Federal Politics

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PBO admits to cost doubts

Many of the official costings the government has used to justify its budget-tightening credentials are unreliable.

The Parliamentary Budget Office has estimated the budget impacts of a range of government policies and says billions of dollars it has identified in government savings are only of a ''low'' or ''medium'' reliability.

The PBO does not assess the actual policies but their budget impacts based on information available to it.

On Friday, October 18, Treasurer Joe Hockey hailed a post-election analysis by the PBO of government policies and their likely costs, which found the Coalition would improve the budget bottom line by $7.1 billion - $1 billion better than the Coalition forecast before the election.

Five days later, Mr Hockey responded to Australia's ballooning credit card bill by almost doubling the borrowing limit to $500 billion.

But buried deep within the report are revelations that many of the PBO costings of Coalition policies are of a ''low'' or ''medium'' reliability. These include costings for the paid parental leave scheme, about $4 billion worth of savings measures proposed to offset the non-collection of the carbon tax, cost estimates for border security measures and combating people smuggling, and the estimated $5.2 billion saving from cutting the public service by 12,000 jobs.


The PBO says other policies will have significant long-term adverse budget implications, increasing costs and reducing revenue.

On Friday, a spokesman for Mr Hockey said: ''The Treasurer has full confidence in the Parliamentary Budget Office costings … The assessment of the PBO of the reliability of costings is in no way intended to signal the costings are incorrect. It is simply an acknowledgment by the PBO that some costings are more difficult than others and are dependent on assumptions and the quality of available data.''

The PBO says that its estimate of the cost of the paid parental leave scheme is only of low to medium reliability because it is subject to assumptions including working women's fertility rates, female labour force participation, the wages parents earn and how much leave parents take after the birth of their children.

The PBO says its estimate that cutting the public service by 12,000 staff would save $5.2 billion over four years is of ''low to medium'' reliability.

To achieve the projected savings, the government will need to tightly constrain hiring new staff and not renew the contracts of non-continuing public service staff to avoid additional redundancy payouts.