Zombies return as cost blowouts and unfunded programs hit budget

Health programs left unfunded, “zombie” measures unlikely to ever become law and cost blowouts for major infrastructure projects promised up to three years ago have forced billions of dollars worth of extra spending into Treasurer Jim Chalmers’ first budget.

The Herald and The Age can reveal preliminary work by the government’s audit of programs and promised savings has uncovered $6.4 billion in extra spending that will have to be shoehorned into the budget to ensure continued services such as aged care and COVID vaccine booster shots.

An audit of government programs has found $2.6 billion worth of COVID-related spending that will have to be put back into the budget.Credit: AP

The audit’s discovery of the extra spending is on top of cost pressures facing the budget’s infrastructure commitments which have grown due to inflation and overly optimistic initial price estimates.

Chalmers will on Tuesday deliver the government’s new 2022-23 budget, which is expected to cut spending to offset Labor’s pre-election promises which will cost $2.4 billion this financial year. The government has been undertaking an audit of “waste and rorts” with the initial results to form part of the budget.

But ministers and the government’s expenditure review committee have also been told of hundreds of programs that are expected to continue but only have enough funding for this year or next.

In health, there are more than 200 programs including an adult dental health program aimed at concessional cardholders, the ongoing digital health record program and Closing the Gap measures. In Treasury, not enough cash was set aside for a long-term plan to modernise business registers.

Finance Minister Katy Gallagher says an ongoing audit revealed huge problems in the budget.Credit: Alex Ellinghausen

Finance Minister Katy Gallagher confirmed there were $4 billion worth of “zombie” measures that were savings written into the budget but which were never going to be approved by the parliament.

They included $872.8 million expected to be saved by applying a four-year waiting period on newly arrived residents for certain services, a $215 million saving from changes to the liquid assets waiting test for the unemployed and a $175 million saving from changes to the pension supplement.

Some proposed measures are five years old but have never been put in place.

Another $2.6 billion was required for COVID-related programs that are continuing, including $810 million for aged care support, $48 million for GP respiratory clinics and $314 million for the fourth COVID vaccination expansion.

Gallagher said the audit, which is ongoing, had revealed huge problems in the budget.

“The Labor government’s line-by-line audit of the budget has so far revealed $6.4 billion in spending that the former government knowingly refused to account for in the budget and where they were not honest with Australians about the real cost of some of these programs and decisions,” she said.

“Labor is being honest and upfront with the Australian community when it comes to the true state of the budget and some of the challenges that we’re all going to face in the future.”

Infrastructure construction is also putting pressure on the budget.

Cost blowouts are plaguing a plan to deliver extra car park spaces at railway stations.Credit: Paul Jeffers

This masthead can reveal huge blowouts in projects, many of which were promised by the previous government ahead of the COVID pandemic but for which little work or planning has been started.

In one case from 2019, the then government promised four projects worth a combined $500 million in the east and south-east suburbs of Melbourne covering the electorates of Higgins, Deakin and Aston.

They included a $260 million plan to remove the Glenferrie Road railway level crossing which, at the time, the Coalition claimed was a “conservative estimate” of the project’s total cost. The state government insisted it would cost at least $100 million more.

Instead of costing $500 million, the estimated cost of the four projects is now closer to $1.7 billion.

Infrastructure Minister Catherine King has confirmed major cost overruns in the urban congestion fund and the commuter car park fund.Credit: Alex Ellinghausen

The commuter car park fund, created in the 2019 budget, was originally expected to spend $500 million.

As of March, $674 million had been set aside for car parks. Just $50.9 million worth of projects had been completed while another $192 million was officially under way.

Since the election, the new government has found even more cost pressures on the program. In some cases, just $1 million or $5 million was committed to car parks which have proven to be far more expensive to build.

A spokeswoman for Infrastructure Minister Catherine King confirmed the government was dealing with a large lift in overall infrastructure spending.

In March, then-treasurer Josh Frydenberg forecast a budget deficit for 2022-23 of $78 billion or 3.4 per cent of GDP. This was then tipped to fall to $56.5 billion in 2023-24.

But a surge in company and personal income tax receipts plus much lower-than-expected unemployment is expected to result in this year’s deficit being revised down.

Commonwealth Bank chief economist Stephen Halmarick said Chalmers had to deliver a budget deficit of around $35 billion if the government was to work in tandem with the Reserve Bank which is lifting interest rates to quell inflation pressures.

“It will be important for the government to maintain budget deficits of approximately one to 1.5 per cent of GDP not only in 2022-23, but also over the next few years to assist the RBA in managing the economic cycle and the surge in inflation,” he said.

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