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Labor defends $7.4bn increase in deficit to fund election promises

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Labor says the party’s decision to post $7.4bn in higher deficits than forecast over the next four years was not “made lightly”, but the spending is necessary to grow the economy.

The opposition’s election costings were released on Thursday after new labour force figures showed Australia’s unemployment rate had fallen to 3.9% – the lowest since 1974.

The shadow treasurer, Jim Chalmers, said Labor had been through the budget carefully to identify savings to offset most of its proposed spending, which it has emphasised will help boost productivity.

The party said its measures will tally $7.4bn more than what was outlined in the pre‑election economic and fiscal outlook, while the government has pledged to improve the budget balance by $1bn, giving an $8.4bn difference.

Labor’s biggest revenue measures include a $3bn cut to public service spending on contractors, $3bn gained through extending Australian Tax Office compliance measures, almost $2bn from a crackdown on multinational tax avoidance and $560m through a new competition policy that imposes large fines for anti-competitive behaviour.

It will also scrap two government programs to save $750m and abolish a 10% discount for upfront payment of Higher Education Contribution Scheme (Hecs) fees to save $150m.

While Labor dug in to explain its less favourable bottomline to swinging voters in the final days of the 2022 campaign, the Morrison government trumpeted the new unemployment figure as evidence its approach to economic management was working.

The prime minister urged voters to stick with the incumbents.

“On this Saturday, you can vote for the Liberals and Nationals … to ensure that you can secure the opportunities that we have ahead, with strong economic management and avoid that risk of Labor,” Scott Morrison said.

He said Labor’s election costings highlighted the risks of a change. “What we have always seen from the Labor party is when they can’t manage money, they come after yours in higher taxes.”

With the Coalition preparing to unleash its final campaign offensive on the economy and fiscal management, Chalmers told reporters there was potential for more savings once Labor was in government on areas such as the national disability insurance scheme. But he said the extra spending “was absolutely crucial” to growing the economy in the right way and had been “rigorous” in its assessment of savings.

“We have gone through very carefully every bit of spending from the government, every bit of proposed spending from us, so we don’t take these decisions lightly,” Chalmers said.

“We feel that the budget would be weaker without investing in crucial economic policies like childcare, cleaner and cheaper energy and trade. And so we’ve made that judgment not lightly, but in the interest of the economy into the future, because we want to make these decisions based on economics, not politics.”

Labor’s most expensive policies include its $5bn childcare policy, $2.5bn for aged care, $1bn for its powering Australia policy, $800m for fee free Tafe, and $750m extra for Medicare.

Chalmers said the investments were worth doing.

“If you start from the basis of what’s best for the economy is best for the budget, then these investments are absolutely necessary and we’re proud of them.”

Josh Frydenberg said Labor’s costings were a ‘farce’. Photograph: Diego Fedele/AAP

The treasurer, Josh Frydenberg, attacked the party’s costings as a “farce”, saying Labor had not been submitted its spending measures to the Parliamentary Budget Office.

“Labor’s own admission in Labor’s own document is every year, debt is higher under Labor, deficits are higher under Labor and taxes are higher under Labor,” he said.

“Their attempt today at releasing their costings was a farce because there was no independent verification of their policy costings.”

The government’s revised costings revealed a $1bn improvement to the budget bottom line based on $3.3bn in spending cuts in the public service, including a $2.7bn saving as a result of an increase to the efficiency dividend.

The government’s figures show cumulative deficits over the next four years totalling $223bn.

The Labor leader, Anthony Albanese, defended releasing the party’s costings on the Thursday before the election, which was the same time as the Coalition released its costings in 2010, 2013 and 2019.

When asked how he could be sure that Labor’s additional spending would not further stoke inflationary pressures, Albanese said Labor was focused on improving productivity.

“The measures that we’re aiming at here, whether it’s childcare, whether it’s clean energy, or skills and training, are precisely aimed at that,” he said.

“That’s why we have prioritised those investments.”

But Frydenberg said there were doubts about how the extra spending could lead to inflationary pressures and higher interest rates.

Polls tighten in final days of campaign

Opinion polls suggest the contest has tightened in the final week of the campaign. But all published polls suggest Labor maintains an electoral advantage going into the final, frantic 48 hours.

A new Ipsos poll published by the Australian Financial Review on Thursday night showed an improvement in the Coalition’s primary vote, but Labor was leading the Coalition on a two-party-preferred basis 53% to 47%.

The Guardian Essential poll this week had Labor with a two point lead in the survey’s two-party-preferred “plus” measure, with the opposition on 48% and the Coalition on 46%. Seven per cent of respondents are undecided.