PBO Review: Possible Areas of Reform to Support Effective PBO Operations
2.1
Since the establishment of the Parliamentary Budget Office (PBO), there has been:
one independent review of the PBO—the Parliamentary Budget Office Review 2016-17, by the Independent Review Panel;
one audit of the PBO—Audit Report No. 36 (2013-14), Administration of the Parliamentary Budget Office, by the Australian National Audit Office (ANAO); and
one parliamentary inquiry into the PBO—Report No. 446, Review of the Operations of the Parliamentary Budget Office, 2014, by the PBO’s oversight body, the Joint Committee of Public Accounts and Audit (JCPAA or the Committee).
2.2
PBO independent reviews, audits and inquiries occur through a number of mechanisms, each having a different role:
Independent review under section 64T of the Parliamentary Service Act 1999 (PS Act 1999)
section 64T states that, ‘after a general election, the JCPAA may request the Parliamentary Budget Officer to cause an independent review of the operations of the PBO to be conducted in accordance with the request’.
Audit by the ANAO under section 17(1) of the Auditor-General Act 1997 (AG Act 1997)
section 17(1) states that ‘the Auditor-General may at any time conduct a performance audit of a Commonwealth entity’; under section 10 of the Act, ‘in performing or exercising his or her functions or powers, the Auditor-General must have regard to … the audit priorities of the Parliament determined by the JCPAA’.
Inquiry by the JCPAA into a PBO audit report by the ANAO, under section 8(1) of the Public Accounts and Audit Committee Act 1951
section 8(1) states that duties of the Committee include ‘to examine all reports of the Auditor-General (including reports as the results of performance audits) that are tabled in each House of the Parliament’ and ‘to report to both Houses of the Parliament … on any items or matters in those … reports … that the Committee thinks should be drawn to the attention of the Parliament’.
Inquiry by the JCPAA as part of its PBO oversight role, under section 64S of the PS Act
section 64S states that duties of the Committee include ‘to report to both Houses of the Parliament on any matter arising out of the Committee’s consideration of [the operations and resources of the PBO], or on any other matter relating to the Parliamentary Budget Officer’s functions and powers, that the Committee considers should be drawn to the attention of the Parliament’.
2.3
The JCPAA has statutory oversight of the PBO and, as such, has an essential role in monitoring the PBO’s implementation of recommendations of independent reviews. The Committee published on its website the PBO’s first report on its implementation of the 2016-17 recommendations of the Independent Review Panel. The Committee has also published on its website the PBO’s update on implementation of these recommendations.
2.4
The Independent Review Panel, Parliamentary Budget Office Review 2016-17, made a number of specific recommendations identifying a continuous monitoring role for the JCPAA in this regard:
Recommendation 5: The PBO should ensure that the JCPAA is provided with sufficient data to allow it to regularly monitor the provision of information to the PBO through the Memorandum of Understanding.
Recommendation 7: The PBO should periodically conduct an ex-post analysis of a limited selection of its policy costing estimates, to help identify areas for improvement in future costings, and report the results to the JCPAA.
Recommendation 15: The PBO should ensure that the JCPAA is regularly provided with sufficient information on the PBO’s workload, resource requirements and efficiency, to enable the JCPAA to monitor their impact on the level and timeliness of the PBO’s outputs.
2.5
The JCPAA’s role in monitoring the PBO’s implementation of recommendations of independent reviews was endorsed by the Joint Select Committee on the Parliamentary Budget Office, in its report on an appropriate mandate for the PBO—Inquiry into the Proposed Parliamentary Budget Office (March 2011).
2.6
The Joint Select Committee recommended that ‘an independent body be engaged to undertake an operational evaluation of the PBO, completed within nine months after the result of a Federal election is notified’. The Joint Select Committee emphasised that ‘ongoing operational evaluation by an independent external body’ would ‘ensure that the PBO continues to meet its obligations under its mandate and meet the changing needs of the Parliament’.
Automatic Referral Process
2.7
Under the current legislation (section 64T of the PS Act) independent reviews of the operations of the PBO are not automatic but at the request of the Committee, after a general election. The Committee makes a recommendation that this process become automatic. The rationale for this change is that by requiring an independent review at the start of the Parliament, the JCPAA will be able to oversee and monitor the PBO’s implementation of the review’s recommendations over the life of the Parliament and inform subsequent Committee inquiries. The recommendation further formalises and assists the Committee’s oversight of the PBO. This change would also:
provide for ongoing independent operational evaluation of the PBO;
ensure that the PBO continues to meet its obligations under its mandate and the changing needs of the Parliament;
assist the Committee in its statutory oversight role of the PBO—a benchmark independent review at the start of the Parliament would enable the JCPAA to oversight and monitor PBO implementation of the review recommendations over the life of the Parliament, and also inform any subsequent Committee inquiries;
enable the PBO to continuously improve the effectiveness of its stakeholder relationships and engagement; and
serve to further reinforce the independence of the PBO.
2.8
For reference, the current section 64T of the PS Act is as follows:
1
After a general election, the Joint Committee of Public Accounts and Audit (the Committee) may request the Parliamentary Budget Officer to cause an independent review of the operations of the Parliamentary Budget Office to be conducted in accordance with the request.
