Coalition unveils election costings: experts respond

As expected, the Coalition will cut the public service by 12,000 through natural attrition to save $5.2 billion. It has already previously outlined savings by abolishing the carbon tax and mining tax that will help pay for its $9.8 billion paid parental leave scheme.

In its costings today, the Coalition committed to increasing its share of the joint road funding from 50/50 to 80% with a 20% state contribution. It also outlined a number of important road and rail projects.

Two considerations are relevant. The announcement made today confirms that the Coalition ignores cyclical fluctuations when designing its fiscal policies. This is a big mistake, given that Australia’s fiscal multipliers are very significant. Budgetary policy should run counter-cyclically as the Labor government has done.

I was expecting some acknowledgment of this fundamental principle. Still, Hockey seems more concerned with balancing the budget, as if a balanced budget were an objective of fiscal policies. Hockey spoke of a “budget crises”, implying the deficit increase observed since 2008 as intrinsically bad. I’ve written previously that this interpretation of fiscal policy is wrong.

Instead, it was a good thing that the Labor government used the budget in a time of crisis to support the economy. Australia would not have avoided recession if the deficit hadn’t increased after the GFC. In the opposite direction, the increased deficit has helped to prevent the recession while maintaining a positive employment rate. The deficit was a good sign of fiscal policy.

Second, the $4.5 billion reduction in foreign aid growth is one of the most notable measures announced today. Suppose Tony Abbott is elected as prime minister. In that case, it will be embarrassing, to say the least, for him to lead the G20 in the coming year after winning the election with a campaign that included cuts to foreign assistance.

John Quiggin, Professor, School of Economics at the University of Queensland

It is not surprising that Coalition costs were kept secret until the very last moment. The costings would not withstand more than two days of scrutiny, but they don’t need to. The failure to include the cost of key policies and the abandonment of the target of a 5% reduction in emissions are among the most obvious issues. Peter Shergold’s, Geoff Carmody’s and Len Scanlan’s endorsement of this flawed process is a scandal.

Roy Green, Dean of UTS Business School at [University of Technology, Sydney

The Coalition’s release of its final policy commitments and costings should provide cautious optimism for those who are interested in the development of Australia’s innovation system. There are reductions in funding for the Automotive Transformation Plan and Manufacturing Technology Innovation Centre, as well as a “reprioritization” of Australian Research Council funds. However, there are further commitments, even if they are modest, to expand Export Marketing Development Grants and the Manufacturing Transition Program. Rural R&D Corporations will also see an increase in funding, which is understandable given the National Party priorities. However, it would be better if these funds were used for R&D and not for marketing or consultancies.

The major innovation and business improvement programs were spared from major cuts. However, there may have been some reconfigurations of these programs, and they may also have fewer employees to run them. Enterprise Connect, Commercialisation Australia, and the recently announced Innovation Partnerships are the programs that will survive unless there is a change of heart.

Shadow minister Sophie Mirabella indicated that she intends to abolish the partnerships in their current form. Anything to do with clean energy has been pushed aside in favor of carbon taxes, depending on the balance of power within the Senate.

The Coalition has mixed opinions about the effectiveness of innovation programs. However, the momentum and commitment of the industry, based on the proven success of these programs may ensure their continuation. This would be a good thing for businesses in Australia to grow and transform, as well as for their workers and the economy. It also bodes well for a bipartisan approach to these important policy areas. The Coalition should be thankful to the Labor Government for making some difficult decisions on their behalf, namely the reductions in funding for research and higher education infrastructure.

Sinclair Davidson, Professor of Institutional Economics at RMIT University

Today, one and a quarter days before the election, the long-awaited Coalition costs were revealed. In previous elections, the ALP released their costings on the eve of the election at 5 pm. This excuses the Coalition’s tardiness.

This sums up “costings”. Everyone gets to play silly-buggers and “gotcha” and avoids important questions. It is important to ask yourself whether all of this really matters. How much detail is really necessary? We don’t need much detail.

Voters need to know if the whole package of promises is financially feasible, not if every penny of expenditure is tracked. We are aware that the government’s plans will change depending on how the parliament is constituted after Saturday, especially after July of next year. This is true regardless of who wins the election.

We know, for example, that the Palmer United Party’s package is not financially viable – it promises massive tax cuts and massive spending increases.

The test for me is to see if the numbers and the story are in general agreement. The answer is “yes” in most cases.

It is a great idea to have an Independent Costings Review Panel, as the Coalition did in this election. This ensures the public that a thorough examination has been done. This is the best thing that the opposition can do, and I expect the ALP to adopt this model when it becomes the next opposition.