Step 2: Impact analysis

In-scope policy proposals that meet or exceed one or more of the IA thresholds (step 1) require an IA to inform a key decision.

An IA refers to the product provided to support the policy decision, which is either a Dashboard or, where required, a Detailed IA.

Templates for both the Dashboard IA and the Detailed IA are on the OIA website.

2.1. Dashboard IA

The Dashboard IA should provide easily accessible analysis of the key likely impacts of a policy proposal. The Dashboard IA should be prepared using the template available on the OIA website and should be around 3 pages.

The Dashboard IA should provide a concise analysis against the 7 IA questions.

This includes, but is not limited to the:

  • policy problem and policy objective, including where appropriate, qualitative or quantitative evidence on the policy problem
  • policy options being considered, including the status quo and at least one non regulatory alternative policy option (unless it can be demonstrated that a non-regulatory option is not viable)
  • analysis of the costs and benefits, including the change in the regulatory burden, of the policy option(s) under consideration
  • implementation and evaluation approach.

The Dashboard IA should also provide a high-level analysis of the policy option(s) against the government’s key strategic priorities.

The Dashboard IA is the primary product used to inform decision‑makers at key decision points.

The Dashboard IA must be published following the policy’s announcement. The Dashboard IA must include material with a suitable depth of analysis and evidence, including drawing on consultation with stakeholders. The analysis and evidence should be proportionate to the scale of the proposal and likely impacts.

2.2. Detailed IA

The Prime Minister or the Cabinet may ‘call in’ or require a Detailed IA for in-scope policy proposals with moderate or major impacts. The OIA can provide guidance to agencies on the development of a Detailed IA.

A Detailed IA must be published following policy announcement and provides in-depth analysis across all 7 IA questions. This includes in-depth analysis and consultation to support policy development. A Detailed IA may be appropriate where policy proposals are expected to have major impacts across the economy, where a range of viable policy options needs to be considered in detail, or where there is a risk of significant unintended consequences.

A Detailed IA is also required for proposals that meet the IA thresholds and involve introducing a mandatory standard that deviates from existing international standards. See Special cases below.

Figure 2. What type of IA is required?

An IA is required

Has the Prime Minister or the Cabinet called-in a Detailed IA? Or is the proposal considering introducing a mandatory standard that deviates from existing international standards?

No: Dashboard IA

The IA should provide high-level analysis, including:

  • addressing the 7 IA questions
  • high-level summary analysis of impacts based on cost-benefit analysis and other analysis techniques to, where possible, quantify impacts
  • evidence from engagement with key affected stakeholders
  • key strategic priorities discussion.
Yes: Detailed IA

The IA should provide detailed analysis, including:

  • addressing the 7 IA questions
  • detailed analysis of impacts based on cost benefit analysis and other analysis technique to, where possible, quantify impacts
  • evidence from engagement with key affected stakeholders
  • distributional impacts
  • implementation and evaluation approach.
  • The executive summary should use the Dashboard IA template.

2.3. The 7 IA questions

The 7 IA questions provide a framework for evaluating the likely impacts — intended and unintended — and for considering alternative ways to address a policy problem. The 7 IA questions need to be considered in all IAs and are a useful framework for any policy process.

Question 1 - policy problem

What is the policy problem and what data are available?

  • Clearly identify and define the policy problem.
  • Provide evidence to demonstrate why it is a problem, the magnitude of the problem and the impacts of not doing anything.
  • Describe the people, businesses or community organisations affected by the problem.
  • Explain which, if any, current government policies have sought to address the problem, and if and why those policies are not sufficiently addressing the policy problem.
  • Identify available information and data and consider how to close any gaps that need to be addressed as part of the IA process.

Question 2 - policy objective

What are the policy objectives, why is government intervention needed to achieve them, and how will success be measured?

  • Establish the policy rationale for government to intervene, including demonstrating that the government could intervene successfully.
  • Clearly identify the policy objectives and intended outcomes.
  • Identify any barriers to achieving the policy objective.
  • Outline what factors will make this policy change a success and include measurable targets.

Question 3 – policy options

What policy options are being considered?

  • Identify genuine and viable alternative policy options, including the status quo and at least one non-regulatory alternative policy option (unless it can be demonstrated that a non-regulatory option is not viable).
  • Demonstrate these policy options can achieve the policy objectives.
  • Identify the context for the options considered (for example, the policy proposal may be an election commitment).

Question 4 – net benefit

What is the likely net benefit of the option?

  • Provide an estimate of the net benefit of each policy option. Where a monetised net benefit cannot be estimated, provide an explanation why this has not been possible (including identifying data and information gaps) and provide qualitative analysis of impacts. This analysis should also draw on evidence from stakeholder engagement and existing evaluations.
  • Identify who is likely to be affected by each policy option. Where significant, assess the economic, competition, social, environmental or other impacts as well as how those impacts are likely to be distributed.
  • Assess the regulatory burden impacts for people, businesses, organisations or the community using the Regulatory Burden Measurement Framework.
  • Provide analysis of impacts based on cost-benefit analysis and other analysis to quantify impacts where possible. Describe the method, assumptions and sensitivity testing used to conduct the analysis.
  • Provide information on any applicable international standards and whether the policy proposal differs from or adopts those standards.

Question 5 – consultation

What consultation was undertaken and how was feedback incorporated into the policy design?

  • Explain the purpose and objectives of consultation and outline the process of consultation.
  • Summarise the key feedback from stakeholders, including the areas of agreement as well as areas of difference.
  • Describe where the policy option(s) has been modified to account for stakeholder feedback, and where and why stakeholder feedback has not been adopted.
  • Consider alternative consultation approaches where the policy proposal is market sensitive, public consultation may compromise the policy, or where key affected stakeholders may require a different consultation approach.

Question 6 – implementation

What is the best policy option and how will it be implemented?

  • Indicate the most appropriate policy option to achieve the identified policy objective (question 2) and the reason. Summarise the supporting analysis and clearly outline any caveats or qualifications, and assumptions.
  • Explain how this policy option will be implemented. Assess implementation challenges and risks: their likelihood, consequences and management. Outline any transitional arrangements and an implementation approach.
  • Build on IA question 1, develop a plan to close any relevant data gaps during implementation to support successful monitoring and evaluation of the policy.

Question 7 – evaluation

How will the policy be monitored and evaluated?

  • Describe the monitoring activities you will undertake to ensure successful implementation. Specify if a formal evaluation will be conducted and, if not, provide a rationale for not doing so.
  • If a formal evaluation will be conducted:
    • state when a monitoring and evaluation plan, consistent with  Commonwealth Evaluation Policy, will be finalised
    • provide a tentative date for completion of the evaluation
    • state the type of evaluation that is proposed: process evaluation, outcome/impact evaluation and/or economic evaluation
    • prepare draft key evaluation questions that relate to the policy objective and success metrics set out in IA question 2
    • consider undertaking an initial data needs assessment (that is, what data is needed, what data is already available, and what extra data might need to be collected)
    • consider including a draft theory of change.

Refer to guidance by the Australian Centre for Evaluation.