Senate Finance and Public Administration Legislation Committee, , 18:34 to 41:44
The Parliamentary Budget Office explains methodology for staffing level forecasts and discusses budget deficits and nuclear energy costings.
Topics: Public service staffing, Government spending, Electricity grid
Speakers: Sam Reinhardt, James Paterson, Tyron Whitten, Lewis Conn, John Clark, Blair Exell, Hon Sue Lines, Interjection, Karen Grogan
Parliamentary Budget Officer and other officers of the Parliamentary Budget Office. Um Mr. Reyn, would you like to make an opening statement? >> No. Thank you, chair. >> Okay. Um, Senator Paterson.
>> Thank you, uh, Chair. Uh, Mr. Ron, thank you. Um, I have a couple of questions for you. Firstly, on the well traversed issue in this committee about, uh, average staffing levels of the public service. Um, and I want to refer to a question on notice that you provided to me, which is PBO 110 or PON 110. uh in that you provided a breakdown of the implied reduction in ASL levels in the budget. Uh you said in order to meet the budget forecast the government would need to reduce ASL by 22,000 um which included 16,300 in the 2627 financial year, 4,400 in the 2728 year and 1,800 in the 2829 year. How did you um calculate that breakdown in particular between the financial years?
>> I might ask Mr. Conn to go into the detail of that. Thank you. That's okay.
>> Yes. Thank you. Lewis Con, assistant parliamentary budget officer. Um so what we do um as as you know, Senator, the um the ASL um estimates published in the budget only go include estimates up to uh 25 26. Yep. Um and that's that number you see there 213,300 consistent in the budget papers. >> Um what we do then is that we um look at the forecast wages and salaries um information for the public service. We do make some adjustments because this ASL figure excludes military um personnel. So we make adjustments for the wages and salaries uh for there and then we also make adjustments for expected um wage increases using wage cost index uh data and then through those calculations we then sort of derive a number um of what the ASL will be. So in a sense you've got the wages and salaries, you've got um how in a sense sort of an average uh cost per person. We make the assumption that the distribution's the same and then just do the straightforward calculations of um what the what the estimates will be each time noting there the estimates at at budget. There are things like terminating measures etc. [clears throat] So as we've provided an analysis previously that they they often get revised um up in subsequent budget estimates.
>> Yes. So there's really only two options here. Either the government proceeds with reducing the ASL by those numbers as you've set out or they increase spending to pay for those people so they are not uh let go. Is that fair?
>> Uh generally as I said we've made assumptions about the sort of same distribution. Of course it's it's up to individual um secretaries about how they allocate uh the funding and the distribution of senior staff versus junior staff etc. There's a whole range of things happening, but yeah, that's that's generally the the mechanics from from from the budget.
>> I mean, they could slash their wages. That would be the other option.
>> Yeah, conceptually it's it's just a yes, simple for the wages and salaries.
>> There's really only three options for the government. Fire 16,000 people, significantly risk government spending or significantly cut wages.
>> So, so there is um supplier costs as well as in departments as well. So like I said they they can control a range of levers but
>> to the tune of 16,000 people
>> uh yeah I can't can't comment on
>> well what's the quantum of money what's the kind of expressed in in dollar terms >> for the 16,000 uh this financial year >> sorry next financial year
>> yes so in ter in terms of yes to to maintain that sort of staffing level that yes there there would need to be additional funds for wages and salaries >> uh senator I don't have that information
>> okay you take that notice. >> Um, obviously the government's published myo in December. Um, have you revised your estimates in light of the myo
>> Uh, so have we revised our estimates? We are required under our legislation to adopt the government's estimates over the forward estimates for um revenue and expenses and in fact UCB um all the fiscal parameters over the forward estimates. So in that sense we revised them. Yes.
>> You're right. So, what is Do you have an updated figure for me?
>> Sorry, for the ASL.
>> Yes.
