Similarity at a price as rivals say surplus largely untouched

THE striking thing about the costings by Labor and the Coalition of their election promises is that with three exceptions they look so similar.

The Coalition plans a net $3.644 billion over five years in new recurrent spending, paid for by taking $3.794 billion from contingency and other funds. That would leave it with $150 million to spare.

Labor would spend a net $4.096 billion, paid for by taking $3.996 billion from contingency and other funds. That would trim $100 million over five years from budget surpluses.

Whoever is in government will be spending about $250 billion over those five years. On these costings, Labor plans to spend 0.1 per cent more than the Coalition. It's a virtual dead heat.

Difficult as it is to believe after the big spending plans of the past month, each says it has left the budget surplus more or less untouched: $800 million or so a year.

How? Many Coalition plans its $1 billion in funds for health infrastructure and regional growth, its 800 new hospital beds and 40 new trains are for eight or 10 years, not the next four. Other plans are back-ended, so that their full cost hits only in 2014. Most of the 500 prison cells promised in its law and order policy, for example, would not operate until 2014.

Both parties raid the hollow log of the contingency funds: on these figures, Labor has emptied out the log in which money was stored for future capital spending.

With the budget's wage and growth assumptions already precarious such as assuming wage rises of 2.5 per cent a year half the contingency funds have gone.

But there are three main differences:

Labor has pledged $3.9 billion of new infrastructure spending, the Coalition just $2.4 billion.

The difference is in schools. Labor would spend $1.8 billion to build 20 new schools in growth areas, renovate 90 others, and build technical education centres and classrooms. The Coalition would spend just $258 million, mostly for small works in marginal seats.

The difference may be more apparent than real. A Coalition government, too, would have to build new schools and fix old ones. There is still money in the log if it wanted to do so. But so far, it has not.

Labor plans to cut $600 million over the next five years through back-office economy measures, while the Coalition plans $1.569 billion of such savings. Its big saving plan is to cut departments' purchasing by 1 per cent.

John Brumby says this would mean cuts in public service jobs. No, it wouldn't. It's not costless, but it's a sensible way to save money.

The two costings come with very different imprimaturs. Labor as government had the advantage of having its policies costed by Treasury. The Coalition went just up the road to a small accounting firm, Yates Partners, not known as experienced policy costers. Its accountant, John Yates, ticked off the costings "based on the information, documentation, supporting assumptions and methodology provided to us by the Coalition".

That's an important qualification, but unavoidable under this system.

We need a better model. The Coalition's proposal for an independent Parliamentary Budget Office under the Auditor-General wins hands down.

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Victoria's ballot box oveflowing with choice

AFTER the sheer awfulness of the federal election campaign, Victoria's campaign has been a breath of fresh air that almost restores your faith in politics. Two decent, intelligent and capable leaders. Policies that address real rather than image problems. Mostly positive messages rather than negative ones. We could almost be living in a different time.

I suspect that a lot of readers will instantly disagree. Our last Nielsen poll found only 53 per cent approved of John Brumby's performance as Premier, and 45 per cent approved of Ted Baillieu as Opposition Leader. Fellow columnist Shaun Carney (20/11) and I are in a small minority who are impressed by both. Let me explain why.

State government is about providing services, and the demands on it come from every quarter. Collectively, our expectations are unrealistic: we demand more services, better infrastructure, lower taxes and a budget surplus. And we just can't have all of that.

Australia is a high-wage, low-tax country. That means infrastructure projects are scarce and expensive. We don't tolerate governments going deep into debt as they did when most of our infrastructure was built. Public-private partnerships to provide infrastructure sometimes work well, sometimes don't.

It is difficult, verging on impossible, for any government in this political culture to provide us consistently with First World infrastructure. Yet if it doesn't, we don't forgive it.

Services are squeezed constantly to provide savings to finance new spending. Departments are asked to do more with less real resources. Maintenance work is put off; overworked staff leave for better jobs elsewhere; and governments face 10,000 urgent needs but can afford to fund only 1000.

The Brumby government's failures are well known. Myki was a fiasco. The desalination plant is a very expensive solution to the water shortage when cheaper options were on offer. Spending on hospitals has soared, yet demand and costs rose even more. And Labor has refused to run an open government.

Its strengths are less obvious. We remember projects that run over cost or over time. We forget those that are delivered early and at lower cost. Who remembers now that the channel deepening project was completed a month early, and $248 million under budget?

Compared with the policy paralysis of federal Labor, Brumby impresses me with his willingness to engage with alternative views, change his mind, make bold decisions, and get things done.

Initially, Labor was slow to respond to the drought, the implications of rapid population growth, and the dramatic shift back to public transport. But it has shifted tack dramatically, taking on debt to finance record levels of infrastructure spending to catch up the backlog. We may not like the debt, but we need the infrastructure.

It's 11 years since the Coalition was in office, and that means Baillieu's team must be taken on trust. But I don't see any reason to distrust them. Like all oppositions, they are not so much lazy as under-resourced. Baillieu is not the most natural politician, but is an intelligent, disciplined, tolerant and progressive leader who represents the broad church of the Liberal Party rather than the fundamentalist right.

He has led the way in important areas: advocating free kindergartens, tackling problem gambling, establishing an anti-corruption commission, cleaning up government advertising, restoring authority to principals in government schools, and tackling Victoria's high construction costs. These are issues that matter across the board.

The Age profile of Baillieu (6/11) included an insightful comment by his long-time colleague Robert Peck, national president of the Association of Consulting Architects and a former Melbourne city councillor. Asked if Baillieu would make a good premier, Peck paused, then responded: "He would make an excellent leader provided there is sufficient policy and team back-up in the cabinet and in the party."

