Labor to allocate $5.5bn over four years to unannounced policy decisions ahead of election

Labor’s budget update will include $5.5bn set aside for an election war chest three times smaller than the amount the Coalition squirrelled away before the 2022 poll.

Exclusive: Labor’s budget update will include $5.5bn in unmarked spending set aside for an election war chest three times smaller than the amount the Coalition squirrelled away before the 2022 poll.

It can be exclusively revealed the cash allocated over the next four years for “decisions taken but not yet announced” in the Mid-Year Economic and Fiscal Outlook (MYEFO) released on Wednesday will pale in comparison to the $15.7bn the former Morrison Government allocated in 2021-22.

Treasurer Jim Chalmers and Minister for Finance Katy Gallagher will hand down the Mid-Year Economic and Fiscal Outlook (MYEFO) on Wednesday. Picture: NewsWire / David Beach

Pressed about the prospect of Labor baking secret pre-planned spending into the budget ahead of the election, Treasurer Jim Chalmers warned on Tuesday the figure “won’t stand out” compared to past updates.

Labor previously allocated $5.7bn for unannounced decisions in its May budget, and $4.6bn in its 2023-24 MYEFO.

Mr Chalmers also tempered expectations of new cost of living relief before Christmas, but he did not rule out additional household support before Australians are sent to the polls in early 2025.

“When we can afford to do more to help people doing it tough, we generally try to make room for that (in the budget),” he said.

Labor has been actively considering an extension of this its current energy bill subsidies of $300 for households and $325 for a million small businesses, which cost a total of $3.5bn in 2024-25.

On Wednesday, Mr Chalmers and Finance Minister Katy Gallagher will credit Labor’s economic management as saving taxpayers $70bn in interest payments on the nation’s debt over a decade.

Coalition treasury spokesman Angus Taylor says Labor is trying to blame others for its spending. Picture: NewsWire / Martin Ollman

The update will show gross debt will be $117bn lower than what was forecast prior to the 2022 election.

But less revenue due to a drop in demand for Australia’s mining exports and weaker company tax receipts, combined with higher spending is expected to show budget deficits growing over forward estimates compared to forecasts in May.

At the time Treasury estimated the 2024-25 budget would have a deficit of $28.3bn blowing up to $42.8bn the following year.

Ms Gallagher on Tuesday blamed some of Labor’s extra spending on the former Coalition government’s failure to fund ongoing costs.

“There’ll be a further $8.8bn in unavoidable spending, which really goes to services and programs that the Australian people rely on – extra going into the PBS for listing of new drugs, for health terminating programs, including aged care Covid support, an important uplift to the AEMO digital systems to ensure energy security,” she said.

Coalition treasury spokesman Angus Taylor accused Labor of looking for “excuses” and people to blame for its own budget choices.

“Jim Chalmers has an addiction to spending that has kept inflation and interest rates higher for longer,” he said.

AMP senior economist Diana Mousina says Labor will not be able to rely on luck to reduce future budget deficits. Source: Supplied

AMP Capital senior economist Diana Mousina said Labor was “lucky” stronger than expected demand for Australia’s exports and the higher company and income tax receipts had helped deliver two budget surpluses, but those factors were “unlikely” to exist in the near future.

Ms Mousina said given the ongoing cost pressures of funding the NDIS, healthcare and paying interest on debt, the government could not just “rely on luck” to bring down forecast budget deficits.

“I do think that there will need to be … some spending cutbacks and or revenue raising measures in the next few years, because the deficit numbers do look a little bit too high,” she said.

But Ms Mousina said she did expect Labor would promise some additional cost of living relief ahead of the election.