Appendix E – Report requirements and methodology

Costing election commitments

Individual costing minutes are included in this report for commitments that have a net non-zero financial impact on the budget aggregates. Estimates of the financial impacts of the commitment are provided over the 2025-26 Budget forward estimates period (2025-26 to 2028-29) and medium term (2025-26 to 2035-36). Where the PBO identified a financial impact in 2024-25, this has been included as a footnote in the relevant financial tables.

The individual costings in this report use the same budget rules and costing conventions, and comparable models and data, as the government uses in preparing the budget. 

Every costing minute includes the detail of the specification of the commitment, a summary of the expected fiscal impact against the relevant budget aggregates (usually the underlying cash balance and fiscal cash balance, and where alternative financing is used, also the headline cash balance), detailed tables of the impact over the medium term, and an explanation of the key assumptions, methodology and data sources used in preparing the costing.

The baseline for the costings included in this report, and the economic parameters underpinning the analysis, were set out in the PEFO released on 7 April 2025 by the Secretary to the Treasury and the Secretary of the Department of Finance (the secretaries). The financial impacts of a costing estimate the impact of the proposal against this baseline.

The estimated cost of a policy can change over time as economic conditions change and new data become available. Some individual costings are only slightly affected by changes in economic parameters, while others are very sensitive to parameter changes. Each individual PBO costing minute contains a discussion of the drivers of the results and how sensitive the estimates are to variations in those drivers.

The costings included in this report have been prepared by either the Parliamentary Budget Officer or by the Secretary of the Department of Finance or the Treasury, in keeping with the Charter of Budget Honesty Policy Costing Guidelines.^[5]  Where costings have been prepared by one of the secretaries during the caretaker period, the Parliamentary Budget Officer has taken all reasonable steps necessary to determine that the costings are valid and appropriate for inclusion in the report. 

Where a policy costing prepared by the Treasury or the Department of Finance during the caretaker period does not include the financial impacts over the medium term, the PBO has prepared a supplementary costing that includes these.  

What is (and is not) in a costing

PBO costings are an assessment of the financial impact of a proposed election commitment on the budget. They estimate how much an election commitment, if implemented, would change the budget surplus or deficit as presented in PEFO. These costings take into account the expected direct behavioural responses to the proposed policy change by people (or other entities) who are directly affected by the policy wherever those responses are likely to have a significant impact on the cost of a proposal.^[6] More detail on costing infrastructure projects is in Box E-3.

The costings do not include impacts that could arise due to the effects of a policy proposal on the wider economy, for instance through a change in prices, wages, investment or productivity that can change the rate of growth of the economy, although the costing documents do include a qualitative statement where the potential for these effects is judged to be significant. This approach is consistent with the approach taken in the budget and in other jurisdictions.^[7] These impacts are sometimes referred to as ‘broader economic’, ‘second round’, or ‘indirect’ effects.

Broader economic impacts are generally not included in costings because their magnitude and timing are highly uncertain. In some cases it is not even clear what direction the broader economic effects would have, as it depends on additional details such as how the proposal would be funded. The broader economic effects may also already be included implicitly in the baseline budget projections. For example, the medium-term budget projections assume that there would be ongoing productivity growth at around the average level of the past 30 years. This implicitly assumes that there would be ongoing reforms to deliver such an outcome. Including productivity growth impacts for a particular proposal on top of these background assumptions risks overstating the likely level of productivity growth.

Costings prepared by the PBO are based on the best information available, including known details of items already included in the budget. Unlike other budget updates, for PEFO the PBO has access to the details of provisions for individual items included in the Contingency Reserve, except where decisions are commercial in confidence or are not disclosed for national security reasons.^[8]

Conventions: agency names and rounding

Agency and portfolio names in the report are as at the 2025 general election. They do not reflect any Machinery of Government changes post-election.

The PBO rounds its estimates of the financial implications of policy proposals to simplify the presentation and acknowledges that the figures presented are estimates and not exact numbers. All estimates are rounded to 3 significant figures. The PBO rounds by applying a set of rules that are simple to implement and apply consistently across all costings. Our default rounding convention may be modified on occasion where it fails to clearly present a costing’s financial implications. For example, where an estimate is particularly uncertain, in which case we may present less than three significant digits, or where a proposal specifies an exact amount to be spent, in which case the figures presented would not be rounded at all.^[9]

How election commitments are specified

The specification of the policy proposal to be costed is the starting point for any costing analysis. The costing specification comes from the person or party who has initiated the proposal. It sets out the proposed change to existing policy, or introduction of new policy, that is the subject of the costing analysis. Typically, the PBO would require the following details to effectively cost a policy:

