Appendix B: The Contingency Reserve
The Contingency Reserve (Other Purposes Function) is an allowance, included in aggregate expenses figuring, to reflect anticipated events that cannot be assigned to individual programmes in the preparation of the Australian Government budget estimates. The reserve is an estimating device used to ensure that the budget estimates are based on the best information available at the time of the Budget. It is not a general policy reserve.
While the reserve ensures that aggregate estimates are as close as possible to expected outcomes, it is not appropriated. Allowances that are included in the reserve can only be drawn upon once they have been appropriated by Parliament. These allowances are removed from the reserve and allocated to specific agencies for appropriation and for outcome reporting closer to the time when they eventuate.
The Contingency Reserve makes allowance in 2004-05 and the forward years for anticipated events including the following:
- an allowance for the tendency for estimates of expenses for existing government policy to be revised upwards in the forward years;
- an allowance for the tendency for the estimates of administered expenses for some specific agencies or functions to be overstated in the budget year;
- commercial-in-confidence and national security-in-confidence items that cannot be disclosed separately;
- decisions made too late for inclusion against individual agency estimates;
- the effect on the budget and forward estimates of economic parameter
revisions received late in the process and hence not able to be allocated
to individual agencies or functions;
- An example of a late parameter revision is the estimated impact of the Australian Industrial Relations Commission’s Living Wage Case Decision released on 5 May 2004; and
- provision for events and pressures that are reasonably expected to affect the budget estimates.
The Contingency Reserve also includes expenses associated with the Government’s major asset sales and associated administration costs.