PPL will make a mockery of the budget

It was telling that Joe Hockey chose an event organised by the conservative magazine Spectator Australia to give his “pre-budget lecture” on Wednesday. The speech was purposefully dry, preparing for the release of the Commission of Audit’s report next week and a likely dry budget soon after.

“Get ready for the coalition’s first budget,” the invitation read, “with the age of entitlement well and truly over!” The exclamation point is theirs, but the uppercase lettering in the sentence has been taken out for reasons of taste. “In his final address in the nation’s financial capital before he delivers his first federal budget, how does Joe Hockey plan to rein in the previous Labor government’s big federal deficit?”

There was, of course, much truth in what Hockey had to say – his obsession with a budget surplus notwithstanding. In the next four decades, the proportion of working-age people supporting those over 65 will nearly halve. Pressure on the health system and on pharmaceutical subsidies will grow enormously, as will demand for the age pension. Welfare of various kinds will become an ever larger part of government spending. Already, four in five people over the age of 65 receive either a full or part pension. Under current budgetary measures, this will not reduce. “The problem we have is that the volume of demand for these programs is outstripping the capacity of taxpayers to fund them…” Hockey said. “So the policies must be changed, either now or more dramatically in the future.” 

Hockey correctly diagnoses one of the major structural problems in the Australian economy. Just as troubling as the end of the mining boom is our ageing population. But how this problem is treated is more worrying. We do not yet know the substance of the budget of the Commission of Audit’s report, but we can assume changes will be made to the pension age and to co-payments for doctors’ visits. There is something menacing in the blandness of Hockey’s promise to “encourage moderation in demand for services”. He establishes a strong economic case, but less so his “moral imperative to change course”.

And yet, for the sense Hockey talked, lurking in his speech were the unspoken excesses of this government – most notably Tony Abbott’s paid parental leave scheme. Against a backdrop of fiscal restraint, it is impossible to see this scheme as anything but stubborn ideology. It is the worst of middle-class welfare, and the senate will do well to frustrate its passage. 

Research suggests the scheme would do little to lift female participation in the workforce, especially among the well-paid and well-educated women who would be the beneficiaries of its greatest largesse.

The $3.6 billion this scheme would cost each year, paying full replacement wages for salaries up to $150,000, will be a mockery to every cut in the budget. While Hockey is willing to talk about sensible reform – the possibility of lifting the GST in the next parliament, for instance – he is neutered by his leader’s commitment to this scheme. A scheme, it is worth remembering, announced with no costings and no consultation – unloved by many in and out of the party.

While the aged will be the victims of this budget, those not yet born will be the enemy of its rhetoric.

This article was first published in the print edition of The Saturday Paper on April 26, 2014 as "PPL will make a mockery of the budget".

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