2
The request must specify:
a.
the person or body who is to conduct the review; and
b.
the scope of the review; and
c.
the manner in which the review is to be conducted; and
d.
that a report of the review is to be provided to the Committee.
3
In making the request, the Committee must have regard to the resources of the Parliamentary Budget Office.
4
The review must be completed within 9 months after the end of the caretaker period for the election.
5
The Committee must table the report of the review in each House of the Parliament as soon as practicable after receiving it.
PBO Implementation of Previous Review Recommendations
2.9
The Committee’s terms of reference for its inquiry included reporting on PBO implementation of the recommendations of the:
Report of the Independent Review Panel, Parliamentary Budget Office Review 2016-17; and
JCPAA Report 446, Review of the Operations of the Parliamentary Budget Office, 2014.
2.10
At the public hearing for the inquiry, the PBO stated that ‘the previous reviews of the PBO have helped to enhance our performance and our ability to effectively undertake our core duties as set out in legislation’. The PBO confirmed that it had ‘agreed with, and implemented, all of the recommendations arising from previous reviews where it is the implementing agency’ and this has ‘improved our ability to perform our day-to-day functions and fulfil the mandate Parliament has given us’. The PBO is also ‘working to improve further in each of the broad areas identified by these reviews’.
2.11
In the three-year period since the independent review, the PBO pointed to a range of indicators suggesting that ‘our services continue to be relevant and valued by parliamentarians and the general public’. Since the start of 2016-17, the PBO has:
completed more than 6460 policy costings for parliamentarians with a median response time of 13 days
published more than 25 reports to inform Parliament and the public about fiscal policy and the budget, all of which were reported in major media outlets—in 2018-19, ten of the PBO’s reports had each been downloaded at least 1000 times in that year
published the 2019 post-election report of election commitments, with new features including medium-term costing minutes and searchable online costings
received formal and informal feedback from parliamentarians, government agencies and other stakeholders that our work is valued and our interactions are professional.
Report of Independent Review Panel
2.12
The 2016-17 Independent Review Panel concluded that the PBO ‘has been a successful institutional development in Australian governance … and has filled a significant gap in Australia’s public policy landscape’. Consultations with stakeholders ‘showed that the PBO is widely regarded as an independent, non-partisan institution, with a reputation for professional and rigorous analysis’.
2.13
The terms of reference and 16 recommendations for the Independent Review Panel, Parliamentary Budget Office Review 2016-17, are set out in Appendices C and D.
2.14
The PBO agreed with all of the recommendations of the Independent Review Panel and, in April 2018, published a ‘Report on Implementation of the 2016-17 Recommendations’. The PBO submission to the inquiry provided an updated report on its implementation of these recommendations.
2.15
The PBO confirmed that it has ‘implemented all of the recommendations arising from previous reviews where it is the implementing agency’.
2.16
During the Committee’s inquiry, a number of stakeholders provided positive feedback on the PBO’s implementation of recommendations of the Independent Review Panel:
The Tax and Transfer Policy Institute (TTPI) noted that ‘the PBO’s information papers about its costing process and methodology, published in response to this review, have facilitated better public understanding about these aspects of its work … The PBO’s establishment of an expert advisory panel, and its increased focus on secondments, including with the TTPI, should continue to augment its costing capabilities’.
The National Foundation for Australian Women (NFAW) noted that ‘a review of the recommendations’ made in the Independent Review Panel and JCPAA reports ‘show that as the PBO has developed further capacity most of the recommendations have been adopted’.
The Grattan Institute noted that, ‘in line with a recommendation from the previous review and international best practice, the PBO periodically conducts ex post reviews of its costings to identify ways to improve its methodology. As part of this process, the PBO asks individuals outside the organisation to confidentially review particular costings (of PBO costings that are public) and provide feedback on the assumptions and methodology. The Grattan Institute has participated in this review process on several occasions’.
Recommendations 1-4, 6, 9-14 and 16
2.17
A detailed summary of the PBO’s update on its implementation of the 16 recommendations of the Independent Review Panel is set out in Appendix D.
2.18
In particular, the PBO confirmed that:
Recommendation 1: replace reliability rating—Since 31 March 2017, the PBO has replaced the single word reliability rating in its costing response documents with a more detailed qualitative statement on the factors that affect the uncertainty of a costing.
Recommendation 2: publish priority principles for parliamentarian requests—On 15 February 2018, the PBO published an information paper—PBO costing processes, timeframes and prioritisation framework.
Recommendation 3: improve quality and timeliness of responses to parliamentarian requests—The PBO introduced an electronic workflow management and data analysis system in mid-2016 to streamline the monitoring and management of costing requests.
Recommendation 4: establish expert advisory panel—The PBO established a panel of expert advisors in late 2017.
Recommendation 6: work collaboratively with Government agencies—Overtime, the PBO has increasingly built effective, collaborative relationships with Commonwealth agencies to ensure that information requests are efficiently responded to and model developments are shared.
