Evaluating public expenditure management systems: An experimental methodology with an application to the Australia and New Zealand reforms

Abstract

This article examines how institutional arrangements affect the size, allocation, and use of public expenditures. It identifies a set of arrangements that can address underlying problems and affect three levels of expenditure outcomes - aggregate fiscal discipline, strategic prioritization, and technical efficiency in the use of resources. A diagnostic questionnaire is constructed which produces index values for each arrangement. This methodology is used to analyze the radical reforms introduced by New Zealand and Australia. The results show that New Zealand sought to achieve aggregate fiscal discipline and enhance technical efficiency through formal mechanisms for transparency and accountability. The Australian reforms sought to improve strategic prioritization through transparency of the medium-term costs of competing policies, and the devolution of detailed program decisions to line ministries within hard budgets.