Labour, Coalition promise billion dollar surplus in three years as pre-election costs revealed

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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.

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.

The government has pledged $8.4 billion worth of new projects — including more than $4 billion for health and new hospitals.

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.”

Danielle Wood Grattan Institute CEO.  Photo by Peter Drought
Grattan Institute CEO Danielle Wood says the details of the costs were not a surprise.(ABC News: Peter Drought)

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.

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