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Julian Hill MPFederal Member for Bruce

Julian Hill MP

The Parliamentary Budget Office has matured into an authoritative, trusted and independent source of budgetary and fiscal policy analysis.

Parliamentary Budget Office 10th anniversary

Parliament House, Canberra - 3 November, 2022

Ten years is a milestone worth marking and celebrating for any organisation, whether community, private or governmental.

So I appreciate the invitation to share some reflections with you today in my capacity as Chair of the Joint Committee of Public Accounts and Audit.

The JCPAA is one of the oldest and most powerful Parliamentary Committees. It has own motion powers to initiate inquiries and oversight of the Australian National Audit Office and the Parliamentary Budget Office.

After two terms as Deputy Chair I was somewhat fearful of becoming the longest ever serving Deputy Chair in Commonwealth history, but fortunately the election result meant I avoided that fate! It's nerdy stuff we deal with but of enormous interest to someone like me with a background in public administration, and I'm delighted to have been appointed Chair.

The JCPAA has a delightful, general and longstanding tradition of bipartisanship in over-sighting these institutions. Consistent with this tradition I will issue you a trigger warning on three occasions in this speech before making a remark with partisan overtones.

An anniversary is an opportunity to reflect on both the genesis and future of any institution. I put forward three overarching contentions, which I'll telegraph at the outset, should you then need a mid-morning nap:

  • Firstly, the PBO has made a significant and positive difference and is already a valued and trusted public institution. Congratulations to everyone involved in the PBO's success over its first decade. I have been lucky to have worked with all of the Parliamentary Budget Officers who each served the Parliament with distinction – Phil Bowen, Jenny Wilkinson and Stein Helgeby.

  • Secondly, the PBO will become even more important in the next decade for reasons I will outline.

  • Thirdly, there is a reasonable likelihood of modest expansion in the PBO's mandate in the coming years, though not to the extent that some may call for or as occurs in some other jurisdictions.

So, to expand on each of these key points. Firstly, given this is a birthday party, let's start with it being all about you and where you came from, PBO.

While the Australian PBO was a significant domestic innovation when it was created in 2012, there were already 15 like organisations around the world. Subsequently, 19 other offices have opened and it's fair to say 'Independent Fiscal Institutions' (IFIs) are now an established part of modern democratic governance.

Yet the creation of any significant new public institution is relatively rare. And, unfortunately, institutions with high levels of public trust are especially rare in this era of declining trust and a more fractious polity and media environment.

While Australia has, so far at least, avoided the worst excesses of the rising populism seen in other democracies, numerous domestic surveys still confirm declining public trust in government and institutions, which reversed only temporarily during COVID.

An illustration of this in recent years is the at times peculiar way in which governments have deployed expensive and theatrical Royal Commissions to undertake inquiry functions into policy issues which could, in many instances in times past, be done through more ordinary and less costly means of Commissions of Inquiry or Expert Committees.

Public institutions that retain public trust are precious indeed and need to be protected and carefully guarded. Backing in the Auditor-General and Parliamentary Budget Officer is a role that I as Chair and the Committee take seriously, including championing the budget bids of each office and working to avoid either office being embroiled in political or partisan debate.

Before the sun, moon and stars aligned to deliver the PBO in 2012 there had been a growing debate about the need for an independent fiscal institution in Australia, and things had been moving gradually in the direction of a PBO.

[First trigger warning!] Somewhat ironically, our PBO arose in part from an claimed lack of trust in the Treasury to undertake Opposition costings under the Charter of Budget Honesty. The then Coalition Opposition famously refused in 2010 to submit its policies to independent costing under the process the Coalition itself created when in government. To help justify this politically convenient nonsense, they made an election commitment to introduce a PBO.

This followed a fine tradition of rhetorical support by the Liberal Party for transparency and independent integrity institutions, unmatched by anything resembling action.

If that seems like an overly partisan comment, think FOI reform, cutting the Audit Office Budget, judicial appointments or the stacking of AAT, or the failure to introduce a national anti-corruption commission. [Trigger warning over!]

The final impetus for the PBO came through the 'Agreement for a better Parliament' negotiated between Labor, the Coalition and the cross-bench after lower house was hung post-election.

Minor legislative changes were made in 2013 requiring the PBO to prepare a post-election report on parliamentary parties' publicly announced election policies within 30 days of the conclusion of an election. Aside from this, the PBO has remained largely unchanged since its creation a decade ago.