>> Uh, so no, we don't have an updated figure for an updated costing. So, we do those we do that costing as a specific request. Um, >> and as Mr. Conn outlined, there's a lot of detail in that analysis that goes to that number. So, no, we have not been requested or done a new estimate of that. We do have a tool called uh build your own budget which is I think very useful and a lot of members and advisers use that tool. Um it provides an estimate of what ASL changes might be at the moment. I would caution with that though it's an educational tool. It's a useful tool but because at myo only part of um there's only updates of certain numbers. There is an update to wage and salary bill. There's not an update to the ASL. That's still the 213 from the previous budget number. So I caution a little bit that's not equivalent to the costing that we have.
>> Sure. I mean I I can put in a costing request. I know Senator Hume has in the past. Um but I'm pretty sure you provided these numbers for me in response to a quan. It wasn't a costing request. So you must have done some work.
>> Uh so those that quan numbers is what we provided I think in the ECR.
>> Yeah. So that's the breakdown of the and it was back back in October premyo. So
if I want to get a myo updated figure, I should put in a costing request.
>> Yeah, you should put in a costing request that's available.
>> Yeah, because the financial reviews reported that the figure is now 28,000 rather than 22.5,000 as a result of my May. Does that sound right to you?
>> So that sounds consistent with our build your own budget tool which as I said has some limitations is not equivalent to the costing done in the ECR.
>> Okay. All right. Um I will move on to another topic. Thank you for your help with that. Um, Mr. You had some correspondence with the shadow treasurer in relation to discrepancies between PIO and myo in terms of the midterm uh deficits. Do you recall that correspondence?
>> Yes, I recall that correspondence.
>> Very good. Um, what's the differences between PIO and my FO in in the medium
Uh so first of all I'd be a bit cautious about this uh characterizing it as discrepancies from any fiscal update to another. There are always changes from year to year. >> So uh let me just so I presume you're talking about the UCB changes from 28 29 >> Uh so uh the deficit in a percentage of GDP in PIFO was 1 - 1.2%. Uh as of Mayo it was - 1.5%. >> Uh following year minus uh 0.9 down to - 1.2. >> Uh 1.8 in the two following years in PIO 1.0. zero and then 0.9 uh in my EO >> uh zero negative0.5 in 334 negative0.7 in that year in my EO >> negative0.3 in 34350.5 and 3435 in my Epho >> uh 0.0 0 in PIO in the final year of the medium-term and negative0.1 in my EO.
>> Okay. So, the budget deficits got worse in every financial year. Is that right?
>> Uh the deficit has got worse in every financial year but continues to converge uh towards uh surplus by the end of the medium term but does not achieve surplus in the medium term.
>> Yeah. No surpluses for a decade. Um, so that's in uh percent of GDP terms. Do you have it in real terms in aggregate over that period perhaps?
>> I don't know if I have that on me.
>> I've seen a figure reported in the media of 57 billion. Does that sound right to you? Does that ring any bells?
>> I can check with the team. Uh, we would generally say that percentage of GDP is a more accurate term. So it's generally what we report on. >> Um, I can check with Dr. Clark. I don't know. Yeah, I don't think I have that on me. Sorry.
>> Yeah. Any of your colleagues?
>> Uh John Clark, assistant parliamentary budget officer. Yes, that's correct. The we would normally talk in terms of percents of GDP in the medium term.
>> Yeah. So you you don't know what the dollar figure is cuz it's been
>> We don't have that on the but we can take that on notice.
>> Okay. Thank you. If you could take that as far as you're aware looking at the numbers, what are the primary drivers of the increased deficit?
Uh so there are drivers in both on both the revenue and expense side. Uh the primary drivers uh let me just see if I can find my I might just see if Dr. Clark while I look through my notes has
>> so senator the Mayifer didn't discuss drivers of uh growth in receipts or yeah the particular drivers of growth in receipts or payments in the medium term uh within the forward estimates it reported that the major fastest major growing payments are interest on debt the NDIS defense hospitals payments medical benefits payments and the childare subsidy
>> sure but and that's helpful thank Um but can you tell me whether it is primarily a revision down of uh revenue or a revision up of payments that has contributed to this uh drop in deficits or increase in the deficits?
