A key role for the Parliamentary Budget Office (PBO) is to provide advice to parliamentarians on the estimated financial implications, or ‘cost’, of policy proposals they are considering. We provide independent advice that can be interpreted in the same way as the costings presented by the government in the budget, prepared to the same standards and using the same concepts.
Our advice is typically sought by members of the Opposition and minor parties as they cannot ask government departments for such advice. We provide our costing advice on a confidential basis if the parliamentarian requests it, and therefore it is the decision of the parliamentarian on whether or not to publicly release the costing.
A costing critically depends on the details of the specification of the proposed policy, as well as our assumptions about how people affected by the policy would be likely to change their behaviour in response to the policy.
This information paper explains our approach to determining the behavioural assumptions we apply when estimating the cost of policy proposals. We are guided by three principles. Behavioural assumptions aim to be:
- consistent across similar policies
- backed by empirical evidence
- informed by expert advice.
Given that a policy costing can be particularly sensitive to assumed behavioural responses, we are committed to transparency around these assumptions. The advice we provide to parliamentarians includes detailed information on the assumptions that have been made in preparing the costing and the basis for these assumptions. Where assumptions are particularly uncertain, we may include sensitivity analysis in our advice to parliamentarians.
To further improve transparency and gather feedback, this paper presents a consolidated list of the behavioural assumptions we have made in costings that were publicly released during 2019 (see Appendix A). In particular, this list includes behavioural assumptions that we used in costings in the 2019 Post-election report of election commitments.