Tony Abbott is to release his full costings today. From the AFR:
The Coalition will claim the budget bottom line will be more than $6 billion better off over four years if it is elected when it releases its final policy costings on Thursday, two days before the poll.
The modest savings – the difference between what Coalition leader Tony Abbott has promised to spend and what he will cut – will spread over four financial years, starting this year.
They all but confirm the $400 billion budget, while better off under a Coalition government, would not return to surplus any sooner than the Labor government’s current forecast of a $4.3 billion surplus in 2016-17.
Not much to go on but enough to draw a few conclusions about whether or the Coalition represents greater fiscal drag than the Government budget.
The August Economic statement made it plain that Treasurer Chris Bowen’s new outlook was a backdoor stimulus plan that shifted the budget from tightening to expansion over the next three years:
Note the shift from zero public final demand growth to 3/4 in 2013/14 and the shift up from 1/2% to 1% in 2015/16. We don’t know yet what year Abbott’s additional $6 billion in cuts will fall into but in truth over four years it is a negligible sum with far more political than economic significance. If evened them out over three years they would round down the Government contribution to growth by 0.12%.
There is a question for me hanging over how the Libs have costed the impacts of their tax cuts on growth. If they assume they will stimulate the economy and increase taxes then I’d have to disagree and would see Tony’s costing as more austere than they appear. After all the $13 billion mining and carbon tax cuts will, as Max Walsh puts it today, not contribute to growth:
While cutting taxes is one way to boost demand, these two particular imposts will do little in that respect. They will, when abolished, be reflected in the bottom line of the major miners and heavy energy users, mainly power stations. Cuts in public spending that have been promised are an offset to new programs – a zero-sum exercise.
The corporate and FBT changes will, however, add to growth. The net effects of these various changes will be near impossible to calculate but I’d guess they’d be growth negative given some large slice of the spending formerly generated by the taxes will be disappearing into the pockets of international shareholders.
Even so, taking Mr Abbott and his bevy of unofficial auditors at their word, the difference between Labor’s budget and the Lib’s is small. As well, don’t forget that these figures have to be taken in the context of expanding government spending. In short, both parties are delivering stimulus packages at the election while misrepresenting them as austerity.
Of course, it’s looking increasingly likely that many of these cards will end up in the air with the Greens in the box seat for the Senate. Tony will claim his mandate and so will they and we will begin again!
