Parliament of Australia: House of Representatives: Infosheet No. 10: The budget and Financial Legislation

The budget and financial Legislation

House of Representatives Infosheet No. 10

Revised May 1999

The Budget

Budget day is one of the busiest and most important sitting days of the parliamentary year and receives close public and media attention. In recent years Budget day has generally been in May. However, the traditional August Budget may still occur when a general election interrupts the usual parliamentary calendar.

What's in the Budget?

The Budget is the occasion of the Government's annual financial report and policy statement to the Parliament and the nation. In addition to the Treasurer's speech, the Budget includes the main appropriation bills, other legislation to give effect to the financial proposals announced in the Budget speech, and the Budget papers—documents presented to Parliament containing information on government finances and related matters.

In the House of Representatives there is no special Budget procedure as such: the Budget depends upon the passage of the main appropriation bill for the year, which in its essentials follows the same stages as any other bill.

Introducing the Budget

Proceedings in recent years have started at 7.30 p.m., with the Speaker announcing a message from the Governor-General recommending that an appropriation of revenue be made for the purposes of Appropriation Bill (No. 1). The Treasurer then presents the bill to the House. The Clerk of the House formally reads the bill a first time by reading out its long (or full) title as follows 'A Bill for an Act to appropriate certain sums out of the Consolidated Revenue Fund for the service of the year ending on 30 June 2000, and for related purposes'. The Treasurer then moves 'That the bill be now read a second time' and delivers the second reading speech on the bill. This is the Budget speech.

The Budget speech

In the Budget speech the Treasurer compares the estimates of the previous financial year with actual expenditure, reviews the economic condition of the nation, and states the anticipated income and expenditure for the current financial year, including the taxation measures proposed to meet the expenditure. In making the Budget speech, the Treasurer may speak without limitation of time and at the conclusion of the speech debate is adjourned on the motion moved by (or on behalf of) the Leader of the Opposition, who thus has the right to speak first when the debate is resumed. The Budget speech is televised, as is the Leader of the Opposition's speech in reply on a subsequent day.

Other Budget business

After debate on Appropriation Bill (No. 1) has been adjourned, the Treasurer presents the Budget Papers. The Appropriation Bill (No. 2) and the Appropriation (Parliamentary Departments) Bill are then introduced. Other business may include the introduction of Budget-related bills, the presentation of various Budget-associated documents, ministerial statements by the responsible Minister explaining Budget decisions in detail, and the moving of customs and excise tariff proposals connected with the Budget.

Budget debate and consideration in detail

The debate on the second reading of Appropriation Bill (No. 1) is known as the 'Budget debate' and normally continues over a period of several weeks. The scope of discussion in the Budget debate is almost unlimited as the standing order which applies the rule of relevancy makes debate on the main Appropriation Bill one of the exceptions from its provisions.

After the second reading has been agreed to, the bill is considered in detail. Before considering the clauses of the bill the House considers the schedule to the bill which contains the proposed expenditure for the various government departments listed alphabetically. The expenditure of a department may be considered on its own or grouped with that of other departments, whichever best meets the convenience of both the Opposition and the Government.

Financial legislation

The Parliament's control . . .

The Parliament has the ultimate control over government finances. This control is two-fold. First, taxes are imposed and loans to the Government are authorised by legislation which must be agreed to by the Parliament. Secondly, and more importantly, government expenditure must also be authorised by legislation.

Australia's Constitution states that 'no money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law'. This means that however much money the Government has, whether raised by taxation or by loan or even by sale of government assets, the money cannot be spent unless the Parliament has authorised the expenditure by an Act of Parliament (an appropriation Act). Such authorisation is often known by the term 'supply', for example, when it is stated that 'the government has supply' or that 'supply has been withheld'.

. . . but the Government's initiative

Although Parliament has the ultimate control by way of veto, the Government has what is known as the 'financial initiative'. This is another way of saying that only the Government can request that an appropriation be made or increased, or propose to impose or increase taxation.

Financial legislation procedures

Ordinary bill procedure is described in Infosheet No. 7 — Making Laws. Financial legislation follows the same basic pattern as any other kind, that is, introduction and first reading, Minister's second reading speech, second reading debate, consideration in detail and third reading. However the Constitution imposes certain restrictions or additional requirements. The specific restraints on particular types of financial legislation are outlined below.

Revenue—Taxation bills

Taxation bills impose a tax. Examples of taxation bills are income tax bills, customs tariff bills and excise tariff bills. Bills imposing 'a charge in the nature of a tax' are also considered to be taxation bills—that is, where a charge is a revenue raising measure as distinct from a fee for a service.

Under the Constitution taxation bills cannot originate in or be amended by the Senate. Under the standing orders of the House they may be introduced without notice and must be introduced by a Minister. Additionally, amendments to a bill to increase the rate or widen the incidence of a proposed tax can only be made by a Minister (any Member may move to reduce a proposed tax).