>> Uh so we would say that over the on a yearby-year basis it's a bit of both. We have some movements in payments and some movements in receipts. uh on by the end of the medium term because it's converged largely back to yeah, it's a it's kind of a consistent story of a little bit of revenue and a little bit of
>> Sure. But I mean we're dealing with numbers. There is going to be a number which is greater than or less than the other number. So can you tell me is the change due due more to a change in receipts or more to a change in expend?
>> We say expenses are a larger proportion than uh receipts.
>> Right. What can you quantify that for me? How much larger are expenses?
>> 60% uh associated with variations in payments and 40% associated with variations in receipts. However, that is on a yearby-year basis rather than by the end of the forward estimates.
>> Yep. Is it well can is it a different breakdown by the end of the forwards?
>> We have that one. >> I don't know if I have that one >> on me unfortunately.
>> Mr. Clark, can you help with that?
no, I don't think so. The 6040 is based on these published percents of GDP which are all rounded to the nearest 0.1. >> So uh I expect the numbers would be a little different with the unrounded numbers which uh we don't have access
>> Okay. So uh it's been driven by both uh revisions on receipts and expenditure but expenditure is doing more of the heavy lifting to the tune of 60 to 40.
>> That's consistent with the published numbers in the MFO.
>> Thank you. It's not consistent with what the treasurer has said, though. He's publicly said it's um explained by receipts, not spending. Anyway, that's not for you to worry about. Um it seems to me that a six-month period between PIO and my EO to have a revision of this nature is quite a a large revision in a six-month period. Is that a fair
characterization? Uh we have had a look at the numbers over a number of years and we do not think it's a particularly large revision. It's consistent with normal revisions between uh fiscal updates.
>> So what what did they not know in PIO that we've since learned in the last 6 months? What's the new information that's led to this revision?
>> You're referring to the revision in the medium term or the forward estimates.
So um d from from one fiscal update to the next there's changes in expenditure in different programs driven by uh population growth that might change expectations of take up that might take
uh changes >> population growth in this instance I'm not asking for
>> changes in take up of particular programs over time uh changes in the costs of programs over time changes in revenue uh take up over time changes in uh estimates of different um price changes whether it be commodities or housing. So there's a very large number of things that can contribute to changes over time between fiscal updates. Uh I don't have the detail of what might have changed between PIO and my EO.
>> No, no one has the detail which is why we're asking these questions. So you in your view is it most likely due to changed forecasts not decisions of
Uh well it it's likely to be some of both and that's not really I think questions that come to the detail of myo versus PIO changes are probably for the government and treasury rather
>> we will certainly be asking them as well but I'm just interested in your expert opinion as the independent parliamentary budget officer. Um uh is it in your judgment based on the information that you have and you have better access to information than I do from treasury and finance. Is it uh largely due to forecasting changes or decisions of government or a combination? And if so,
>> It would be a combination of both Senator
>> But you can't quantify that.
>> No.
>> If the PBO can't do that, I mean, how can you do your jobs providing accurate information to parliamentarians and the public about the state of the budget?
Uh I I think these are questions we we have what we have in terms of myo to PIO. I think it's for the government to talk to questions of changes over time.
>> Shouldn't they be providing you with this information to assist you in your
>> Uh we're provided with everything that is in the public domain. It's uh for the government to determine what it provides. I mean there's a lot of information out there. It may just be that we haven't done the full analysis that you're actually after around the differences between expenditure and decisions taken driving the medium-term outlook.
>> Well, but the PBO does have access to non-public information, don't you? You
>> You can ask for additional information for costings as they arise. That is that is very true.
>> Yeah. So, you don't have any non-public information about this. just have what the government published in my FO.
>> We we can request additional non-public information around the detail. >> Yeah. [clears throat]
>> Do you think that's warranted given that there's been this kind of discrepancy between PIO and my FO and you'll be asked by parliamentarians to >> um provide advice on the on the state of
>> As we're asked for advice, we request additional information.
>> All right. Well, we might have to put in >> Um chair, I am Thanks, Ch. I'm finished with the PB.
>> Excellent. Uh, we'll go to Senator
>> Was the PBO consulted on the costings of the electric vehicle FPT FBT exemption?
we sorry when you say consulted on uh when the government does its own costings it doesn't generally consult the PBO. Um
>> so you were consulted?
