‘Band aid solutions’: Albo, Dutton lashed for election spending

Australia’s major parties have been accused of ditching rational economic policies in favour of a “spendathon” to win votes ahead of the May 3 election.

Australia’s two major parties are engaging in a “spendathon” ahead of the federal election which will do little to pay down the national debt or improve living standards, a leading economist has warned.

As both Labor and the Coalition offer billions in tax cuts, fuel subsidies and housing schemes AMP chief economist Dr Shane Oliver has warned none of these solutions will help Australians in the long term.

Both political leaders have been accused of doing little to help grow Australia’s living standards. Picture: Matt Roberts/ ABC/ Pool/NewsWire

“The Australian election campaign is not going well for anyone hoping for rational economic policies designed to strengthen the economy,” he wrote in an economic note.

“It’s being overwhelmed by both sides trying to outdo each other with a spendathon of measures that will only worsen Australia’s structural budget deficit and debt situation and do little to fix structural economic issues,” he wrote.

“All these handouts – particularly the moves for first home buyers – may be popular but like Easter eggs they are not good for us.”

Labor’s headline cost of living policies include “modest” top-up tax cuts of around $5 a week in 2026-2027 before doubling the year after and an automatic $1000 deduction all workers will be able to claim, instead of having to lodge individual claims and receipts for multiple deductions.

The Coalition will repeal the tax cuts and have instead pledged to halve the fuel excise for a year, saying it will give immediate relief to motorists. The party has also offered up a one-time tax offset of up to $1200 for low- and middle-income earners who take home less than $144,000.

Dr Oliver cautioned both of these policies would add to the national debt, which is forecast to reach $940bn or 33.7 per cent of GDP in 2024-25, with budget estimates showing debt is expected to balloon out to over $1.2 trillion or 36.8 per cent of GDP in 2028-29.

Both parties will spend up big on cost-of-living measures. Picture: NewsWire / Nicholas Eagar

“Unfortunately, the array of cost-of-living promises will do nothing to boost productivity and turn around the slump in living standards,” Dr Oliver said.

“They are mostly just band aid solutions.”

“The billions of dollars in spending promises from both sides of politics will add to Australia’s projected decade or more of budget deficits and rising public debt.”

According to the economist, ALP looks to be adding more debt than the Coalition, although many of the policies offered by the opposition, including the Low and Middle Income Tax Offset, could be hard to remove after one year as planned.

Dr Oliver also called out the current plans from both parties on housing.

Labor previously announced first-home buyers would get some help entering the housing market, needing only a 5 per cent deposit and lenders mortgage insurance waived.

It has also promised $10 billion in funding to build 100,000 properties specifically for first-home buyers.

The Coalition has promised to make the interest payments on the first $650,000 of a mortgage for a new home tax deductible for eligible buyers.

The party has also pledged to let superannuation members withdraw $50,000 from their accounts to use a deposit, and has allocated $5 billion for a fund to speed up essential infrastructure in a move it says will support 500,000 new homes.

Both parties will ban foreign buyers for two years.

“(The Coalition’s) tax break for first home buyers is likely to be far more costly than its estimating and it is committing to more defence spending which hasn’t been detailed yet. So, they may both be similar in terms of adding to the deficit and debt,” Dr Oliver said.

“The tax breaks on offer from both sides suggest a further step back from fundamental tax reform and the Coalition’s tax break for first home buyers will introduce yet another complication into our income tax system.”

Dr Oliver did, however, note both parties do have some rational economic policies, including Labor’s attempt to fixing bracket creep and the Liberal party’s vow to remove unnecessary red tape.

Originally published as ‘Band aid solutions’: Albo, Dutton lashed for election spending