Overview of the NSW Budget process

The state budget is generally released once a year, typically in June. However, the timing of the budget can move from year to year, depending on elections, changes of government, and other unforeseen circumstances that can alter the standard 12-month cycle.

The Budget process is the decision-making process for allocating public resources to the NSW Government's policy priorities. The budget process involves phases of planning, delivery and review that occur over a 12-month cycle. Typically, while the annual Budget is being finalised and delivered by the Government, planning is already underway for the next budget process.  

To assist planning and to encourage fiscal responsibility, the budget process is carefully sequenced to provide the Government with oversight of the overall impact of all proposed spending decisions.

While the budget is released once a year, the Government takes into account the impact of all proposed spending decisions for:

• the budget year
• the ‘forward estimates’ – three years after the budget year

Using the 2024-25 financial year as an example:

• the Budget Year is 2024-25 (current financial year).
• the forward estimates are 2025-26, 2026-27, and 2027-28 (three years after the current budget year). 

As part of the planning phase, the Treasurer prepares a submission for Cabinet endorsement to seek agreement on the budget process and associated Budget Operational Rules. These rules set out the scope and context for the budget, including the NSW Government’s priorities, timing of deliverables and the general budget process. 

The priorities of the budget are set out by ERC, and guidance is issued by the Treasurer to Ministers and by Treasury to agencies for the submission of budget proposals. Agencies prepare and submit these proposals to Treasury for analysis, consideration and review. 

The economic and fiscal forecasts are predictions, based on the available data, of macroeconomic factors that will influence the outlook of the economy.  These updates feed into the major budget publications. 

The Half-Yearly Review provides a mid-year update on the state’s fiscal and economic outlook since the release of the budget. It is typically released in December, with the exception of an election year, where it can be delayed and released by no later than early February. 

During this phase, proposals and business cases are submitted by government agencies to Treasury, on behalf of their Ministers. Treasury then assesses these budget proposals and business cases based on an agreed set of criteria, which generally align with the priorities of the Budget set out by ERC and the current fiscal context.

Meetings between Ministers (referred to as trilaterial or bilateral meetings) can take place to ensure final proposals brought to ERC for consideration are well developed, supported by evidence (business cases, cost-benefit analysis and impact assessments) and align to the Government’s priorities for the budget. The submissions are developed and submitted for budget decision making.

Decision making also occurs during this period, with ERC meeting to consider all spending and revenue proposals, and deliberate on options within and across portfolios that help achieve its fiscal strategy.

Agencies submit their updated financial data to Treasury. This includes spending and revenue for the current year, the budget year and the forward estimates. This is taken into account when ERC is considering all spending and revenue proposals and their impacts on the State’s fiscal position. This forms the basis of the Budget, along with the budget proposals and funding variations, and this is detailed within the budget papers and associated products. 

Once all ERC decisions are agreed upon and agency financial data has been taken into account, the budget is drafted by Treasury and released on Budget Day (typically the third Tuesday in June). The budget papers and the Appropriation Bills are tabled in Parliament by the Treasurer. The Appropriation Bills should be approved by both the Legislative Assembly and Legislative Council to be passed into law [1]. The Appropriation Bills set out the amount to be appropriated to Ministers, along with the purpose for which it is to be spent.

[1] Provision does exist, under the Constitution Act, for the Governor to give his or her assent if the Legislative Council does not agree to pass certain money bills. 

The Appropriation Act commences on 1 July and the Budget is legally implemented.

Certain content is mandated by legislation to be outlined in the budget papers.

The Constitution Act 1902 requires an Act to authorise the government to take out sums from the Consolidated Fund for the services of the Government (section 45).

The Government Sector Finance Act 2018 sets out the legislative requirements that guide the composition and content of the Budget.  

• Section 4.2 sets out the core content of budget papers. This includes:  
  • a statement of financial position for the general government sector    
  • an operating statement for the general government sector (flow of revenue and expenditure over a 12-month period)    
  • a cash flow statement for the general government sector 
  • a 6-year reporting period for budget aggregates.
     
• Section 4.3 outlines additional required content:  
  • 4-year forecasts or projections for all major economic and financial variables
  • a statement of expenditure
  • savings and revenue measures
  • a statement of risks
  • a statement of contingent liabilities and information on the performance and activities of GSF agencies.

You can see a further explanation of some of the above terms in How to Read the Budget Papers.

The Fiscal Responsibility Act 2012 serves as the financial guidelines for the Government and the Budget. Section 6 of the Act outlines the two key fiscal targets:

1. the annual growth in general government expenses of the State is less than the long-term average general government revenue growth of the State.
2. the elimination of the State’s unfunded superannuation liability by 2030.

Section 7 outlines required principles of sound financial management that must guide the policy agenda of the Government. There are three principles.

1. responsible and sustainable spending, taxation and infrastructure investment
2. effective financial and asset management
3. achieving intergenerational equity.

Section 8 requires the budget papers to include:

• a statement of the Government’s fiscal strategy, fiscal targets and principles  
• a report which sets out performance against these targets and principles  
• reasons for departure against these and any plans or actions to achieve them  
• an assessment of the impact of measures in the Budget on the State’s long-term fiscal gap.  

This is a document prepared to support a government funding decision. It provides information Cabinet (or other delegated decision-maker) needs to decide whether to fund a proposal. See TPG24-29 NSW Government Business Case Guidelines for more information.

This is a holistic appraisal method that estimates the economic, social, environmental and cultural costs and benefits of an initiative and expresses them in monetary terms. See TPG23-08 NSW Government Guide to Cost-Benefit Analysis for further information.

A sub-committee of Cabinet responsible for determining the Government’s policy in respect of budget management, fiscal strategy and all policy proposals with financial implications.

This phrase refers to the expectations of the government’s economic situation, based on the available data.

This is net income received from all sources. These sources of income include taxation (e.g. transfer duty), sales of goods and services, interest income, other recurrent income and capital revenue.