Recommendation 9: explain policy costing methodology, including in non-technical way—We have endeavoured to draft [a range of recent policy costing] papers for a non-technical audience.
Recommendation 10: publish regular data on policy announcements referring to PBO costings—The PBO activity report … has been expanded to include a summary of all costings that have been publicly released by parliamentarians.
Recommendation 11: include medium-term matters in post-election report—The PBO implemented this recommendation in the 2019 post-election report.
Recommendation 12: new timing for publication of post-election report—The Parliamentary Service Act 1999 was amended in early 2019 to enable publishing of the post-election report within 30 days or seven days before sitting before sitting of the new Parliament. In 2019, the PBO met this new requirement.
Recommendation 13: PBO Post-election Report for parliamentary political parties with fewer than five parliamentarians – On 27 April 2018, the PBO provided guidance to Members and Senators outlining how this recommendation would be implemented, however no minor parties or independents were elected to be included in the 2019 post-election report.
Recommendation 14: consider value of chart pack—The PBO has refined its chart packs over time.
Recommendation 16: conduct stakeholder survey once each Parliament—The PBO conducted a stakeholder survey during February and March 2018.
Recommendations 5, 7 and 15
2.19
The Independent Review Panel, Parliamentary Budget Office Review 2016-17, made a number of specific recommendations identifying a continuous monitoring role for the JCPAA:
Recommendation 5—The PBO should ensure that the JCPAA is provided with sufficient data to allow it to regularly monitor the provision of information to the PBO through the Memorandum of Understanding.
Recommendation 7—The PBO should periodically conduct an ex-post analysis of a limited selection of its policy costing estimates, to help identify areas for improvement in future costings, and report the results to the JCPAA.
Recommendation 15—The PBO should ensure the JCPAA is regularly provided with sufficient information on the PBO’s workload, resource requirements and efficiency, to enable the JCPAA to monitor their impact on the level and timeliness of the PBO’s outputs.
2.20
As referenced above, the Committee makes a recommendation to allow for an automatic referral process for independent review of the operations of the PBO. This will enable the Committee to ensure it receives sufficient information from the PBO, can identify areas for improvement, and can monitor the PBO’s workload.
Recommendation 8
2.21
During the inquiry, matters were raised concerning recommendation 8(c) of the Independent Review Panel, which stated that the PBO should ensure it has ‘the capacity to further develop its longer-term analytic ability to allow consideration to be given to transferring responsibility for the next Intergenerational Report (IGR) (scheduled for 2020) to the PBO’.
2.22
By way of background on this recommendation, the Independent Review Panel stated that, ‘as the PBO’s longer-term analytic ability develops, it would be well positioned to take responsibility for the next IGR should the Government of the day decide to transfer it to the PBO’.
2.23
In its additional information on implementation of recommendation 8, the PBO noted that it had built longer-term analytic ability:
…in addition to our annual medium-term fiscal projections … other recent publications such as the ageing population and the measurement of government debt have built our capacity to analyse underlying drivers of the budget over the longer term. Since April 2017, costing advice has covered a 10-year horizon, enhancing the integration between our medium-term analysis work and our costing capability.
2.24
The Grattan Institute proposed that proposed that the PBO be ‘given carriage of the IGR, given the benefits of a national approach and the real risks of this document being politicised’. The Grattan Institute stated that transferring the IGR to the PBO:
… allows us to focus on the issues that are highlighted by that document, particularly the impact of population ageing on the fiscal position – an incredibly important issue – rather than second-guessing the political motivations that might have fed into the document… Having it in the hands of an independent body would put people’s minds at ease about the underlying assumptions and also improve the discussion around the rationale for those assumptions.
2.25
As stated by the Acting Parliamentary Budget Officer, the Australian Labor Party took this as a policy proposal to the 2019 Federal Election and the PBO published ‘a full costing document on that particular proposal’. Therefore, the Committee believes that the transfer of the IGR from Treasury to the PBO must ultimately be a policy determination for the government of the day.
2.26
If this transfer was to occur, the PBO would require additional resources to build a team to complete the IGR, and expertise surrounding economic projections would have to be developed:
The proposal that we’ve made in the past has been to draw on Treasury’s models, particularly as the PBO currently doesn’t have a role around economic projections, which do underpin the IGR.
2.27
The Review of the Operations of the Parliamentary Budget Office notes that there are several bodies similar to the PBO in other nations, though their role and functions vary significantly. Some conduct macroeconomic forecasting, and others are established to cost budgetary measures. In its current form, the expertise of the PBO remains with the latter, and the skills, personnel and resources to conduct long-term economic forecasts remain with Treasury. Treasury stated that it had ‘a significant amount of modelling capability on par with recognised fiscal agencies such as the US Congressional Budget Office’:
In additional to significant modelling assets there is also significant human capital concentrated in our Macroeconomic Conditions, Macroeconomic Modelling and Policy, and Tax Analysis Divisions, but also in other areas of the Department. Treasury modellers have a range of qualifications, including Masters and PhD level training in economic theory, applied economics, econometrics, statistics and information technology. Treasury officers gain expertise in-house but also through work experience in and secondments to academia, international organisations, the private sector and other parts of government. We also collaborate with external experts, including recognised experts in academia on a range of projects.
