'The days of borrow and spend must come to an end'
Treasurer Joe Hockey has bought down a budget that hits
middle Australia with swingeing cuts and price hikes, while lauding
smaller government and pushing increased responsibilities onto the
Middle income families face tightened and frozen family benefits, a
$7 co-payment when they visit the doctor, a price hike for
pharmaceuticals and higher petrol costs.
Unemployed young people will have to wait longer for welfare and will
be put on the youth allowance, rather than the higher rate Newstart;
people under 35 on the disability support pension will face more
stringent assessment; Family Tax Benefit B will no longer be available
when a family’s youngest child turns six and the income threshold will
be reduced to $100,000.
Hockey told parliament: “The age of entitlement is over. It has to be
replaced, not with an age of austerity, but with an age of
opportunity.” He said the government’s economic action strategy was
about “spending less on consumption and more on investment so we can
keep making decent, compassionate choices in the future”.
The budget presents a major challenge to the states, with the
government refusing to renew three national partnership agreements and
pledging to cut funding indexation rates sharply for schools from 2018
and hospitals from 2017-18 and removing funding guarantees from public
This will leave rapidly growing funding gaps that the states will
have to finance with their modest array of taxes - unless there are
changes to the GST. The budget papers say, “ These measures will achieve
cumulative savings [to the Commonwealth] of over $80 billion by
2024-25.” But this will be at the states' expense.
By far the biggest budget cut will be to foreign aid with the
government abandoning Labor’s commitment to lift Australia’s aid budget
to 0.5% of national income. By 2017-18 this will save $3.5 billion a
The budget estimates the 2013-14 deficit at $49.9 billion, falling to
$29.8 billion in 2014-15. The budget remains in the red throughout the
forward estimates, with a $2.8 billion deficit in 2017-18, but projects a
surplus of “well over 1% of GDP” by 2024-25. This takes into account
the government giving future tax cuts at some unspecified time.
By 2023-24, debt will be nearly $300 billion lower than the $667
billion the government projected six months ago, according to the new
projections. The budget estimates growth for 2014-15 will be 2.5%,
rising in subsequent years to 3% then 3.5%. Unemployment for 2014-15 is
put at 6.25% falling to 5.75% by 2017-18.
The clampdown on welfare is comprehensive, although reforms to the
pension have been delayed until the next parliamentary term, to keep
Tony Abbott’s election promise of no change to pensions. The government
will index pensions, including the age pension and the disability
support pension, to inflation rather than wages – which is the higher
measure – from September 2017. At the same time eligibility thresholds
will be paused for three years. The pension age will be raised to 70 by
Hockey said there needed to be a change in business culture towards
older workers. The government would pay up to $10,000 to a business that
employed an Australian over 50 who had been on unemployment benefits or
the disability pension for six months.
A large number of payments and programs will have their indexation
“paused” for two to three years. These include eligibility thresholds
for transfer payments, thresholds for the Medicare levy surcharge, the
private health insurance rebate and Medicare benefits schedule fees –
except GP services.
As widely foreshadowed, people on incomes of more than $180,000 will
pay a 2% “temporary budget repair levy”. It will run from July 1, 2014
until June 30, 2017 and raise $3.1 billion over the forward estimates.
The levy will affect about 400,000 taxpayers in 2014-15. A person
earning $200,000 will pay $400, while someone on $300,000 will pay
In a major change to higher education, universities will be allowed
to set their own tuition fees from 2016, although for current students
existing arrangements remain until the end of 2020.
Hockey said that Australia should have at least one university in the
top 20 in the world and more in the top 100. The higher education
sector at present was being “held back and could not compete with the
best in the world”.
For the first time, the Commonwealth will provide direct financial
help for all students studying diploma and sub-bachelor degree courses.
While people with HELP debts will have to start paying them back
earlier, one of the budget’s few new spending initiatives allows full
fee paying students to take out government loans with no establishment
“This is a watershed,” the Treasurer said. He described the overall
changes to higher education as “once-in-a-generation” reforms, which
would help build a sector that is “more diverse, more innovative and
more responsive to student needs”.
All the revenue to the government from the new GP co-payment will go
into a new Medical Research Future Fund that would build eventually to
$20 billion. The fund would within six years be the biggest medical
research endowment fund in the world, Hockey said. It would also receive
money from the changes to the pharmaceutical benefits scheme and other
savings in the health budget.
Doctors will get $2 of the $7 co-payment, which starts July 1 next
year. For concessional patients and children, the contribution will be
only for the first ten services each year. From January, pharmaceutical
benefits scheme medicines will cost $5 more, or 80 cents more for those
with health cards.
Infrastructure and defence do well from the budget, with an $11.6
billion infrastructure investment program that will fund extensive road
construction, and $1.5 billion of defence equipment spending brought
Hockey said the government spending would drive a wider
infrastructure push across the continent, that over the longer term was
expected to boost the economy by 1%. “Shovels will start moving within a
matter of months,” he said.
The ABC and SBS will suffer a 1% reduction in their base funding
(saving $43.5 million over four years) and the ABC has lost the
Australia Network (saving $196.8 million over nine years).
In its quest for smaller government more than 70 boards, committees
and councils are being abolished. “A smaller, less interfering
government won’t need as many public service – 16,500 staff will leave
over the next three years,” Hockey said.
Corporate welfare - including apprenticeship funding - has been
trimmed, with the government abolishing a range of industry assistance
programs at a saving of more than $845 million. “We will refocus our
effort on innovation and self reliance,” Hockey said. The promised 1.5%
company tax cut goes ahead but for big businesses it will be wiped out
by a levy to pay for the Prime Minister’s signature paid parental leave
policy, which will have a maximum payout of $50,000.
The reintroduction of petrol price indexation – scrapped by the
Howard government – will raise more than $2 billion over the forward
estimates. Revenue from the fuel indexation will be hypothecated for
The Treasurer said that unless the budget was fixed, “we will leave the next generation a legacy of debt, not of opportunity.
“We must not leave our children worse off. That’s not fair. That is not our way. We are a nation of lifters, not leaners.”