Labor’s off-budget plans to blow out national debt by $52bn on current borrowings

Labor off-budget spending would cause debt to balloon by another $52bn to pay for climate change and affordable housing.

Anthony Albanese again refused to rule out higher budget deficits if elected, admitting he had ‘no idea’. Picture: Liam Kidston

Labor’s off-budget spending plans would cause the national debt to balloon by another $52bn to pay for its signature climate change and affordable housing programs, challenging Anthony Albanese’s claim to economic management and his attacks on the Morrison government’s Covid debt levels.

The Labor spending commitments would also add a further $3bn in interest payments over the next four years, adding further pressure to the budget at a time of rising interest rates, with deficits already set to increase by up to $10bn under an ­Albanese government.

The nation’s debt profile would increase to $67bn with Labor’s $20bn other spending commitments – which have a direct impact on a budget already in deficit – and taking into account its modest $5bn in savings as outlined in its economic and budget blueprint.

This would wipe out around half of the Coalition’s improved debt reduction program announced in the March budget.

The analysis of Labor’s ­publicly available spending commitments comes as Mr Albanese again refused to rule out higher budget deficits if elected, admitting he had “no idea”.

Labor’s $52.3bn in extra debt-funded promises includes its $20bn Rewiring the Nation Corporation plan to reform the national electricity grid, $15bn for its National Reconstruction Fund, a $10bn Housing Future Fund, and $7.3bn for the Help to Buy home equity scheme announced last week.

The cost of the programs is not set against normal budget expenditure and instead would be added to the national debt ­profile, which is expected to peak at $981bn by 2024–25.

The government announced in the March budget that the debt profile – a result of the ­commonwealth response to the Covid-19 pandemic – would be drastically reduced under a fiscal consolidation plan that it claimed would see the fastest and largest improvement to the budget bottom line in 70 years.

Finance Minister and Coalition campaign spokesman Simon Birmingham said the ­nation’s medium-term budget strategy to reduce debt as a share of GDP would be in jeopardy.

“This fiscal recklessness by Labor would risk Australia’s AAA credit rating and lead to higher debt costs that would ­further undermine Australia’s ­finances. This is also a demonstration that Labor’s spending spree would put more pressure on interest rates.

“Labor is addicted to spending and we know from previous experiences that this addiction will only lead to higher taxes for Australians.

“This is precisely the wrong time for a big-spending Labor government adding to the size of budget deficits and therefore adding to the pressure on interest rates.”

A Labor campaign spokesman said Mr Albanese would not be “taking lectures from the most wasteful government since Federation that had doubled the debt before the pandemic”.

“As we’ve repeatedly pointed out, what matters in the budget is the quality of the investments and ours will be much more responsible than what we’ve seen over a decade of Liberal rorts, waste and mismanagement,” the Labor spokesman said.

“Scott Morrison and the Liberals are becoming increasingly desperate. All of Labor’s policies are fully costed, and just like every other opposition – Liberal or Labor – we’ll release details in the usual way at the usual time before the election.”

Mr Albanese on Sunday said he didn’t know whether Labor would produce higher budget deficits than the Coalition ­because “we have no idea” of the election commitments the Prime Minister would make in the final fortnight of the campaign.

The Opposition Leader sidestepped questions over Labor’s costings after The Weekend Australian revealed the opposition was likely to announce modestly higher deficits than the Coalition over the next four years.

Asked whether budget deficits would be higher or lower under a government he led, Mr Albanese refused to give a direct answer.

“We will wait and see what the government comes up with. We know what our plans are, we know what our commitments are,” he said.

“We have put out costings as we have gone and have released all of our costings in the usual way as oppositions have.”

Labor sources said there had been internal discussions about the deficit “gap” between the major parties of being in the vicinity of $10bn, which MPs consider minor given the government’s forecast deficits over the forward estimates totals at $225bn.

Labor MPs have told The ­Australian the deficit gap could end up being far below $10bn if the Prime Minister came out with big policies as the Coalition attempted to win over undecided voters.

There was also a potential for Labor to jettison planned announcements in the final fortnight of the campaign given inflation had proven to be higher than expected.

However, Labor MPs said ­rising inflation and interest rates had already been factored into their budget strategy.

The Australian understands Labor will not unveil any more budget repair measures, other than its $5bn pledge to crack down on multinational tax avoidance and cut contractors in the public ­service.

This is not enough to offset its commitments on childcare, health, education, housing and foreign aid.

Opposition Treasury spokesman Jim Chalmers on Saturday left open the possibility of Labor running higher deficits than the Coalition, despite Mr Albanese saying “that’s not the plan”.