Statement 6: Expenses and Net Capital Investment (Continued)
Appendix B: The Contingency Reserve
The Contingency Reserve (part of the other purposes function) is an allowance, included in aggregate expenses, principally to reflect anticipated events that cannot be assigned to individual programs in the preparation of the Australian Government budget estimates. The Contingency Reserve is used to ensure that the estimates are based on the best information available at the time of the Budget. It is not a general policy reserve. While the Reserve is designed to ensure that aggregate estimates are as close as possible to expected outcomes, it is not appropriated. Allowances that are included in the Reserve can only be drawn upon once they have been appropriated by Parliament. These allowances are removed from the Reserve and allocated to specific agencies for appropriation and for outcome reporting closer to the time when the associated events eventuate.
The Contingency Reserve contains an allowance for the tendency for estimates of expenses for existing Government policy to be revised upwards in the forward years, known as the conservative bias allowance. Since the 2012‑13 MYEFO, the allowance has been drawn down to zero in the Budget year (2013‑14), to ½ of a percentage point of total general government sector expenses (excluding GST payments to the States) in the first forward year (2014‑15), to 1 per cent of expenses in the second forward year (2015‑16) and a 2 per cent provision has been included in the third forward year (2016‑17). The drawdown of the allowance reduced expenses by $865 million in 2013‑14, $879 million in 2014‑15 and $1.9 billion in 2015‑16. The drawdown of the conservative bias allowance is consistent with long standing practice and does not represent a saving or offset to Government spending measures.
The Contingency Reserve also makes allowance in 2013‑14 and the forward years for anticipated events, including the following:
- a provision for underspends in the current financial year reflecting the tendency for budgeted expenses for some agencies or functions not to be met;
- commercial‑in‑confidence and national security‑in‑confidence items that cannot be disclosed separately, and programs that are yet to be renegotiated with State and Territory governments;
- decisions made too late for inclusion against individual agency estimates;
- the effect on the budget and forward estimates of economic parameter revisions received late in the process and hence not able to be allocated to individual agencies or functions; and
- a provision for events and pressures that are reasonably expected to affect the budget estimates.
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