Bills dealing with taxation

Bills in this category lay down the administrative procedures for assessing and collecting tax. As with taxation bills they may be introduced without notice but in all other respects they are treated as ordinary bills, and may originate in and be amended by the Senate.

Customs and excise tariff proposals and bills

Customs tariffs (duties on imports and exports) and excise tariffs (duties on goods produced in Australia) are initiated by a customs tariff or excise tariff proposal, taking the form of a motion moved by a Minister without notice. Such a motion is usually treated as a formal announcement and is not voted on, and rarely debated. Successive tariff proposals are listed together on the Notice Paper as 'orders of the day', that is, theoretically, as matters on which debate will be resumed at a later date.

Periodically a customs tariff or excise tariff amendment bill is introduced. Such a bill consolidates outstanding tariff proposals and provides for their operation retrospectively to the date of their introduction as a proposal. Following the bill's enactment the 'proposals' are discharged from the Notice Paper.

Appropriation and supply bills

Appropriation bills are all bills which contain words of appropriation (that is, authorising expenditure) and also those which would have the effect of increasing, altering the destination of, or extending the purpose of an already existing appropriation.

Under the Constitution appropriation bills cannot be initiated in the Senate, and appropriation bills for 'the ordinary annual services of the Government' cannot be amended by the Senate (e.g. Appropriation Bill (No. 1)). No appropriation bill can be passed unless the purpose of the appropriation has been recommended by a message from the Governor-General.

The annual appropriation bills are bills which are passed regularly each financial year to appropriate money from the Consolidated Revenue Fund to provide funds for government and parliamentary expenditure. (Parliament is constitutionally separate and independent from the Government and has separate funding by means of its own appropriations.) The table below outlines the annual appropriation cycle.

If the main appropriation bills do not pass before the commencement of the financial year, the Parliament may pass supply bills to provide funds in the interim. This is the usual practice when the budget is presented in August.

Special appropriation bills

This type of bill appropriates funds for a specified purpose, for example, to finance a particular project or program set up by the bill (the appropriation being in most cases incidental to the bill's main intention). About two thirds of government expenditure is covered by special appropriation. Special appropriation bills are often not specific in amount or duration. Those providing funds for an indefinite period are said to give 'standing appropriation'.

The annual appropriation cycle (May Budget)

1 July	Start of the financial year
October/ November	Additional or supplementary estimates—inevitably some departments will need more funds than those appropriated by the main appropriation bills. Appropriation Bill (No. 3) (ordinary annual government services—see below), Appropriation Bill (No. 4) (other expenditure), and Appropriation (Parliamentary Departments) Bill (No. 2) (expenditure for the Parliament) provide additional funds for the current financial year.
May	The Budget—introduction of the main appropriation bills which appropriate money for expenditure by the Government and the Parliament for the next financial year. Appropriation Bill (No. 1) covers expenditure for ordinary annual government services (continuing expenditure by government agencies on services for existing policies), Appropriation Bill (No. 2) covers new policies, new capital expenditure, and payments to the States, and Appropriation (Parliamentary Departments) Bill covers expenditure for the Parliament.
30 June	End of financial year

The annual appropriation cycle (August Budget)

1 July	Start of the financial year—until the year's appropriation bills are passed, interim expenditure is authorised by the Supply Acts passed in the preceding financial year (see below).
Mid/ Late August	The Budget—introduction of the main appropriation bills which appropriate money for expenditure by the Government and the Parliament for the current financial year. Appropriation Bill (No. 1) covers expenditure for ordinary annual government services (continuing expenditure by government agencies on services for existing policies), Appropriation Bill (No. 2) covers new policies, new capital expenditure, and payments to the States, and Appropriation (Parliamentary Departments) Bill covers expenditure for the Parliament.
March/ April	Additional or supplementary estimates—Inevitably some departments will need more funds than those appropriated by the main appropriation bills. Appropriation Bill (No. 3) (ordinary annual government services), Appropriation Bill (No. 4) (other expenditure), and Appropriation (Parliamentary Departments) Bill (No. 2) (expenditure for the Parliament) provide additional funds for the current financial year.
April/May	Supply bills—The authority to spend money provided by the annual Appropriation Acts ends at the end of the financial year on 30 June. Supply Bill (No. 1) (ordinary annual government services), Supply Bill (No. 2) (other expenditure), and Supply (Parliamentary Departments) Bill (expenditure for the Parliament) provide interim funding until the next year's main appropriation bills are enacted. The amounts provided are usually sufficient to cover the first five months of the financial year, that is, from 1 July to 30 November.
April/May	'May statement'—Supplementary economic statements may be made to the House at any time but it was frequently the practice for the Treasurer to make a statement at this time.
30 June	End of financial year

Suggestions for further reading

House of Representatives Practice, 3rd edn. AGPS, Canberra, 1997. pp 390–410.

Department of Finance. Commonwealth Financial Management Handbook. AGPS, Canberra, 1992.

Last updated: 10 November 1998