Labor to slash $21bn of government spending after audit of departments

Finance Minister Katy Gallagher and Treasurer Jim Chalmers have hatched a plan to save $21bn in their first budget.

Labor’s federal budget will save up to $21bn after an audit revealed ways to claw back savings by cutting costs in many government departments.

Among the cuts to be made are $2bn worth of grants and $3.6bn that would have been spent on travel, advertising, legal expenses and outsourcing government work including to consultants.

Some existing spending will be redirected in order to improve the budget’s bottom line.

This includes $6.5bn that will be recouped by shifting infrastructure projects that can’t be delivered within the next four years out of this budget and into the government’s medium-term expenditure plans.

The Albanese government will have to balance funding its policy commitments with servicing nearly $1 trillion of debt and the spiralling costs of public services such as the NDIS when it delivers its first federal budget on Tuesday.

Labor will also begin the onerous task of repairing a budget which is forecast to remain in deficit for at least four years.

Treasurer Jim Chalmers and Finance Minister Katy Gallagher in May asked their respective departments to conduct an audit of the quality of government spending to identify areas of potential waste.

Senator Gallagher said the government had “responsibly gone through the budget line-by-line” to identify savings and opportunities to reprioritise funding for different projects.

“We take the job of budget repair seriously and these savings are the first step towards repairing the budget following a decade of damage done by the Coalition,” she said.

Treasurer Jim Chalmers will deliver his first federal budget on Tuesday. Picture: NCA NewsWire / Gary Ramage

Senator Gallagher accused the Albanese government’s predecessor of using taxpayers’ money to “cynically buy votes” through the use of grants funds.

She said the former government had “used the budget to land political deals” with the Nationals in the Coalition party room and that Labor would end this approach to spending.

Former Nationals leader Barnaby Joyce had secured $30bn in funding commitments for regional Australia from former prime minister Scott Morrison in return for the junior coalition partner’s support for signing up to the net zero greenhouse gas emissions by 2050 pledge.

Senator Gallagher said the Albanese government would use its first budget to deliver on its commitments and “clean up the mess” left by the Coalition.

She unveiled the $21bn of savings on Sunday night, hours after Dr Chalmers revealed the government had been forced to find room for an additional $33bn to cover welfare payments, which have increased due to indexation.

Anthony Albanese on Sunday said the budget would focus on delivering Labor’s election promises including cheaper childcare, healthcare, paid parental leave and the National Broadband Network.

Finance Minister Katy Gallagher says bureaucrats have gone through the budget “line-by-line” in their audit. Picture: NCA NewsWire / Gary Ramage

The Prime Minister said the budget would include a range of “responsible” cost-of-living measures but their scope would be hampered by the need to not worsen inflation.

“We would like to do much more but we will be responsible to make sure that we have our eye on the economic constraints which are there because we do need to address cost of living,” Mr Albanese told reporters in Perth.

The Coalition has released its own list of demands for the budget.

Among them is that Labor must put downward pressure on interest rates and inflation – set to peak at 7.75 per cent in December – without increasing taxes.

Opposition treasury spokesman Angus Taylor has released the Coalition’s demands for the budget. Picture: NCA NewsWire / Gary Ramage

The Coalition has also called on Labor to fulfil its election promises including to bring down power bills by $275, to implement the stage three tax cuts in full, to reduce the cost of living and to increase real wages.

Opposition treasury spokesman Angus Taylor said the government’s first budget must make hardworking businesses and households a priority.

“Australians need Jim Chalmers to stop complaining about the challenges of this economy and instead deliver a plan to support Australians through this cost of living crisis,” he said.

“If the Treasurer can deliver on these priorities we will back him in. If not, we will hold him to account.”

Mr Taylor told the ABC’s Insiders program earlier on Sunday that the Coalition would only support a “responsible” budget and that its “early signs aren’t good”.

Opposition finance spokeswoman Jane Hume said the budget would be a “test” for Dr Chalmers and Senator Gallagher.

“Labor inherited an enviable set of economic circumstances,” she said.

“The test for Labor is whether they will use this to deliver for the Australian people, or whether they will squander it.”