Election spending promises are fine, but how will we pay for them?

As Australians struggle to pay bills, mortgages and rent, the Albanese government is taking heat for having overseen the biggest spending increase as a share of the economy for a first-term government since Gough Whitlam ended 23 years of Coalition government in 1972.

Like Whitlam, Prime Minister Anthony Albanese had a lot of catching up to do. Labor has reportedly made at least $123.6 billion worth of discretionary spending decisions from its three budgets on areas such as childcare subsidies, aged care, health, housing and green energy, but a large amount comes from commitments to veterans, the aged and the National Disability Insurance Scheme that had gone unpaid as previous governments did not fully implement recommended programs.

Anthony Albanese at Labor’s ‘Strengthening Medicare’ announcement in Launceston.Credit: Brodie Weeding

The approaching federal election is being framed as a cost of living contest, but the major political parties appear oblivious to the need for economic restraint. For instance, Labor and the Coalition pledged a $9 billion injection into Medicare at the weekend without any credible plan to pay for it. At this rate, we can only wonder how much their promises will cost by election day.

The real problem is that our debt ratio is not improving, and we’re adding to it. A lot of this spending may well be justified: the increase in health and caring spending over the past decade by both sides has been necessary, reflecting our ageing population and our commitment. Further, the Albanese government has reeled in some of the more egregious abuses undermining the NDIS, but we know the reforms do little to decrease the overall money earmarked for the scheme.

The Albanese government has also promised $7.2 billion for a Queensland highway, $3 billion for the NBN and $1.7 billion to rescue the Whyalla steelworks in South Australia, and Opposition Leader Peter Dutton has matched much of Labor’s big ticket items.

But none of the leaders have the political guts to talk about how they propose to pay for their promises and the revenue measures needed. They remain mute, relying on bracket creep thanks to the income tax thresholds not being indexed to pay for their profligacy.

This year’s stage 3 tax cuts were painless for politicians but contain long-term hurt for many.

Former senior public servant Ken Henry last week warned that young Australians are the victims of “wilful acts of bastardry” from governments, voters and powerful vested interests, accusing federal governments of overseeing a tax system that is failing the country and future generations. Henry said voters, concerned about self-interest, were electing populist governments engaged in “intergenerational larceny”. They were aided by vested interests that did not want any change because they benefited from the current inequitable tax system.

Unfunded spending decisions have probably pushed another tax cut far into the future, but bracket creep and taxation reform are not the only way governments can pay for their election promises. With uncounted billions in election promises waiting in the wings, getting the economy going faster is a ready-made source of funds.

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