2.28
The skills required for such modelling are very specific. The Division Head, Budget Policy Division, Treasury, confirmed that, ‘from time to time we have specific recruitment rounds targeting people with those kinds of expertise. I’m not aware of any particular problems in that area’. In terms of staffing levels associated with production of the IGR, Treasury noted that ‘we do not have an estimate of the total number of people’—a range of areas of Treasury provide input into the IGR, including ‘modelling and forecasting areas, a range of policy areas and our corporate areas’. However, ‘a team of 9 people is dedicated full-time to coordinating the production of the report, located in Budget Policy Division’.
2.29
As to its capability in demographic analysis for the IGR, Treasury stated that a centre for population had been established in the department over the last 12 months, ‘with responsibility to have much closer ownership of population and demographic kind of modelling’. Similarly asked about its capabilities in demography, the PBO responded: ‘we don’t currently have that capability to undertake detailed demographic analysis, but it would be something that, if we were tasked with that function, we would obviously seek to build within the organisation as we considered appropriate’.
2.30
On the robustness of its IGR modelling, Treasury responded that, ‘in terms of the medium-term fiscal modelling…our models reflect our best professional judgement, informed by expertise in relevant agencies that are closer to the actual programs that we’re modelling’.
JCPAA Report 446
2.31
In November 2014, the JCPAA tabled Report No.44 Review of the Operations of the Parliamentary Budget Office, the first such inquiry since the PBO was established in July 2012. This took place shortly after the ANAO’s external audit on the administration of the PBO, with its report completed in June 2014.
2.32
In Report No. 446, the JCPAA concluded that the PBO had ‘quickly established itself as a credible, independent source of expertise that has strengthened parliamentary debate on budget and fiscal policy matters’—it has ‘developed into a well-regarded and credible professional parliamentary body that is providing high-quality advice in an impartial manner in accordance with its mandate’.
2.33
The terms of reference and eight recommendations for JCPAA Report 446, Review of the Operations of the Parliamentary Budget Office, 2014, are set out in Appendix C.
2.34
The PBO submission to the inquiry outlined ‘comments and actions’ in response to the recommendations of JCPAA Report 446, with the PBO confirming that it has ‘implemented all of the recommendations arising from previous reviews where it is the implementing agency’.
Recommendations 1 and 2 and 4 to 8
2.35
Recommendations 1-2 and 4-8 were all supported, in part, or noted in the Government response to JCPAA Report 446. The PBO confirmed that it had largely addressed the matters raised in recommendations 1 and 2 and 4 to 8:
‘over the past three financial years, 98 per cent of responses received from agencies to PBO information requests have been on time’ (recommendation 1).
the Government noted that sufficient access to information from the Commonwealth bodies is expressly provided for in the existing PS Act. Further, the PBO outlines that ‘this has not been an impediment to the operations of the PBO’ (recommendation 2).
‘situations where the outsourcing of advice has impeded our access to this information have been negligible’ (recommendation 4).
‘the PBO is not aware of specific legislative barriers that have impeded release of relevant information to the Parliamentary Budget Officer’ (recommendation 5).
‘agencies have adopted a less conservative bias towards the provision of information’ (recommendation 6).
the PS Act ‘does not limit the PBO’s ability’ to address these matters (recommendations 7 and 8).
2.36
Further information on the PBO’s actions in response to recommendations 1 and 2 and 4 to 8 in JCPAA Report 446 is provided below:
Recommendation 1—The PBO confirmed that, over time, it has ‘increasingly built effective, collaborative relationships with Commonwealth agencies to ensure that information requests are responded to on the timeframes agreed under the Memorandum of Understanding’.
Recommendation 2—The PBO confirmed that ‘it is our assessment that maintaining cooperative arrangements with agencies is the most effective way of ensuring access to information’.
Recommendation 4—The PBO confirmed that, ‘in preparing policy costings, the PBO has been able to rely on the data and models provided by agencies in responses to information requests. Since the release of the 2014 review and the Government’s response to the recommendations, situations where the outsourcing of advice has impeded our access to this information have been negligible’.
Recommendation 5—The PBO confirmed that, ‘since the release of the 2014 review and the Government’s response to the recommendations, the PBO is not aware of specific legislative barriers that have impeded release of relevant information to the Parliamentary Budget Officer’.
Recommendation 6—The PBO confirmed that, ‘since the release of the 2014 review and the Government’s response to the recommendations, the PBO has observed agencies have adopted a less conservative bias towards the provision of information to the PBO and subsequent release to requesting parliamentarians … There remain occasional instances where we have to advise a parliamentarian that an agency has refused the provision of information to the parliamentarian on the grounds that it is confidential’. It is noted that the Government response supported this recommendation, stating that, ‘should significant barriers emerge, the Government would consider additional protection for Commonwealth decision makers in prescribed circumstances’.
