You are developing legislation with a likely cost of greater than $2 million. You are required to prepare a Legislative Impact Assessment, which includes an economic assessment.

A Legislative Impact Assessment (LIA) outlines the problem that the proposed legislation is intended to address, various options that may address the identified problem and the costs and benefits of the proposed legislation.

What is the process for developing legislation?

Broadly, the process for developing legislation involves the following steps:

• Advise your Minister on the best approach, including whether an LIA is required.

  • Better Regulation Victoria can provide advice to help you to advise your Minister.

• You prepare for the development of the LIA, including detailed planning and consultation with the you Legal and Legislation, Economic Assessment, Performance Evaluation, Regulation Reform teams.

• You develop the LIA, including engaging with affected parties.

• The Commissioner for Better Regulation provides independent advice about the adequacy of the analysis in the LIA (rather than the merits of the proposal) against the requirements of the Subordinate Legislation Act 1994 (SLA) and the Victorian Guide to Regulation.

Most LIA go through three to four draft iterations. You need to allow three to four business days for the Commissioner for Better Regulation to provide an assessment for each draft of an LIA.

It can take two to six months – or longer for complex, higher impact proposals – to draft a LIA and have it assessed by the Office of the Commissioner for Better Regulation as adequate.

The Commissioner for Better Regulation also provides guidance material, training and can advise on what kind of assessment a proposal requires.

If the likely cost of the legislation is at least $2 million, then a low-impact LIA should be prepared.

If the likely cost of the legislation is at least $8 million, then a high-impact LIA should be prepared.

High impact LIAs have additional requirements on top of the minimum requirement (low-impact).

How should I undertake the economic assessment?

Guidance on undertaking economic assessment Guidance-on-how-to-undertake-economic-assessment-internet.DOCX (DOCX 127.36 KB) has been developed for staff to assist when performing, commissioning and evaluating economic assessments. Further guidance on specific processes, variables and methods is also available.

Cost-benefit analysis is recognised as leading practice economic assessment and is the recommended approach across the Victorian Government. In practice it may not be possible to undertake a cost-benefit analysis for all proposals and other methods may be used on an exceptions basis.

All economic assessments should be guided by the principle of proportionality, such that the investment in undertaking an economic assessment should be proportional to the scale and risk of the particular issue, initiative or investment.