Peter van Onselen: Labor’s policies and costings ‘recipe for fiscal disaster’

LABOR’S policies and costings ahead of this year’s election are predicated on 10-year time horizons. It is a recipe for fiscal disaster plain and simple.

Labor’s plan to use a rise in tobacco taxes to cover long term education funding is ‘plain stupid’ says Peter van Onselen.

LABOR’S policies and costings ahead of this year’s election are predicated on 10-year-time horizons.

Rather than ensuring its agenda adds up over the traditional four years of budget forward estimates, Labor wants voters to believe it can deliver substantial new spending in the next few years, and pay for the up tick in the second half of the next decade.

Peter Van Onselen.

It is a recipe for fiscal disaster plain and simple.

While it’s prudent to model what impact policy decisions will have in the long term, relying on such modelling is a risky business.

The further out you forecast the less accurate underlying assumptions are, and the more susceptible to changing economic circumstances the plans become.

Which is why Labor’s approach of spending money which hasn’t yet flowed into the treasury coffers years before when it is modelled to do so is a pathway towards more debt and the pushing back of any return to surplus.

All of this is to say nothing of the unpredictable types of taxes which have been allocated to pay for particular policy areas.

A rise in tobacco taxes to cover long term education funding for example is plain stupid. Smoking rates are supposed to go down when taxes on cigarettes go up.

So if the government is successful with that policy outcome courtesy of its higher taxes on tobacco, it will by definition be unsuccessfully in paying for increased education funding via the very same tax.

With the extra funding for education already spent that will leave only one way to pay for it - via more debt.

There are other items relied on by Labor to fund promises which are similarly risky.

Here’s a prediction: if Labor wins the federal election government spending across the next four years will significantly rise, yet beyond that the supposed extra revenue coming in to pay for it will never materialise.

I’d bet my house on it. Not that it will be worth much if their negative gearing policy becomes law.

Peter van Onselen is The Sunday Times’ political analyst and a professor at UWA

Originally published as Peter van Onselen: Labor’s policies and costings ‘recipe for fiscal disaster’