Australian federal budget

The federal budget, and the budgetary process, is a social contract between a people and its government. Despite its complexity, it is a document that shows our societal preferences (for example, guns versus butter) and demonstrates that we do not live in a consensus political economy—interest group and class politics are alive and well.

What is the Budget?

According to Aaron Wildavsky, "The budget is a representation in monetary terms of government activity. If politics is regarded in part as conflict over whose preferences shall prevail in the determination of policy, then the budget records the outcomes of this struggle."

Federal financial authority comes from the U.S. Constitution. Article 1, Section 8 states: "the Congress shall have the power to levy and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the Common Defense and General Welfare of the United States." Federal taxing authority and the broad responsibility for the country's defense and general welfare is at the heart of the budget. "General welfare" has been broadly interpreted and serves as the justification for programs as different as space exploration, transfer payments to low-income citizens, road building, and wildlife preservation.

The federal budget is one of many tools available to the government to accomplish its goals; in addition, there is the tax system, loans and loan guarantees, monetary policy, regulation, the courts, and government-sponsored enterprises such as the mortgage lender FNMA (Federal National Mortgage Association), or Fannie Mae.

The federal budget also works with state and local government budgets. Certain government obligations are exclusively federal, such as national defense. Most education and transportation funding comes from states. Fire and police departments are paid for at the local level. Income and payroll taxes provide most federal revenue. States rely on sales taxes, and many also levy an income tax. Local services are mostly funded from property taxes.

The budgetary process is massive and involves the president and the executive departments, the Congress, outside interest groups, and the courts. To take a snapshot from 1988, the federal budget spending equaled one-fourth of national income, involved over 5 million civilian and military personnel, and was tracked in nearly 2,000 separate accounts. Even in a society that extols the virtue of free enterprise, the federal government is still the largest borrower, the largest spender, and the largest income receiver in the economy.

Key Terms and Concepts

Authorization, appropriation, and outlays. Before any federal entity can spend money, it needs both authorization—an approved guideline that explains the goals of a program and sets a spending limit—and appropriation. Appropriation is a separate legislative act that allows a program or department to make a spending commitment, such as hiring an employee or buying a jet fighter. Appropriations are not supposed to exceed budget authority. Finally, the money spent is budget outlay. In any given year, there is a significant amount of budget authority from prior years that obligates outlays in the current year.

Entitlements. A large portion of the budget is used to pay for obligations that do not require budget authority. The Social Security Act, for example, outlines who is eligible for a social security pension. The amount of money spent each year on this program, the outlay, does not depend on budget authority or appropriations; it is driven by how many people are eligible under the current law. Other programs in this category include food stamps, Medicare, and veterans' pensions. Because of prior budget appropriations and formula-driven programs such as entitlements, as little as 25 to 30 percent of a given year's budget is discretionary.

Economic assumptions. Perhaps the most confusing part of any budget debate is predictions on the future performance of the economy. Both the president's Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) make economic forecasts. Often they do not agree. Even a slight discrepancy in economic growth or inflation can result in very different pictures of the future budget.

Baselines. A baseline is an estimate of what a certain program at current service levels will cost into the future. For example, many federal programs are indexed to inflation. Government payments of medical care for elderly and low-income citizens depend on the number of people who are eligible and the increase in medical costs. If medical costs are rising and/or more people are eligible for government-paid care, then the future budget baseline will be higher than the current one. In budget terms, this is neither an increase nor a cut. A decision to cut or increase funding is applied to the new baseline. Like economic projections, baseline calculations also are a source of controversy.

Off budget. Not all federal spending is reflected in the federal budget. Sometimes a particular program is funded by a special tax and therefore is not part of the budget deliberation, and some items are taken off budget as an accounting trick.

Budget effort. Measuring the budget is more difficult than it might first appear. Different indicators tell contradictory stories. In 1962, for example, the federal budget was about $107 billion. In 1984 it was nearly$852 billion. On its face, this looks like a spectacular increase in spending and the growth of government. The problem with this comparison is that it does not adjust for inflation (a dollar in 1962 was "worth" more than one in 1984) or for the growth in the economy, which is typically measured as gross national product (GNP) or gross domestic product (GDP). The federal budget in 1962 amounted to 18.8 percent of GDP; in 1984, it was 22.2 percent. This suggests a rather gradual increase in government spending.

