Australia has little-known rules in place around our federal budget that could be amended to help us in planning for the long term. This report details how the federal Budget Process Operational Rules (BPORs) can be reformed to incentivise long-term, holistic policymaking that prioritises wellbeing.

The BPORs detail how federal decisions about policy proposals are made, who can make the decisions, and what information must be included as part of the decision-making process. These rules currently state that: “Only first round effects will be considered in costings.” The inability to consider second round fiscal effects and ‘bank’ the savings from certain policies can act as a barrier to policy proposals that have significant, long-term benefits for society, such as those with a focus on early intervention and prevention. It also contributes to understating the costs of other policies that may achieve targets in one portfolio, but at the expense of outcomes in another portfolio.

Second round fiscal effects (SFREs) are the costs or savings for government due to increased or decreased demand for government services – such as improved health translating into less demand for health services.

The report recommends the following changes to the BPORs.

• Including SFREs in formal budget costings, where those effects can be determined (and secured) with a high degree of confidence.
• Extending the timeframe for costing policy proposals to up to 25 years (from 10 years), to better capture their long-term impacts.
• Ensuring a high degree of rigour in assessing SFREs by building government capability, tracking outcomes, and making sure SRFEs are not conflated with second round economic effects, which are much more challenging to estimate.

It’s possible to drive major benefits, both for the health and wellbeing of Australians, and for the budget’s bottom line. What’s needed is a long-term approach that supports improved wellbeing for people now and for generations to come.