What goes into preparing the federal budget?

Tuesday sees the treasurer step up to present his 2022 budget, with the Opposition presenting a budget reply later in the week. Neil Pharaoh examines the process of getting to budget night.

While the budget kicks off with Treasurer Josh Frydenberg’s speech, each budget is actually a 21-month cycle. This article steps through the journey to budget night, and what happens beyond. 

2022’s budget will have started in September 2021. This is unusually early – however given the budget is normally in May, bringing it forward two months would create the knock-on effect of forward estimates also being two months earlier than normal.

The forward estimates are a rolling three-year projection of expenditure, assuming all current policies remain in place, as well as any policy decisions made after the last budget affecting future ones. This forms the base upon which spending and income is built.

Across October and November, a senior ministers’ review will be undertaken. Typically, this includes the PM, treasurer, finance minister and others, who set the priorities for the coming budget and timetables (including the early March budget we have in 2022). The senior ministers’ review will also consider new policies, lapsing programs and major pressures on the budget, and concludes with a framework for the budget going forward.

As this period culminates, framework and priorities are set, and portfolios busily prepare their budget submissions, comprising major and minor proposals. Potential savings are all calculated and worked on by various policy departments, and briefings given to relevant ministers regarding impact, considerations and outcomes for each portfolio.  

Costings, paperwork, letters-of-intent and proposals are actively undertaken back-and-forth from policy departments (Education, Health, Defence, etc) to central agencies (Treasury, Finance and Prime Minister and Cabinet). Comment, feedback and circulation is often coordinated by the Cabinet Office: while this typically occurs in February; December was the rumoured timeframe for this budget. 

In December the mid-year economic and fiscal outlook (MYEFO) is presented. For those not up-to-speed on the jargon, “fiscal” refers to government spending activities (as opposed to “monetary” which is Reserve Bank of Australia policy). This provides a publicly visible update to show how everything is tracking.

 Soon after the senior ministers review and priorities are set, the Expenditure Review Committee (ERC) is established or convened. ERC sets the framing for the spending side of the budget, and is constantly reviewing new policy and savings across this time. In a normal cycle, they would meet heavily from March, this year they started soon after the New Year. 

In parallel to the ERC, another committee is busy working away, this being the Revenue Committee. Lesser known than the ERC, it’s equally important, as it considers income opportunities and broad savings which might be achieved in the budget. Both ERC and the Revenue Committee are understood to have been meeting since December last year. 

Cabinet sign-off is the next step (typically March, but this year, February). Cabinet makes a final decision on the budget, new policies, agencies and their work, and starts the process of preparing the budget documents and appropriations bills.

Then we have budget night and, while all attention is on the treasurer and his speech, this is the spin around the substance. The substance comes via budget papers, and the various appropriations bills required to be passed by both houses of Parliament.

In a normal cycle, after the budget is handed down, senate estimates commences, whereby scrutiny of the bills, appropriations, income and expenditure occurs. The portfolio budget statements (from each portfolio) form a key part of the inquiries.

So, what should you be looking out for during the 2022 federal budget? 

The budget papers and documents typically consist of:

• The budget speech – what the Treasurer says in Parliament. While irregular, some laws will take effect from this speech (or resulting media release) and Parliament will retrospectively legislate accordingly, especially on revenue measures. This is done to avoid spillage, where in the time between intent and legislation, assets can be moved to avoid tax changes.
• Budget overview – high level, what is in the budget. Well worth a read for all.
• Four budget papers – the detail, often containing little hidden things are found here. They are all worthwhile checking in your relevant portfolio area. Budget paper number one is the most important explanatory document of the set, number two contains all the changes to expenses, revenue and capital by portfolio, number three is the Commonwealth and state/local budget paper, including special purpose payments, number four comprises the appropriations bills.
• Portfolio budget statements – for each area or portfolios, reflecting their position, roles and activities.
• Ministerial statements – and supporting media releases, which is the spin to the substance above.

Many commentators will do the deep dive on the budget and any sector impacts. But understanding how the budget is created is an invaluable skill – think of the timelines, and think ahead as to when, where, and how you can have influence on the process.

About the author: Neil Pharaoh has spent most of his voluntary and professional life in and around social purpose organisations, government, public policy and advocacy. Neil has been behind many leading social policy and advocacy campaigns on gender rights, equality, medical research and education, and ran for Parliament in Victoria in 2014 and 2018. Neil is co-founder and director of Tanck, which focuses on better engagement with government, and regularly runs workshops and advocacy sessions and advises leading social purpose organisations on their government engagement strategy and systems. 

Happenings on the Hill is a fortnightly column focusing on all things politics, policy, campaigns and advocacy. Stay tuned for updates around political trends and elections, lobbying and advocacy news, and hints, tips and ideas on government engagement that are specifically written for the social purpose/for purpose sector. 

If you have any ideas, suggestions, tips or questions, please feel free to email Neil Pharaoh at neil@tanck.com.au or reach out to him via Tanck social media: on LinkedIn, Twitter, Facebook and Instagram.