Dutton eyes better budget but will require cuts in homes and power

Peter Dutton will pull money out of programs to build homes and upgrade the nation’s electricity system to cover the cost of his own multi-billion-dollar election promises as he aims to deliver a better budget bottom line than Anthony Albanese.

The Coalition, due to release its final costings just days out from polling day, is committed to producing stronger budget numbers than the government even as new figures show the nation’s finances improving thanks to strong tax collections and lower-than-expected spending.

Peter Dutton visited Karama Shopping Plaza in Darwin where he met with locals to discuss youth violence.Credit: James Brickwood

Shadow treasurer Angus Taylor told this masthead the Coalition had taken “hard but responsible decisions” to repair the budget to make way for its priorities such as essential services and defence.

“Across the board Labor is spending big dollars for little impact,” he said.

“The Coalition’s costings will be released [this] week and you can be assured that our budget bottom line will be stronger than Labor’s and gross debt will be lower.”

In the March 25 budget, Treasurer Jim Chalmers forecast a deficit of $27.6 billion for the current financial year, widening to $42.1 billion in 2025-26. The budget is expected to remain in deficit for the rest of the decade and well into the 2030s.

Dutton has campaigned heavily on economic management, declaring during a trip to the Coalition-held seat of Leichhardt on Saturday that his party would “always be better at managing the economy” while keeping interest rates lower.

But that will be tested as Taylor and finance spokeswoman Jane Hume attempt to make space within the budget for a range of big ticket spending items.

They include a $21 billion increase in defence spending over the next five years, which Dutton has said will be covered by repealing the government’s small tax cuts.

He has also pledged a one-off $1200 tax offset, worth $10 billion, a $6 billion cut in fuel excise that would start almost as soon as the Coalition took office and a $5 billion infrastructure support program to help local councils develop new housing lots. So far this campaign, he and his candidates have also made a host of small-scale promises worth at least $2 billion.

The Coalition will move $5 billion out of the government’s $19 billion Rewiring the Nation Fund, which is being used to cover the cost of major electricity upgrades, into its own Regional Australia Future Fund. Some of the projects it has promised voters this campaign require the Regional Australia fund.

The $10 billion Housing Australia Future Fund, which earned almost $900 million in its first full year of operation from its investments, with that money pumped back into housing programs, will be axed by the Coalition.

While Taylor and Dutton have continually raised concerns about gross government debt, not all of the money freed up by axing the Rewiring the Nation and Housing Australia funds will be used to pay down outstanding debt, which is currently $925 billion.

A large proportion of Rewiring the Nation has already been contracted to projects, including $1.9 billion to connect the Snowy 2.0 renewable energy project to the Sydney electricity market and an interconnection link between NSW and Victoria.

Tunnel borer Lady Eileen Hudson excavating the tunnel that will connect the turbines to the lower Talbingo reservoir. The Snowy 2.0 power project is being connected to the grid from money out of a fund that will be axed by the Coalition.Credit: Alex Ellinghausen

Another $3 billion has been earmarked to upgrade two key energy systems in Western Australia.

Taylor is not expected to reveal how the Coalition would meet its long-term plan to lift defence spending to 3 per cent of GDP by the middle of next decade. In 2035-26, the 3 per cent target would be $33 billion more than currently forecast.

Another large saving is expected to come from axing 41,000 public servants, although there is ongoing confusion over how quickly people will leave their positions and if they will be entitled to forced redundancy payments.

The Coalition has also pledged not to proceed with Labor’s plan to write-off $16 billion in HELP debts to university students which is due to start from June 1. That move would save about $2.4 billion over the next decade.

Albanese, campaigning in Melbourne on Saturday morning, said the Coalition’s economic agenda would leave all Australians worse off.

“We’re the only political party putting forward at this election campaign, a coherent economic policy. A coherent economic policy that seizes the opportunities that are before us,” he said.

Figures released last week showed the budget is improving on what was forecast just four weeks ago. In the nine months to March, the budget showed a deficit of $21.2 billion, a $5.7 billion improvement on what had been expected.

Total tax collections were $10 billion ahead of forecast, largely due to stronger business taxes ($5 billion) and from working people ($2 billion).

Government spending is also lower than expected, about $5.5 billion better than had been forecast.

Quarterly inflation figures to be released on Wednesday are likely to be used by both major parties in their economic arguments.

Economists are expecting the March quarter consumer price index to show annual inflation falling to around 2.3 per cent, its lowest level in almost four years with underlying inflation expected to ease to a three-year low of around 2.9 per cent.

Markets believe the figures will allow the Reserve Bank to cut official interest rates to 3.85 per cent at its mid-May meeting, just after the election. The same markets believe the bank could cut rates at least another three times this year.

But the inflation data will likely confirm a lift in electricity prices, largely due to the end of the Queensland state government subsidy, plus higher prices for food, petrol and rents.

These are likely to be offset by falls in prices for holiday travel and household furnishings while the cost of clothes and communication services are expected to be flat.

Michael Blythe, co-founder of PinPoint Macro Analytics, said the Reserve would be taking notes about the major parties’ spending plans.

He said these notes would include the lack of measures to improve productivity, the inflation risks posed by President Donald Trump’s tariff war and housing policies that would add to property price inflation.

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