Labor Cuts Consultants, Saves $2.1 Billion for Cost of Living Support and Medicare

The Australian government is preparing for an election tussle over the level of government spending. Labor has announced plans to save $2.1 billion by cutting back on private consultants and returning "expensive" outsourced work to government departments. This is in addition to the $4.7 billion in savings already achieved during Labor's first term.

Finance Minister Katy Gallagher said that this approach is more cost-effective than the Coalition's proposal to cut public servants. She added that the savings will allow the government to invest in important areas such as cost of living support, Medicare, and housing.

However, the $2.1 billion reduction is less than the new spending that will be included in the budget. This includes $8.5 billion for bulk billing and $1.8 billion to extend energy bill subsidies. The figure also includes "re-prioritisations" - spending reductions that are cancelled out by a spending increase elsewhere in the same portfolio.

Treasurer Jim Chalmers has indicated that the budget will have a similar bottom line to the December mid-year budget update. This means that the gap between the new spending and the cuts is likely to be funded by upgrades to the estimates of how much tax will be collected.

The Coalition has matched most of Labor's new spending and has promised new spending of its own, including $5 billion for housing infrastructure and an unspecified taxpayer cost to build nuclear power plants. Shadow Treasurer Angus Taylor said that the Coalition would spend less overall than Labor.

Mr Taylor also said that the Coalition would restore a budget rule that real spending can grow no faster than the economy. Labor's own medium-term projections suggest that this level would not be breached on average over the next decade, but it would be breached for the 2024-25 financial year.

The government has ruled out boosting the level of defence spending again this budget. Mr Taylor said that the Coalition would reveal its own intentions after the budget.

In health, the Coalition has matched most new Labor initiatives, including $25 PBS medicines and the new bulk billing incentive. It also proposes to restore the 10 additional Medicare-subsidised therapy sessions that expired under Labor, but it does not have a position on Labor's 50 new urgent care clinics.