Albanese looks to public sector for big spending

Opposition Treasury spokesman Jim Chalmers has given a welcome insight into what an Albanese Labor government might mean for the economy. In crude terms, it can be summed up as higher taxes and a bigger public service. In an address on Tuesday to the National Press Club, Dr Chalmers ruled out revisiting the stage three tax cuts that will deliver a return to higher-income earners, but he said Labor would not adopt the Coalition’s limit of keeping tax as a share of gross domestic product to less than 23.9 per cent. Dr Chalmers said an Albanese government wanted to be “pro-business, pro-employer”. He said because the economic challenges were so vast and so substantial, they could not be met without a working relationship with business, with unions, with the community sector, with the states and others to get the job done.

The centrepiece of Labor’s economic pitch for government is a five-point plan that includes investment in renewable energy, free TAFE places, cheaper childcare and an upgraded made-in-Australia policy. All will require increased government spending, but the plan is that each point will increase productivity and grow the economy.

Dr Chalmers made clear that Labor would not be scared to spend. “The quantity of the debt matters to us, but the quality of the spending, I genuinely believe, matters as much, if not more,” he said. On the basis of his performance on Tuesday, it is difficult to assess where the spending will stop. “There is an opportunity to reorientate the budget, as we would like the opportunity to do before the end of the year, into more quality investments,” he said. Dr Chalmers said the Morrison government’s tax cap was an “arbitrary cap imposed for political reasons rather than good economic reasons”.

It is likely a federal Labor government would follow the lead of Labor state governments and dramatically increase the number of public servants. Dr Chalmers highlighted the public sector when he said government funds would be taken away from paid external consultants. Increased spending on aged care is only the beginning. Having been caught out on the detail of where additional nurses would come from, he said a Labor government would train them for free and presumably add their ongoing wages to the public bill. This would be in addition to government support for higher wages for all aged-care nurses. He celebrated the fact that the health and social assistance sector had come from nowhere to make the second-biggest contribution to GDP of any industry. Much of this would be due to the unsustainable spending on the National Disability Insurance Scheme. An Albanese government would redouble the effort with aged care.

Dr Chalmers downplays the Morrison government’s achievements on employment, claiming there is more to the labour market than jobs: “We would declare victory if wages are growing again sustainably in ways that made sure that people can keep up if we’re dealing with job insecurity, if we’re dealing with all of the other issues that have been issues in the labour market for so long.” Alongside Labor’s promise to lift wages across the board, the union movement is pushing for a return to centralised industry bargaining. Inflationary pressures are obvious. Part of the solution might be found in Labor’s planned review of the Reserve Bank to answer the “big question” about the “interaction of fiscal and monetary policy”. What this means for the continued independence of the RBA is not clear.

Dr Chalmers is to be congratulated for lifting the carpet on what lies beneath Anthony Albanese’s small-target campaign. In doing so, he confirmed that Labor does not intend to be a passive manager of the nation’s economic affairs. Dr Chalmers has raised more questions than he has answered.