After initial confusion, Coalition says $7.5bn infrastructure spend in budget is ‘new money’

The Morrison government says about $7.5bn in infrastructure spending to be promised in Tuesday’s budget is “new money” that comes on top of the $100bn over 10 years previously foreshadowed.

Michael McCormack wearing a suit and tie: Photograph: Mick Tsikas/AAP

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Photograph: Mick Tsikas/AAP

The government announced the funding on the eve of the budget, arguing it would aid the economic recovery from the coronavirus recession – but it was unclear at first whether it amounted to new money or simply speeding up the delivery of previous commitments.

Michael McCormack wearing a suit and tie: Michael McCormack. It was unclear at first whether the $7.5bn infrastructure spend was new money or fast-tracking previous commitments.

© Photograph: Mick Tsikas/AAP
Michael McCormack. It was unclear at first whether the $7.5bn infrastructure spend was new money or fast-tracking previous commitments.

During a round of morning media appearances, Michael McCormack did not contradict an interviewer who suggested that the pledge of more than $7bn came from the already announced 10-year rolling $100bn infrastructure program.

Related: Coalition pressures states to deliver infrastructure projects or miss out on funds

“We’re making sure we’ve got the right money for the right projects,” the deputy prime minister told ABC TV in response.

Pressed on whether that meant the government was fast-tracking the money, McCormack said: “Absolutely.”

But at a later media conference next to a busy road in Canberra, McCormack said the $7.5bn was new money and came on top of the existing $100bn decade-long program.

“Correct,” he said. “Today is a $7.5bn commitment, a $7.5bn tick of approval to our economy, to our workers in our economy, to make sure that we put the right infrastructure in the right places, to build on the connectivity, to build on the strengths of our nation,” the Nationals leader said.

The exact funding profile – including the years in which the funding is to be delivered and when particular projects are due for completion – won’t become clear until the budget papers are published on Tuesday evening.

Labor’s infrastructure spokesperson, Catherine King, expressed scepticism about the announcement, saying it was “hard to see whether it’s new money” in advance of the budget documents being released.

“The problem is that the government makes the announcement but isn’t spending the time and the effort on actually delivering,” she told reporters in Canberra. “It’s not interested in the projects actually getting there on the ground. It’s interested in the headline.”

In questioning the government’s record of delivery, King pointed to the fact the commonwealth had spent $1.7bn less than it had planned on infrastructure last financial year.

“We know over the course of the last six budgets that the government has underspent $6.8bn on infrastructure projects that it promised but has failed to deliver.”

Related: Jobs, health and climate: what Australians want the budget to pay for

The government’s final budget outcome document, released last month, said lower-than-estimated payments to the states and territories for road and rail infrastructure reflected “slower than anticipated progress” on relevant projects, largely as a result of the pandemic and last summer’s bushfires.

The announcement comes as the government attempts to ratchet up political pressure on the states to quicken the pace of infrastructure projects to help kickstart the economic recovery, signalling it will focus federal resources on jurisdictions willing to cooperate and shun laggards.

McCormack said the federal government would work with the states and territories “and we expect them to do their fair share of heavy lifting” in the delivery of infrastructure projects.

“Some states are better than others,” he said.

McCormack said he was not claiming the recent underspend was entirely the fault of the states, but he noted the two levels of government had to work together, and acknowledged that Covid-19 and bushfires had “placed stresses and strains on every sector of the economy”.

McCormack said he had spoken with his state and territory counterparts over the past 24 hours and had detected a “positive” response to the funding plans.

He indicated that there would be further announcements and some of the components would include time limits in a bid to ensure speedy delivery.

The breakdown of Monday’s newly announced funding is $2.7bn for New South Wales, $1.3bn for Queensland, $1.1bn in Victoria, $1.1bn in Western Australia, $625m for South Australia, $360m in Tasmania, about $190m for the Northern Territory and $155m for the Australian Capital Territory.

The government said the infrastructure funding would include $560m for the Singleton bypass on the New England Highway in NSW and $528m for the Shepparton and Warrnambool rail line upgrades in Victoria.

Previewing the budget more broadly, McCormack said Tuesday’s economic statement would be “big on jobs, big on infrastructure, backing those things which we know are going to help through the Covid recovery”.

McCormack also urged the Labor party to clarify whether it would support the Coalition’s move to bring forward income tax cuts, saying the government was “not going to tax the bejesus out of” people.

Labor is waiting to see how the government is structuring the tax cuts before locking in a position.

The Morrison government has been signalling for weeks that it is poised to bring forward tax cuts legislated to take effect from 2022 – and possibly also stage three changes due to start in July 2024.

The stage three proposal reduces the tax rate for income between $45,000 and $200,000 to 30 cents in the dollar. Critics have argued fast-tracking the tax cuts would deliver a windfall to high-income earners and overwhelmingly favour men.

The shadow treasurer, Jim Chalmers, on Monday reiterated that the opposition was concerned about the stage three tax cuts because they were the “least responsible, least affordable, least fair, and least likely to be effective because higher income earners aren’t as likely to spend in the economy as workers of more modest means”.

Chalmers said the budget was likely to reveal “new record debt, more than a trillion dollars” – something that clashed with the Coalition’s previous rhetoric about the Rudd and Gillard governments.

“Remember this is the party that said debt a tiny fraction of that was a debt and deficit disaster,” Chalmers said. “Now they say that debt higher than a trillion dollars is manageable. It’s for them to explain that inconsistency. It’s for them to explain that hypocrisy.”

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