Appendix E – Report requirements and methodology

Aggregating election commitments

Once individual election commitments were identified and costed, the costs were aggregated to determine the combined impact of each party’s election commitments on the budget aggregates against the PEFO baseline. This was done by:

• adding together the direct budget impacts of the individual election commitments
• adjusting for material interactions between commitments
• applying any overarching commitments, such as a tax cap
• adjusting for an estimate of the PDI impact of the entire platform.

Adding together the direct budget impacts of the individual election commitments

The aggregate budget impact includes all quantifiable election commitments for each party. In some cases, the PBO may judge that a commitment would have a material impact on the Australian Government budget, and therefore be included in the report, but judge that the impact on the budget cannot be reliably quantified.

Adjusting for material interactions between commitments

The PBO estimates material interactions between commitments for each party.

An interaction arises when 2 or more proposals (or individual components of a proposal) would have different budgetary implications when implemented together, compared to the sum of the budgetary implications of implementing the proposals (or individual components of a proposal) in isolation.

For example, a policy to increase the age pension payment rate and a policy to reduce the income test for eligibility for the age pension would have a different (and larger) impact when implemented together, because the second policy would increase the number of pensioners receiving the higher payment.

Consideration of overarching commitments

Where a party includes an overarching commitment, the PBO includes estimates where it has determined that the commitment has a specific and material impact.

Where a party has stated a policy to commit to spend a percentage of the budget or GDP, the PBO considers whether this commitment has additional financial implications. A commitment is included where the announced overarching commitment is considered specific and material, and is not already included in the budget baseline or in other commitments in the party platform.

In the 2025 ECR, there are 2 Coalition commitments and one Greens Commitment that fall into this category.

The Coalition commitment Increase defence spending – including investing in a Fourth F-35A Lightning Squadron (ECR-2025-2734) would lift defence spending to 3% of GDP and has been included as a specific commitment. 

The Coalition also stated a policy for taxation receipts to not exceed 23.9% of GDP. This has not been included as a specific commitment but taken into account when considering the aggregate impact of the party’s commitments, and is shown in the charts illustrating the medium term impact of the party’s commitments. 

The tax cap was applied by calculating the total impact of all individual election commitments on tax receipts. The total impact of election commitments was then added to the PEFO baseline and converted to a share of GDP.

This final tax impact is compared to the target cap for the tax-to-GDP ratio and, where tax receipts are above the target, the excess is deducted to ensure tax receipts stay at the target level. No adjustments are made where tax receipts remain below the target cap. The impact of the tax cap is assumed to affect tax receipts (cash) and revenue (accrual) equally.

The Australian Greens commitment, to ensure that 1% of the Federal Budget goes towards nature, was assessed to have no financial impact as the threshold would be met through existing expenditure and new party commitments.

Adjusting for an estimate of the PDI impact of the entire platform

The total impact of each party’s platform includes an estimate of the total PDI impact. This total PDI impact takes into account the PDI impacts already included in a small number of individual policy costings. PDI impacts of policies are always presented in individual PBO costing documents. However, they are only included in the costs of the policy if it is an explicit policy objective to impact the level of interest payments or the policy involves transactions of financial assets (such as loan schemes, equity investments or guarantees). 

In these cases, the PDI impact is included in the budget aggregates in Table 1 and Attachment A of the costing minute. In all other cases, PDI is included in the costing minute as a separate memorandum item in Attachment A. The aggregate impacts for each party in the ECR include the PDI impacts for all individual costings.

Calculating gross debt and net debt

The ECR includes an estimate of the total impact of each party’s platform on gross and net debt.

Gross debt is the total borrowing by government.^[12] Commitments that increase government borrowing also increase gross debt, and vice-versa. For most costings, the impact on gross debt is simply determined by the cumulative impact of the headline cash balance (including public debt interest). This is demonstrated in Table E-3.

Table E-3: Example calculation of gross debt ($ billion)

The impacts on gross debt also include election commitments that involve deposits or withdrawals from government investment funds. These transactions do not change the headline cash balance because no money leaves the general government sector, but they still affect gross debt.^[13] 

Net debt is the sum of selected financial liabilities (deposits held, advances received, government securities, loans, and other borrowings) less the sum of selected financial assets (cash and deposits, advances paid, and investments, loans, and placements). It is a common measure of the strength of a government’s financial position.

Net debt does not include the value of government equity investments, such as ownership of public corporations (for example, the National Broadband Network, Australia Post and the Australian Rail Track Corporation) and the holdings of shares within investments directly held by government investment funds (for example, the Future Fund).

The impact of election commitments on net debt is calculated as the cumulative sum of the fiscal balances, similar to the method for gross debt, with adjustments for commitments that affect equity investments.^[14]

Why might the PBO’s budget aggregates differ from those presented by parties before the election?

There are 3 key reasons why the budget aggregates presented in this report may differ from those presented by parties in their election commitment documents.

1. The PBO’s list of individual election commitments may differ from those presented by parties.
2. There may be differences between the PBO’s and party’s costings for individual commitments, including assessments of the impact of interactions between commitments.
3. The PBO’s estimates of the overall impact of party commitments on PDI payments may be different.

Any differences arising from the first 2 sources are discussed in the Major party election commitments and party sections of the report.

Each of these calculations depends on the final election platform announced by parties which is determined after final costings for individual components against the PEFO baseline have been provided. 

More broadly, differences will arise due to updated economic and fiscal parameters included in the PEFO baseline (only available in the caretaker period), and any other fiscal updates that occur after the party may have sought a confidential costing of its proposals.

When completing costings for the ECR, the PBO also takes the opportunity to review the models, assumptions and methodology underlying each costing. This includes taking account of government policy decisions in the baseline, new data or to address identified errors or changes in modelling approaches. This may also be a source of difference in the aggregate estimates.