News National Budget takes shape

Budget takes shape

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As the treasurer polishes his budget speech and picks a tie, most of Tuesday night’s news has already been leaked or announced. In fact, the Abbott government’s first budget started taking shape long before the Coalition was elected to power in September last year.

One of its key themes was first introduced to the public in April 2012 when the then shadow treasurer Joe Hockey gave a speech in London titled The End of The Age of Entitlement.

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Mr Hockey argued that government handouts in western nations were “undermining our ability to ensure democracy, fair representation and economic sustainability for future generations”. He said it was time for governments “to make some very hard and unpopular decisions to wind back the involvement of the state in peoples lives”.

Joe Hockey, Tony Abbott
The Prime Minister (L) and Treasurer in conference. Photo: AAP

Despite being delivered half a world away, the speech made headlines at home. While Mr Hockey was saying he would give voters much, much less, his leader was promising a maternity leave scheme which would give mums much, much more. The contradiction remains in place today, despite the PM recently clipping a bit off the top of his plan.

But Tuesday’s budget has a second theme which predates Mr Hockey’s speech – the so-called “budget crisis”. Since the 2010 election, the Coalition has argued that the Rudd and Gillard governments mismanaged the nation’s finances, with budget deficits projected as far as Treasury economists could see.

By the time the Mid-Year Economic and Fiscal Outlook (MYEFO) was released just before Christmas, the “crisis” had become a “disaster” and then became an “emergency”, according to Mr Abbott. 

This has been a touchstone for any government MP talking about the budget, particularly the treasurer, who says Tuesday night is a “call arms for the nation”.

The ALP strongly disagrees. Opposition leader Bill Shorten says Mr Abbott’s “scare campaign on debt needs to be called for what it is – a complete falsehood and a deliberate campaign to talk down our economy”. But if the leaks and pre-budget announcements are any guide, the new government looks set to deliver a budget roughly in line with its promises.

While many aspects of this year’s budget remain a mystery, the list of things we already know is growing.

Ruled in

 Deficit levy / tax

Cabinet has reportedly agreed to including a deficit levy in the budget (which Labor is describing as a tax). Assistant Treasurer Matthias Cormann told a news conference on May 7 that “there is a need for an immediate special effort”, which has been interpreted as shorthand for the levy.

There are reports that the levy will only affect those earning more than $150,000 a year, up from $80,000 when the idea was first leaked.

Raise the pension age to 70

Mr Hockey wants to raise the pension entitlement age to 70, and for the measures to come into force in 2035.

 Deregulation of university fees

Education Minister Christopher Pyne made his case for deregulating university fees to a private audience at Monash University on 30 April. This would force universities to compete on price. There is also currently a ceiling on these fees, the removal of which may result in an increase for some courses.

Apart from this announcement, the budget is also expected to include the same funding and HECS loans for private colleges and TAFEs as is made available to university.

 Welfare cuts

Mr Abbott told the Sydney Institute on 29 April that some welfare payments will be changed in three years’ time, whereas as other “could be adjusted now”. It is widely believed that the payments in the crosshairs for this budget are Family Tax Benefit A and B, which are expected to be combined to have a lower income cap of $100,000.

Paid Parental Leave Scheme

Mr Abbott is pushing ahead with this controversial scheme, but the income threshold for the top payments would be cut from $150,000 to $100,000.

“Delivering on the Government’s Paid Parental Leave scheme will help women to remain engaged with their employer, lift female workforce participation, and it will provide a boost to their retirement savings,” Mr Hockey said in a recent statement.

 Fuel excise increase

The excise has been frozen at 38.1 cents per litre since 2001. A return of indexation means that the rate would rise with inflation. On Sunday it was revealed the fuel excise will increase with inflation twice a year, with additional revenue being spent on roads.

Axing the Australia Network

Cabinet has signed off on the decision to abolish The Australia Network, which broadcasts Australian television programmes to the Asian region.

Closure of detention centres

The government has announced that the closure of six immigration detention centres will be included in the budget. These closures, on the mainland and at Christmas Island, are estimated by the government to save $280 million.

Work tests for young people on welfare

On Saturday, Social Services Minister Kevin Andrews said up to 20,000 young Australians receiving the disability support pension will be assessed for their capacity to work.

“The message out of this is simply this. The days of easy welfare for young people are over,” said Mr Andrews.

Ruled out

 Age pension

In a speech to the Sydney Institute on April 29, Mr Abbott made it clear that the age pension will not be changed during this term – but it is firmly on the agenda. Significant changes to the payment, including an increased eligibility age of 70 by 2035, will be taken to the next election, Mr Abbott said.

 Personal tax cuts

Mr Abbott has said that personal tax cuts are “much more likely in four or five years’ time”.

 Changes to the GST

This is a political hot potato and like big changes to industrial relations, changes to the tax system might be on the negotiating table closer to the next election. Mr Hockey says the Coalition will take a “tax agenda” to the next election in 2016.

We’ll know on budget night

? GP co-payment

Health Minister Peter Dutton has not taken a back step on the GP co-payment, but he and other frontbenchers are yet to confirm it.

The Commission of Audit recommended a $15 fee for those who visit a general practitioner in order to discourage unnecessary consultations, but expectations are that it will come in between $6 to $7.50.

Media reports in the past four weeks have relied on a “senior government source” who reportedly told News Limited that this would be a budgetary measure.

—with Thomas Hunter

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