I can't judge the quality of Baillieu's team. But, as with Labor, I have concerns about some of his policies, if not insuperable ones.

First, by last weekend the Liberals' website listed 244 policy announcements, nearly all involving new spending. Many were small, some big but long-term, and there was some duplication. But it is inescapable that the Coalition has pledged billions of dollars of new spending and far from clear that all of it can be afforded, even after its savings.

I don't buy Labor's line that the Coalition would drive Victoria into deficit. It is far more likely that if the money isn't there, a Baillieu government would junk some of the promises to keep the budget in surplus.

Second, the Coalition's planning policies imply that the solution for Melbourne's housing shortage is to keep widening the urban growth boundary. As the Victorian Council of Social Service points out, this year's widening alone released enough land to build more than 284,000 new homes. The problem is not the urban growth boundary, but the obstacles to redevelopment around the inner city, the activity centres and along rail and tram corridors. That's where prices are highest, and demand is most intense. Yet the Coalition's policy is virtually silent on this.

It has run an effective scare campaign on law and order, yet as The Sunday Age reports (21/11), crime rates have fallen almost 30 per cent in a decade. Victoria has always had fewer police than other states, and for one good reason: we have less crime.

But both sides have strengths and weaknesses. Labor has made a good case to be given a fourth term. The Coalition has made a good case for a change. Only you can judge.

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Promises wipe out Victoria's $4.4bn surplus

IN MAY, the Brumby government's budget forecast $4.4 billion of surpluses over the next four years. Treasurer John Lenders pledged "hand on heart" that those surpluses would not be used to fund election spending.

But that was May. The election is now. And, on current trends, there will be very little of that $4.4 billion left by the time it's over.

Treasury's pre-election budget update shows that by the start of the campaign, $1.2 billion of surpluses had already gone, mostly to fund the government's $630 million regional package, its bushfires response and its climate change package.

Since the campaign began last week, the government has committed a further $2.4 billion in new spending over the next four years, mostly to reduce hospital waiting lists. And there's more to come.

That's not a serious problem. The budget will stay in surplus, thanks to years of conservative budgeting by both sides. Net debt within the budget sector itself is only $8 billion and is forecast to peak at $15.7 billion or 4.3 per cent of GDP in 2013. Global ratings agency Standard & Poor's has just reaffirmed Victoria's AAA rating.

But Labor will have to be careful from here on, and the Coalition will have to be very careful. It has banged the drum about dangerous debt levels for years, yet now it comes into the state campaign proposing a lot of new spending, but virtually no savings.

Sending thousands of offenders to jail rather than issuing suspended sentences will cost real money. So will providing another 1000 or so protective service officers and transit police. These are not cheap solutions.

One can be sceptical about Labor's estimate that the Coalition's pledges so far imply $4.2 billion in new recurrent spending.

But they are going to cost us, and Team Baillieu needs to be open about telling us how much, and how it will pay for them. Accountability begins here.

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Deal won't break the bank

WITH the fiscal cupboard almost bare, how can Labor really afford to spend an extra $10 billion on regional Australia? And will it be spent on good projects, or electoral pork?

Beware of spin: this is far less than it sounds. Most of that money will simply be allocated from programs already budgeted for and already earmarked for regions.

Essentially, this deal promises to:

Raid the funds set up by Peter Costello to finance future health and education infrastructure, taking up to $2.3 billion to invest in regional health and education facilities.

No doubt country centres have many worthy contenders for those projects: moving the rundown University of Ballarat into the heart of its city would be high on my list . But Labor needs a long-term plan to refill the funds it is draining.

Guarantee regional Australia defined as all of Australia outside the built-up suburbs of the 10 "major cities" a third of new investments in programs to upgrade primary health care, skills and schools.

That's in line with its population, so no one can complain about that. And it suits Labor's deal with Andrew Wilkie that Hobart is not one of the 10 cities excluded.

Set up an $800 million fund for "priority regional infrastructure". That's a worry, given that we've seen that Labor's priorities for regional funding are where it has seats to protect. Hopefully, Rob Oakeshott as minister might bring more integrity to the process.

Promise the same broadband prices, at least from the national broadband network to suppliers, for all Australians wherever they live.

That's a big one, and no wonder Tony Windsor was happy. It's the same rule we've had for yonks for local phone calls and postage stamps. But this will be a serious subsidy, paid for by broadband users in the cities.

But little of all this actually impacts on the budget bottom line: only $763 million of new spending over the next four years. That will be paid for by postponing the promised tax break on interest from bank deposits so it starts only in 2013. There's another $362 million of new spending after 2014, and $1.02 billion which has various "ifs" attached to it, to ensure it's not wasted. But most of the $10 billion are old promises recycled. They won't break us.

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A climate for change

LAST week we saw Julia Gillard and Tony Abbott as rivals performing genteel courting dances to win over the independents. This week it gets deadly serious, as the four independents must decide who to support. Of the six MPs on the crossbenches, three are crucial. Tony Crook, the West Australian National who unseated Wilson Tuckey, plans to sit on his own but surely will back the Coalition on confidence issues. Melbourne's Green, Adam Bandt, says he will support Labor. And neither side would want to rely on maverick Bob Katter.

That means that to have a secure 76 seats in the 150-member House, either Labor or the Coalition must win over the other three independents as a group, or we will be heading back to the polls well before 2013.

Let's be realistic: Labor has to win over all three. For one thing, all of them want real action on climate change. Abbott is a remarkable political gymnast, but he can't go there. If Gillard can't find a way to do so, gear up for another election.

