number of debt reduction strategies ranging from tariff rate reductions to privatisation and competitive tendering, Australia's public sector significantly declined in the period.[ when? ]

Spending in the 1990s saw significant shifts in social policy expenditure as part of a broader scheme of "low inflation targeting". Although outlays for services to industry increased, the budget outcome remained the same throughout the early 1990s recession. The Howard Government actually reduced expenditure by 1.3% of gross domestic product in its first two years, making large cutbacks to outlays for the hospital system and education. Overall the government continued to run down public debt and promote asset trading in the private sector.

See also



  1. Key indicators of economic activity in Australia, such as cost-push inflation and manufacturing and retailing sector productivity, are usually compared with other Organisation for Economic Co-operation and Development member countries.

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  1. Department of Finance - Budget
  2. CBMS site
  3. Appropriation Bill (No. 1) 2014-2015
  4. Budget Speech, 10 May 1994, Ralph Willis
  5. Invitation to the 2013-14 lock-up
  6. Saunders, Peter (1987). "Understanding Government Expenditure Trends in OECD Countries and Their Implications for Australia". Australian Quarterly . 59 (1): 34–42. doi:10.2307/20635411.
  7. John Howard; quoted in Terrill, Ross (1987). The Australians. Sydney: Bantam Press. p. 95. ISBN   0-593-01019-1.