Recommendation 7—The PBO confirmed that the PS Act ‘does not limit the PBO’s ability to prepare medium-term projections. The PBO publishes an annual report on the medium-term budget outlook, including projections of receipts and payments, and analysis of the major trends in, and risk to, the medium-term outlook. The first medium-term projections were published in 2015-16, with annual publications since 2017-18’.
Recommendation 8—The PBO confirmed that the PS Act ‘does not limit the PBO’s ability to include 10-year medium-term projections of election commitments in the election commitment report ... Guidance 02/2018—Post-election report of election commitments: medium-term reporting set out the details for how the PBO intended to include the medium-term financial impacts of election commitments in the post-election report’.
2.37
In terms of recommendation 8, there was interest in the public hearing in how the PBO undertakes its 10-year projections. The PBO observed that:
there is an inherent uncertainty with all costings, particularly as you go out over time, and that is the case with the medium term, which is a 10-year period. We use the best data and models that we have available to undertake those costings … we’ve built that capability within the organisation so that our staff are skilled to undertake medium-term costings.
Recommendation 3
2.38
The PBO highlighted issues associated with recommendation 3 of JCPAA Report 446.
2.39
Recommendation 3 proposed that ‘the Government release details of the individual components of the Contingency Reserve to the Parliamentary Budget Officer, subject to any non-disclosure requirements considered necessary’. This recommendation was not supported in the Government response to the inquiry on the basis that ‘disclosing individual line items in the Contingency Reserve would be contrary to the public interest … due to commercial sensitivity, national security or where the disclosure would disadvantage the Commonwealth’.
2.40
The PBO stated ‘it remains the PBO’s view … that it is desirable that the PBO be provided with full details of the budget, including the composition of the Contingency Reserve and its revenue equivalent, noting that legislation protects information provided to the PBO in confidence from public release’. The PBO advised that, in the absence of this provision, ‘particularly when the value of Decisions Taken But Not Yet Announced is substantial’, it will ‘continue to caveat costing and budget analysis responses to parliamentarians with advice that there is particular uncertainty around costing estimates, which may need to be updated after decisions are announced’.
2.41
The Independent Review Panel commented on JCPAA recommendation 3, indicating it was the panel’s finding that ‘the accuracy of PBO costings has only on rare occasions been affected by lack of access to the Contingency Reserve, revenue forecasting models, and other information from the Government’. In the light of this, the Independent Review Panel ‘concluded it is not worth further pursuing the issue at this time, but it should continue to be monitored by the JCPAA’.
2.42
The reason provided by the Government for not supporting Recommendation 3 was that ‘disclosing individual line items in the Contingency Reserve (CR) would be contrary to the public interest’. It was further explained that ‘individual measures in Budget Paper 2 may include a statement that a provision has been included in the CR where the financial implications cannot be published due to commercial sensitivity, national security or where the disclosure would disadvantage the Commonwealth (such as in the negotiation of National Partnership Agreements)’.
2.43
Due to the sensitivity of the information and the potential harm disclosure may cause to the Commonwealth, the Department of Finance ‘relies on exemptions that are available under the Freedom of Information Act 1982 to exempt such information from release or disclosure’.
Stakeholder Relationships and Engagement
2.44
The PBO confirmed that the PBO is continuing to ‘broaden and deepen its stakeholder relationships and engagement, including by seeking regular feedback on our performance’.
2.45
The PBO regularly gathers stakeholder feedback through a range of mechanisms, including:
the stakeholder survey we undertake once a Parliamentary term … which was last undertaken early in 2018;
targeted interviews with key stakeholders within the Parliament, most recently in relation to their engagements with the PBO during the 2019 election period, which has informed our conclusions about how we can improve our performance during the next election period;
informal discussions with stakeholders, particularly parliamentarians’ advisors, in relation to our costings work, which has led us to revise our templates and guidance material to make them more accessible; and
website mechanisms that facilitate feedback being provided to the PBO on any of our publications.
2.46
The PBO stated that its 2018 stakeholder survey ‘indicated a high degree of satisfaction with our services and the publications we produce’. In terms of parliamentarian requests, ratings across a range of service attributes within each of the three stages of contact with the PBO ‘showed a solid to very high level of overall satisfaction’—‘100 per cent of respondents were satisfied with the initial discussion and with customer service during the formal request; 88 per cent were satisfied with the request template itself; and 88 per cent were satisfied with the formal response’.
2.47
The PBO provided additional information on the implementation of Recommendation 16 of the Independent Review Panel—that the PBO should ‘conduct a survey once in each term of Parliament to get feedback on its performance from its stakeholders’. The PBO stated that it had ‘conducted a stakeholder survey during February and March 2018’, with results of the survey being included in the PBO’s activity report in May 2018 and the annual report, and that it is also ‘looking at ways to gather more regular feedback through a range of channels to enhance reporting on the PBO’s performance as part of the annual performance statement in the annual report’. The next stakeholder survey is planned for early 2021.
2.48
Other performance indicators that the PBO uses to track external engagement include media mentions, report downloads, website page views and twitter activity:
In 2018-19, the PBO recorded 1045 media mentions across print, online, television and radio, blogs and other media. These related to policy costings, PBO research and PBO functions more generally. Media mentions of our costing work usually indicated that the costing estimates were regarded as reliable and that the PBO is regarded as impartial and independent.
