The CBAx tool is a spreadsheet model that contains a database of values to help agencies monetise impacts and do cost benefit analysis
The Treasury first released CBAx, a cost benefit analysis tool, in October 2015. The CBAx version for Budget 2023 was released in October 2022. Key changes for this version are summarised below.
Using CBAx to inform decision-making
The Treasury encourages important public sector decisions to be informed by cost benefit analysis (CBA). This helps decision-makers to compare different options. The CBAx tool helps people to do in-house cost benefit analyses.
The CBAx tool is a spreadsheet model that helps agencies to:
- take a consistent approach across government to cost benefit analysis, including common values and assumptions
- take a long-term and broad view of societal impacts, costs and benefits
- rigorously assess these by monetising and discounting impacts, where possible, and
- be transparent about the assumptions and evidence base.
Many factors are considered in the decision-making process. Initiatives are not evaluated on CBAx results alone. CBAx results together with unmonetised impacts, evidence base and assumptions inform value for money advice. Value for money is considered alongside other factors such as strategic alignment with Government priorities, fiscal constraints and implementation risks.
In the budget context, the CBAx analysis is used primarily by the Treasury vote team in assessing the wellbeing impacts for New Zealand and developing value for money advice.
How to use the CBAx tool
The CBAx tool has been designed specifically with social sector agencies in mind, but can be used to help calculate present values for many initiatives.
The Treasury’s CBAx tool:
The Treasury's guidance on using CBAx:
Guidance on undertaking a cost benefit analysis:
We recognise that there will always be limitations to a tool like CBAx. To be able to use the CBAx tool, organisations need to quantify impacts and success rates, for example the number of people expected to gain employment, based on the best available data and evidence about the relevant impacts of an initiative. There will be gaps in the evidence for how effective an initiative might be, for example when trying something new.
The advantage of the CBAx tool is that it makes assumptions explicit, and values different types of costs and benefits in a consistent way. This provides the basis for more informed choices between different options. Discussions should consider all impacts including unmonetised impacts, as well as those impacts able to be monetised using the CBAx tool.
CBAx impact values database
CBAx contains a database of New Zealand specific publicly available data that you can use to value impacts. An impact value provides a numerical value in relation to one or more impacts of an initiative. In some situations a value may be a cost, in others it could be a benefit or a saving. Examples include the costs of an emergency department visit, the cost of the Jobseeker Support benefit and increased income for individuals. Agencies have derived the values using a variety of non-market valuation methodologies. The values are adjusted to reflect a common time period. The CBAx tool also allows you to add your own values for impacts into the model.
The Treasury welcomes suggestions of values, data or information to include in the CBAx database. This may be information that is available and that can be shared, or it may be a request for values that people would find helpful to have included in CBAx.
The Treasury purchased a licence for the Australian Social Value Bank in 2017. This significantly extends the wellbeing values available to use in CBAx. If a New Zealand government agency would like to purchase a sub-licence and use New Zealand applicable values in CBAx modelling, then please contact [email protected].
In 2016, the Treasury hosted Daniel Fujiwara, who provided an introduction to the methodology in the Treasury Guest Lecture on Social Impact Values. A copy of his presentation is available at Social Impact Values.
New Zealand agencies have started to use the methodology to develop subjective wellbeing values based on New Zealand data such as the General Social Survey. The CBAx model includes subjective wellbeing values developed by Kāinga Ora and Sport New Zealand. CBAx includes values for a WELLBY. Given their newness and our limited experience using these estimates, users should apply subjective wellbeing values with care to not overestimate the impacts.
What has changed? Recent improvements to the CBAx tool
The CBAx tool remains familiar and has no structural changes. It retains the Living Standards Framework domains and the focus on the initial cost benefit analysis steps that provide input to the CBAx model. This is to support fit-for-purpose application.
Key changes to the CBAx tool and its use are:
- Updating the CBAx database to reflect underlying data updates and additional environmental values.
- Updated wellbeing domains reflecting the refreshed Living Standards Framework.
The discount rates of 5%, and an alternative rate of 2%, are unchanged, consistent with the Treasury rates.
The CBAx Tool User Guidance has been updated to updated to include the refreshed Living Standards Framework and guidance on distributional analysis.
The quality of cost benefit analysis in budget initiatives has improved significantly since the introduction of the CBAx tool. While there are capability and resourcing issues with completing and assessing CBAx, it has led to more robust analysis including intervention logic and the initial steps of identifying and quantifying impacts.
Applied examples of CBAx are available as part of the Budget 2016 and Budget 2017 Information Release.
- Review of CBA advice to support budget initiatives - review shows improved quality of cost benefit analysis advice
- Applied Examples of CBAx - Budget 2016 Information Release
- Applied Examples of CBAx - Budget 2017 Information Release
The Treasury welcomes suggestions on the CBAx tool and would like to learn from practical experiences of applying CBAx. Over time, the Treasury will improve and update the tool. We welcome feedback and insights from people within and outside the public sector. Please contact [email protected] with comments and suggestions.