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This paper examines the evolution of expenditure budgeting in Australia, at both the federal or commonwealth and state levels. The paper begins with a brief constitutional and fiscal overview, goes on to examine the evolution of expenditure budgeting at the commonwealth level over the 1970s, continues with a discussion of innovations in expenditure budgeting at the state level in the late 1970s, and concludes with a comparative assessment of the state of expenditure budgeting in Australia.

Abstract: This paper deals first with alternative concepts of accountability and efficiency. It views accountability—and associated concepts of efficiency—in a hierarchy of increasing sophistication and potential usefulness, but corresponding operational difficulty. The lowest level is fiscal or fiduciary accountability, relating to the actual expenditure of funds and procedures by which that expenditure is accounted for. The second level is efficiency accountability, defined in terms of the ratio of some physical measure of output to cost. The most sophisticated level is effectiveness accountability, in which the output measures used reflect the attainment of objectives or programs. Corresponding to these levels is a hierarchy of approaches to auditing, namely financial, efficiency, and effectiveness auditing.The second part of the paper looks at the present situation in Australia and at the recommendations of the Royal Commission on Australian Government Administration in terms of this framework. It argues that the government should commit itself to a continuing, comprehensive process of analysis and evaluation of public programs and activities aimed at making programs efficiently effective in a manner consistent with regular financial procedures. A "package" for implementing this approach—including revised institutional arrangements—is discussed in terms of the difficulties likely to be encountered—difficulties such as the shortage of capable personnel and problems of extending analytical practices to the State and local spheres of government.

The goal of rational decision-making in resource allocation is to produce net improvements in social welfare through policy choices. This ordinarily takes the form of microrationality, manifested as cost-benefit & cost-effectiveness analysis. Unless this approach is embedded in awareness of the properties of the whole social system, which can be called macrorationality, it is not possible to determine whether a specific program will produce an overall net gain or an overall net loss. A conceptual basis for macrorational evaluation is outlined. This involves four steps: (1) explicit specification of a weighted object function for national policy with subfunctions for particular programs, (2) development of analytical parameters for use in cost-benefit & cost-effectiveness analysis which are mutually comparable & consistent with national goals, (3) development of a general interdisciplinary analytical framework for cost-benefit & cost-effectiveness studies, which will take financing implications into account in determining expenditures, & (4) explicit recognition of a need for overall systems improvement criteria in analysis of tradeoffs between alternative policy mixtures. 6 Figures. Modified HA.