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26 March 2014

Coalition has 'blown out' debt forecasts to discredit Labor, says Chris Bowen

Chris Bowen accused the Coalition of painting a distorted picture to justify its own agenda

Opposition cites independent analysis showing gross debt in 2023-24 would be about $270bn less than predicted in outlook.

Labor is seeking to fight back in the political battle over its economic legacy by releasing analysis that contradicts the government's debt and deficit projections.

The shadow treasurer, Chris Bowen, said commissioned analysis by the independent Parliamentary Budget Office showed gross debt in 2023-24 would be about $270bn lower than the $667bn predicted by the government.

Labor had asked the office to perform a "sensitivity analysis" of key budget indicators set out in the Abbott government's mid-year economic and fiscal outlook (Myefo), released in December.

The office was asked to assume real growth in spending over the four-year budget period would replicate annual spending growth as outlined in the pre-election economic and fiscal outlook (Pefo). This would be followed by annual real growth in spending of 2%, and no increase to tax receipts above 23.6% of gross domestic product.

"The net debt of the government is projected to be $110bn in 2023-24 under the conditions imposed in the sensitivity analysis," the office said. "The projected net debt in 2023-24 published in 2013-14 Myefo is approximately $370bn."

Bowen said the report showed net debt "would be a whopping $260bn less" than projected by the Coalition government. He said the budget "would be in surplus by $34bn by 2023-24 , a $46bn swing from the $12bn deficit in Myefo".

"The government has sought to blow out the size of the debt and deficit over the next decade as part of a clear and deliberate strategy to cynically mislead the Australian people about the previous government's legacy and to set the scene for severe cuts to services and more broken election promises,"

Bowen said.

"Labor commissioned the Parliamentary Budget Office to independently cost the medium-term budget figures had the Coalition not committed to nearly $14bn in new spending and if Labor's medium-term fiscal strategy been maintained."

Bowen said the government's first budget update "included a number of cynical decisions that painted a distorted picture about the future state of the budget".

"This analysis confirms that the government's secret decision to drop Labor's fiscal rules dramatically inflated the current debt situation, painting a doomsday picture to build support for its ideological drive to deliver massive cuts in the upcoming budget,"

he said.

The treasurer, Joe Hockey, strongly rejected claims of budget games during question time on Tuesday.

Bowen directly accused Hockey of "cooking the books to artificially inflate debt and deficit".

Hockey replied that Labor's budget efforts resembled "an episode of MasterChef". He pointed to the former treasurer Wayne Swan's abandoned surplus pledge and then took a swipe at Bowen, who briefly served as the treasurer after Kevin Rudd's return to the prime ministership.

"And the books were so cooked that he piled on the mustard, he piled on the horseradish, he piled on the barbecue sauce,"Hockey told parliament on Tuesday.
"It was the Labor party that kept promising a surplus. It was the Labor party that kept making big, heroic promises about the economy that were never delivered. Every single number Labor published for six years was wrong.

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