Box 3.A1.3. Cost-benefit analysis in policy evaluation in Australia
and Canada
Cost-benefit analysis (CBA) of policies and programmes is one way in which policy
makers can determine the net social benefit or cost of a programme and, accompanied by
a portfolio approach to SME and entrepreneurship policy, determine the optimal allocation
of budget across their portfolio in terms of net social benefit. CBA is a method of
quantitative economic analysis that can be used for a variety of purposes including
analysing a prospective policy option or ex post evaluation of a project or programme. It is
used to determine the net social benefit of alternate policy options and in this way aids
policy makers in allocating resources in the most efficient way possible. CBA has been an
integral part of SME and entrepreneurship policy development in Australia and Canada
since the 1990s.
In Australia, an updated Handbook of Cost-Benefit Analysis was released by the
Department of Finance and Administration in 2006. This handbook provides guidance in
the use of cost-benefit analysis for evaluation and decision-making. It also covers two
alternative methodologies – financial evaluation and cost-effectiveness analysis – for the
evaluation of projects and programmes