Since then the PBO has matured into an authoritative, trusted and independent source of budgetary and fiscal policy analysis, helping to:

  • level the playing field for all parliamentarians – especially Oppositions and cross-bench MPs,
  • improve the accuracy of election commitment costings, and
  • improve transparency about budget information for the Parliament, and through it the public.

If that all sounds a bit dry, let's try a cosmic illustration. The trusted reputation of the PBO has in effect banished the previously predictable emergence of so called Budget 'black holes' that used to pervade federal politics, especially during elections.

For those too young to have experienced this ancient Australian political phenomenon, 'Black holes' were pointless and generally tawdry 'gotcha' moments where errors – real or confected – were discovered in policy costings then mercilessly beaten up in newspapers and on the TV news.

It's a fine thing that this era has passed. And the fact that non-government parties and members can now access credible and believable costings has also improved, at least somewhat, the quality of policy debate and public acceptance of new policy ideas from the non-government ranks.

Perhaps another way the enduring value of a PBO can be understood, beyond the domestic arguments, is the global experience during COVID.

In late 2020 the OECD published a soporific comparison of legislation experiences of budget oversight of COVID emergency responses. Reflecting on the challenges (including the illness of decision makers, business practice disruptions, remote working and parliamentary impact, disrupted budget cycles and changing fiscal responses, the OECD noted that "the crisis also brought to the fore the importance of the role of IFIs … [which] stepped up to provide rapid analysis of emergency measures … particularly important in informing the parliamentary debate and in promoting transparency and accountability on emergency spending…".  IFIs globally provided rapid analysis of the economic and / or budgetary impact of the pandemic including self-initiated briefing notes and support for Parliament and Committees.

To close then on this first of my three key points: despite being only a decade young, I would contend that we could not now imagine our Parliamentary or political landscape without the PBO as a trusted advisor in private and public.

And so my second contention: looking ahead, I believe the PBO will become even more important in the next decade.

Most obviously, given the difficult fiscal situation Australia faces, which the Government has inherited, informed Parliamentary and public debate about budget and fiscal policy will become even more critical.

[Second Trigger warning!] If you had to pick one decade in the last 120 years to govern, you'd surely have picked John Howard's decade in office. Aside from the Asian Financial Crisis, the biggest fiscal problem was what to do with all the cash pouring into the Budget from record terms of trade. In retrospect, today's MPs – from all parties if people are honest I suspect – would wish Howard and Costello had done something – anything really and especially in their last term – aside from bake in massive structural Budget spending that governments since have still not managed to unwind.

And if you had to pick a decade since WWII that you'd be most fearful of governing in, it's with trepidation I observe it may well be the 2020s.

The unavoidable impact of the COVID pandemic, pre-existing structural problems plus tens of billions of dollars of wasteful spending last term – don't get me started on paying $20 billion of JobKeeper to companies to increase their profits – have left the nation with a diabolical budgetary mess. This is exacerbated by a wasted decade devoid of policy reform or action on issues like climate change, energy policy, women's economic participation or equitable structural budget repair. They let a good crisis go to waste.

As a share of the economy, Commonwealth debt now is higher than it's ever been outside of wartime and post-War recovery, tracking towards $1 trillion with not nearly enough to show for it. Commonwealth spending as a share of GDP remains at record post-War highs. As a percentage of GDP, Scott Morrison's government was the second highest taxing government in modern Australian history, beaten only by John Howard. [Trigger warning over].

And so amidst this dire starting point, when we factor in largely unavoidable spending demands in defence, aged care, health and the eye-watering interest bill on Commonwealth debt, combined with the increasingly unsustainable trajectory of the NDIS, things look even more confronting. It's clear there are no easy choices ahead.

In this environment, informed Parliamentary and public debate about fiscal sustainability and prudent budget repair will become even more important.

I commend to you the Parliamentary Library Lecture last year by the Parliamentary Budget Officer on fiscal sustainability and recent public explainers as examples of the sort of contribution the PBO can make.

There is also likely to be a greater call in coming years upon the PBO's costing and analytical work from both Parliamentary Committees and the cross-bench.

