Publishing fiscal policy intentions
Part 2 of the Public Finance Act requires the Government to set out its fiscal policy and to describe the relationship between this policy and the principles of responsible fiscal management. The Government presents this information in two key documents:
- the fiscal strategy report, and
- the budget policy statement.
Fiscal strategy report
The fiscal strategy report sets out the Government’s high-level fiscal strategy.
Key requirements – fiscal strategy report
When
- Tabled in the House of Representatives by the Minister of Finance at the time of the Budget (around May/June for a 1 July fiscal year).
Long-term objectives (10 or more years)
- State long-term objectives for fiscal policy and for the following key variables:
- total operating expenses
- total operating revenues
- the balance between total operating expenses and total operating revenues
- the level of total debt, and
- the level of total net worth.
- Explain how the long-term objectives accord with the principles of responsible fiscal management.
- Disclose the timeframe to which the long-term objectives contained in the fiscal strategy report relate.
- Assess consistency of long-term objectives with most recently published long-term objectives and explain any departures.
Short-term intentions (3 or more years)
- Indicate short-term intentions for key variables.
- Assess consistency of short-term intentions with the principles of responsible fiscal management and long-term objectives. Explain the reasons for departure from the principles or long-term objectives, how the Government expects to return to the principles or objectives, and when.
- Assess consistency with most recently published short-term intentions and explain any departures.
Other
- Assess consistency of economic and fiscal update with short-term intentions.
- Provide projections of likely progress against long-term fiscal objectives under stated significant assumptions.
The fiscal strategy report:
- encourages consistency in fiscal policy over time
- requires that the Government focus on the long-term implications of fiscal policy, and
- allows users to assess the sustainability of the fiscal position and its sensitivity to changes in policy.
Budget policy statement
The budget policy statement focuses more on the detailed priorities for the upcoming Budget.
Key requirements – Budget Policy Statement
When
- Commonly tabled in the House of Representatives by the Minister of Finance in December (in conjunction with the December Economic and Fiscal Update). It must be provided by 31 March.
Broad strategic priorities
- State the broad strategic priorities for the forthcoming budget including overarching policy goals, policy areas and consistency with the most recent short-term fiscal intentions.
- Explain any changes in the long-term fiscal objectives and their relationship to the principles of responsible fiscal management.
- Explain any changes in short-term fiscal intentions and their relationship to the principles of responsible fiscal management and long-term fiscal objectives.
The budget policy statement:
- contributes to fiscal transparency. The statement provides for transparency by avoiding big surprises at Budget time. The Budget Policy Statement may be used as a vehicle for seeking submissions from the public on the proposals outlined in it. Pre-Budget reports are regarded as part of international best practice on budget and fiscal transparency
- encourages consistency in fiscal policy. It encourages consistency between stated intentions and actual budget decisions, and between budget decisions and the principles of responsible fiscal management
- encourages debate on the aggregate impact of the proposed Budget as opposed to the detailed budget allocations within the proposed Budget. This helps make the trade-offs between taxes, expenses, debt and net worth more explicit, and
- provides a key opportunity for debate on the content of the forthcoming budget. This is consistent with an open budget process in which fiscal strategy, budget parameters and priorities are debated.