Goals of the Federal Budget

Public finance professors Peggy and Richard Musgrave argue that the federal budget has three goals: (1) to provide social goods, (2) redistribute income, and (3) manage the economy. Social goods are the things that we as a community can enjoy but that the market does not provide—including national parks, battleships, and interstate highways. The budget also redistributes income. This may take the form of transfer payments—money to low-income citizens—and subsidizing services and products used by low-income people, such as housing, medical care, and food. Finally, the budget tries to cushion the swings in the business cycle. Since the Great Depression of the 1930s, the federal government has tried to manage the economy. The federal budget pursues this goal through automatic mechanisms and deliberate action. For example, the government automatically pumps buying power back into a community when workers are laid off through unemployment insurance payments to individuals. In addition, Congress may enact a fiscal stimulus package where the government tries to spend money with the goal of increasing economic demand and creating jobs.

The Budgetary Process

The revenue side of the budget is managed through periodic changes to the tax code. The appropriations side of the budget, however, is prepared annually to allow for regular reviews of policies and programs. Since the Budget Reform Act of 1974, the federal fiscal budget year runs from 1 October to 30 September and is known by the year in which the budget ends (for example, Fiscal Year 2002 ended on 30 September 2002).

Although we often think of Congress as having the "powers of the purse," the federal budget requires the president and Congress to work together. The president presents a budget to Congress in early February. Although the budget is a single document, it is funded through thirteen separate bills. The House of Representatives and the Senate, through their committees, analyze and debate the budget and usually pass the modified funding bills between April and mid-September. If there are differences between the House and Senate versions, the bills go to the conference committee. Once both houses pass the final versions, they send them to the president for a signature. The power of a presidential veto is great since a single party rarely has the two-thirds majority vote necessary for a veto override.

At the end of the year there are two types of audits. One attempts to make sure that the money was handled honestly—a check on possible graft and corruption. The other is a performance audit that analyzes the effectiveness of different programs in an effort to enhance program outcomes while minimizing costs. These outcomes are often measured as ratios or other numerical relationships of cost to services or product. For example, tax collecting agencies will monitor their performance as "cents to collect a dollar of taxes." This type of measurement has become increasingly important in recent years as the federal government moves in the direction of "performance based budgeting."

Tools for Achieving Compromise

Since claims always exceed available resources, the budget is an effort to negotiate multiple claims from competing interest groups, regions of the country, and economic classes. Even when there is broad agreement, for example, on the need for a fiscal stimulus package during the recession of 2001, there are disagreements over the specifics. To combat the recession, the Republicans wanted to create jobs by giving tax breaks to corporations and derided the Democrats as giving into class warfare. The Democrats, in turn, wanted to boost consumer demand through workers spending their unemployment checks and claimed that the Republican plan was simply a pay-back for corporate campaign contributors. With this kind of rancor, how does a budget ever get passed?

There are a number of techniques that help achieve compromise. One is a concept known as "incrementalism," where there is a base funding amount that is deemed acceptable by all parties for a particular program. The budget debate focuses on the increment—increase or decrease—for next year's funding. Another technique is "decentralization," where Congress debates lump sums of funding rather than the specific programs funded by those sums. These lump sums can go to a federal bureaucracy or state or local government, where specific spending decisions are made. Finally, there is a great push to compromise because taking extreme positions often brings the government to a standstill, with serious political consequences for whomever the voting public blames for the breakdown. And when compromise is very difficult to forge, for example, during the late 1980s, the federal government has resorted to "budget summits," where the congressional leadership and the president hammer out a compromise behind closed doors. The ultimate product is usually enough of a compromise by all parties that the leadership can take the budget back to Congress for approval.