As more MPs catch on to its value we can expect Committee inquiries to seek more budgetary analysis from the PBO. I'm a recent customer myself in this regard, calling for some complex and detailed budget analysis on spending on employment services for another Committee I'm Chairing examining the outsourced employment services system. Think it's due this week Stein!

And outside Committee-world, a larger cross-bench and an influx of new MPs from all parties will likely lead to more demand for advice and costings, especially from minor parties or independent MPs.

Thirdly, and finally, there will be calls for expansion in the PBO's mandate and functions in the decade ahead some of which I think would be useful. 

Before mentioning those, I'll briefly acknowledge two key areas where there are calls for the PBO to expand its remit that I think are unwise and unlikely to happen in Australia, despite being within the purview of some other IFIs.

  1. For the PBO to be given the power to develop its own economic or fiscal forecasts – it would be enormously expensive and of dubious benefit to resource the PBO to develop a third 'official' economic forecast alongside the Treasury and the Reserve Bank.

    There may be some benefit in the future in comparing and estimating the accuracy of published forecasts over time to assist Parliament in interpreting the quality of the Treasury assumptions underpinning the Budget. But we are a country of 25 million people and have a Westminster system, not a US-style system with 2 co-branches of Government, and our current arrangements overall serve us well.

  2. For the PBO to be given responsibility for the Inter-generational Report – this was rightly and unanimously rejected in the previous inquiry into the PBO. But there's a caveat: the credibility of the Intergenerational Report needs to be restored in the next one, likely delivered by Treasurer Jim Chalmers, or calls for it to be shifted to the PBO will grow.

    [Final Trigger warning]: The Intergenerational Report was initially a pretty credible, respected document. The last couple however have been increasingly politicised with assumptions that stretch credulity. Joe Hockey's started drifting towards being a marketing document not a robust piece of fiscal analysis. And Josh Frydenburg's effort in particular was in many respects ridiculous. For example, dubious assumptions about the fertility rate, population growth and migration directly contradicted the same Government's Budget. [Trigger warning over].

But I do expect Jim Chalmers will restore credibility to the Report and this debate will diminish.

Finally then, to mention a few areas where there is a good case for the PBO to innovate and have greater responsibility. Disclaimer: my views here are personal, and not government policy or the JCPAA's position!

  1. There's room to give greater flexibility to the PBO in how it can use economic assumptions to develop and analyse future scenarios, without the extreme step of setting up yet another set of economic forecasts.

  2. The PBO could deliver more real-time reporting of election commitment costing, akin to the Victorian PBO's Election Commitment Tracker.

  3. Whilst this is tricky administratively, there is a strong public interest case for the PBO to have a greater role in costing and scrutinising costings and election commitments by minor parties and independents.

  4. I don't think this political comment needs a trigger warning! For multiple elections now, the nation has endured the populist nonsense of Clive Palmer or Pauline Hanson who routinely make ridiculous, outlandish and un-costed or under-costed promises, which they then campaign on. In Clive's case investing tens of millions of dollars to talk up nonsense, without the same scrutiny which parties of government are subject to.

  5. There's a legitimate question as to whether registered political parties – and now independent MPs – who gain the benefit of public funding, tax breaks and public resources – should be required to be subject to the same scrutiny in the interests of improving the quality of political debate and providing a more level playing field, during and after elections.

    It's enormously frustrating as a member of a serious party of government to have to stand at voting booths alongside the 'free beer' parties claiming the same status but without the same scrutiny. Even aside from populist protest parties on the left and the right – in this I include the Greens Party – I suspect we may require similar scrutiny on independent candidates and MPs in coming elections as magic pudding promises, throwaway lines and unrealistic demands likely multiply.

  6. Finally, as the PBO continues to mature there will be greater demand for and reliance upon its independent research publications. In this difficult economic and fiscal environment, it seems wise for governments to ensure the PBO remains resourced and equipped to assist in the mammoth task of public education about public finances and budget policy as a credible and trusted impartial outfit.

    A recent example I'd point to is the excellent research report into 'Alternative Finance Mechanisms'. This outlined the growing use of so called 'off-budget' financing mechanisms, usually for good reasons, but the risks that arise if Budget transparency and reporting are not enhanced.

Of course there are many more suggestions for expansion that we could debate but that's just a flavour for now.

In closing, I again thank the PBO for the invitation to present, congratulate everyone involved in reaching this first decade and look forward to the next decade in wishing the PBO a very happy 10th birthday!