Coalition flags $100bn in budget savings

The Coalition will go the next election with budget and off-­budget savings of close to $100bn in a ‘back to basics’ inflation-fighting agenda that will see a raft of Labor spending programs axed.

Opposition Treasury spokesman Angus Taylor says the Coalition would deliver a ‘back to basics’ economic agenda to arrest excessive government spending under Labor. Picture: NewsWire / Martin Ollman

The Coalition will go the next election with budget and off-­budget savings of close to $100bn in a “back to basics” inflation-fighting agenda that will see a raft of Labor spending programs axed in a bid to arrest a structural decline of the government balance sheet.

With cost of living dominating among voter concerns, Peter Dutton is spoiling for a fight over spending ahead of Wednesday’s monthly CPI data, which is expected to show a sharp drop in headline inflation with federal and state energy rebates due to flow through to temporarily lower energy costs.

Economists are forecasting headline inflation to come down significantly for the first time in two years. The Coalition will argue this will be a Pyrrhic victory at best for Jim Chalmers, with the Reserve Bank already flagging it would be focusing on underlying inflation, which is anticipated to remain high.

Savings measures identified so far by the opposition razor gang have amounted to almost $100bn.

Opposition Treasury spokesman Angus Taylor told The Australian the Coalition would deliver a “back to basics” economic agenda to arrest excessive government spending under Labor, which he said was fuelling longer term inflation.

The Coalition would not be abolishing indexation of welfare payments as claimed by Labor, however, and has pledged not to cut spending for essential services in health and education.

The government has accused the opposition of plans to slash spending by $315bn. While Mr Taylor has used this figure to identify what it claims as Labor’s “wasteful spending” pledges, the list of savings measures identified by the Coalition would be less than a third of this.

Some of the savings would go directly towards the budget bottom line, including cuts to the public service, while others would indirectly help the bottom line through the savings on interest payments on debt through the axing of off-budget programs.

The savings include the axing of the $10bn Housing Australia Future Fund, which Labor has pledged for the construction of 20,000 new social housing dwellings and 10,000 affordable homes over five years. No money has so far been spent under this fund, with the first round of $500m likely to be allocated this year.

The Opposition Leader has flagged the scrapping of the $20bn Rewiring the Nation program to build transmission lines to connect renewable energy projects to the grid, which it claims would not be necessary under its nuclear and renewables policy.

The $15bn National Reconstruction Fund, designed to provide loans and equity investment primarily for renewable and low emissions technologies, transport and medical sciences, would also be axed.

Mr Dutton has also flagged the Coalition’s plan to abolish the $22bn Future Made in Australia program, the bulk of which will be used for production tax credits for critical minerals sector and green hydrogen production.

The parliamentary library has noted that $19.7bn of this fund was to be allocated under “Making Australia a renewable energy superpower”. However, it is unclear what programs this would include or whether it double counts money allocated under other programs, including about $7bn provided to the Australian Renewable Energy Agency.

Labor’s boosted Arena funding includes $1.9bn to the agency’s baseline funding, $2bn for round two of the Hydrogen Headstart program and $1.7bn for the Future Made in Australia Innovation Fund. A further $1bn has already been allocated for the Solar Sunshot program, with another $500m dedicated for a ­battery initiative.

Assuming the bulk of this funding is separate from the ­Future Made in Australia program, the Coalition expects to assume extra savings of about $6bn.

The Coalition also plans to axe the government’s Help to Buy scheme, which provides 40 per cent government equity stakes in up to 10,000 homes.

The Coalition estimates that would save around $5.5bn.

The public sector would also be trimmed, following the expansion by Labor of up to 36,000 new employees. This could save several billion dollars.

A further saving would be made in scrapping the $2.2bn in federal funding for Melbourne’s suburban rail link, with almost $1bn saved from not going ahead with Labor’s electric car discount.

Combined, these would see savings of around $80bn. However, a senior Coalition source said the total savings would be closer to $100bn.

While the Coalition aims to bank a large part of the savings, senior figures said some of it would be used to underwrite ­Coalition spending priorities.

It has yet to put a price tag on its nuclear energy policy, which could be expected to be close to the total figure of the savings.

With the long lead time expected on nuclear construction, the bulk of this spending would likely not be included in medium-term projections and start beyond the period of realised savings.

Mr Taylor has already committed to two priorities for the Coalition in government, including economic growth to exceed spending, which is designed to bring the budget into balance.

It has also pledged to return to a tax to GDP cap of 23.9 per cent. Both are designed to constrain not only total spending but spending growth.

“As the RBA has noted, inflation, and therefore interest rates, will stay higher for longer because of growth in government spending,” Mr Taylor said. “Labor thinks it can spin and spend its way out of its homegrown inflation crisis. Spending is projected to grow by 16 per cent over just two years – that’s double the rate of economic growth.

“After three failed budgets, it’s clear Labor has no plan to restore Australians’ standard of living.”