2.49
The PBO further stated that it had increased its focus on engagement with relevant experts in the public and private sectors, academia and similar international organisations—‘we engage formally and informally with individuals in all of these organisations to inform the development of our costing methodologies, to assist with the evaluations we have undertaken, and in relation to our research publications’. The PBO also engages internationally with peer independent fiscal institutions, such as the Canadian Parliamentary Budget Office, the United States Congressional Budget Office and the United Kingdom’s Office for Budget Responsibility, as well as through the Organisation for Economic Cooperation and Development network of independent fiscal institutions.
2.50
Several stakeholders commented positively on PBO stakeholder relationships and engagement. Box 2.1 provides a summary.
Box 2.1: PBO Stakeholder Relationships and Engagement:
Government Departments
The Treasury—We‘ve got a very close relationship with the PBO. We meet regularly with them on a kind of informal liaison basis, which means we often can talk through any potential issues and deal with them. In terms of timeliness, my understanding is that the PBO are happy with how arrangements are working, and I’m not aware of any other issues.
Department of Finance—The PBO have done a lot in relation to their engagement with agencies in understanding and explaining what they do … the PBO have had a really strong focus on working with agencies, and so the level of comfort has increased over the lifetime that the PBO has been in place. There are really no issues and there are very positive relationships.
Members of Parliament
The Parliamentary Budget Office … is an important part of our parliamentary democracy. It has provided a valuable and vital service to non-government parties and the Parliament since its establishment, through the provision of costings and associated information … As recognised by the independent review and the Australian National Audit Office, the PBO has informed the public debate and strengthened the fiscal policy discussion.
Research Bodies and Policy Think Tanks
Tax and Transfer Policy Institute—We believe that the PBO’s ongoing external engagement activities, including consulting the expert advisory panel, undertaking secondments and conducting stakeholder surveys, will assist in maintaining the relevance of its self-initiated research … The PBO has developed a wide range of consultative procedures that appear to be working effectively, and the PBO’s public communications are typically clear and informative.
Grattan Institute—We believe that the establishment of the PBO has been unambiguously positive for the Australian policy landscape … in the short time since it’s been established, the PBO has become an important institution in the policy landscape. We at Grattan very much value our interactions with the PBO and really appreciate the quality of both its research and costings work.
Grattan Institute—The credibility of PBO costings has enhanced policy development by the opposition and minor parties, improving the contest of ideas … The PBO’s research reports have improved the information base for public debate … In our experience, it employs high-calibre staff with a good understanding of policy costing methodologies … We draw on the PBO’s work in our research and find it to be of a high quality … Grattan Institute has a positive and productive working relationship with the PBO … The PBO has provided its time and expertise to review budget and other economic policy-related Grattan reports, helping ensure we make a well-informed contribution to public debate.
National Foundation for Australian Women—The publication of self-initiated Research Reports has provided a useful resource to external stakeholders who do not have direct access to the resources of the PBO.
Possible Areas of Reform to Expand PBO Operations
Gender Budget Analysis
2.51
Although outside the scope of previous reviews or recommendations, a number of submissions to the Committee made suggestions that the PBO play a greater role in assessing the impact of various budgetary measures on women.
2.52
The NFAW maintained that ‘one of the external factors which should influence the role of the PBO into the future is the ongoing lack of transparency and public understanding of budget and fiscal policy settings as they apply to women’. The NFAW proposed that ‘the PBO be given a mandate to prepare an annual Women’s Budget Statement (WBS) for Australia’. The NFAW observed that preparation of a WBS could be a matter referred to the PBO on an on-request basis—‘it could notionally perform a WBS-type function so long as a parliamentarian was willing to make the necessary request’. However, the PBO ‘could also have the preparation of an annual WBS as a mandated component of its research program’. The NFAW further proposed that ‘the Office for Women be tasked with partnering with the PBO on the internal analysis and building the capacity of the public service across the board to provide budget input.’
2.53
Dr Risse and Ms Jackson similarly proposed that the PBO’s current responsibilities be ‘formally expanded to include undertaking an independent and non-partisan analysis of the gender implications of the Federal Budget’. Dr Risse and Ms Jackson were of the view that the PBO should have:
…a role in ensuring that the gender implications of the government’s economic budgetary decisions are properly recognised, computed and well understood by Parliament … It is … in the interest of effective and equitable fiscal policy design that our Australian Parliamentarians are reliably informed on the ways in which proposed budgetary measures differently affect our population on the basis of gender.
2.54
In terms of its existing capability to undertake gender impact assessments in costing and other work, the PBO stated that ‘we can and do undertake distributional analysis at the moment. It can be about gender but also around incomes, disadvantaged people or regions. But, at this point, we undertake that as requested, largely in relation to our costings work’.
2.55
As to whether the PBO costing request template prompts parliamentarians to seek advice on distributional or gender impact analysis, the PBO confirmed that ‘we don’t specifically prompt people for that’—however the template has ‘recently [been] revamped’ to include requests for ‘any supplementary analysis required’. The PBO stated that ‘a prompt is one option that we could take’.