Andrew Wilkie and Rob Oakeshott are both independent progressives: for them, tackling climate change is central. Tony Windsor is a moderate conservative, but he is also a farmer in the Murray-Darling basin, where climate change is forecast to shrink future rainfall by 30 per cent. If that comes true, he warned Parliament last year, "it will destroy agriculture in that system". In 2008, helped by 65 environment groups, he introduced a private member's bill proposing a target of reducing emissions to 30 per cent below 1990 levels by 2020 using a carbon price, regulatory action across the board, and new ways to store carbon in soils and vegetation.

But in 2009 and 2010, he twice voted against Labor's emissions trading scheme, saying it proposed too much dislocation for too small a target, and aimed to split the Coalition rather than seriously reduce emissions. He has common ground with the Coalition on soil carbon, and with the Greens on an ambitious target. Now Labor has to find common ground with him.

The 22 demands set out by Wilkie, the new Denison MP, show how difficult the task will be. In March, Wilkie stood for Denison at the Tasmanian state election and won 8 per cent of the vote. At the federal election he won 21 per cent, taking votes equally from the Liberals and the Greens. One reason was that this time he had a new issue, telling southern Tasmanians they were not getting their fair share of federal funding because they were in safe Labor seats. So, naturally, his wish list yesterday began with 10 local demands, starting with a new Royal Hobart Hospital, and including funding for broadband, roads, public transport, including a light rail for Hobart's northern suburbs, and a demand that the government withdraw its formal approval of the proposed Gunns pulp mill.

Then there are 12 broader issues: poker machines, climate change, refugees, whistleblower legislation, mental health, dental care, a fairer distribution of schools funding, increasing welfare benefits, same-sex marriage, aged care and a national disability insurance scheme. Abbott might get a tick for his mental health policy, but everything else there is difficult for both leaders.

To me, apart from a couple of caveats, all of it is good policy but it's difficult. And Wilkie is just one of four independents. Katter has made it clear he wants a lot of things for his electorate (which is bigger than France). Windsor and Oakeshott last week were strong on good principles and procedures, but they will also have to demand that the electors of New England and Lyne get their share.

Still, what they ask for and what they get will be two different things. Labor (and the Coalition, if it wants to stay in the game) will have to plead for time to tackle some issues, insist on national program funding for others, and choose carefully what to give away from the very small amount left in the kitty after the campaign.

The first week was encouraging, even if some commentators missed the point. The independents' demands were about principles of government. They stared down Gillard, and got her to agree to improve the way Parliament works. They stared down Abbott, and got him to agree to have his policies properly costed by Treasury and the Finance Department.

That means the Liberals will need to prepare credible excuses for getting some of their costings wrong. I suggest they just tell the truth, which is that the much-vaunted charter of budget honesty doesn't work for oppositions. They need access to the departmental experts when they are planning their policies, and not merely to reveal during the electoral campaign where they got costings wrong.

When Labor was in opposition, Lindsay Tanner proposed that oppositions be allowed private access to Finance and Treasury officials for the last year before an election to help them get costings right. But Labor in government did nothing on that, and shadow treasurer Joe Hockey argues that this solution would put unfair pressure on officials, by asking them to serve two masters.

The Coalition instead proposes to set up a parliamentary budget office, along the lines of the Congressional Budget Office in the US. But on the scale it proposes, that wouldn't work either.

The US office has an annual budget of $A50 million and employs 175 economists and other analysts. The Coalition's proposed office would have an annual budget of just $2 million, which might pay for 10 or 12 analysts at best. The Finance Department has 1000 of them. Get real.

Climate change is one key issue. The key economic issue is to train the young, the unemployed and the workforce dropouts in the skills Australia will need to sustain a long recovery. Could one of the independents please put that on their list?

Credit: TIM COLEBATCH. Tim Colebatch is economics editor.

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Time to change this silly game - REALITY CHECK

ON PAGE 2 of the Coalition's policy costings, the principals of accounting firm WHK Horvath put a crucial caveat on their endorsement of it. The numbers add up, they say, "based on the assumptions provided" to them by the Coalition.

The Coalition, they write, "provided access to the assumptions used to determine the cost of individual initiatives". But the assumptions were never independently tested: not by Horvaths, not by Treasury, not by the Finance Department.

Any costings are accurate only if the assumptions on which they are based are accurate. We have only the Coalition's word on that. Labor disputes it, on several big-ticket items, with arguments that look persuasive.

But because the Coalition refused to submit its policies to be costed by the officials in Treasury and Finance, what we have will be no independent judgment. Which side you believe is up to you.

In 2007 Labor refused to submit its most sensitive policies for costing until it was too late. In 2010 the Coalition likewise has refused to have its policies costed by the experts who know exactly how to do it.

The claim that it couldn't trust the officials is a phoney excuse. The truth is that Coalition didn't submit their policies because they feared the experts would find mistakes. Just like Labor in 2007.

OK, we've now had two elections in a row when whoever is in opposition has boycotted the process. Why? Because they get access to the experts only when it's too late — once the campaign has started, and their policies have to be made public.

Please, guys, can we make this process work in the interests of taxpayers? How about you sit down together when the election is over and come up with a better set of rules?

When Labor was in opposition, Lindsay Tanner proposed that oppositions be allowed to submit policy proposals privately to Treasury and Finance for costing for a year before an election is due. That would give them the same access as the government has. It would be fair. It would be democratic. It would be in the interests of us — the taxpayers who pay for all this.
What did Labor do when it came to office to reform the process? Nothing.

