Labor will release its full costings document today, in a ritual that obsesses the governing class and has little interest for the majority of voters, even those engaged with politics and public policy.

The great costings game was formalised by the Howard government, when it established a mechanism for the Department of Finance and Treasury to receive and cost policies during the caretaker period. Instead of providing greater transparency and end the ritual of incoming governments declaring the fiscal situation was much worse than they’d been told so they would have to break their promises, the primary aim was to embarrass oppositions, which lacked the public service resources to fully cost complex policies. That was demonstrated when the Coalition found themselves in opposition and promptly refused to submit their policies for costing, instead claiming an accounting firm had “audited” them — a claim later shown to be nonsense

Since then, the Parliamentary Budget Office (PBO) has been established to independently and confidentially cost policies, and the Charter of Budget Honesty process has fallen into disuse. The only costing of opposition policies now done by the government comes from demands from ministers’ offices for parodies of opposition announcements to be assessed, the results of which are then handed to News Corp journalists for hatchet jobs. The continuing role of Treasury officials in this process — despite the hand-on-heart declarations that they do not “cost opposition policies” — is another example of the ongoing degradation of the Australian Public Service.

The deeper problem with this political game is that it all bears little relationship to what ends up happening. The government itself can’t accurately forecast revenue one year ahead, let alone across the full forward estimates or a decade. In the 2015-16 budget, the government confidently predicted it would receive $398 billion in receipts in 2015-16. It ended up getting $387 billion. In the 2017-18 budget, it predicted $433 billion, and ended up getting $446 billion. Extend the timeframe across the forwards estimates, and the error margin gets worse. The Abbott government’s first budget — accompanied by declarations that they had drawn “a line in the sand” on Labor’s poor revenue forecasts — forecast $468 billion in receipts for 2017-18. The most recent budget showed receipts of $447 billion for that year. 

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What Labor’s costings will confirm, however, is the extent to which it has embraced a more conservative and risk-averse fiscal policy. Its closure of a number of tax practices exploited by the wealthy and by corporations, and its refusal to follow the government in handing tax cuts to high-income earners, will generate substantial additional tax revenue. The bulk of this additional revenue is funding Labor’s higher spending in areas like health and childcare.

The traditional costings game was designed to enable governments to declare that opposition policies were unfunded or had “black holes” because of accounting errors or missed nuances of design that only Treasury could identify. Labor has entirely stymied this line of attack — the government’s focus has been on the fact that Labor’s policies are, in effect, too funded, by tax increases. Indeed, if anything, the black hole lurks on the government side, with its commitment to tax cuts for high-income earners requiring $40 billion worth of spending cuts, which have not been spelt out during the campaign.

The remainder of the additional revenue raised by Labor’s tax policies will be directed toward higher surpluses than those projected by the Coalition, which won’t even reach 1% of GDP across the forwards. This gives Labor bragging rights among the fiscal disciplinarians (though the latter tend to believe the only way to surplus is to cut welfare, health and education spending). But far more important is that Labor under Chris Bowen and finance shadow Jim Chalmers are signalling that tax cuts only come after the restoration of Australia’s budget position, and that that restoration should be primarily funded by high-income earners and corporations, not by low- and middle-income earners.

Higher surpluses mean greater fiscal firepower to deal with the next economic downturn, which is likely to happen in a much lower interest rate environment than the global financial crisis, meaning central banks can play far less of a protective role than they did back then. If the Reserve Bank ends up cutting rates twice this year, for example, it’s quite possible it could enter the next downturn with interest rates at just 1%, compared to 7.25% when it made its first cut of the crisis in 2008. It’s thus crucial that the federal government have plenty of ammunition at the ready in fiscal policy. It’s the unsexy, risk-averse and boringly sensible fiscal play, and Labor is absolutely right to embrace it. We may never need the insurance it provides, but hundreds of thousands of workers could pay with their jobs if we don’t have it.