The History of the Federal Budget

The United States was born in debt. Alexander Hamilton, the nation's first secretary of the treasury, successfully lobbied for the federal government to assume the debt from the states for fighting the Revolutionary War. The states' debt combined with the federal debts owed to both foreign and domestic lenders totaled nearly$100 million. The early federal budget and budgetary process reflected the new nation's fear of strong executive power, entrusting most budgetary power in the legislature. During the eighteenth century and much of the nineteenth century, the departments of government made direct requests for funding to legislative committees.

Until the Republican Party began to create a stronger federal government during and after the Civil War, the federal budget was very small. In fact, even into the twentieth century, the total amount spent by city governments was greater than all the state and federal budgets combined.

The most dramatic tax story before 1940 was the dethroning of the Tariff and the creation of an income tax as the primary source of revenue. Most of the federal government's revenue in the eighteenth and nineteenth centuries came from duties on imported goods. Other sources were the sale of public lands and excise taxes on consumer goods, such as tobacco and alcohol. Although the federal government flirted with an income tax to help pay off the North's Civil War costs, there were doubts about its constitutionality. Progressive reformers ended that debate with the Sixteenth Amendment in 1913. Since then, taxes on income—individual and corporate—have been the federal government's largest source of revenue.

The federal budget has tended to accumulate large deficits in times of war and run surpluses in peacetime, which helped to pay the increased interest expenses in subsequent years. After the Civil War, however, civilian spending increased, primarily for pensions to Union veterans and their dependents. The most dramatic increase in civilian spending, however, came in the 1930s during the Great Depression when the federal government started experimenting with ways to reenergize a failing economy and quell the growing unrest of millions of citizens.

Graft, corruption, kickbacks, and rigged contracts are problems as old as government itself. Controlling these problems was a major emphasis of the Progressive Movement reforms of the late nineteenth and early twentieth centuries. Many of the budget reforms that would be incorporated in the federal budget were first tried in the private sector and by local governments. The Budget and Accounting Act of 1921 borrowed many of these ideas, modernized the budget process, and began the current system whereby the president prepares a comprehensive budget for all government spending on an annual basis. It also created the General Accounting Office (GAO) as an independent agency that would facilitate Congress's role in the audit and review of the executive branch.

For over fifty years, the president had more power over the budget than Congress. In the wake of the Watergate scandal, however, Congress reasserted some of its historic budget prerogatives. In 1974, it passed the Budget and Impoundment of Control Act, which among other things gave the Congress more oversight of the president's budget, including the creation of the CBO.

World War II made many permanent changes to the nature of the federal budget. The federal government spent and collected much more money. Federal revenue from individual income tax rose from 17 to 49 percent during the 1940s, and the corporate income tax rose more modestly from 20 to 27 percent of federal revenue. The federal government also began to take a bigger bite out of national income. The ratio of federal tax revenue to GDP doubled in the 1940s. Rising post-war wages also transformed the income tax from something that only rich people paid to a mass tax. The number of people paying income tax rose from 7 million in 1939 to 50 million in 1945. By the end of the twentieth century, nearly 100 million people paid income taxes.

At the middle of the twentieth century, the height of the Cold War, the amount of military spending reached 14 percent of GDP and then steadily dropped into the 4 to 6 percent range until the 1990s, when it hovered around 3 percent. Civilian spending, on the other hand, seems to be a mirror of that trend. It was 6 to 8 percent through the 1950s and into the 1960s, when it began to climb to its high, in 1991, of 15.8 percent. The rise in civilian spending is almost entirely due to increased spending on social security (including hospital insurance). The last important category is net interest on the national debt, which grew rapidly during the budget deficits of the 1980s.

The shortfall between revenue and outlays in any given year is the annual deficit. The accumulated deficits contribute to the national debt. Budget deficits in the 1980s and early 1990s were massive (averaging $223 billion from 1982 to 1993). That trend subsided in the mid-1990s. There were three consecutive surplus years ending in 2000, an achievement not seen since 1949. However, the U.S. government continues to hold a large debt, nearly$5.6 trillion in 2000.

Three congressional acts were created to reign in runaway deficits in the 1980s and early 1990s. They were the Budget and Emergency Control Act of 1985 (also known as the Gramm-Rudman-Hollings Act), the Gramm-Rudman-Hollings Reaffirmation Act of 1987, and the summit-negotiated Budget Enforcement Act of 1990.