Labor's critique raises serious doubts about billions of dollars of the Coalition's claimed financing sources, savings and spending plans
.
What the true bottom line is, frankly, is anyone's guess. Until they fix this silly game, and agree on rules that are fair to all — including the Greens — I'd be sceptical about anything they claim.

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AFP probes leak as opposition accused of hiding $8bn

THE Australian Federal Police will investigate who leaked a Treasury costing of a Coalition policy proposal, as Labor accused the opposition of hiding an $8 billion long-term cost of its promise to lift defence pensions.

As the campaign rhetoric escalated, shadow finance minister Andrew Robb also questioned the integrity of Treasury officers, warning that the Coalition would not submit any further policies to be costed until the matter was resolved.

Mr Robb said he was concerned that the officials carrying out the costings "may have a political agenda" and could be "engaged in criminal activities to create a political problem for us".

"It is important to have Treasury test [the cost of Coalition policies], but only if it can be shown that they are totally independent and that they are impartial," Mr Robb said. "Their impartiality is critical to them properly assessing the costing of both sides . . . We are very concerned that [the costing] is not compromised by the potential of individuals who may have a political agenda, who are responsible for carrying out the assessment of costings on all these programs."

The Coalition has so far submitted only 11 minor spending proposals totalling $388 million less than 2 per cent of its $24 billion of new spending plans to be costed by the Department of Finance.

Mr Robb spoke with Australian Federal Police Commissioner Tony Negus yesterday to urge the AFP to investigate who told The Sydney Morning Herald that Treasury had found an $800 million hole in one of the Coalition's policy costings.

The opposition in May claimed it would save $2.44 billion in interest bills over four years by not building the National Broadband Network. According to the Herald report, since confirmed by Treasurer Wayne Swan, Treasury estimated the saving was only $1.6 billion.

"The Commissioner . . . advised that the investigation would be conducted as a matter of priority," Mr Robb said.

Shadow treasurer Joe Hockey said that unless the leaker was identified, the Coalition would instead release costings made by its accounting firm next Wednesday.

A row also escalated over the long-term cost of the Coalition's pledge to allow some defence pensions to be indexed to wage growth rather than the consumer price index (CPI), whenever wages are growing faster than prices.

While the promise will cost just $98 million in the next four years, the government said it would cost $8 billion over the next 45 years, with defence pensions ultimately rising by 20 to 25 per cent as higher indexation operated like compound interest.

"The Liberals would immediately increase the unfunded liability of the military superannuation scheme by $8 billion," Finance Minister Lindsay Tanner and Veterans' Affairs Minister Alan Griffin alleged.

But a Coalition spokesman said the long-term cost would be only $4.8 billion, and the Coalition would put an extra $100 million into the Future Fund, which would be followed by further payments to meet that cost.

"Over time it will cost more, and it's not insignificant, I accept that," Opposition Leader Tony Abbott responded in a radio interview.

"In any one year, it is bearable and we ought to bear it because if we expect people to put their lives on the line for our country, we've got to be prepared to show some reasonable commitment to them," he said.

The plan will benefit only 4270 of today's armed forces because it applies only to a scheme closed to new entrants in 1991.

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Coalition spending cuts amount to just 0.1%

THE Coalition has used up almost all its budget savings for new spending and tax cuts, leaving it with a bit over $1 billion of net savings over the next four years on its own costings.

Analysis by The Age finds that, on its own costings and excluding all its proposals for new transport projects, the bottom line is the Coalition would improve the budget balance over the next four years by just $1265 million.

On the Coalition's own costings, the net impact of its plans would be to reduce spending by just $796 million, and raise taxes by $469 million.

On official figures, budget spending over the four years is estimated to be $1430 billion. If the Coalition's costings are right, it would cut spending over that time by less than 0.1 per cent.

If so, what was all the fuss over deficits and debt really about? Given the margin for error, the Coalition is planning to spend just as much as Labor is. If Labor has been "spending like a drunken sailor", the Coalition plans to join the party.

In fiscal terms, the two parties will go to the election with identical policies. The spending will be in slightly different areas, but in its impact on the economy, nothing would change.

This is probably true even if, as many suspect, the real reason the Coalition is now threatening to refuse to send its policies for costing is that it knows that some were too optimistic big time.

Its plan to extend the education tax rebate is so sweeping that its costing of $760 million over four years is simply unbelievable.

On another costing, Treasury has reportedly told Treasurer Wayne Swan that the interest savings the Coalition claims from scrapping the national broadband network are overstated by $840 million.

The Coalition is now doing a dummy spit and threatening to boycott the costings process because Labor leaked that to the media. Well, guys, if you want us to elect you to be our government, you need to be made of tougher stuff.

The reality is, the Coalition has come up with excuse after excuse to delay submitting its proposals to the Department of Finance and Treasury for costing before tonight's deadline.

In 2007, Labor did the same. It submitted just 32 proposals for costing before the deadline, and put in most of its plans after the deadline, making it impossible for them to be costed.

The Coalition has followed a similar path. It lifted its tally on Monday by submitting almost $20 billion of policies for costing: essentially, its pledge to scrap the mining tax, and all the things Labor proposes to spend that money on.

But so far it has submitted just 11 small spending proposals to be costed. It estimates they would cost $388 million, out of more than $23 billion of new spending proposals. That's 1.5 per cent.

Among the policies withheld from costing are:

Replacing Labor's bare-bones paid parental leave scheme with its own more generous one. The Coalition estimates its gross cost of its scheme as $8.8 billion, which it says would be more than offset by $6.1 billion from its 1.5 per cent levy on business profits, and by $3 billion of savings on the baby bonus and other welfare benefits.

