$500m black hole revealed in Labor’s first federal budget since 2013

A $500 million ‘black hole’ has emerged in Labor’s policy to increase penalties for business wrongdoing, which the federal government was relying on to offset other budget costs.

A $500 million “black hole” has emerged in Labor’s policy to increase penalties for business wrongdoing, which the federal government was relying on to offset other budget costs.

Prior to the election, Labor claimed its policy to increase fines under the Competition and Consumer Act would raise $557.7m for the budget in its first four years, but News Corp can reveal this estimate was hundreds of millions of dollars short.

Treasury’s costing of the government’s legislation to make the penalty changes has found the policy would actually raise a mere $63m in that time.

Opposition finance spokeswoman Jane Hume said the huge discrepancy “further demonstrates” the government’s lack of a plan to bring down cost-of-living for Australians.

“Labor said its competition policy was about reducing the cost of living, but it is clear that it was actually just a way to raise revenue – revenue that the Treasury says will never materialise,” she said.

Coalition finance spokeswoman Jane Hume says Labor has no plan to address cost of living. Picture: APH

Opposition treasury spokesman Angus Taylor accused the government of looking to break its promise to deliver stage three tax cuts to cover the costings “black hole”.

“Labor talked a big game about these policies before the election, but now it’s clear they don’t add up,” he said.

Labor’s pre-election costings assumed the penalty changes would deliver $139.4m annually in revenue from the current financial year onward.

However the penalties actually only take effect from 2024-25 and are not retrospective, with Treasury estimating the government would actually only get $7.2m initially and $55.4m the year after.

The changes are expected to generate $117.5m from 2026-27 once fully implemented, but this still leaves the government with almost $500m less than expected over the next four years.

Treasurer Jim Chalmers said the various estimates on revenue generated by policies Labor took to the election would appear differently in the October budget.

“One entity did the costings for us in opposition and a completely different entity does them in government,” he said.

Treasurer Jim Chalmers says the October budget will “trim wasteful spending”. Picture: NCA NewsWire / Gary Ramage

“They won’t be exactly the same. That is just being upfront about that.

“There will be differences. Some will deliver more (revenue), some will deliver less.”

Mr Chalmers will travel to Washington DC on Wednesday to meet with other finance ministers as the forecast for a global recession shifts from “possible” to “probable”.

“The world is bracing for another global downturn,” he said.

“(The trip) is an opportunity to take the temperature of the deteriorating global economy, to properly understand what it means for us as the government puts the finishing touches on the budget.”

Mr Chalmers said the budget would “trim wasteful spending” with an eye to making room for “persistent structural pressures” including rising health, defence and aged care costs.

“A culture of waste and rorts and largesse has been allowed to build up in the Budget for the best part of a decade and that means the Australian people aren’t getting maximum value for money for the dollars that previous governments have committed,” he said.

Originally published as $500m black hole revealed in Labor’s first federal budget since 2013