An important trend that gained momentum under Richard Nixon is a decentralization of the federal budget, known as "fiscal federalism," which provides state and local governments with block grants from Washington. An extension of this decentralization is evident in the increasing use of tax incentives, rather than budget spending, to achieve public policy goals. For example, in the 2000 campaign for president, both candidates discussed plans to cut taxes to provide incentives for everything from education to energy efficient cars; they did not propose new budget authority for these programs.

Bibliography

Meyers, Roy T., ed. Handbook of Government Budgeting. San Francisco: Jossey-Bass, 1999.

Musgrave, Richard A., and Musgrave, Peggy B. Public Finance in Theory and Practices. 5th ed. New York: McGraw-Hill Book Co., 1989.

Schick, Allen. The Federal Budget: Politics, Policy, Process. Rev. ed. Washington, D.C.: Brookings Institution Press, 2000.

U.S. Office of Management and Budget. Budget of the U.S. Government. Washington, D.C.: Government Printing Office Budgets from Fiscal Year 1997 forward are available online at www.access.gpo.gov.

Wildavsky, Aaron B., and Naomi Caiden. The New Politics of the Budgetary Process. 4th ed. New York: Addison Wesley/Longman, 2001.

—David J. Erickson

An annual effort to balance federal spending on such things as forestry, education, space technology, and the national defense, with revenue, which the United States collects largely through federal taxes.

When the federal government spends more money than it collects in a given year, a deficit occurs. U.S. expenditures have exceeded revenue in every year since 1969. By the mid-1990s, annual budget deficits were exceeding $200 billion, alarming the public and fueling debate over how to balance the federal budget.

Of the three branches of the U.S. government, Congress has the power to determine federal spending, pursuant to Article I, Section 9, of the U.S. Constitution, which states, "No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." The drafters of the Constitution sought to secure the federal spending power with legislators rather than the president, to keep separate the powers of purse and sword. In The Federalist No. 58, James Madison wrote, "This power of the purse may, in fact, be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people."

Still, the Constitution reserved the president some role in legislative decisions regarding federal spending. The president may recommend budget allowances for what he or she considers "necessary and expedient," and if Congress does not heed these recommendations, the president may assert his or her qualified veto power. But the ultimate determinations of federal expenditures belong to Congress.

To encourage better communication and cooperation between the president and Congress on matters concerning the federal budget, Congress has enacted laws formalizing the budget-making process. The first such law was passed in response to an enormous national debt following World War I. The Budget and Accounting Act of 1921 (31 U.S.C.A. § 501 et seq.) required the president to submit to Congress an annual budget outlining recommendations, or budget aggregates. Within budget aggregates recommended by the president, Congress then was to assign priorities. The 1921 act did not change the balance of powers assigned by the Constitution: Congress retained the right to ignore the president's recommendations, and the president retained the right to veto spending legislation. Rather, the act formalized and codified the roles of each branch.

As may be expected, the president and members of Congress do not always agree on federal budget issues. In the early 1970s, President Richard M. Nixon claimed impoundment, which is an executive power to refuse to spend funds appropriated by Congress. Although Nixon argued that he had the right to impound in instances he believed were in the country's best interest, the U.S. Supreme Court affirmed a ruling by the Second Circuit Court of Appeals requiring Nixon to expend federal funds appropriated for the protection of the environment (Train v. New York, 420 U.S. 35, 95 S. Ct. 839, 43 L. Ed. 2d 1 [1975]). However, this ruling was based on the terms of a federal water pollution law; the Court declined to address specifically whether the executive branch had the general power to impound funds appropriated by Congress.

Congress responded with the Congressional Budget and Impoundment Control Act of 1974 (2 U.S.C.A. § 190a-1 note et seq.; 31 U.S.C.A. § 702 et seq.). This act sought to restore and strengthen legislative control of the budget by requiring the approval of both the Senate and the House of Representatives for presidential recisions, or current-year cuts, of funds appropriated by Congress. The 1974 act also established a budget committee in each congressional house, and the Congressional Budget Office to provide technical information and support. Finally, this act required that Congress adopt budget resolutions setting limits on budget aggregates and allowing debates on spending priorities within those aggregates.