1. the aim of the policy change that is being made, which provides the context and helps us understand the policy proposal
2. the change that is being made to current policy settings, including details of any changes in:
   1. grant amounts
   2. payment rates
   3. tax rates
   4. the transactions base
   5. eligibility criteria
   6. thresholds
   7. taper rates
   8. financing arrangements
   9. any other matter that has a bearing on the financial impact of the proposal.
3. implementation details, such as which agency will administer the policy
4. the commencement date of the policy
5. the date of announcement of the policy
6. details of any transitional arrangements
7. whether the policy is ongoing or terminating, and if it is terminating, the termination date.

In costing election commitments for the ECR, the PBO will prioritise public statements to evaluate and specify the commitments. Where the required detail cannot be determined from the policy announcement, the PBO will apply the following standard assumptions set out in our election guidance.^[10]

• For all proposals, except those that are ‘capped’ at a fixed amount, unless otherwise specified, it will be assumed they will commence on 1 July after the general election, will not be indexed and will be ongoing.
• For expenditure proposals that are ‘capped’ at a fixed amount, unless otherwise specified, it will be assumed they will commence on 1 July after the general election, will not be indexed, will terminate after 4 years (that is, at the end of the forward estimates period related to the date of commencement), will spread expenditure evenly over 4 years and will include departmental expenses within the capped amount.

Where further information is required to cost the commitment, the PBO may draw on several sources, including:

• responses to costing requests submitted on a confidential basis prior to the start of the caretaker period (the PBO continues to process these on a confidential basis up until polling day)
• responses to requests for costings submitted publicly during the caretaker period
• additional information provided by the parties, where the PBO has contacted them for further information related to announced election commitments.

Each costing minute summarises the policy specification for the costing at the start, so that it is clear exactly what has been costed. To improve transparency, costing minutes for election commitments separate the policy specifications into 2 sections: the ‘summary of proposal’ which details those specifications drawn from public sources or from the PBO’s set of standard assumptions, and the ‘Additional information (based on advice provided)’ which details those specifications drawn from non-public sources, including previous costings or from clarifications with parties.

Commitments are assumed to be ongoing unless parties publicly state otherwise

Where the PBO could not determine from the policy announcement and related public material whether a commitment was ongoing or terminating, we adopt the standard assumption that the commitment is ongoing at the level of funding in the last year of the forward estimates, either at a fixed level or indexed. This assumption does not apply to discrete ‘projects’ such as the construction of a specific piece of infrastructure, which are all assumed to be terminating.

Commitments where departmental expenses are absorbed

When tracking announcements made by parties, the PBO notes all instances where departmental costs associated with implementing a commitment are specified to be absorbed by the affected agency or otherwise required to be offset under the commitment. A list of the number of commitments by portfolio is provided in each party chapter.

Commitments with concessional financing arrangements

A concessional loan is a loan provided on more favourable terms than the borrower could obtain in the financial market. The most common concession is a below market interest rate, but concessions can also include favourable repayment conditions. The income contingent loans available through the Higher Education Loan Program (HELP) are an example of concessional loans offered by the Commonwealth.

The accounting treatment of concessional loans differs across each budget aggregate. The underlying cash balance only captures actual flows of interest related to the loans (which include fees). The headline cash balance captures actual flows of principal as well as interest. The fiscal balance captures accrued interest, the value of the concession and any write-offs related to the loans. The interest cost of financing these loans is captured in all budget aggregates, and is separately identified by the PBO (see Table E-2 for more detail).^[11]

The provision of concessional loans decreases the Australian Government’s net worth if the liabilities issued (the value of Commonwealth Government Securities issued to finance the loans) are greater than the assets created (measured at their ‘fair value’ or price at which the loans could be sold).

Table E-2: Components of concessional loan financial impacts in costing proposals

Treatment of debt not expected to be repaid (DNER)

All budget aggregates take into account estimates of the share of loans not expected to be repaid when calculating interest flows and estimating the value of the concession that is being provided. The fiscal balance captures change in loans not expected to be repaid through ‘Other loan financing’. If a portion of loans are not expected to be repaid, estimates of the ‘fair value’ of the loans outstanding will be reduced. Such reductions, both when loans are issued and if loans are subsequently re-valued, are recorded in the budget under ‘other economic flows’ which are also reflected in net worth.

Additional detail regarding the treatment of concessional financing arrangements in each election commitment is contained in the corresponding costing minute available in the 2025 Election commitment costing section of the website.