How policy costings work in Australian elections

The short answer

How policy costings work in Australian elections

A costing estimates budget effects under stated assumptions; it does not prove benefits will occur. Read the request, baseline, behavioural assumptions, time horizon and what is excluded.

This is a method for assessing public claims, not a verdict on a party or a direction on how to vote. Conclusions should change when the underlying law, data or implementation evidence changes.

The useful question is not only “what is the rule?” but also “who administers it, which document controls it, and when might it change?” That distinction prevents an accurate general explanation from becoming wrong advice in a particular election, chamber or policy setting.

Evidence review

What a policy costing is and what it does

A policy costing is an estimate of the financial impact a proposed policy would have on the Australian Government budget if implemented. It answers the question: how much more or less would the government collect in revenue or spend on programs compared with the current policy baseline? Costings are typically produced by the Parliamentary Budget Office, the Treasury, the Department of Finance, or party policy units. A costing is an estimate, not a fact. It depends on assumptions about economic conditions, the behaviour of individuals and businesses in response to the policy, and the accuracy of the administrative data used to model the affected population. Different institutions may produce different costings for the same policy because they use different assumptions or modelling methods. A costing that shows a policy will cost the budget a certain amount does not mean the policy will actually achieve its stated purpose, and a costing that shows a policy will save money does not mean the saving will materialise in practice.

Evidence review

The role of the Parliamentary Budget Office

The Parliamentary Budget Office is an independent statutory body established to inform the Parliament by providing non-partisan budget analysis and policy costings. During election campaigns the PBO operates under a caretaker-period protocol that allows it to cost policies proposed by parliamentary parties and independent members. Parties submit a costing request specifying the policy, its parameters and its start date. The PBO then produces a public report setting out its estimate and the key assumptions underlying it. The PBO does not endorse, oppose or comment on the merits of any policy. It does not cost policies for candidates who are not currently members of Parliament. The PBO's costings are published on its website and are available for public scrutiny. The PBO also produces the post-election report on election commitments, which provides an independent assessment of the combined budget impact of the policies the major parties took to the election.

Evidence review

What a costing cannot tell you

A costing is specifically a budget-impact estimate. It does not measure whether a policy will be effective, whether the benefits will outweigh the costs to society, whether the assumptions about how people will respond are realistic, or whether the policy can be implemented in practice. A policy that costs nothing on paper may still fail to deliver its promised outcome. A policy that shows a large budget saving may involve cuts to services with consequences that fall outside the budget framework. Costings also typically ignore second-round effects: for example, a tax cut that stimulates economic activity may have a different net budget impact than the static estimate suggests. The PBO explicitly states in its reports that costings are not comprehensive evaluations of policy proposals. Their purpose is limited to informing Parliament and the public about the budget implications.

A common misinterpretation of policy costings is treating a zero-cost estimate as proof that a policy will cost nothing. A cost-neutral estimate may result from offsetting assumptions, such as predicted revenue gains from behavioural change that may or may not occur, or from restricting the costing period to a window that excludes long-term expenses. The PBO requires costing requests to specify the policy parameters clearly, and if a party submits a request that is framed narrowly it may receive a narrow costing. Independent scrutiny of a costing involves reading not just the dollar figure at the bottom but the entire set of assumptions, the baseline, the time horizon and the stated limitations. The PBO's published reports include all of these elements, and a costing that omits key assumptions or uses an unrealistic baseline should be treated as less reliable.

Evidence review

How to read a costing: the key components

When reading a costing, look for four things. First, the costing request: what exactly was the PBO or Treasury asked to cost? A request can be framed in a way that determines the outcome. Second, the baseline: what is the current policy against which the costing measures the proposal? If the baseline assumes a program is already going to end, a proposal to extend it may show as costing nothing. Third, the behavioural assumptions: how does the costing assume people, businesses, or other governments will respond? If a policy assumes full take-up by every eligible person but real-world take-up is lower, the costing will overstate the cost. Fourth, the time horizon: a costing that covers four years of the forward estimates will look different from one that covers ten or more years. Policies that involve large upfront costs and long-term savings may look expensive on a four-year horizon and cheap over a decade.

Evidence review

Election-costing promises and the post-election reality

During an election campaign parties and candidates may release costings produced by their own policy units rather than by the PBO. These costings are not independently verified. The PBO post-election report, released after the election, independently assesses the combined budget impact of the commitments the incoming government made during the campaign. This report provides a benchmark against which the government's subsequent budget measures can be assessed. It is common for policies announced during a campaign to be modified, phased in differently, or not implemented at all after the election. The post-election report is therefore a starting point for budget scrutiny rather than a definitive account of what will happen. The Department of Finance is responsible for publishing the final budget outcome each year, which provides the actual financial results to compare against earlier costings and estimates.

Common questions

Before you rely on the answer