Dear Mr Albanese: don’t be such a tight-arse

Look after the pennies and the pounds will look after themselves, so the saying goes.

It’s a mindset Prime Minister Anthony Albanese owned in opposition, saying that growing up in a poor, single-parent household taught him scrupulousness he’d apply to government finances. Now in government, Albanese has directed his ministers to find savings in their portfolios.

But kitchen-table folk wisdom — or poverty-induced frugality — rarely translates well to public policy. Indeed, if you do too much penny-pinching you can create problems that will take pounds to clean up later.

Last week Albanese learnt that lesson the hard way.

Out for a pound

On Saturday he backed down on his planned scrapping of welfare payments for COVID isolation, agreeing with national cabinet to extend the scheme until September 30.

Albanese also reinstated telehealth appointments to administer antiviral COVID treatments, after cutting funding for 70 consultation types at the end of June. For now at least, he remains committed to scrapping free rapid antigen tests for concession card holders.

State premiers, the opposition and his own backbench saw before he did that such cuts were self-defeating. They would worsen the winter COVID wave and cost the government more in health resources and lost tax revenue than it would save.

Licking its wounds from its first embarrassing own goal, the Labor cabinet is likely to limit its fiscal restraint in the health portfolio for now. Perhaps it’ll extend the free RATs program before it lapses at the end of July.

But the frugal mindset runs deeper. The government has strained important relationships with new crossbenchers by cutting their staff allocation, saving a mere $1.5 million (chump change for a federal government). Labor also dumped relatively low-cost, likeable promises during the election campaign such as parental leave super.

And we’re warned there are more cuts to come. Why?

Spending ≠ inflation 

Albanese argued recently that the Reserve Bank could see increased government spending as adding fuel to the inflationary fire and thus raise interest rates further. With costly childcare and aged care policies locked in, compensatory cuts must be made.

But not all spending is inflationary. Indeed many foreshadowed items in the October budget could help reduce inflation.

Sure the money families save on childcare could be put towards a new car or holiday, thus bidding up their already ballooning prices. But by allowing more parents (predominantly mothers) to enter the workforce, output can be increased, reducing its imbalance with demand and thus price pressure. Albanese argued earlier this year that his childcare reforms will be inflation-reducing.

Yet free RATs and isolation payments could also reduce inflation by stopping the virus from spreading among colleagues — keeping more people at work and churning out more products. Why not maintain these policies on the same grounds?

Ghost of deficits past

Beyond inflation, increasing interest rates raises the cost of servicing government debt. So looking for modest savings in wasteful or inflationary areas is sensible. For instance, Albanese has proposed cutting often-rorted community and regional grants programs.

Liberal Senator Andrew Bragg has proposed cutting federal judges’ generous pensions. There are likely to be other poorly justified items in the policy cupboard.

Then there’s tax reform. Perhaps not on the table this early in the election cycle, but it must be strongly considered eventually given how low Australia’s revenue is by global standards.

But with high commodity prices and low unemployment increasing revenue from existing taxes, a relatively manageable deficit by historical and international standards, and growth-enhancing social reforms on the way, it’s hardly time to panic and dump valuable policies.

Labor cannot afford to distract itself, the media and the public with attention-sapping spot fires for inconsequential sums, causing real harm in the process. Overplaying its hands this soon suggests paranoia. It has long been scarred by the Coalition’s baseless scare campaigns that Labor governments recklessly spend too much.

Yet by projecting stern respectability to recapitulate yesteryear’s war, Albanese risks being stuck behind the times. Australians don’t care that much about the deficit any more. Sure certain quarters of the media will undoubtedly rediscover their fiscal hawkishness now Labor is in power. But with even the opposition calling for COVID spending to be maintained, now is hardly the time to ape Scrooge.

Australians do care about living safely and practicably with the pandemic after two years of hardship and disruption. If Labor tarnishes its credibility as a steadier pair of hands on COVID, health and social services — its present electoral advantage — its bigger problem will be a deficit of trust in government.