Sussan Ley to push for fiscal guardrails, warn overspending risks AAA rating
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The news: Opposition Leader Sussan Ley will promise to reintroduce fiscal guardrails and run balanced budgets over the cycle as she warns government over-spending could risk both the nation’s AAA credit rating and intergenerational fairness.
In a speech to be delivered to the Committee for Economic Development of Australia in Melbourne on Wednesday, Ley will focus on “restoring responsibility to the budget” and raise her concerns the nation could end up permanently dependent on government support if spending is not reduced.
She will push to “put guard rails around government spending, not as an end in itself, but so that we can strengthen our economy, preserve our capacity to help those truly in need, and ensure the next generation inherits opportunity, not debt”.
“If we keep spending at pandemic-emergency levels during ordinary years, we will inevitably lose our AAA credit rating,” she will say, arguing the Albanese government has “normalised and extended the era of big government” and increased spending during the economic recovery.
“Our default should be budgets that are balanced over the economic cycle, and surpluses in prosperous times to pay down debt. Restraining spending growth is key to this, as is avoiding over-reliance on volatile revenue booms that may not last,” Ley will say in her speech.
“When the economy is growing, the budget should ideally be in surplus so we have room to move when storms come. The current projections of continuous deficits are a sign something is fundamentally wrong with policy settings and we intend to right that.”
The numbers: Government spending is expected to hit 27% of GDP this year.
Ley will point to the $42 billion deficit forecast for 2025-26 and gross federal debt of $959.7 billion, with $1.22 trillion expected by 2028-29. She will also raise the rising costs of essentials, such as electricity, rent, insurance, food, health and education.
And she will cite Centre for Independent Studies data indicating that more than half of adults rely on the government for most of their income while 10% of taxpayers pay two thirds of income tax. This figure of those “relying on the government” includes those working in the public sector and being paid a wage.
The context: This is Ley’s first major economic speech as opposition leader and lays out her philosophy for the next federal election.
Details about the speech provided to media ahead of time indicate she will justify actions taken during Covid on a temporary basis, such as JobKeeper, while criticising the government for normalising “big government” and racking up more debt.
She will hearken back to “key Liberal Party principles” such as living within our means, rewarding effort, targeting welfare to genuine need and restoring fiscal discipline.
What they said: “It’s about the kind of Australia we want to build: an Australia that is prosperous, fair, and self-reliant, where government lives within its means and empowers its citizens,” Ley will say in her speech.
“Today, I will make the case that we must move from a time of dependency to empowerment.
By ‘dependency,’ I mean the growing expectation that government will provide for every need and solve every problem by spending more,” she will say.
“Moving to empowerment is about restoring the right balance between what citizens provide for themselves and what taxpayers provide as a safety net. It’s about reaffirming that government can do a lot of good but it cannot and should not do everything.”
She will back in a “fair social safety net” but rail against a welfare system “that attempts to be all things to all people”.
“If we want to keep the safety net strong, we have to ensure it is financially sustainable and targeted to genuine need,” she will say.
“The time of reflexively looking to Canberra to solve every problem with a blank check, must give way to a time of empowerment, personal responsibility, and fiscal commonsense.”
The source: Extracts from Sussan Ley speech
