Confirmation that the government will be progressing an independent Parliamentary Budget Office is great news for democracy and transparency, Federated Farmers says.

The proposed PBO will provide independent fiscal and economic policy analysis to Parliament, and a policy costing service for political parties.

"This was a provision in the Labour-Greens confidence and supply agreement and Federated Farmers strongly supported the concept when consulted last year. It is particularly good that it will be an office of Parliament and not a unit sitting within a government department," Feds economics and commerce spokesperson Andrew Hoggard says.

The PBO is expected to be operational from mid-2021.

"It is a pity it won’t be established in time for next year’s election but in the meantime the Government has said it will look to improve existing protocols for costing political party policies," Hoggard said.

"We hope the PBO proceeds through its remaining steps, including endorsement by the multi-party Officers of Parliament Committee."

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