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Coalition costings: $3.3bn in public service cuts to fund election pledges worth $2.3bn

Treasurer Josh Frydenberg and finance minister Simon Birmingham release the Coalition's election costings in Melbourne on Tuesday
Treasurer Josh Frydenberg and finance minister Simon Birmingham release the Coalition's election costings in Melbourne on Tuesday Photograph: James Ross/AAP

The Coalition says spending cuts across the public sector will deliver $3.3bn in savings to pay for its election commitments, as the government turns the pressure on Labor to submit its plans to Treasury for costing.

The treasurer, Josh Frydenberg, and finance minister, Simon Birmingham, released the Coalition costings in Melbourne on Tuesday, revealing that the proposed increase to the public sector efficiency dividend and changes to super contributions would offset the $2.3bn in new spending promises made by the Coalition since the beginning of the election campaign.

This would deliver a $1bn improvement to the budget bottom line over the four-year forward estimates period, with $386m of this coming in 2024-24 when the deficit is forecast to be $42.5bn. Cumulative deficits over the next four years total $223bn.

$2.7bn will come from the efficiency dividend, while an additional $653m in savings will come from changes to contributions made by public sector agencies to the Commonwealth Superannuation Corporation and the corresponding cost for entitlements accrued by employees under the defined benefits scheme.

The largest of the Coalition’s election commitments is $558m to reduce the pharmaceutical benefits scheme co-payment, followed by $321m for the government’s housing package that would incentivise downsizing and give first homebuyers access to their superannuation balance.

Scott Morrison rejected suggestions that the public service cut was “mean spirited” in the wake of the pandemic, saying it was a saving of just $2.7bn from a total budget of $327.3bn across the public sector.

“That is something that I think is entirely sensible and, frankly, taxpayers would be demanding, that these types of sensible efficiencies are achieved and that is part of the process of managing a good budget,” the prime minister said while campaigning in Darwin on Tuesday. “It doesn’t impact on programs or services at all. It never has.”

The efficiency dividend does not apply to the National Disability Insurance Agency, the ABC, the SBS, Safe Work Australia or small entities with fewer than 200 staff.

The government has also put in further exemptions for Emergency Management Australia and the newly created National Recovery and Resilience Agency.

Frydenberg said it would be left to individual public service agencies to decide how best to deliver the 0.5% increase to the efficiency dividend to 2%, suggesting savings could be found through changing work habits arising out of the pandemic or through a reduction in contract staff.

The government’s costing document states the efficiency dividend will return to 1.5% in 2025-26 and the base rate of 1% in 2026-27.

“This efficiency dividend is half what it was in Labor’s last year in government, at 4%, and what it will see is productivity gains delivered to the budget bottom line,” Frydenberg said.

“It’s a responsible approach. It’s one that is being used by previous governments of both political persuasions, and it ensures our budget bottom line actually improves over time.”

He said the Coalition had submitted all of its election commitments to the Department of Treasury and Finance for costing, and called on Labor to do the same.

“Why has Labor not put forward these policies for costings?” he asked. “Why? There’s no reason other than they do not want to be subject to scrutiny.

“We know they will spend more. We know they will tax more. We know they will deliver a budget after the next election. But they’re not telling the Australian people before they vote what will be in that budget.”

Labor will release its costings on Thursday after the Labor leader, Anthony Albanese, appears at the National Press Club on Wednesday.

Birmingham said while there was $25bn of “on-the-record” Labor promises, there was more in “nods and winks” made to state governments and unions, and further commitments in the party’s national platform.

“Mr Albanese and the Labor Party have outlined rather than fully costed policies, a raft of vague promises, hidden promises, hidden spending that they’re not being transparent about,” Birmingham said.

But Labor’s shadow treasurer, Jim Chalmers, accused the government of last-minute desperation, saying the Coalition had borrowed more, spent more and taxed more than the last Labor Government, but had delivered less.

“All of this bleating and banging on about Labor’s costings can only be seen as a desperate distraction from the Government’s own substantial economic and budget failures,” Chalmers said.

“Now, the difference between our budget and the Coalition budget will be really important investments in cleaner and cheaper energy and cheaper childcare and skills and opportunities for more Australians.”

Morrison said the release of the costings demonstrated the government’s strong economic management that underpinned its ability to fund services.

“I can’t stress to Australians how important responsible economic management, understanding the economy, understanding how to manage money, has such a big impact on you and your family,” Morrison said.

“You’ve got to be able to do this if you want to support Medicare, the pharmaceutical benefits scheme, the defence forces, our security agencies, the federal police, to combat law and order. All of that starts with this – responsible economic management.”