Frequently Asked Questions
- What is the budget?
- Where can I find information on:
- What is the Mid‑Year Economic and Fiscal Outlook (MYEFO)?
- What is the budget process?
- What is a budget surplus?
- What is a budget deficit?
- How does money get provided for particular policies?
- Who manages the Australian Government's money?
- How does the collection and allocation of the GST work?
- Apart from taxes, are there any other ways the Government earns revenue?
The Australian Government budget sets out the fiscal and economic outlook for Australia, and includes expenditure and revenue estimates for the current financial year and three forward years. It shows the Government's social and political priorities, and how the Government intends to achieve these. The Department of Finance & Deregulation website has further information on the production process of the Commonwealth Budget.
Budget Paper No. 1 Statement 1 details the Government's current medium‑term fiscal strategy.
The estimated surplus, deficit or balance for the current budget can be found in Budget Paper No. 1 Statement 2.
The Australian Government's current national debt can be found in Budget Paper No. 1 Statement 13, Table 3 under the Australian Government general government net debt and net interest payments table.
The MYEFO updates the economic and fiscal outlook from the previous budget. Section 14 of the Charter of Budget Honesty Act 1998 requires the release of a MYEFO each year by the end of January, or six months after the last budget, whichever is later.
As well as updating the economic and fiscal outlook, the MYEFO updates the budgetary position. In particular, the MYEFO takes account of all decisions made since the release of the budget which affect expense and revenue and hence revises the budget aggregates. An appendix to MYEFO summarises all policy decisions taken since the budget.
The following steps are taken in the lead up to the presentation of the budget to Parliament.
Pre‑budget Submissions (September to November): The Treasurer issues a press release calling for pre‑budget submissions from interested parties. This allows for consultation with the community on priorities for the next budget.
Senior Ministers' Review (SMR) (November/December): At SMR, portfolio ministers' new proposals and expected major pressures on agency budgets are considered, and priorities for the coming budget are established. The ministers who attend SMR are the Prime Minister, the Deputy Prime Minister, the Treasurer and the Minister for Finance and Administration.
Portfolio Budget Submissions (February): To seek funding for new policy proposals, agencies prepare Portfolio Budget Submissions based on the outcome of SMR. The submissions outline all major proposals that agencies wish to have funded and potential savings.
Expenditure Review Committee (ERC) (March): This sub‑committee of Cabinet is primarily responsible for developing the budget against the background of the Government's political, social and economic priorities. It decides which of the agencies' proposals will be funded and by how much. Membership varies, but usually comprises the Prime Minister, the Treasurer, the Minister for Finance and Administration, and one or two other ministers.
Ad Hoc Revenue Committee (March/April): The Ad Hoc Revenue Committee is also a Cabinet committee. It meets after ERC to decide the revenue components of the budget.
Budget Cabinet (April): This is the final stage in the decision‑making process. Decisions from the ERC are endorsed and the Budget Cabinet agrees to present the budget to Parliament.
Budget Night: The budget is usually brought down on the second Tuesday of May. The Government presents the Budget Papers and budget‑related documents. The Treasurer summarises the budget in his Budget Speech, which is traditionally presented at 7.30 pm on Budget Night.
Final Budget Outcome (September): The Charter of Budget Honesty Act 1998 requires that a Final Budget Outcome be released no later than three months after the end of the relevant financial year. The financial statements in the Final Budget Outcome are similar to those in the budget but provide actual outcomes rather than estimates.
Mid‑Year Economic and Fiscal Outlook (MYEFO) (December): The MYEFO must be released by the end of January, or six months after the budget is handed down, whichever is later. The role of a MYEFO is explained above.
Pre‑Election Fiscal Outlook (PEFO): The Charter of Budget Honesty Act 1998 requires that a PEFO be released in election years. The purpose of the PEFO is to update information on the economic and fiscal outlook before an election. A PEFO must be released publicly within 10 days of the issue of the writ for a general election, and contain spending and revenue estimates for the current and following three financial years, the assumptions underlying the estimates, the sensitivity of the estimates to changes in assumptions and risks that might change the fiscal outlook materially.
A budget surplus occurs when the funds the Government receives from taxation and other revenue exceeds Government spending in any financial year. Information on the budget aggregates can be found in Budget Paper No. 1 Statement 2, Table 1.
A budget deficit occurs when Government spending exceeds the funds the Government receives from taxation and other revenue in any financial year. Information on the budget aggregates can be found in Budget Paper No. 1 Statement 2, Table 1.
The Parliament has ultimate control over government finances. Section 83 of the Constitution of Australia states:
No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law.
This means that money cannot be spent unless the Parliament has authorised the expenditure through an Act of Parliament. These Acts of Parliament are more commonly known as Appropriation Acts and are accounted for in Budget Paper No. 4.
There are two broad categories of appropriations: annual appropriations and special appropriations. Annual appropriation bills are passed regularly each financial year to provide funds for government and parliamentary expenditure. Special appropriation bills are for a specific purpose, for example, to finance a particular programme or project set up by the bill.
The budget presents three different appropriation bills. Appropriation Bill (No. 1) provides government agencies with funding for the ordinary services of Government. Appropriation Bill (No. 2) provides agencies with funds for capital injections, grants to the States and Territories and administered funding for new agency outcomes. The Appropriation (Parliamentary Departments) Bill provides separate funding for Parliament.
More information on Appropriations can be found in the introduction to Budget Paper No. 4.
The Reserve Bank of Australia (RBA) provides specialised banking services to the Australian Government. A facility is provided to the Australian Government that is used to manage a group of bank accounts, known as the Official Public Account (OPA) Group, the aggregate balance of which represents the Government's daily cash position. Information on the role and function of the RBA in managing the Government's money can be found at www.rba.gov.au.
The Australian Office of Financial Management (AOFM) is responsible for the management of the Government's cash balance. Information on the role and functions of the AOFM can be found at www.aofm.gov.au.
The collection of GST revenue is administered by the Australian Taxation Office. While GST is a tax on a national base, all GST revenue collected is received by the States and Territories (States). As agreed by all States, the Commonwealth Grants Commission (CGC) makes recommendations as to the distribution of the GST revenue between the States.
The CGC's recommendations are based on the principle of Horizontal Fiscal Equalisation to ensure that if each State made the same effort to raise revenue from its own sources and operated at the same level of efficiency, each would have the capacity to provide services at the same standard. However, States can spend their GST revenue according to their own budgetary priorities.
The CGC recommends relativities for the distribution of GST that are applied to state populations to determine a weighted population for each State. The Australian Government uses the weighted populations to distribute the GST revenue pool.
In accordance with the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations, each State is guaranteed a minimum of GST revenue in the transitional years so that its budgetary position is no worse off than it would have been had the tax reforms covered by the agreement not been implemented.
The majority of Government revenue is earned from different types of tax. However, the Commonwealth also receives revenue from grants and subsidies, dividends, interest, and sales of goods and services. Budget Paper No. 1 Statement 5 details Government revenue.