Establishing a Parliamentary Budget Office the Australian - PowerPoint PPT Presentation

Establishing a Parliamentary Budget Office – the Australian experience Jenny Wilkinson Address to the New Zealand Treasury Parliamentary Budget Officer September 2019 www.pbo.gov.au | 1

Brief outline • Global perspective • Australian context • Key purpose and features of Australian PBO • Contributors to our effective establishment • Assessment of impact | | 2 2 Parliamentary Budget Office

Global trends to establish IFIs … • A few countries (US, Netherlands) have had independent fiscal authorities for many decades • From 2005 to 2019: the number expanded from 11 to 39 • EU established a requirement that member states establish such independent bodies • UK established the Office of Budget Responsibility following concerns about biases in forecasting and adherence to fiscal targets • OECD/IMF have increasingly advocated the establishment of independent authorities as part of good-practice fiscal frameworks | 3 Parliamentary Budget Office

… but roles, mandates and sizes of IFIs differ significantly Source: OECD Independent Fiscal Institutions database, September 2019 | 4 Parliamentary Budget Office

The effect of the GFC on debt was important in some countries United States Spain United Kingdom Germany France Source: IMF World Economic Outlook database, April 2019 and IMF historical public debt database | 5 Parliamentary Budget Office

… but less so in Australia and NZ Australia New Zealand Source: IMF World Economic Outlook database, April 2019 and IMF historical public debt database | 6 Parliamentary Budget Office

Australian elections often featured costing debates Source: ‘Keeping the Bastards Honest’, The Australian – 18 May 2016 | 7 Parliamentary Budget Office

2010 election delivered a minority government | 8 Parliamentary Budget Office

Implementation of the PBO Early political discussions around PBO open establishing Legislation for General PBO passed business election Sept June Sept Aug Aug July 2005 2010 2011 2012 2012 2013 2013 Establishment PBO began Legislation agreed as part operations amended of minority to provide government access for agreement the PBO to ATO data | 9 Parliamentary Budget Office

What are the features of the Australian PBO? We aim to assist all The PBO is an We undertake parliamentarians independent and objective analysis ; to better understand non-partisan we do not provide budget issues and the department of the policy advice or budget implications Parliament recommendations of policies they may be considering | 10 Parliamentary Budget Office

What is the PBO’s purpose? To provide a more level playing field for all parliamentarians ; particularly non-government parties and independent parliamentarians To improve the accuracy of election commitment costings To improve transparency , particularly around budget information and budget-related issues | | 11 11 Parliamentary Budget Office

̶ ̶ ̶ What do we do? 1. Confidential costings of policy proposals for parliamentarians What would be the impact on the budget of a policy being implemented and what would be the number or distribution of people affected 2. Confidential budget analysis for parliamentarians How much of a particular grant program has been spent, or how does a particular budget measure affect different groups of people 3. Assistance with parliamentary committee work Particularly relevant when legislative committees are considering bills before Parliament 4. After each general election, publicly report on cost of parties’ election commitments 5. Publish independent research on fiscal and budgetary issues | 12 Parliamentary Budget Office

Key drivers of PBO’s reputation and performance • Legislation : establishes independence and confidentiality • Access to information and models : effective MoU and cooperation with government agencies • Adequate resourcing : around 45 staff with specialist skills • Research program : builds reputation and commitment to transparency • Relationships : with requestors, government agencies and external experts | 13 Parliamentary Budget Office

Transparently report on our performance and impact Statistics on costings Data on Mentions in publications media Statistics on co-operation Parliamentary with references agencies Measures efficiency Suggestive of Demonstrates Demonstrates & effectiveness of integrity & trust relevance & influence operations accessibility | 14 Parliamentary Budget Office

Our experience: demand for costings is strong • Demand continues to increase over time, with a peak in election years 2014-15 2015-16 2016-17 2017-18 2018-19 Number of requests 869 3,251 1,888 1,560 2,970 completed (options) Number of information requests sent to 203 743 523 424 514 government agencies | 15 Parliamentary Budget Office

̶ Our experience: broad interest in research program Regular publications: • Medium-term budget projections • National fiscal outlook • Budget snapshot and chart pack Other research papers: • Sensitivity of the budget to economic developments • Reports on specific topics important to the budget Medicare Benefits Schedule; Goods and Services Tax distributional analysis; Higher Education Loan Programme; National Broadband Network; Future Fund; Disability Support Pension, Measuring Net Debt, Budget Impacts of Ageing | 16 Parliamentary Budget Office