The 1974 act greatly reduced the president's role in the budget process — in particular, the president's responsibility of determining and recommending budget aggregates to Congress. Now, legislators could more readily ignore the president's recommendations, and instead create for themselves, through budget resolutions, generous limits on budget aggregates. This allowed politicians more flexibility in setting spending priorities within the budget aggregates, thus pleasing their constituents. Not surprisingly, federal budget deficits grew.

In 1985, Congress reacted to the rising deficits by enacting the Balanced Budget and Emergency Deficit Control Act (popularly known as the Gramm-Rudman-Hollings Act) (Pub. L. No. 99-177, 99 Stat. 1038) (codified as amended in scattered sections of 2, 31, and 42 U.S.C.A.). The Gramm-Rudman-Hollings Act encouraged congressional conformity to deficit reduction targets specifically prescribed by the act. If, after the budget process has been completed, the budget exceeds deficit reduction targets, spending cuts are ordered by the president's Office of Management and Budget. The Gramm-Rudman-Hollings Act limited this executive power by providing congressionally mandated formulas for the spending cuts.

The Budget Enforcement Act of 1990 (2 U.S.C.A. § 601 et seq.; 15 U.S.C.A. § 1022) revised Gramm-Rudman-Hollings to make deficit targets flexible, not fixed. The 1990 act further required that reductions in defense and foreign spending cannot be used to increase domestic spending, and vice versa. This requirement is known as the firewall. In addition, the 1990 act required that either revenue increases or spending cuts must balance increases in spending for entitlements, such as Aid to Families with Dependent Children. This requirement is known as pay-as-you-go.

The current federal budget process is extremely complex. Confusion and misunderstandings about the process contribute to disagreements over how to resolve the federal deficit. A very basic description of the process follows:

First, the president sends budget recommendations to Congress. Congress, which has the ultimate power to appropriate federal funds, may follow or ignore the president's recommendations.

Second, the House and Senate together devise an overall budget resolution, usually debating their differences at a conference committee. Following the guidelines of the budget resolution, House and Senate committees recommend spending for each of thirteen substantive areas. For the House of Representatives, these committees, which loosely correspond with the thirteen substantive areas, include Agriculture; Banking, Finance and Urban Affairs; Education and Labor; Energy and Commerce; Interior and Insular Affairs; Judiciary; Merchant Marine and Fisheries; Post Office and Civil Service; Public Works and Transportation; Science, Space, and Technology; Veterans Affairs; and Ways and Means. For the Senate, the committees, which also loosely correspond with the thirteen substantive areas, are Agriculture, Nutrition, and Forestry; Banking, Housing, and Urban Affairs; Commerce, Science, and Transportation; Energy and Natural Resources; Environment and Public Works; Finance; Governmental Affairs; Judiciary; Labor and Human Resources; and Veterans' Affairs. The full House and Senate together vote on the recommendations of the committees, following debate in a conference committee if necessary. The House and Senate then jointly send an authorization bill for each of the thirteen substantive areas to the president for signing. These bills merely establish guidelines for spending; they do not actually authorize spending.

Next, the House and Senate Appropriations Committees together draft thirteen separate appropriations bills, which correspond to the authorization bills. The full House and Senate together approve or disapprove each appropriation, conduct debates in conference committees to resolve differences, and amend appropriations if necessary. They then jointly send the thirteen appropriations bills to the president to be signed. If the bills are signed, spending is approved.

Upon congressional funds appropriations, the branches and agencies of the federal government are required to spend the funds on the functions for which they were appropriated. Congress may supplement budget appropriations if conditions change following the budget process, but supplemental appropriation in excess of authorization bills must be accounted for with spending cuts, amendment of the individual authorization bills, or amendment of the overall budget bill containing all the individual authorization bills.

Several wrinkles complicate the federal budget process. For example, Congress and the president enact as law permanent authorization and spending appropriations for entitlement programs such as Medicare and Medicaid. Thus, appropriations for entitlement programs become automatic, requiring no further congressional action during the annual budget process.

