What Joe Hockey is not telling you about the Budget AUGUST 15, 2014 3:57PM JOE Hockey seems to be playing a game of chicken with the electorate, but one expert thinks the electorate should not blink first. The Treasurer is standing by his tough Budget and was yesterday defending his unpopular ‘poor people don’t drive’ comments justifying the fuel tax hike. But chief executive officer of public policy think tank the Grattan Institute, John Daley, said there were other measures that deserved scrutiny including one “outrageous” perk no one was mentioning. “Young Australians should be furious about this,” he said. It has been three months since Mr Hockey handed down his first Budget and he has not had much support for its harsh measures. But he does not seem to be willing to tear it up and or to deliver a mini-budget. While Mr Hockey seems willing to compromise on some of the budget measures, like the $7 GP fee, he has warned that without introducing structural changes, more painful measures could be necessary in the future. “Either we make the decisions now or you end up doing what (Premier) Campbell Newman and (Treasurer) Tim Nicholls have had to do in Queensland, and that is take emergency action in order to address the problem you inherit,” Mr Hockey told reporters. So should we call his bluff? SAYING ‘YES’ TO THE BUDGET Mr Hockey’s budget includes the axing of 16,500 government jobs over three years, a $7 GP fee, $5 prescription fee, reintroducing indexation of the fuel excise, cutbacks in family benefits, university contributions and unemployment benefits for people under 30 years old, increasing the pension age and introducing a three-year debt levy for high income earners. It has been criticised for impacting low income families the most. But Mr Daley, a public policy expert at Grattan, said there were at least three other measures that the government could take that would raise a lot more money than the $7 co-payment and be “a lot fairer too”. These were: eligibility for the aged pension, superannuation tax concessions and negative gearing. Mr Daley said people over 60 years old were essentially able to enjoy a tax-free threshold of almost $55,000 a year because of super tax concessions. This is because they are able to put up to $35,000 of their income (before tax) into super, it will not be taxed and because they are 60 years old they can withdraw this money at any time. This is regardless of whether they were actually retired. They can still be working but they can benefit as long as they are registered as being in the “transition to retirement phase”. They can freely take money out of their super funds and potentially pay no tax on the super fund’s earnings for the rest of their lives. Everyone else pays 15 per cent on super earnings, as well as paying income tax on everything they earn over $18,200. “If you think this is outrageous, then you’re right,” Mr Daley said. “Young Australians should be furious about this.” Even the controversial Commission of Audit suggested this perk should be pulled back but “apparently super is sacred”. Many older people are also enjoying a generous aged pension scheme. “You have to ask, why did the inquiry into welfare in Australia look into disability and unemployment benefits, which are growing at about the same rate as GDP, but explicitly exclude the age pension, which costs much more and is growing at a faster rate?” Mr Daley said. He said unlike someone on the dole, which “no matter which way you cut it, they are definitely doing it tough”, the aged pension was not well targeted. “Some people on the aged pension are doing it tough and some are quite well off,” he said. “You can have a house worth $5 million and other assets of about $1 million and still get a part pension, well someone with $6 million in assets is not doing it tough.” When asked why he thought these benefits were seemingly “sacred cows” he said: “There is a large amount of people over 60 in Australia and they vote, you could say they were disproportionately influential in political parties”. ARE WE THERE YET? While there was some debate over whether Queensland faced a true budget emergency, it definitely had more justification to deal with the issue than the Commonwealth, Mr Daley said. When the Newman Government handed down its horror budget in 2012, the state had lost its triple A credit rating, meaning it would be charged higher interest rates on any money it borrowed. “It wasn’t a Greece style situation, the banks hadn’t stopped lending to them but they were charging them more and more for what they did borrow,” Mr Daley said. Queensland’s debt-to-revenue ratio had risen sharply and it was forecast to peak at 132 per cent in 2013-14. In contrast, Mr Daley said the Commonwealth still had its triple A rating and its debt-to-revenue ratio in 2013-14 was less than half of Queensland’s, about 41 per cent. Mr Daley said in comparison the Commonwealth did not have a debt problem but the federal government’s deficit was an issue. The deficit is how much the government is spending compared to how much revenue it receives each year. At the moment the deficit is 2-3 per cent of gross domestic product (GDP). “This means year in, year out, we are adding to our debt,” Mr Daley said. “And someone will have to pay for it in the future.” Mr Daley said the government was in a similar situation as someone who was overweight, smoking and unfit. “It’s not absolutely vital for them to change their habits this year, or even next year, but if they never change their behaviour then we all know how this ends and it’s not pretty,” he said. To summarise: “It’s not going to be a true emergency in this term of government,” Mr Daley said. “But should we be fixing the budget this term? Absolutely yes, we are spending money and asking our children to pay”. news.au/national/what-joe-hockey-is-not-telling-you-about-the-budget/story-fncynjr2-1227025105949
Posted on: Fri, 15 Aug 2014 08:10:37 +0000
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