Treasury reveals $90bn surge in off-budget spending

The Albanese government is set to spend a record $90bn ‘off-budget’ over the next four years, concealing additional expenditure from the bottom line.

Treasurer Jim Chalmers revealed a boom in off-budget spending. Picture: NewsWire / Martin Ollman

The Albanese government is ­expected to spend almost $90bn “off-budget” over the next four years, concealing additional ­expenditure on green energy, ­infrastructure and student debt ­relief from the bottom line.

Due to Treasury’s accounting rules, the increase in off-budget spending is officially classified as an “investment” and does not ­impact the underlying cash balance despite its significant cost to taxpayers. Instead, the off-budget spending surge, which amounts to more than $20bn a year over the four-year forward estimates, will affect the little known “headline” cash balance.

Wednesday’s mid-year budget update projects a headline deficit of $47.7bn this financial year – $20.3bn lower than the $26.9bn underlying cash deficit that has been more widely reported – due to the booming growth of off-budget spending.

From there, the headline deficit is then expected to swell to $70.3bn in 2025-26 – which in nominal terms is the highest level recorded outside of the Covid pandemic – owing to the rise in off-budget outlays. Over the forwards, the headline cash deficit is expected to total $233.5bn, well in excess of the $144bn cumulative cash deficit and $33.6bn worse than projected in the May budget.

Labor’s pledge to slash $16bn in student debts was the largest ­driver of the $11.9bn increase in off-budget spending over the four years to 2027-28, with the measure expected to add $5.4bn to the headline deficit.

Announced by Anthony Albanese last month, more than three million university students and graduates will see their student debts reduced by 20 per cent in a bid to placate voter anger over the increased cost of living.

While both Labor and the ­Coalition have historically listed off-budget spending, such outlays have surged since the Albanese government came to office. It has established a host of energy, housing and infrastructure investment vehicles, including its Future Made in Australia fund.

Also among Labor’s off-budget investments is the Housing Australia Future Fund, which is projected by Treasury to cost $6.3bn over the forward estimates.

Similarly, the Northern Australia Infrastructure Facility established by then-deputy prime minister Barnaby Joyce is anticipated to cost taxpayers $3.2bn, the Gillard-era Clean Energy Finance Corporate has a $4.6bn price tag, while $7.1bn will be ploughed into Snowy Hydro 2.0, which was ­established by the Turnbull government.

Responding to the rise in off-budget expenditure, Jim Chalmers said the government had been “very upfront” in detailing the headline budget balance, arguing it would bolster productivity and economic dynamism.

The Treasurer then took aim at the Coalition’s proposal to build seven taxpayer-funded nuclear power plants, which Peter Dutton has said would similarly be ­financed through off-budget spending. “If you care about off-budget funds, then you should be terrified by Peter Dutton’s off-budget fund to fund a nuclear experiment in this country which has every chance of being uneconomic and therefore not qualified to be off-budget,” Dr Chalmers said.

Opposition Treasury spokesman Angus Taylor disputed the off-budget impact of a push for ­nuclear energy despite experts claiming the opposition’s costings are significantly underestimated.

“What we’re talking about is investments over many decades … There’s an order of magnitude difference,” he said, before refusing to detail its cost.

The surge in off-budget outlays has generated significant concern among economists, who argue the accounting trick provides a misleadingly optimistic picture of the nation’s finances.