Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
In budgeting it's known as the magic asterisk, the get-out-of-jail-free card. If it looks as though you'll be in the red, you simply add in a figure for general unspecified savings and, magically, your problem's solved.
Traditionally, it's extra, unspecified savings from cracking down on tax avoidance. This time it's welfare overpayments, many of them unintentional. Newstart recipients and families are asked to estimate their incomes in advance. Often they do better than expected and find themselves owing money back. With a bit of effort it ought to be possible to collect a bit more.
But the Coalition's difficulty in arguing that it can collect an extra $2 billion more is that it has already announced plans to collect $5.7 billion more. They named their 2015 packages: "strengthening the integrity of welfare payments" and "enhanced welfare payment integrity".
Without the extra $2 billion, their election announcements would have sent the budget backwards, but only by around $900 million. It's Labor that has made by far the biggest immediate spending commitments in the campaign, adding an extra $16.5 billion to projected deficits over the next four years, before the long-term benefits of its slow-acting tax measures swell the budget to produce a bigger surplus than the Coalition's.
Or that's the way it looks. In year one, Labor's attack on capital gains tax concessions and negative gearing would bring in just $500 million. By 2026-27, it would rake in $7.7 billion per year. The Coalition's business tax cut also starts small, at first costing $300 million per year and then by 2026-27 $14.2 billion. After year 10, the combined tax measures would see the budget between $10 billion and $20 billion per year better off under Labor.
Treasurer Scott Morrison and finance minister Mathias Cormann had an opportunity on Tuesday to dispute that calculation. They could have produced their own estimate of the costs and savings resulting for their policies over 10 years.
That they didn't suggests Labor's right. Its policies hurt the budget in the short term (in order support Medicare and schools) but help it in the long-term through a more responsible approach to taxation.
It's a pretty clear choice. The costings suggest it isn't an election about nothing.
Peter Martin is economics editor of The Age.
