Labor pledge to scrap the cashless debit card will save budget $286.5m over four years

by Paul Karp
Government’s election promises will add $6.9bn to deficits over four years, Parliamentary Budget Office says

Labor’s commitment to scrap the cashless debit card will save $286.5m over four years, the Parliamentary Budget Office has revealed.

On Thursday the PBO released election costings showing that Labor’s policies would add $6.9bn to budget deficits over four years and a further $33.6bn would be spent in off-budget investments including for housing and the electricity grid.

Before the election Labor had estimated its policies would cause deficits to be $7.4bn bigger over four years, despite measures to crack down on multinational tax avoidance and save on the public service’s use of contractors.

The PBO found Labor’s most expensive promises were cheaper childcare ($5.1bn over four years) and fixing aged care ($2.5bn).

But it also identified savings, including from abolishing the cashless debit card and mandatory income management, which Labor did not estimate due to “commercial sensitivities”. Over 10 years that measure would save $786.9m, the PBO said.

The cashless debit card and income management scheme quarantines up to 80% of a person’s welfare payments onto a card with which one cannot withdraw cash or buy alcohol.

The Coalition extended the scheme for two years in December 2020 after failing to win support to make it permanent in four sites. The auditor general later found the Morrison government had not demonstrated whether the scheme was working despite operating trials across the country for more than five years.

Labor pledged to scrap the “privatised” Indue-operated cashless debit card, though smaller welfare income management programs requested by a local community could continue.

The PBO said overall its estimates “are not materially different from the costs for the forward estimates period released by Labor prior to the election”.

“While there are some material differences for individual commitments, when taken together, these differences amount to not more than 0.1% of GDP in any given year.”

The PBO noted 11 Labor policies that added to off-budget spending (such as loans and equity) to finance promises including public housing upgrades, the Help to Buy housing scheme, the Powering Australia plan and the National Reconstruction Fund.

The promises would result in the headline cash balance being $33.6bn lower over four years, or $62.7bn over 10 years.

The independent economist Saul Eslake said the government increasing spending at a time of high inflation and low unemployment was notionally moving in the “wrong direction” but the movements were “very small”.

“Fiscal policy ought to be working to reduce deficits not to increase them,” he told Guardian Australia. “Having said that, the numbers we’re talking about are relatively small.”

Eslake also noted recent comments from the treasurer, Jim Chalmers, that Labor was continuing to look for savings that could offset increased spending which would be revealed in the October budget.

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The PBO found the Coalition’s policies would have resulted in “slightly smaller deficits”, although the difference was “negligible”.

The Greens’ policies would “result in larger deficits” due to the minor party’s commitments “on both receipts and payments [which] are significantly higher than the other major parties”, it said.

Under the Greens’ policies, revenue as a share of GDP would rise to 29% and deficits would be $6.5bn a year higher than the Coalition.

The Greens leader, Adam Bandt, said Labor did not need to hand down an “austerity budget”. “In a wealthy country like ours, the government can manage the budget by stopping handouts to coal and gas corporations and reversing tax cuts for billionaires.”