Both the Labor and Liberal parties are promising to deliver budget surpluses of more than $1 billion by 2025-2026 if they win government, according to pre-election costs.
- Labor says it will have a surplus of £1bn. USD in 2025-2026, while the coalition says its figure will be 11.3 billion.
- Both parties rely on contingency funds in the budget to support their costs
- The costs have been assessed by the Parliamentary Budget Office as the state election approaches
The figures were revealed as both major parties gave details of the costs behind their election promises as election day approaches.
Labor costs were assessed by the Treasury, while the Coalition’s have been assessed by the independent Parliamentary Budget Office.
Economists have criticized both sides of politics for failing to engage in any budget repair or attempts to create a sustainable budget, describing the costs as relying on “optimistic assumptions and accounting tricks”.
Both parties have revealed that the expected surpluses for 2025-2026 would be partly delivered by raiding contingency funds already in the budget. The coalition also plans to take $10 billion from the state’s future fund to pay down debt – saving the state $775 million in interest payments.
The contingency funds are designed to protect the budget from future financial shocks, but Treasurer Tim Pallas said it was appropriate to use the funds.
“We set aside a contingency for future expected costs and we draw down on that contingency which happens regularly and is part of the normal process of day-to-day government,” he said.
Sir. Pallas said Labor was “on track” to reach a surplus of more than $1 billion by 2025-2026.
Costings for the Coalition show it is able to spend $10.5 billion to scrap the Suburban Rail Loop.
Shadow Treasurer David Davis strongly criticized Labour’s costs as he revealed his party’s forecasts would deliver a bigger surplus at the next state election.
He said under the coalition plan the surplus in 2025-2026 would be $11.3 billion, with a smaller surplus achieved the year before.
Sir. Davis said that if elected, a coalition government would “start the job of budget repair and start the job of cutting the debt” immediately.
Its debt reduction will depend in part on taking billions out of the state’s future fund over the next four years, as well as by privatizing the state’s sewer system.
Lack of ‘real savings’ criticized
Danielle Wood, economist and executive director of the public policy think tank Grattan Institute, was disappointed by the offer from both parties.
“The costs confirm what we had already seen through this campaign,” she said.
“Both parties have announced significant spending programmes. There is very little in the way of genuine savings outlined in these documents, certainly no proposals around tax.
“So any budget repair we see is largely based on optimistic assumptions and accounting gimmicks.”
She said the way the parties had claimed contingency funding was not usual practice.
“We see parties drawing on contingency funding pledges, but I think the heavy reliance on that as the primary mechanism by which they repair the budget is unusual and points to the fact that they really haven’t looked for real savings or opportunities . to repair the budget elsewhere,” said Dr. Wood.
She said Victorians should be concerned about the state’s “quite a large” debt coming out of COVID.
“It’s expected to rise over the next four years and neither party has come into this election with a real plan to bring that debt down,” Ms Wood said.
“In fact, on the contrary, we see very large spending commitments on both sides.”
Labor says no increase in debt or new taxes
Sir. Pallas said Labor made more than a billion dollars in savings by reducing the use of consultants and labor hire firms, as well as winding down some programs that were superseded by Commonwealth programs.
Figures published by the Ministry of Finance and Finance at the end of October predicted a more modest number with a profit of almost $900 million in 2025-2026. In the state budget handed down in May, that figure was $650 million.
“We have fully calculated, fully funded a plan that will continue to deliver for all Victorians,” Mr Pallas said.
“It also confirms that we will deliver on our election commitments with no new increases, no new or increased taxes, no increase in net debt.”
Treasury documents show no timelines for more than $5 billion in capital spending on new hospitals, schools and trains, but Mr Pallas insists the programs will start to be delivered in the next government term.
The government will also delay payments to a public defined benefit scheme, which will save it $3 billion but will not affect benefits to beneficiaries.
Coalition plan backed by rail loop scrapping
Davis accused Labor of not providing an “accurate” projection of the national debt in its figures.
“A state facing huge debt, going into debt, suffocating debt, and the treasurer releases a set of numbers without confronting the impact of the shocking debt,” he said.
He said the government should have published “transparent” debt forecasts.
Davis said scrapping Labor’s Suburban Rail Loop project was a key part of its plan to reduce Victoria’s debt and invest in health.
The rail project, which will link Melbourne’s rail lines and its airport, is estimated to cost between $30-50 billion.
In its analysis, the budget office found that scrapping the project would free up $10.5 billion.
“The state needs the budget to be run properly,” Mr Davis said.
“The state needs proper focus on the things that matter to Victorians and that is our health system, the crumbling health system, ambulance funding … and funding all the steps that we have set out in our election policy and elsewhere .”
The costs also revealed a Liberal plan to sell management of the state’s sewer services on a 50-year lease, which would reap $6.6 billion.
Pallas criticized the plan, saying that the privatization of power under the opposition in the 1990s had not worked.
“Now they’ve announced they’re going to sell off our precious water and sewerage, which means you pay more every time you flush,” he said.
As part of its election promises, Labor has said it would reinstate the state’s Electricity Commission, returning some of the state’s energy infrastructure to public ownership.