More than $5 billion of new health spending, and a similar amount of savings.

Its plan to freeze public service recruitment, announced in May (estimated saving: $3.8 billion).

The interest saving from scrapping the national broadband network ($2.4 billion).

Its plan to extend the education tax rebate ($760 million).

The Coalition created the charter of budget honesty. Now that it is in opposition, it should not use a flimsy excuse to dodge it.

The same is true for Labor, which has submitted most but not all of its spending and saving plans. Put them all on the table.

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Libs skate over the details - DEBATE 2010

TONY Abbott could end up as the Steve Bradbury of Australian politics. It had seemed that both Kevin Rudd and Julia Gillard were skating away from him. But then Gillard brought down Rudd and Rudd kicked out, almost bringing down Gillard and allowing Abbott to sail past her as the only one still securely on his skates.

Will he win? Time will tell. What makes this election so unpredictable is that so many young Australians are yet to engage with what seems to them a boring, irrelevant, repetitive slanging match. One suspects a lot of them will make up their minds only hours before they vote.

But Abbott has had a dream campaign, Gillard a nightmare. The media focus has been all on Labor, very little on the Coalition. What kind of government would it be? What kind of decisions would it make on the real issues we face, after having devoted so much energy to whipping up a confected issue on deficits and debt?

Yesterday, shadow treasurer Joe Hockey gave his answer while debating Wayne Swan at the National Press Club, setting out a five-point economic agenda for an Abbott government.

First, was the predictable "fix the mistakes made by Labor in the last three years". Hockey was disarmingly frank about the role of the planned debt reduction taskforce. "We'll be focusing in particular on identifying if Labor has not told us the truth about their programs," he said.

That suggests the real role of the taskforce is not debt reduction but the usual witch-hunt to try to find anything the new government can use to discredit the old.

After all those pledges to return the budget to surplus quicker than Labor, the Coalition now plans to arrive there at the same time, in 2012-13. And on its own costings the great bulk of which it has yet to submit for costing by Treasury and the Finance Department it would save a net $2.8 billion over four years. That issue, rightly, has faded away.

Second was what Hockey called a productivity agenda, but was really about lifting workforce participation. He foreshadowed a big announcement ahead from Abbott on reforms to get people under 30 "off welfare and into work".

A good aim, and one that's been a theme of Abbott's for many years. But there are good and bad ways of doing it. We'll wait and see.

Hockey also cited the Coalition's generous paid parental leave scheme as a move to lift workforce participation, along with one of the best policy initiatives of the campaign: its plan to pay employers a $3500 bonus for hiring unemployed older workers.

That's a long overdue move to challenge the HR managers' bias against hiring older workers a bias that must be overturned for Australia to cope with a rapidly ageing society. But will Abbott offer a similar bonus for employers hiring our 250,000 unemployed young workers?

And if it is to be real reform, giving taxpayers value for money, it should be paid for by removing the tax break of up to $500 for workers aged 55 and over. It's a useless handout: too small to influence anyone's decision to work or not, yet costing $1 billion a year.

Hockey's next two pledges were to improve the efficiency of our infrastructure by asking the Australian Competition and Consumer Commission to review the access regime for privately owned infrastructure, and by ensuring that future capital works (presumably major ones) must pass an upfront benefit/cost analysis. A pledge to publish the benefit/cost analysis of competing projects before decisions are made, that would be a welcome reform. If an Abbott government pledged to build those projects with the highest economic bang for buck rather than those with the highest political bang for buck it would be better still. I wouldn't hold my breath.

Finally, Hockey repeated his leader's commitment to revisit the Henry report over the next year and come up with a plan for further tax reform. That's a great aim but again, it all depends on how it's done. Will it be about cherry picking, giving us the electorally attractive bits and ignoring the rest?

Or will it be about giving us a fairer and more efficient tax structure, given Henry's repeated warnings that an ageing society will require more services and hence more tax, not less.

It is not encouraging that Abbott keeps claiming falsely that Labor has adopted only one of Ken Henry's recommendations. In fact, it has adopted at least six, three of which the Coalition is opposing: the mining tax, halving the tax rate on interest income, and introducing a standard deduction for work-related expenses. Labor has also increased tobacco tax, committed to cut company tax, and promised higher family benefit rates for older teens. It's not enough, but let's stick with the facts.

What matters now, as Ross Garnaut argued in his Hamer Oration last week, is to revive the impetus for real economic reform, which has died since John Howard's near-death experience with the GST. We need leadership that is not afraid to commit to changes that will ensure that resources are used where they will do most to lift our living standards, not the government's ratings.

I have one proposal. Abbott's pledge to retain Hockey as treasurer if he wins raises the question of what he will offer Malcolm Turnbull. I suggest he be given a cabinet-level post as minister for revenue in charge of tax reform. That could kickstart a new age of real reform.

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Swan for content, Hockey for style - Debate 2010

FORGET the leaders' debate: yesterday's Treasurers' debate was far better. It was articulate and feisty, with the ABC's Chris Ullmann as chairman doing a great job of getting them to engage and make sparks fly.

My initial verdict was that it was pretty even. But after the bout, Wayne Swan threw a low blow by trying to verbal Tony Abbott, quoting comments from a radio interview without the qualification Abbott put on them. On that basis, I'd give it to Joe Hockey.

Swan had the edge on content, but Hockey won the points on style. Wayne was once a boyo, but these days he's the class swot: controlled, unfunny, relentlessly on message. Joe was trying to look as serious and Treasurer-like as he could, but he's really the fun kid of the class: affable, full of laughs, with what Dr Johnson once called "a bottom of good sense".

