The Budget process can be thought of as the overarching framework in which the Government delivers its policy and service commitments, while also ensuring it lives within its fiscal means.

A robust financial and budgeting framework is not just good accounting, it’s about good policy and maximising value for citizens. A good Budget process ensures policies and their costs are well understood (including whether there is an evidence base supporting whether it works) and it enables Ministers to have trade off discussions, before public resources are locked in. 

The Budget itself is prepared by Treasury and is the Government’s signature policy document. It presents an outlook for the NSW economy, the Government's policy measures for the medium term, the financial implications of these policies and the aggregate fiscal position of NSW. The Budget provides members of Parliament and citizens with an update on revenue and expenditure, both at the aggregate level and at the Departmental level. Following recent reforms, the Budget also links cluster expenditure to citizen outcomes.

Fiscal Responsibility Act 2012

The finances of NSW are managed in alignment with the objectives, targets and principles set out in the Fiscal Responsibility Act 2012(FR Act). The FR Act establishes the framework for financial management with the key objectives of maintaining the state’s triple-A credit rating and delivering services to the people of NSW.

The FR Act aims to achieve two fiscal targets:

  • keeping annual average expense growth below long-term average revenue growth
  • eliminating unfunded superannuation liabilities by 2030.

 It is also underpinned by three principles of sound financial management:

  • responsible and sustainable spending, taxation and investment
  • effective financial and asset management
  • intergenerational equity.

Expenditure Review Committee of Cabinet

The Expenditure Review Committee of Cabinet (ERC) is a Cabinet subcommittee that considers all policy issues with material financial implications. One of ERC's primary functions is to formulate the Budget, which includes making policy decisions within the constraint of the Government’s fiscal strategy. ERC also considers whole-of-government revenue and economic policies, saving strategies, and significant industrial relations issues. Further, ERC monitors financial performance and reviews financial and risk management policies.

To assist ERC, Treasury verifies the costing impact of all proposals before they are tabled for consideration. 

As a general principle of good budgeting, policy submissions are put forward to ERC as part of the annual Budget round and not at other times of the year - unless they are genuinely urgent and unavoidable. This is so Ministers can make policy decisions with awareness of what other policy options they are trading off, within the cap of the Government’s fiscal strategy.

Annual NSW state budget

Each year, Treasury prepares the NSW Budget. It is a comprehensive document that outlines the economic outlook, the fiscal outlook, new policy measures and the capital program for the coming four years ahead. The Budget contains:

  • revised financial projections for the current financial year and an explanation of any significant variation in those revised projections from the original budget projections
  • revised forward estimates for major aggregates by sector
  • the latest economic projections for the current financial year and an explanation of any significant variation from the projections contained in the Budget Papers
  • key financial statements for the State
  • information on how funding is linked to the achievement of state outcomes - as part of the move to outcomes budgeting.

The current financial year’s Budget papers and related information is publicly available on the NSW Budget website.

Appropriations

The Treasurer tables the Budget alongside the Appropriation Bill. The Bill provides the legal authority for the appropriation of monies from the Consolidated Fund, as required to deliver government services and projects during the financial year. The Bill allocates funds to Public Service agencies, the legislature and various special offices. The amount each entity receives is determined as part of the Budget process, and represents a maximum amount each agency can draw from the Consolidated Fund.

Parliamentary budget debate

Under the requirements in the Government Sector Finance Act 2018 (GSF Act), the Treasurer is required to present the Budget to Parliament by the end June each year. An exception to this rule is if the Budget is being handed down in an election year, in which case it can be deferred until no later than September. Alongside the Budget the Treasurer tables the Appropriation Bill. Parliament votes on the Appropriation Bill prior to the Bill becoming a legal Act of Parliament.

Standing Committee on Budget Estimates

Each year Ministers and senior public servants attend annual Budget Estimates hearings to answer questions about agencies' expenditure, performance and effectiveness.

The Budget Estimates hearings are a key process for government accountability and transparency. It involves detailed questioning on the decisions, actions and advice of ministers and public servants.

Half-yearly review

The GSF Act requires the Treasurer to publicly release a half-yearly review by 31 December each year. This statement is an update of the economic and fiscal outlook for NSW, including an explanation of any significant financial variation from the projections contained in the Budget papers.

As the name suggests, the half-yearly review provides citizens with a mid-year update on the key aggregates presented in the previous Budget. For example, it includes a revised update on the expected budget result and information on new policy measures announced since the Budget. The half-yearly review does not provide updated Department by Department budgets.

Report on State Finances

After the completion of the financial year, the Treasurer is required under the GSF Act to release a 'Report on State Finances'. This report and its associated commentary provides a comprehensive analysis and review of the State’s financial performance and position.

The NSW Report on State Finances includes:

  • an overview of the financial performance and position of the general government sector and total state sector for the previous financial year
  • the audited Consolidated Financial Statements of the general government sector and total state sector for the previous financial year, including a full set of disclosures required by Australian Accounting Standards
  • the Outcomes Report on Government Finances for the previous financial year, for the general government sector, public non-financial corporations sector, public financial corporations sector and non-financial public sector.

This report is prepared in accordance with the Uniform Presentation Framework, which all Australian governments have adopted.

Further information