Labor has unveiled its costings, showing it would have a deficit of about A$16.5 billion higher across the forward estimates than that shown in the official Pre-election Economic and Fiscal Outlook (PEFO).
Shadow Treasurer Chris Bowen and finance spokesman Tony Burke put out the figures just after Malcolm Turnbull’s official launch of the Coalition’s campaign. The timing appeared designed to have the Labor numbers get less attention than they would on another day.
The opposition has also announced two new savings measures:
From July 1, 2017, a Labor government would put a $5000 cap on the deduction individuals can claim for the cost of managing their tax affairs. There would be an exemption for small businesses with a positive business income and turnover of less than $2 million. This would save $295 million over the forward estimates and $1.7 billion over a decade.
Labor would remove the private health insurance rebate from policies that only cover public hospital treatment, at a saving of $135.1 million over the forward estimates and $384 million to 2026-27.
Labor would add $2.4 billion to the PEFO deficit in 2016-17; $4 billion in 2017-18; $4.7 billion in 2018-19 and $5.4 billion in 2019-20.
A Labor government would have a deficit of $39.5 billion in 2016-17, falling to $11.3 billion in 2019-20. In 2020-21 Labor would return the budget to balance with a surplus of $1 billion. This is the same year the budget is back in balance under the PEFO figures.
Bowen and Burke said Labor would have net savings of $10.5 billion more than the government over the decade. It would have total savings of more than $130 billion over 10 years.
The Labor figures are based on work by the independent Parliamentary Budget Office and signed off by an independent panel consisting of Robert Officer, emeritus professor at the University of Melbourne; former head of the prime minister’s department Michael Keating, and James MacKenzie, who has served as a director of a number of public companies.
Bowen and Burke said that under the current forecasts, Labor would reduce the deficits every year until the budget returned back to balance. It would bring the budget back to balance the same year as the Liberals and build strong surpluses over the medium term through measures that permanently improve the bottom line.
“Every dollar of the modest difference between Labor and the Liberals over the forward estimates is a result of Labor’s decision to protect Medicare and deliver productivity-enhancing investments in schools, universities and infrastructure. 50% of the difference is because of Labor’s investments in our schools and universities.”
According to Labor’s figures, it would have a surplus of more than $10 billion in 2023-24, compared with the PEFO projection of $6.7 billion surplus. By 2026-27 Labor’s surplus would be nearly $20 billion; the PEFO projection under current policies is $6.2 billion.
Bowen said that Turnbull had announced more spending in Sunday’s policy launch and called for him to release the government’s full bottom line as soon as possible.
Labor says that the difference between its deficit over the forward estimates and that of the government is actually lower than it seems because the government figures included billions of dollars worth of zombie measures that will not pass the Senate.
Treasurer Scott Morrison said that Labor had confirmed “that they are a AAA threat to our AAA rating”. The ALP had confirmed that it would increase the deficit by $16.5 billion; would increase debt and increase taxes. “This is something that will weaken our economy at a time when we need to be doing everything, particularly right now,” he said.
The Brexit decision was a reminder of the global uncertainty and now the increased volatility that we faced, he said.
Morrison rejected Labor’s argument that the government should be excluding zombie measures from its numbers, saying it was very arrogant to presume on the next parliament and that measures on both sides were subject to the parliament.
Authors: Michelle Grattan, Professorial Fellow, University of Canberra