They had a good debate. Both made strong cases: Swan on Labor's term in office, Hockey on the Coalition's agenda.

Both also swung several fouls, and feigned ignorance on some key inconvenient issues, such as the role of tax breaks in making home ownership unaffordable for the young.

Swan won clearly on Labor's record. He repeatedly pulled Hockey up for pretending that the debt and deficits were due to Labor being in power, when clearly they were the result of a global recession.

Hockey ultimately conceded that had the Coalition been in office during the crisis, it too would have had to run deficits, although, he said, smaller than Labor's. Glad we got that clear.

Treasury figures suggest that in the four years of deficits, the revenue collapse and Labor's stimulus decisions contributed equally to the blowout. But then, without those handouts propping up retailing, construction, the finance sector and car manufacturing, the collapse of revenue and jobs would have been much worse.

Hockey won clearly in spelling out an Abbott government's economic agenda. Ironically, when Swan keeps attacking the Coalition for not having an economic agenda, his only plan for tax reform was to keep cutting company tax.

But Swan scored again by highlighting the Coalition's failure to submit more than a tiny fraction of its proposed new spending and tax cuts for costing by the Finance Department and Treasury.

Hockey insisted they would be submitted before the deadline, but as of last night the Coalition had still submitted just $288 million of almost $40 billion in new spending and tax cuts for costing.

On the Coalition's own estimate, he said, it now had net savings of $2.8 billion over four years. That's a cut of 0.2 per cent in the $1.4 trillion of planned spending in that time. Wow.

But Joe, if you're that confident of your figures, would you mind letting the boys at Treasury and Finance look at them? Just for a week or so? That might reassure the rest of us.

But Swan fouled out when he accused the Coalition of opposing all the stimulus spending. Not so, said Hockey: we supported the first tranche, and would have passed the second if you'd negotiated with us to make it smaller.

"We've never disputed the stimulus," he said. "What we've disputed is how much you spent, and the way you spent it." But then Hockey too fouled out, claiming repeatedly that the stimulus had pushed up interest rates and squeezed out business borrowers. That is true only if you concede that the stimulus is responsible for Australia's relatively good economic growth because as Reserve Bank governor Glenn Stevens keeps explaining, that's what drives up interest rates. The Libs can't have it both ways.

Both fighters came out with their heads high.

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Cocky Coalition has costed just 1% of promises

BETWEEN them, Tony Abbott and Nationals leader Warren Truss announced three new measures at yesterday's Coalition policy launch. But none of them were costed, and one was not even fleshed out.

It's a measure of the Coalition's confidence that it no longer feels obliged to spell out what its policies will cost, or how they will be funded. Its campaign is going like a dream; everyone's focus is on Labor divisions. Why rock the boat?

With four days left before the deadline for submitting policies for costing, the Coalition's running tally of new spending measures and tax cuts is almost $40 billion.

Yet just six measures totalling $288 million less than 1 per cent of that have been sent for costing.

Its three initiatives yesterday had no costing at all. They included:

relaxing the work test for rural students to receive the youth allowance, which Labor costed at up to $270 million over four years.

a breathtaking yet unspecified proposal to offer guaranteed jobs to "young indigenous people and others trapped in intergenerational poverty" if they give up their rights to welfare payments.

the offer to reimburse householders for inspections and if necessary, removal of Pink Batts installed under Labor's home insulation program. Opposition environment spokesman Greg Hunt said this could be funded within the existing program. Well, with respect, that depends how many people use it, and how many Pink Batts need to be removed.

Meanwhile, Treasurer Wayne Swan announced:

the cost of a passport will be increased by $18 from January 1, from $208 to $226, and be indexed annually thereafter for inflation (raising $193 million over the next four years)

the Tax Office will get more resources to pursue tax fraud, especially by businessmen setting up 'phoenix' companies letting one business die with unpaid debts, then starting up a new one.

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REALITY CHECK: Big promises, small costings

THE Coalition's health policy takes the four-year cost of its promises of new spending and tax cuts to at least $32.5 billion. Yet less than 1 per cent of that has been submitted to the Finance Department and Treasury for costing.

With just a week left before the deadline for submitting campaign promises for official costing, it looks unlikely that the Coalition will be able to prove its claim that it will reduce the budget deficit (or lift the surplus).

While its new spending would be offset by savings and new taxes that the Coalition estimates will reap $37.7 billion, only 15 per cent of the savings and tax rises have been submitted to be officially costed.

Key policies released earlier this year have still not been submitted for costing. They include:

The proposed two-year freeze on hiring for the public service, which Tony Abbott announced in his budget reply (claimed saving: $3.8 billion).

The interest saved by not building the National Broadband Network ($2.4 billion).

The climate change policy that Mr Abbott announced in January ($2.05 billion).

The education tax refund announced two weeks ago ($734 billion).

Also yet to be costed are the big-spending policies and savings the Coalition has released in recent days.

They include $8.8 billion in just two years for paid parental leave, the $2.55 billion for one year of company tax cuts, and almost $6 billion over four years in new or repackaged health spending.

Shadow finance minister Andrew Robb said yesterday the Coalition had "submitted a large body of work to our independent accounting group" a week ago, and was still waiting to hear back.

"As they work through programs, we are then submitting them to Treasury," Mr Robb said. "We will demonstrate that on the savings side and on the spending side, that we can produce a stronger surplus."

But so far the Coalition has sent the Finance Department just six new spending programs, totalling $288 million, or less than 1 per cent of the new spending and tax cuts it has pledged.

