Albanese and Dutton are bidding to buy your vote, with no regard for the price

Australians are about to be invited to an auction in which Anthony Albanese and Peter Dutton bid for votes with competing claims about personal tax cuts.

The prime minister has opened the bidding with a tax cut worth $268 in its first year and $536 in the second year and every year afterwards. The opposition leader is waiting until his budget reply speech on Thursday night to raise his hand with a rival bid.

The bidding war over tax cuts has begun. Credit: Kathleen Adele

The election contest turns on whether Dutton will go big with a more generous tax cut or even a substantial tax reform. He and his colleagues had to rethink their plans as soon as they saw the budget on Tuesday. They had to revisit their decision at the start of this year, as revealed by this masthead in February, to avoid big tax cuts.

But the tax argument means hiding some ugly facts from Australians because the nation’s finances are too weak to sustain an election spendathon. The budget forecasts deficits every year for more than a decade. At the same time, it outlines new ways to deepen those deficits.

The “top-up” tax cut is forecast to cost $7.4 billion in the year to June 2029. That is the same year the “stage three” tax cuts, as revised last year, will cost $31.1 billion.

The deficit in that year will be $36.9 billion, so Australia would have a surplus without the tax cuts. The real cost of the tax auction is laid bare in the budget papers, but politicians do not want to talk about it when they have an election ahead.

Worse, both sides dodge the truth with misinformation. The government pretends the budget is in good health, while the Coalition pretends it has a solution.

“We’re paying down Liberal debt,” Chalmers said this week. Wrong. The debt belongs to both major parties because it has been growing since Labor governed during the global financial crisis. Neither side is paying it down.

The debt rises to $940 billion this year and keeps growing to $1.2 trillion by June 2029.

Interest payments on that debt will rise to $41.7 billion in 2029 – more than the government pays for Medicare benefits and more than it pays the states to run their hospitals.

The Liberals also hide behind misleading claims. “We’ve already opposed more than $100 billion worth of Labor spending initiatives,” said shadow finance spokeswoman Jane Hume on Sunday. But this is not a cut to annual spending.

The $100 billion reflects the off-budget funds the Liberals oppose, such as the $15 billion National Reconstruction Fund. The fact is that Dutton has no public plan to end the deficits – for the obvious reason that this would turn him into a political target.

Both sides blame the media for their predicament because they will be criticised if they are bold about bringing spending under control. But is this really a sufficient excuse for leaders to be timid?

Australians will appreciate the personal tax cuts. There is a fairness in giving a little back to workers from the taxes they pay, even if it is only $5 a week. The great vacuum in this year’s budget is the absence of any spending restraint to fund the tax cut. It is an unfunded election sweetener – a chocolate cake bought on the credit card.

This is also in the budget papers if you look. Federal spending rises to 27 per cent of GDP this year, the highest in four decades outside the pandemic. At the same time, the “table of truth” in the budget (officially the “reconciliation” of spending and revenue decisions) shows that Labor policy decisions have weakened the bottom line by $34.9 billion over five years. Albanese and Chalmers have been fortunate that tax revenue has grown to cover that largesse.

This budget may be remembered for buying votes when the country needed braver decisions now that US President Donald Trump is bringing so much upheaval to the world.

What is the bigger challenge for Australia? Tax or Trump? Right now, it is the president. The wildcard in the White House presents an economic risk not just because he has started a trade war that can suffocate global growth, but because his volatile temperament brings daily gyrations to world markets.

The government knows the danger from this sheer unpredictability. Senior officials worry that the world economy is heading toward uncertainty and danger. Albanese and Chalmers see this, but they prefer to talk in euphemisms about the risk. Dutton has no economic agenda – right now, at least – to confront this future.

It is not just about waiting to see how Australia might suffer from the next round of tariffs Trump is due to announce on April 2. It is also about not knowing what other fights Trump will start – and what turmoil he will bring to our living standards.

The best defence against Trump would be a stronger budget, not a free coffee every week.

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