Appropriations funding the principal and interest owed on the national debt are, practically speaking, also automatic. Unlike appropriations for entitlement programs, those for the national debt must be approved annually by Congress. But approval for funding this debt is always granted; to allow the United States to default would severely damage the national and world economies. In the debate over how to balance the federal budget, politicians and citizens often overlook automatic federal spending.

Also complicating the budget process is the method of accounting used by the federal government, known as the cash method. The cash method of accounting calculates expenditures based upon the date they are paid. This differs from the accrual method of accounting, which calculates expenditures based on the date the obligation is incurred. Although this may seem to be a subtle distinction, the cash method by its nature leaves more room for error in budget appropriations, some of which is corrected by a government statistic called the National Income and Product Accounts. Economists, politicians, and concerned U.S. citizens disagree over which accounting method, cash or accrual, would better serve the U.S. budget and the national economy. Moreover, economics is an inexact science whose complexities are not well understood by the average voter.

Added to the public's general confusion is the difficulty in estimating the federal budget, both revenues and expenditures, before the start of a fiscal year. Future unemployment, inflation, and growth in the gross national product are variables that will affect actual federal spending. And although the Treasury Department and the Senate Finance Committee estimate future revenues, no accurate determination will be available until the fiscal year has already ended.

Largely because the budget process is so complex, there is little agreement as to how to balance the federal budget. As the federal deficit lingers each year, so does public support of a constitutional amendment requiring a balanced budget. Yet several attempts at such legislation — in 1984, 1990, 1992, and 1994 — have failed to pass in Congress. One vocal proponent of a balanced budget amendment is Texas businessman H. Ross Perot, who ran unsuccessfully for president in 1992. Perot denounced mushrooming deficits, blaming politicians who approve current spending to appease constituents at the expense of future taxpayers: "[I]n 1992 alone we will add over $330 billion to the $4 trillion we've already piled on our children's shoulders… . The weight of that debt may destroy our children's futures."

Yet a balanced budget amendment would not be without obstacles. One problem is defining a balanced budget, especially given the confusion over federal accounting methods, automatic expenditures, and inaccurate estimates of revenue and spending. For example, a federal budget employing the cash method of accounting may show a far greater deficit than the same budget employing the accrual method of accounting.

Another problem is that of the enforceability of a balanced budget amendment, which hinges in part on taxpayer standing, or legal entitlement to sue. Would all taxpayers have standing to enforce a balanced budget amendment, or would only taxpayers who could demonstrate actual damage as a result of an unbalanced budget? Further, courts are reluctant to make determinations of what they consider political questions, or issues best decided by the legislative or executive branch of government. Many commentators consider the judicial branch incapable of effectively analyzing and deciding issues concerning the federal budget.

Perhaps the greatest impediments to a balanced budget amendment, or any other meaningful reform of the federal budget, are the sacrifices faced by U.S. citizens: to have their taxes raised and their spending programs cut. Whether Congress, the president, and the public will make these sacrifices to reduce and perhaps eliminate the federal deficit is an engaging political question.

See: accrual basis; independent parties; Congress of the United States; Constitution of the United States; Office of Management and Budget; Separation of Powers.

For the 2009-10 Australian Federal Budget, see 2009 Australian federal budget.

The Australian Federal Budget is a document that demonstrates the Australian Government's planned financial performance, and the framework it intends to conduct its operations in the following financial year.

Contents 1 Process 2 Charter of Budget Honesty Act 3 Budget Night 4 Budgetary policy developments 5 Footnotes 6 References 7 External links

Process

The exercise of putting together the Budget begins in November when the Accrual Information Management System (AIMS) is updated with the latest estimates, and the Senior Minister's Review, where the Prime Minister, Federal Treasurer, and Minister for Finance and Administration, meet to establish the policy priorities and strategy for the coming financial year.

The outcome of the Senior Minister's Review determines how the different portfolios will prepare their Budget Submissions for Cabinet. Agencies within each portfolio will not submit a request for new funding, because their potential savings within the agency are unfounded. After Finance has agreed to the costings, the Submissions will be circulated for coordination comments and lodged with the Cabinet Office by late February.

