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Supply and the Budget

May 19, 2002

In the past week we have seen the presentation to Parliament of the Federal Government's budget. What happened?

Firstly, a number of constitutional provisions are relevant:

  • Appropriation - Section 83 of the Australian Constitution states that "No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law." This means that even though the government was elected eight months ago, it does not have the right to simply spend public money as it likes. All money must be appropriated by the Parliament. This is commonly referred to as Supply.

    The tradition has developed whereby Appropriation and Supply bills are presented twice yearly to the Parliament for its approval. Hence, the survival of any government depends on the twice-yearly approval by Parliament of its Appropriation Bills known as the Budget (May-June) and its Appropriation Bills known as Supply (October-November).

  • Initiation by the House of Representatives - Section 53 of the Constitution states that "Proposed laws appropriating revenue or moneys, or imposing taxation, shall not originate in the Senate." This fulfills the political value of the People's House retaining control over taxation. The House of Representatives is popularly elected, whereas the Senate represents each State equally, regardless of population. It is for this reason that elections for the House of Representatives, not the Senate, determine who shall form government.

    Even though the Appropriation bills must be initiated by the House of Representatives, they must also be passed by the Senate. Senate 53 says: "Except as provided in this section, the Senate shall have equal power with the House of Representatives in respect of all proposed laws."

    Section 53 further states: "The Senate may not amend proposed laws imposing taxation, or proposed laws appropriating revenue or moneys for the ordinary annual services of the Government." It also says: "The Senate may not amend any proposed law so as to increase any proposed charge or burden on the people." By convention, the Senate does not reject Appropriation or Supply bills, since this would have the effect of bringing down the government. This convention was broken in spectacular fashion in 1975, resulting in the Governor-General's dismissal of the Whitlam Government.

  • Ordinary Annual Services of Government - Section 54 of the Constitution states that: "The proposed law which appropriates revenue or moneys for the ordinary annual services of the Government shall deal only with such appropriation."

    Ordinary annual services includes things such as the daily operational costs, including salaries of public servants, members of the armed services, and other day-to-day expenses of government. It also includes a large proportion of social welfare payments and other government programs.

    The effect of Section 54 is that the government presents three Appropriation Bills to the House. An agreement between the Senate and the House in 1965 determined the allocation of items classed as for the ordinary annual services of the government and those that were not. A separate bill to fund the operations of the Parliament itself is also submitted.

Hence, on May 14, 2002, the Federal Treasurer, Peter Costello, introduced three bills into the House of Representatives. The total appropriation of the bills is $49,732,888,000 ($49.7 billion).

  1. Appropriation Bill (No. 1) 2002-2003 - this bill is described as "A Bill for an Act to appropriate money out of the Consolidated Revenue Fund for the ordinary annual services of the Government, and for related purposes".

    The bill appropriates $43,445,965,000 ($43.4 billion). This is broken down amongst various government departments as follows:

    Appropriation Bill (No.1) 2002-2003
    DepartmentAmount $
    Agriculture, Fisheries and Forestry 450,388,000
    Attorney-Generals 1,779,689,000
    Communications, Information Technology and the Arts 2,393,837,000
    Defence 18,235,532,000
    Veterans Affairs 416,773,000
    Education, Science and Training 2,095,139,000
    Employment and Workplace Relations 1,674,687,000
    Environment and Heritage 515,815,000
    Family and Community Services 3,095,628,000
    Finance and Administration 458,570,000
    Foreign Affairs and Trade 2,658,605,000
    Health and Ageing 3,019,484,000
    Immigration and Multicultural and Indigenous Affairs 2,261,872,000
    Industry, Tourism and Resources 853,143,000
    Prime Minister and Cabinet 164,842,000
    Transport and Regional Services 605,532,000
    Treasury 2,766,429,000
    Total 43,445,965,000

  2. Appropriation Bill (No. 2) 2002-2003 - this bill is described as "A Bill for an Act to appropriate money out of the Consolidated Revenue Fund for certain expenditure, and for related purposes".

    The Budget Papers say that this bill appropriates money for

    • grants to the States under section 96 of the Constitution and payments to the Northern Territory and the Australian Capital Territory;
    • administered expenses for new outcomes;
    • departmental equity injections, loans and previous year's outputs; and
    • administered assets and liabilities.

    The bill appropriates $6,120,821,000 ($6.1 billion). This is broken down amongst various government departments as follows:

    Appropriation Bill (No.2) 2002-2003
    DepartmentAmount $
    Agriculture, Fisheries and Forestry 158,193,000
    Attorney-Generals 104,614,000
    Communications, Information Technology and the Arts 113,945,000
    Defence 1,315,415,000
    Veterans Affairs 20,391,000
    Education, Science and Training 124,688,000
    Employment and Workplace Relations 12,950,000
    Environment and Heritage 9,390,000
    Family and Community Services 1,970,488,000
    Finance and Administration 78,507,000
    Foreign Affairs and Trade 231,869,000
    Health and Ageing 1,138,525,000
    Immigration and Multicultural and Indigenous Affairs 87,237,000
    Industry, Tourism and Resources 107,950,000
    Prime Minister and Cabinet 734,000
    Transport and Regional Services 411,946,000
    Treasury 233,979,000
    Total 6,120,821,000

  3. Appropriation (Parliamentary Departments) Bill (No. 1) 2002-2003 - this bill is described as "A Bill for an Act to appropriate money out of the Consolidated Revenue Fund for expenditure in relation to the Parliamentary Departments, and for related purposes".

    The bill appropriates $166,102,000 ($166.1 million). This is broken down as follows:

    Appropriation (Parliamentary Departments) Bill (No.1) 2002-2003
    DepartmentAmount $
    Senate 29,369,000
    House of Representatives 29,938,000
    Joint House Department 44,817,000
    Parliamentary Library 17,522,000
    Parliamentary Reporting Staff 44,456,000
    Total 166,102,000

What About The Rest Of The Money?

A second version of the three Appropriation Bills outlined above will be presented to the Parliament in the Spring Session in October-November. Together, the six bills account for around 30% of government expenditure for the year.

The remaining 70% of expenditure is funded by special appropriations in particular legislation presented to the Parliament by the relevant ministers. "Special appropriations provide funds for specified purposes, for example, to finance a particular project or programme."

The current controversy about changes to the Pharmaceutical Benefits Scheme does not affect the passage of the Appropriation Bills. Separate legislation will deal with these changes. These changes may be rejected in the Senate by the combined forces of the ALP and the Australian Democrats.

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