>> No you we would not normally be consulted on government costings.
Um so the the initial figure of the 90 million wasn't your figure then. It would have been the government's figure.
Uh so I I'm I guess I'm not sure. So we have done electric vehicle costings in the past. I think some of those uh appeared in ECRS but I'm not certain.
>> So specifically the FBT exemption. >> Yeah. Were you was the PBO involved in that or was
>> just having we looked to see if it was part of the um
>> sorry the tricky thing is there are FBT exemption costings that um appear in government budget papers. We do a number of costings including a very large number that are um confidential costings. I'm not sure what costing you're referring to and so I'm a little unsure about answering questions associated with it. Um
>> was the >> the initial costing figure of $90 million >> that would have been made
>> if it was a government costing we didn't
>> sorry
>> if it was a government costing it appeared in a budget or a myo or the PIO uh we wouldn't have been involved in it
>> what I'm trying to establish is is it the government's number or is it your
>> we'll take that on notice and work out whether 90 million is the government's number yeah
>> because it's now $1.35 billion, which is 15 times the initial estimates. Um, what that was so massively understated? So I
I suspect given your question, it's probably a question for um treasury finance associated with a government budget costing um as opposed to a costing by the PBO to assist a parliamentarian. So the government's numbers are produced by Treasury and finance.
>> But when the government comes up with a number, do they not involve you in
>> coming to that number? No, that's not really our role. So, we we um
>> budgeting.
>> Uh
>> It would be valuable for you into the future to maybe get a briefing from the PBO on their role.
>> Yeah, very happy to do that. And um you know if the sometimes our modelers um exchange information with treasury and finance provide assistance but generally we we don't uh comment on budget proposal and and as an independent organization the government would not involve us in their budget process normally.
>> Okay. So a similar question on the home batteries was the PBO involved in >> No. >> No. Okay.
>> Yeah. Um, Senator Whitney, if I could just stress the PBO is independent of government. So, so senators can ask um the PBO and often do to do costings for them, but it is independent of government. That's why it was set up that way to to give parliamentarians the opportunity to get their own programs costed or to check on other costings they had concerns about.
>> Yeah. No, I I understand that. Um it's just wondering where the budget estimate came from.
>> Would it have come from Treasury?
>> Yeah. Yeah. Because they're pretty big misses on both of those schemes. And I'm I'm looking to ask the correct person the correct question.
>> I I would head to Treasury. Senator
okay, just on to another one. um the costings for the of the uh power stations like nuclear at the pre um the pre-election costings where we had a 600 billion sorry yeah 600 billion price tag um was that you guys
>> that was us uh I don't know about 600 billion but um that we did do the nuclear costing in the uh election ction commitments report after the last election. Yes.
>> Sorry. Say
>> uh so we do a report after the election. The election commitments report we did uh nuclear was part of that.
>> Okay. Was it the same figure?
>> Uh 600 million I don't have in my head but um if you if you question I'll um
>> if you like. Okay. so just as a a note, for the 11 gawatt capacity proposed, those construction costs would come in at about $55 per watt. Um, and an article out of the Nature Journal from July 25 shows that China has built dozens of nuclear plants for as low as $2.5 per watt. um why are we seeing such a wide gap
between >> I think it's fair to point out that there there are uh very different views about what nuclear would cost and I think in the end um a proper cost benefit analysis for Australia would be the best approach to actually revealing what the full cost would be. Um
>> I'd like to think there was more science than various views. I mean, we all have a view, but I'd like to see >> hard data and facts used.
>> We use the profile provided by the coalition for the costings of the power station. So, we didn't actually make any assumptions about the likely costs of the power stations. The the only place that we used some discretion was to show the range of possible costs that might be implied. But we did not do an estimate of the equity costs required to build that was based on what was provided okay >> by the coalition parties through the election process.
>> So you got your information from politicians.
>> Uh we were pretty limited by what was available for Australia. Yeah. given it would be completely new for Australia.
>> Yeah.
>> Yeah.
>> Thank you, chair.