Joe Hockey does want to frighten the horses ahead of May 13
If Joe Hockey’s first budget runs into problems, it won’t be for want
of effort to construct a dramatic narrative about pain, personal
responsibility and Australia’s fiscal health.
The Treasurer believes in laying it on thick, whether he’s talking
about the frightening state of the nation’s overall finances or the need
for individuals to carry heavier loads.
It was a “sobering observation” that Australia wasn’t doing as well on repairing its budget as many other developed countries, he told a function hosted by the Spectator.
And to anyone who might gripe about co-payments or other nasties
needed to curb spending there was the stricture: “It is appropriate that
those who use government services should contribute towards their
All treasurers engage in pre-budget massage – usually of the remedial
kind - but Hockey, with his end of the “age of entitlement”
philosophical framework, is going to great lengths. His Wednesday night
pitch was backed by details on projected spending growth from the Audit
Commission’s report, which will be released next Thursday.
British journalist Andrew Neil, interlocutor at the Spectator
function, gave him a bit of curry for exaggerating Australia’s troubles
when one looked at those of other countries.
The question is whether the Australian public will buy the story
about how seriously broken the budget is, requiring drastic actions –
including “winding back some spending that people have come to take for
granted” - before it’s too late.
Take the expected increase (in the long term) of the pension age to
70. Polling by Essential released on Wednesday found 20% approve and 71%
disapprove. Asked at what age people should be able to receive the
pension, 58% favoured the present 65.
This indicates that change will be a big selling challenge, but
doesn’t necessarily suggest it is an impossible one. Labor encountered
much flack when it announced the age would rise to 67 by 2023 but
eventually the issue settled down.
Hockey in his speech dwelt extensively on the burden of the age
pension bill, which is nearly $40 billion – 10% of outlays - rising to
$72 billion by 2023-24 – an average annual growth rate of 6.2%.
He pointed out that four out of five Australians over 65 receive a
full or part pension, and if concessionary card holders are taken into
account, only 14% of older people receive no government payments.
While many pensioners are obviously very needy, a lot of these
recipients are getting help from the government because politicians
(such as John Howard) threw out sweeteners to attract or keep the
support of older voters. With the ageing population the situation is
indeed unsustainable over the long haul.
Also unsustainable, in another way, is the argument Hockey tried to
make for the quarantining of Tony Abbott’s paid parental leave scheme
from the slashing and burning.
Leaving aside the planned national disability insurance scheme (46.2%
projected annual average growth over the coming decade), the area with
the largest estimated average annual growth rate in the period is child
care and paid parental leave (11.5%).
Hockey told his audience the PPL scheme (believed to be considered
extravagant by the Audit Commission) would help women remain engaged
with their employer, lift female workforce participation, and provide a
boost to the women’s retirement savings.
It was also a “huge benefit” for many small and medium sized
businesses which would be able to match the PPL offered by larger
companies and the public service.
Even if it does all the things claimed, which experts believe
unlikely, the introduction of such a scheme (providing wealthier women
up to $75,000 over six months) does not fit the budget narrative of the
need for spending restraint over the medium term.
Hockey always knew this plan was over the top and presumably hates
having to pretend otherwise. He’ll be quietly clapping if and when the
Senate trims it back.
The PPL plan was one of Abbott’s most flamboyant promises and he’s
determined to keep it (to the extent the parliament will let him).
Now he is making another, pre-budget promise that seems, on the face
of it, to defy all that is being signalled in the Hockey story.
“We are going to keep our [election] commitments,” Abbott said again on Wednesday.
There was just a slight wrinkle. Asked if he meant no election
promises would be broken he said: “Now, I’m not going to say, well you
know there was 27 and a half commitments and you know 26 and
three-quarters are going to be kept. We will keep our commitments.
“Now, I’m sure lots of people will argue and say, ‘Well what about
this and what about that?’ We will keep our commitments, because the
point I keep making, if there is one thing that we learnt from the fate
of the former government, you cannot say one thing before an election
and do the opposite immediately afterwards.”
Make of this what you will. Presumably a lot of creative timing in
implementing measures and some redefinitions will have to be employed to
avoid a budget that might get away with being seen as mean but can’t
afford to look tricky as well.