Technical report

Factors influencing the reliability of policy proposal costings

Technical note no. 01/2017
Federal government Budget Government expenditure Policy costings Australia
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Costings produced by the Parliamentary Budget Office (PBO) are estimates of the financial impact of policy proposals on the Commonwealth Government’s budget.  They generally cover a future time period of between four and 10 years.  Despite being the PBO’s best possible estimates of the budget impact of a policy, all costing estimates are subject to some degree of uncertainty about how closely they would correspond to actual outcomes, were the policy proposal implemented.  The level of uncertainty will vary from costing to costing depending upon factors such as data quality, assumptions, methodology, the volatility of the costing base and the magnitude of the policy change.

The PBO is committed to providing transparency in relation to the factors that affect the reliability of any given costing.  This technical note has been prepared to raise awareness of the factors affecting uncertainty in costings and how the PBO deals with them.

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