2.56
However, there may be resource implications of including a specific prompt on this matter in the PBO costing request template. The Acting Parliamentary Budget Officer stated that:
If the level of request for analysis stayed similar to what it is currently or was only slightly above then I wouldn’t expect there to be resource implications, but if it was requested routinely for each costing that we did then there would likely be some resource implications … if it became a core element of our work … that would likely have resource implications. In particular, we would look to significantly enhance and embed that into our core functions, were we requested to do that on a routine basis for our costings.
2.57
The PBO further observed that ‘potentially we could survey parliamentarians or their offices to test interest in that service before we made the changes … an alternative would be for us to make the change and test it over a period of time and then seek resources if required’.
2.58
In terms of the NFAW proposal that ‘the PBO be given a mandate to prepare an annual Women’s Budget Statement (WBS) for Australia’, the Acting Parliamentary Budget Officer observed that, if this was to be undertaken with current resourcing, other tasks would have to be reduced:
Depending on the scope of what we were requested to do, I think we would have the capability to do it … With our current resourcing, if we were to undertake it, it would mean either a reduction in other tasks that we undertake or we would require additional resourcing … in terms of timing of such a statement. Because we don’t have access to the deliberations in the lead-up to a budget, we would be in a position only to start preparing it following the release of the budget.
Publication of Policy Costings
2.59
The Independent Review Panel recommended the PBO ‘publish regular data on the number of policy announcements made with reference to PBO costings, and whether or not, and when, the underlying PBO costing document was released by the party or parliamentarian concerned.’ This recommendation has been implemented by the PBO.
2.60
The NFAW raised concern over the ability of a parliamentarian to ‘announce that the policy has been costed, without releasing the full costing, with the result that members of the public cannot readily verify the parameters of the policy that has been costed unless or until it is formally published as an election commitment’. The NFAW proposed that the PBO ‘be authorised to issue full details of policy costings where a parliamentarian states that the policy has been costed by the PBO regardless of whether the parliamentarian releases full details of that costing’.
2.61
Similarly, the Grattan Institute proposed that the PBO ‘be required to release a costing once the commissioning politician (or their party) comment on the costing in public … This would ensure that important context—including the assumptions and level of reliability—are visible.
2.62
The Independent Review Panel ‘decided, on balance, not to recommend any change in the current strict confidentiality surrounding costings and costing documents’ but noted:
…it is appropriate to make more transparent the extent to which parties and parliamentarians publicly draw on the PBO’s reputation but do not release its costing response documents. This might give some encouragement to parliamentarians to voluntarily release costings, and in turn, would result in more informed public debate without compromising confidentiality.
Post-election Report and Minority Parties
2.63
The Independent Review Panel recommended that ‘the PBO should provide parliamentary political parties with fewer than five Members or Senators the option to have the financial impact of their election commitments included in the PBO’s Post-election Report of election commitments’.
2.64
The panel outlined that ‘minor parties and independent members now play a prominent role on some budget-related issues’; this is further supported given the crossbench continues to have a significant impact on the passage of legislation through both the House of Representatives and the Senate. The panel also argued that expanding the report to minor parties would promote accountability and encourage them to fully articulate their policy platforms, enabling more informed discussion and debate.
2.65
The review panel also outlined that this proposal is similar to the operation of the Bureau for Economic Policy Analysis in the Netherlands, which allows parties of any size the option to have their pre-election policy platform costed.
2.66
However, in implementing the recommendation, the PBO stated that ‘no minor parties or independents chose to be included in the 2019 post-election report’.
2.67
The PBO also contemplated the possibility of these costings becoming compulsory for minor parties and independents. This would require legislative change and have a minor impact on the PBO’s resource capability:
…requiring the PBO to include in the report all parties represented in Parliament before the election would require a legislative change. For the 2019 election, had legislation been in place to require this, seven minor parties would have been included in the report. If the PBO had been required to publish the platforms for all of these parties, the overall financial implications would have been relatively minor for the PBO … However, the timing of publication for the minor parties’ component would have been later than that for the major parties, and there would likely have been flow-on effects to the delivery times for other PBO work, such as costings and publications …
If minor parliamentary parties were compelled to have their platforms costed in each general election, their use of the PBO outside the caretaker period could increase in response. There is considerable uncertainty around the potential increase in demand for the PBO’s costing resources; in the event that demand exceeded the available resources, the PBO would continue to use its published principles for prioritising costing requests. This could result in an increase to median response times for costings for all parliamentarians. The size and duration of the impact on resources required to cost minor parties’ platforms would be heavily influenced by the number of minor parties and the complexity, novelty and size of their policy platforms … To include [in any amendment to the PBO legislation] those candidates or parties not represented in Parliament prior to the election would likely have significant resourcing implications, depending on the nature of the proposed change.
2.68
The Committee therefore makes a recommendation that further consideration be given to the post-election report and future inclusion of minor parties and independents.
Concluding Comment
2.69
The PBO is fulfilling its legislative mandate and is held in high regard by relevant stakeholders. The PBO continues to inform the Parliament by providing independent and non-partisan analysis of the budget cycle, fiscal policy and the financial implications of proposals.