It has submitted 34 proposed savings measures adding up to $5.7 billion. But all were measures the department had recently costed, or were patently obvious.

For example, the Coalition asked the department the cost of giving the Productivity Commission an extra $4 million a year. Yesterday the department replied poker-faced that it would cost $4 million a year.

Labor by contrast has run a low-key campaign with relatively little new spending. As of yesterday, it had announced $2.1 billion of new spending, offset by $2 billion of savings measures. Half the spending promises and virtually all the savings had been sent off for costing.

Labor similarly delayed submitting most of its costings until the final week of the 2007 election. It had also submitted only 32 policies for costing at this stage. As a result, most of its savings and spending plans were never costed.

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Cash-for-old-cars policy $35m over budget

LABOR'S cash-for-clunkers policy has had another breakdown. The Department of Finance estimates it would cost $35 million more than Labor told us.

The department's costing finds the much-ridiculed policy would cost $429 million, for a goal of reducing greenhouse emissions by 1 million tonnes.

At its release, Prime Minister Julia Gillard said cash for clunkers would cost $394 million. But the department found two serious flaws in Labor's costing.

On one hand, it said, Labor overestimated the cost of administering the scheme. But on the other, the fine print showed Labor costed it assuming that only 180,000 motorists would trade in their pre-1995 cars for new fuel-efficient ones - not the 200,000 it announced publicly.

The department instead assumed the target would be met. But it estimated that up to 165,000 of the cars traded in would be ones that were ''(at) the end of their useful life and need to be replaced'' - so their owners would need a new car anyway. It forecast conservatively that only 35,000 of the clunkers would still have ''useful life'' in them - making it a very costly policy.

Shadow finance minister Andrew Robb accused Labor of pricing the scheme too low, saying the $2000 rebate was too low to induce owners to trade in their cars.

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Abbott's answer is blowing with the wind

LAST year, a month before he was catapulted into the Liberal leadership, Tony Abbott spoke to a group at Melbourne University on Aboriginal policy. It was a low time in his life. He was stuck in opposition, in a portfolio he didn't want, while Malcolm Turnbull drove the Liberals in another direction.

Abbott was honest, idealistic and relentlessly pragmatic. He frankly conceded the Howard government's intervention in the Northern Territory would never have solved the malaise of Aboriginal communities. "It was authoritarian. It was top down," he said. "It was based on mainstream Australian rather than Aboriginal values."

But it was essential to try again, to work with people in remote communities to restore some form of authority, to try to end their "permissive paralysis, where anything goes and nothing really happens".

"What we need are people who can make decisions and get things done, and overcome the fear of offending," he said. This meant working to change "the expectations that Aboriginal people have of themselves . . . [to end] this general expectation of a life on welfare".

Since his days as a junior minister, Abbott has crusaded to stop paying Aborigines "sit down money" and start working to equip them to hold jobs in the mainstream economy. One of the best parts of his book Battlelines puts it starkly:

"If the fundamental object of government policy is to preserve Aboriginal culture, it will fail. Only Aboriginal people can do that . . . Government's job is to try to equip Aboriginal people to participate in wider Australian society.

"Under the ideology of self-determination, an exaggerated respect for Aboriginal culture has coexisted with a kind of abandonment of Aboriginal people . . . Building more Aboriginal housing in places where there are no jobs . . . makes people's lives easier in the short term, but, in the long term, traps them in welfare villages."

This was Abbott at his best: direct and honest, sharp brain and generous heart, focused on issues and outcomes, and ready to challenge conventional wisdom to achieve them. But then he became Opposition Leader. And instead of seeing those qualities rising to the top, that Tony Abbott disappeared.

Instead, we now have Abbott the populist, who tells swinging voters whatever they want to hear. Day after day, the man who was such a creative wordsmith now repeats mind-numbing mantras such as "great big new tax". He is now focused solely on winning votes. And to do so, he has dumped policy after policy he supported when he was guided by principle.

Take immigration. Abbott used to go out out of his way to endorse high immigration, the last time in January in Melbourne when he declared: "My instinct is to extend to as many people as possible the freedom and benefits of life in Australia. A larger population will bring that about, provided that it's also a more productive one."

But that was January. By July, Abbott had swung around to become an anti-immigration campaigner, fanning a scare campaign by declaring immigration out of control. He now wants to cut net overseas migration to 170,000 which, taken literally, could mean turning back Australians returning home from overseas jobs, or blocking their partners, or New Zealanders, since all of them come within that cap.

Abbott hinted that he is prepared to restrict the enrolments of foreign students to achieve it. To win votes, a major party leader is suggesting he might reverse the growth of a key Australian export industry. We're in Peron's Argentina here.

The reality is that Chris Evans as Immigration Minister has pushed through a set of reforms to end the rorts of student visas and temporary work visas, but keep the goals of immigration policy constant. Immigration has been well handled. It is not out of control. Julia Gillard, despite some silly rhetoric, has kept her policy options open. Why couldn't Abbott?

Then there's climate change: the most crucial economic reform facing Australia. The only way to tackle it cheaply and effectively is to put a price on carbon so investors and consumers have an incentive to move to low-emission alternatives. Yet Abbott vows "never" to introduce a carbon price and his views on global warming swing around 180 degrees depending on whether he is talking to Alan Jones or Tony Jones.

Get real. Last year was the second-hottest year Australia has recorded. The past decade was the hottest ever recorded, in Australia and globally. This is the kind of issue that defines the courage and integrity of a nation's leaders. Ours fail.

Or take the $24 billion of Coalition "savings" Abbott says will pay for his new spending. Of that, $9 billion would come from scrapping the programs Labor plans to fund from the mining tax. But the Coalition won't get the revenue from the mining tax. And you can't save money you don't get.

