As Finance Minister, Katy Gallagher plays a pivotal role in managing the expenditure side of Australia’s federal budget. However, with government spending set to reach a 40-year high, many are questioning whether she is prepared to enforce the discipline needed to rein in this growth.
While Prime Minister Anthony Albanese and Treasurer Jim Chalmers have faced increasing scrutiny for presiding over the largest spending increase for a first-term government since Gough Whitlam’s era in the 1970s, Gallagher has largely avoided the same level of attention. Yet, as the minister in charge of federal spending, Gallagher’s role cannot be understated.
The Albanese government’s fiscal approach has notably lacked the strict spending rules employed by past administrations. Economists and political observers have long pointed to the need for spending discipline, particularly in the face of high inflation and a period of relative political capital that could have been used to make difficult financial decisions. Yet, federal spending is forecast to soar to 27% of GDP next year, excluding the pandemic years, marking a level not seen since the global financial crisis in 2008.
Labor has touted its achievements in managing the National Disability Insurance Scheme (NDIS), claiming $52 billion in savings. However, the NDIS budget is still growing at a rate of 10% this year—down from an alarming 20% in the previous year. Even the targeted 8% growth is considered unsustainable by many experts.
Gallagher’s portfolio extends beyond just the federal budget to managing the government’s “off-budget” funds, which will cost taxpayers an additional $103.9 billion over the next five years. This includes significant commitments such as $21 billion for the Clean Energy Finance Corporation, $12 billion for Housing Australia, and $12 billion for the National Reconstruction Fund. This increasing debt-funded expenditure raises critical questions about whether Gallagher can reign in spending or whether she has become complicit in a broader trend of unchecked fiscal growth.
For Gallagher, the job requires more than just managing numbers—it demands the ability to challenge colleagues and impose tough financial discipline. This is especially challenging in the current political environment, where Prime Minister Albanese, a self-styled populist, and Treasurer Chalmers, focused on maintaining popularity, have shown little appetite for austerity. Gallagher, a senator from the Australian Capital Territory (ACT) and former ACT treasurer, is deeply embedded in a region where public service growth is the lifeblood of the local economy. With Canberra’s public service expanding by over 41,000 positions since the Albanese government took office, cutting back on government spending or public sector jobs is politically perilous.
Polling data reflects this regional reality: only 29% of Canberrans support cutting government spending, compared to 51-62% in other states. Despite the rhetoric of fiscal restraint, the federal government has yet to implement any significant cuts that would risk alienating voters, particularly within the ACT, where Labor dominates politically. In fact, there have been no high-profile cuts under the current government to rival the middle-class welfare cuts that former treasurer Wayne Swan and finance minister Lindsay Tanner made in the past. Instead, Labor has drawn parallels between the proposed cuts to the public service by opposition leader Peter Dutton and the notorious spending cuts of figures like Elon Musk during Donald Trump’s administration.
Gallagher’s links to the public sector, including her past role as an organiser for the Community and Public Sector Union (CPSU), make her less inclined to pursue the kind of significant cuts that might limit government growth. Her relationship with the CPSU—and her vocal opposition to Dutton’s proposed public service reductions—reinforces her stance. Additionally, her policies, such as embedding work-from-home rights for public servants in enterprise agreements, underscore her alignment with the growing public sector and its voters.
Another complicating factor for Gallagher is the increasing influence of independent Senator David Pocock, who represents a threat to Labor’s hold on power in the ACT. This political dynamic further encourages Gallagher to avoid tough decisions that might alienate her support base.
In addition to her finance ministerial duties, Gallagher also oversees the public service, government services, and women’s affairs. She sits on the government’s Expenditure Review Committee, which plays a crucial role in shaping budgetary decisions. Furthermore, she has demonstrated considerable skill in managing legislative business in the Senate, often facilitating the passage of legislation that increases government spending.
Historically, the role of finance minister has been a critical one for controlling government expenditures. Former Labor finance minister Peter Walsh, in tandem with Treasurer Paul Keating, famously reduced federal spending from 27.6% of GDP in 1984-85 to 22.9% by 1989-90, in real terms saving around $130 billion annually. In contrast, Gallagher’s claimed savings of $95 billion over six years have been offset by rising government expenditures elsewhere.
Labor’s fiscal philosophy today appears starkly different from that of UK Labour leader Sir Keir Starmer, who has called for “fundamental reform” of the British state, emphasizing a need for a smaller, more efficient government. Starmer’s critiques of government inefficiency and overspending contrast sharply with Gallagher’s approach, which has shown little indication of a similar push for fiscal reform.
In sum, while Katy Gallagher is undeniably a central figure in Australia’s fiscal strategy, the growing concern is whether her approach to spending restraint is tough enough to handle the country’s expanding budget. Without significant cuts or reforms, the question remains: Can she balance the need for effective fiscal management with the political pressures of an ever-growing government?
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