2.70
In the three-year period since the previous independent review, a range of indicators point to the PBO’s services continuing to be relevant and valued by stakeholders. Since the start of 2016-17, the PBO informed the Committee that it had completed more than 6460 policy costings for parliamentarians, with a median response time of 13 days; published more than 25 reports to inform the Parliament and the public about fiscal policy and the budget, all of which were reported in major media outlets; published the 2019 post-election report of election commitments, including medium-term costing minutes and searchable online costings; and received formal and informal feedback from parliamentarians, government agencies and other stakeholders that the PBO’s work is valued and its interactions are professional.
PBO Review: Possible Areas of Reform to Support Effective PBO Operations
2.71
Under the Parliamentary Service (PS) Act, independent reviews of the PBO after general elections are currently not automatic but at the request of the JCPAA. A legislative provision that provides for an automatic referral process for independent review of the operations of the PBO would strengthen governance practice by:
providing for ongoing expert and independent operational evaluation of the PBO;
ensuring that the PBO continues to meet its obligations under its mandate and the changing needs of the Parliament and international practice;
assisting the JCPAA in its statutory oversight role of the PBO—a benchmark independent review at the start of the Parliament would enable the JCPAA to oversight and monitor PBO implementation of the review recommendations over the life of the Parliament, and also inform any subsequent parliamentary inquiries;
enabling the PBO to continuously improve the effectiveness of its stakeholder relationships and engagement; and
serving to further reinforce the independence of the PBO.
2.72
In respect to oversight of the PBO, the role of the JCPAA is (as intended by the Joint Select Committee on the Parliamentary Budget Office in its 2011 report) to inquire into the findings and recommendations of the required three-year review of the PBO, as desired by the Parliament, rather than conduct that review.
2.73
In addition, the PBO is funded to commission a quality, independent review and so it is appropriate for it to automatically cause this function to take effect at the appropriate time.
2.74
In this vein, the Committee has recommended legislative change to section 64T of the PS Act.
2.75
The Committee recommends that the Australian Government amend section 64T(1) of the Parliamentary Service Act 1999 (PS Act) to provide for an automatic referral process for independent review of the operations of the Parliamentary Budget Office (PBO), to be completed within 9 months after the end of the caretaker period for a general election.
Consistent with section 64(T)(2) of the Act, the person or body who is to conduct the review, the review scope and the manner in which the review is to be conducted will be determined by the Joint Committee of Public Accounts and Audit (JCPAA). In the third year of a Parliamentary term the JCPAA may propose the method and scope of the review prior to the prorogation of Parliament for endorsement by the successor Committee in the new Parliament.
PBO Implementation of Previous Review Recommendations
2.76
The JCPAA has statutory oversight of the PBO and, as such, has an essential role in monitoring implementation of recommendations of independent reviews of the PBO.
2.77
The Committee acknowledges the PBO’s confirmation that it has implemented all of the recommendations arising from previous reviews where it is the implementing agency.
2.78
The PBO provided comprehensive additional information, updating previous information on this matter published in April 2018, on its implementation of the 16 recommendations of the Independent Review Panel, Parliamentary Budget Office Review 2016-17.
2.79
The Committee is satisfied that the PBO has sought to address all of these recommendations and notes the PBO’s confirmation that it is working to improve further in each of the broad areas identified by the review.
2.80
The Committee makes recommendations below with regard to four of the Independent Review Panel recommendations, where there were remaining matters of interest.
2.81
The Independent Review Panel made a number of specific recommendations identifying a continuous monitoring role for the JCPAA.
2.82
Consistent with the Joint Committee of Public Accounts and Audit (JCPAA) role in monitoring the implementation of recommendations of independent reviews of the Parliamentary Budget Office (PBO), the Committee recommends that the PBO ensure the JCPAA is provided with sufficient data to enable it to continue to monitor matters addressed by recommendations 5, 7 and 15 of the Independent Review Panel, Parliamentary Budget Office Review 2016-17.
2.83
The Independent Review Panel also recommended (recommendation 8) that the PBO should ‘consider a possible evolution of its self-initiated work program by … ensuring it has the capacity to further develop its longer-term analytic ability to allow consideration to be given to transferring responsibility for the next IGR (scheduled for 2020) to the PBO’.
2.84
Any future transfer of the IGR, is a matter for the Government of the day. However, the Committee notes that, consistent with recommendation 8, the PBO has been further developing its longer-term analytic ability.
2.85
The Committee recommends that the Parliamentary Budget Office give further consideration to the issue of gender distributional analysis and provide advice to the Joint Committee of Public Accounts and Audit regarding how this may be incorporated into existing costings.
2.86
The Committee recommends that the Parliamentary Budget Officer acknowledge the intentions of the Joint Committee of Public Accounts and Audit, under section 64T of the Parliamentary Service Act 1999, to include in its request concerning the scope of the next independent review of the Parliamentary Budget Office, consideration of the post-election report and the possible compulsory inclusion of minor parties and independents.
Chair