Budget snapshot improves understanding of budget • Released the morning after the Budget • Presents the budget as simply as possible • Identifies the impact of key policy decisions and parameter changes | 17 Parliamentary Budget Office

Increased transparency around medium term budget outcomes % of GDP % of GDP 3 28 2 27 UCB (lhs) Total payments (rhs) 1 26 0 25 -1 24 Total receipts (rhs) -2 23 -3 22 -4 21 -5 20 2000-01 2003-04 2006-07 2009-10 2012-13 2015-16 2018-19 2021-22 2024-25 2027-28 Source: PBO Report 02/2017: 2017–18 Budget: medium-term projections | 18 Parliamentary Budget Office

Increased transparency around medium term budget outcomes Temporary shock to investment Permanent shock to productivity % of GDP % of GDP % of GDP % of GDP 1.0 1.0 1.0 1.0 Higher Faster economic productivity growth 0.5 0.5 0.5 0.5 Slower economic growth 0.0 0.0 0.0 0.0 Lower productivity -0.5 -0.5 -0.5 -0.5 Central Central -1.0 -1.0 -1.0 -1.0 -1.5 -1.5 -1.5 -1.5 -2.0 -2.0 -2.0 -2.0 2017-18 2019-20 2021-22 2023-24 2025-26 2027-28 2017-18 2019-20 2021-22 2023-24 2025-26 2027-28 Source: PBO Report 05/2017: 2017–18 Budget medium-term projections: economic scenario analysis | 19 Parliamentary Budget Office

Supplementary analysis of budget measures 2018 Government proposal to cut personal income taxes • To be implemented over seven years: – Stage 1 (from 1 July 2018): relief for low-to-middle income earners – Stage 2 (from 1 July 2022): reduce impact of ‘bracket creep’ – Stage 3 (from 1 July 2024): simpler and flatter taxes • Budget papers published the fiscal impact for each year over the forward estimates (2018-19 – 2021-22) and the aggregate impact over the medium term (2018-19 – 2028-29) • Some distributional analysis released | 20 Parliamentary Budget Office

Opposition and crossbench parties requested supplementary information Ahead of parliamentary debate, PBO received requests for: • year-by-year budget impact of each component of the tax package • year-by-year budget impact over the medium term • distributional analysis of the impact of the package by: – income – gender | 21 Parliamentary Budget Office

PBO analysis: gender impacts Number of individuals receiving tax cut by gender Millions Millions 8 8 6 6 M M F F 4 4 2 2 M F 0 0 Stage 1 Stage 2 Stage 3 (18/19) (22/23) (24/25) Source: PBO costing – Personal income tax plan (advice provided to Senator Ketter, 13 June 2018) | 22 Parliamentary Budget Office

PBO analysis: distributional impacts Expected change in average tax rates by income % pts % pts 2017-18 to 2026-27 6 6 Before 5 5 After tax tax package package 4 4 3 3 2 2 1 1 0 0 1st 2nd 3rd 4th 5th Quintile Source: PBO report – 2018-19 Budget: medium-term budget projections (6 September 2018), Figure 3–4 | 23 Parliamentary Budget Office

PBO analysis: distributional impacts Expected change in average tax rates by income % pts % pts 2017-18 to 2026-27 6 6 Impact of tax 5 5 package 4 4 3 3 2 2 1 1 0 0 1st 2nd 3rd 4th 5th Quintile Source: PBO report – 2018-19 Budget: medium-term budget projections (6 September 2018), Figure 3–4 | 24 Parliamentary Budget Office

̶ ̶ ̶ ̶ ̶ Impact of the PBO: costings • Provision of confidential costing and budget analysis services: assists parliamentarians develop and refine policies in confidence, informed by estimates of fiscal cost, before policies are publicly debated supports parties to develop election platforms ahead of time and earlier in campaigns increases focus on fiscal trade-offs by establishing a new norm that policy platforms are completely costed enabled debate to focus on policy merit , not veracity of fiscal cost increased focus on medium-term fiscal impacts of proposals | 25 Parliamentary Budget Office