Bowen says Labor looking at similar ‘good debt’ change

Labor leader Bill Shorten says the federal government is moving the budget goal posts because it has failed to get debt under control, lashing its plan to divide the federal budget into “good” and “bad” debt.
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But shadow treasurer Chris Bowen has confirmed the opposition is looking at making a similar change to the federal budget and will “look at these changes in detail”.

Treasurer Scott Morrison is preparing to boost infrastructure spending in the May budget, with changes to accounting methods in train to enable the Coalition to borrow for worthwhile projects without endangering a return to surplus.

The Treasurer’s second budget will now highlight a different measure of the budget balance – the so-called “net operating balance” currently buried in the budget papers – to indicate whether the government’s day-to-day spending and income are in balance, with spending on infrastructure hived off.

Capital spending on so-called “good” debt will be accounted for differently, as happens in major corporations, state governments and in countries including New Zealand and Canada.

Labor has been considering a similar move, floated it in a recent discussion paper, and there is internal support for the party to make the change, too.

But on Thursday, Mr Shorten said the mooted change to the budget “is tantamount to an admission of failure” from Mr Morrison and Prime Minister Malcolm Turnbull, who were part of a government elected in 2013 promising to cut debt and deficit.

“They say they can’t get on top of the debt so they will redefine the debt. This is surrender by the government. They will change the goalposts, they are changing the goalposts,” Mr Shorten said.

“The net debt of every n, man, woman and child has increased by $4000, $4000 extra net debt on every n, man, woman and child since the Liberals got elected.”

In a separate statement on Thursday morning, Mr Bowen said the change in accounting practices – which will nevertheless see the underlying cash balance remain the “key measure” of budget health – amounted to a “smoke and mirrors” change.

“It’s astonishing that the best he [Mr Morrison] could come up with to replace housing affordability as the Budget centrepiece is a change to budget reporting,” Mr Bowen said.

But he confirmed Labor could adopt the change, despite criticising it.

“Of course we are open to new ways to better invest in infrastructure, given the Turnbull government has slashed infrastructure spending,” Mr Bowen said.

“We have considered our own changes to how debt is displayed in the budget through our recent Better Budgeting discussion paper and will look at these changes in detail – but given all the problems with this shambolic budget, this should be far from Scott Morrison’s top priority.”

Mr Turnbull echoed his treasurer on Thursday, arguing “there is a difference between government debt that you incur because you’re living beyond your means, spending more than you are receiving in tax and debt, [with] that you incur in order to build an asset, particularly an economic asset, like rail or like the NBN.

“Debt has an important role to play, but we shouldn’t be living beyond our means. We are committed to bringing that budget back into balance.”

Deloitte Access economist Chris Richardson said the change in budget accounting was “arguably a better way to do it”.

“But if you actually had a measure that that separated good debt from bad debt, you would set aside more than pure capital spending,: you would set aside things like education and you would also identify in some way stuff that doesn’t comfortably pass a cost-benefit test,” he said.

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