Thursday, September 02, 2010

Coalition costings - billions of problems

Peter's post:

Coalition Costings

From Abbott just now:


The Coalition maintains that our election policies will deliver a Budget bottom line that is improved by more than $11 billion over the forward estimates.

The Departments of Treasury and Finance have confirmed to the Coalition that, in their view, 95 to 96 per cent of Coalition policy costings were correct.

These costings cover 304 savings and spending measures, totalling more that $90 billion.

Even under the worst case scenario considered by Treasury and Finance, our bottom line will be $7 billion better than Labor’s over the forward estimates.

The Coalition has carefully considered the worst case $4 billion in adjustments identified by Treasury and Finance and we remain confident that we will deliver on our commitments.

The Treasury and Finance assessment of these costings notes that: “There were no significant differences between the costings for the vast majority of policy proposals. Several of the differences in the Coalition’s and Departments’ costings reflect different models and data.”

Of the variations identified by Treasury and Finance, we make the following observations.

In relation to the Coalition’s plan to save $2.5 billion from a reduction in the conservative bias allowance in the contingency reserve, Treasury and Finance have confirmed that this is a decision for government.

Their analysis states that: “Since budget documents are published by authority of the government of the day, it would be open for an incoming government to decide to adjust the Conservative Bias Allowance”.

This is what an incoming Coalition government will do and it can be responsibly achieved through prudent economic management.

The Coalition identified $3.3 billion in expenditure redirected from projects that may well be committed but not contracted from the Health and Hospital Fund, Education Investment Fund and Building Australia Fund.

The secretaries have advised the Coalition that it would be possible to cancel or defer non-contracted projects to make way for the bulk of this spending ($2.8 billion).We are confident that the remaining $500 million can be saved from uncontracted projects in the $30 billion Nation Building/Auslink fund. This is exactly the approach adopted by the incoming Rudd-Gillard Government in 2007.

In relation to the Coalition employment participation programs, Treasury and Finance have assumed that these measures would not create a single new job.

At time of low unemployment, yet strong demand in various sectors, it is unreasonable to assume that the Coalition’s policies, which increase the incentives for the unemployed to find work and employers to take on staff, would have no positive effect on employment.

The fiscal impacts of the Coalition’s participation policies were modelled independently by NATSEM, Australia’s foremost social policy modelling consultant. The NATSEM showed that even on the most conservative assumptions the Coalition’s policies would lead to significant budget savings, far greater than those estimated by the Coalition.

1 September 2010

ALP Costings

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