The Expenditure Review Committee (ERC), a committee of Cabinet, meets in March to consider all Submissions. They decide which proposals will be funded and the level of funding each will receive. At the end of the ERC, the Ad Hoc Revenue Committee will meet to make decisions on the revenue streams of the Budget. A pre-Budget review of the estimates will be conducted after all decisions have been finalised to ensure that they are reflected in AIMS.

Budget documentation will commence at the end of the ERC process. Agencies will prepare two components - the Portfolio Budget Statements and the Mid-Year Economic and Fiscal Outlook.

The Portfolio Budget Statements provide additional details and explanations of the Budget and the Statement of Risks, which is included in Budget Paper No. 1.

The final Budget will be presented and tabled in Parliament by the Treasurer on Budget night.

Charter of Budget Honesty Act

The Budget has to be presented within the framework that has been established by the Charter of Budget Honesty Act (1998).

The Charter provides for:

• sound fiscal management of the Australian economy
• open dissemination about the status of public finances
• transparency in Australia's fiscal policy

Budget Night

The Federal Treasurer presents the Budget on Budget Night, which is traditionally the second Tuesday in May. In modern times, the budget has always been broadcast live from Parliament House on the ABC and Sky News Australia. It is hosted on the ABC, without interruption from 7:30 pm to 8 pm, normally followed up with a report by a panel assessing the changes, benefits and flaws in the budget.

Before the presentation of the Budget, the day is spent behind locked doors briefing media and interest groups on various aspects of the budget. This is known as the Budget lock-up. Those invited to attend the briefings are not allowed access to the outside world until the Budget has been presented by the Federal Treasurer.

A convention in Australian politics is that the Leader of the Opposition delivers a "right of reply" speech in Parliament that is also broadcast on live TV.

Budgetary policy developments

Large cyclical changes in cash receipts (in yellow) and payments (in black) reflect changes in the government's economic objectives.

In comparison with similar economies,^{[nb 1]} Australia's government spending is relatively low. For the twenty year period from 1960 to 1980, the growth in spending roughly paralleled percentages in Japan and the United States.^[1]

In the first half of the 1980s, spending surged by approximately 3% of gross domestic product and the tax rate surpassed that of Ronald Reagan's neoliberal government. This brought much criticism of the political parties which were in power in the Australian States, and public sector medium enterprises came to be seen as inefficient. The economic term "current account deficit" was in vogue.

Riding on strong economic growth in the latter part of the 1980s, the Hawke Government brought forward an agenda for public sector reform that had been pioneered in the United States. Declaring a number of debt reduction strategies ranging from tariff rate reductions to privatisation and competitive tendering, Australia's public sector significantly declined in the period.^[when?]

Spending in the 1990s saw significant shifts in social policy expenditure as part of a broader scheme of "low inflation targeting". Although outlays for services to industry increased, the budget outcome remained the same throughout the early 1990s recession. The Howard Government actually reduced expenditure by 1.3% of gross domestic product in its first two years, making large cutbacks to outlays for the hospital system and education. Overall the government continued to run down public sector debt and promote asset trading in the private sector.

Footnotes

1. ^ Key indicators of economic activity in Australia, such as cost-push inflation and manufacturing and retailing sector productivity, are usually compared with other Organization for Economic Cooperation and Development member countries.

References

1. ^ Saunders, Peter (1987). "Understanding Government Expenditure Trends in OECD Countries and Their Implications for Australia". Australian Quarterly 59 (1): 34-42. 

• "Australian Government Budget - Overview". Department of Finance and Administration. http://www.finance.gov.au/budgetgroup/Commonwealth_Budget_-_Overview/commonwealth_budget_-_overview.html. Retrieved on May 12 2005. 

• "Financial management and budget frameworks". Foundations of Governance. http://www.apsc.gov.au/foundations/financialbudget.htm. Retrieved on May 12 2005. 

External links

• Australia Federal Budget
• Charter of Budget Honesty Act (1998) at ComLaw

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