There is no grey area here. When you won't receive that $9 billion, to pretend it can be spent on other policies is either a lie or utter incompetence. Whichever it is, how can we trust a leader like that?

The principled Abbott was one of the best and fairest in the game. The populist is not. And his rivals are Gillard, another populist whose key message is that he is worse than she is, or the Greens, a team of dreamers yet to forge their ideals into the steel of pragmatic reforms.

Many of us out here want leaders who are honest, idealistic and relentlessly.

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Coalition might increase deficit, debt

THIS election campaign is changing colour more rapidly than Julia Gillards hair. Last week, both parties pledged, hand on heart, this would not be an election spendathon. But if its not that, what do you call it?

On Monday in Queensland, both party leaders pledged roughly $1 billion of new spending, in one day: both pledged about $750 million to build a rail bridge in Brisbane without a benefit/cost analysis, and Abbott pledged another $240 million to build a bypass of Mackay.

Yesterday, Labor took a break owing to certain problems with cabinet leaks, but the Liberals ploughed on.

The spend-of-the-day award indeed, the big spend of the campaign so far went clearly to Tony Abbott, as he pledged to cut the company tax rate from 30 per cent to 28.5 per cent from mid-2013.

This one-upped Labors pledge to cut it to 29 per cent, and neutralised Labors campaign against Abbotts impromptu decision in April to make employers, not taxpayers, pay to lift maternity leave to six months.

That decision, made without reference to shadow cabinet, could now be reversed. Shadow Treasurer Joe Hockey said yesterday the Coalition would have more to say on the issue later in the campaign clearly implying that it would be different to what it has said since April.

Fine, but if so, well be paying for it. And who would pay for his cut in company tax?

Well, we would. Under Labors plan, the cut in company tax would be financed by the mining tax. The Coalitions cut would come out of general revenue.

And its not cheap. The Coalition estimates it at $2.5 billion in year one, settling down then to $2.1 billion a year. On the four-year basis we usually use, thats $8 billion plus easily the most expensive campaign promise yet.

But isnt it financed by their plans to cut spending in other areas?

In theory, yes. In practice, the cuts are far smaller than the Coalition claims, and now run the risk of being overwhelmed by its spending promises.

The Coalition claims $24 billion of spending cuts. But $9 billion of that is pledging not to spend money it wont raise by not having a mining tax. How can you save money you dont receive? Thats phoney.

Are you sure Labor will receive it?

No! It depends entirely on mineral prices, and who knows what they will be?

Analysts Wood Mackenzie forecast that the coal half of Labors tax could raise as little as $7.4 billion over the next five years. If so, the revenue will be well short of the $6.5 billion a year target.

But Labors numbers include some safety buffer. The Coalition has none. Take out that $9 billion, and its claimed savings shrink to $15 billion. But $5.6 billion of that is savings from programs it plans to replace with new spending, so you cant book gains from that.

That leaves roughly $9 billion of real savings over the next four years mostly $4.4 billion from not replacing public servants who leave, and $2.3 billion from cutting climate change programs.

The Coalition tells us it will reduce the deficits and debt. But this way, its in danger of increasing them.

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Balancing the books on education refund promises

THE Coalition's plan yesterday to extend the education tax refund to school fees got both sides hot and excited.

Education Minister Simon Crean accused the Coalition of opening a fiscal "black hole". Coalition finance spokesman Andrew Robb accused Labor of planning to cut access to family tax benefits.

Let's ignore all that to look at the key issues.

OK, start with the real question: which is the better policy?

Sure. Team A offers parents a tax break on the cost of buying iPads, other IT equipment and school uniforms. Team B would extend the tax break to cover school fees and extra-curricular costs, even sporting equipment. Which plan makes more sense?

To me, the Coalition's plan is clearly better, even if both go too far. School fees and tutoring bills at least are genuine education expenses, unlike iPads or sports gear. If you think parents deserve more support, surely this is a better way to give it.

Won't it go disproportionately to parents with children at non-government schools?

Yes, it will, and it's curious that the Coalition's six-page policy paper makes no reference to extending the tax break to include voluntary contributions by parents at government schools.

Perhaps none of them send their kids to government schools. But the two-thirds of Australian parents who do, deserve more than an offhand assurance by Tony Abbott that of course we'll include those payments.

Tony, it's not in your policy. How about giving parents a very clear commitment to that in print? Do it now.

That said, bear in mind that only families eligible for Family Tax Benefit A will qualify anyway, which excludes a lot of AB families — and, I'm sorry to say, a lot of Age readers. It's not welfare for the rich.

And the big question: is the Coalition's proposal fully costed?

Probably not. But there's probably only one person in Australia who knows, and (s)he is keeping quiet. It's really messy. Labor had estimated the plan would provide a bit over $1 billion a year in benefits. But by June, only $606 million had been claimed for year one, a takeup rate of 60 per cent.

Why? First, claims were lodged for only 1.7 million of the 2.1 million students now deemed eligible. Second, only 32 per cent claimed the full amount: $375 for primary students, and $750 for secondary.

So in May, the government quietly cut its estimate of the future cost to about $750 million a year (or $3.1 billion over four years).

Then Julia Gillard extended it to school uniforms, at a cost of $340 million over the four years. That estimate assumed 10 per cent more claims in all, and roughly half the existing claimants getting much bigger rebates.

It looks like the Coalition might have been working off earlier, smaller estimates of the takeup in arriving at its cost estimate.

To me, its costing looks too low. But even if it is, it won't bankrupt us.

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