The mixed messages of Hockey’s budget
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Back in 2010, when Tony Abbott first rolled out his gold-plated paid parental leave policy, critics claimed he had only hatched the scheme because he had a problem with women.
Five years later, he really does.
One of the lessons the government is learning in the wake of its second budget is that it’s not just what you announce that can cause you grief with voters, but also how you pitch it. It is not unheard of for ministerial gaffes to derail budget announcements. Remember Amanda Vanstone, as the Coalition’s family and community services minister in 2003, dismissing a tax cut her government had just unveiled as “a sandwich and a milkshake”?
What is extraordinary this time is that the dubious sales pitch of a dramatic revision of paid parental leave rules was, apparently, deliberate.
The attack on “double-dipping” mothers, championed by Social Services Minister Scott Morrison, has the whiff of something workshopped in the all-male Expenditure Review Committee.
It was just one of several confusing messages in a “have a go” budget that sought to rev up a slowing economy and shore up the Coalition’s voter base but failed to meet the government’s promises to spend less, tax less and reduce the deficit.
Overall, it’s a budget that may be justifiable in this economic climate but risks leaving voters perplexed about what it is the Coalition stands for.
Last year 72-year-old Margaret from Langwarrin in Victoria was the oracle of Joe Hockey’s budget, urging him to embrace austerity and see through tough reforms for the sake of the nation.
The treasurer proudly revealed her influence at his post-budget National Press Club speech in 2014, saying he had been inspired by the self-funded retiree when he called her for a chat after she wrote to him.
“Her message to me throughout the entire development process of the budget was: ‘be brave, be true, remember that we have to forge our destiny’,” Hockey said.
At the same event this year, the treasurer was not so keen to talk about Margaret, beyond confessing that she was a “serial letter writer” who still sent him lengthy epistles.
“They’re all full of good advice,” he said, in a rueful tone that suggested he wasn’t inclined to heed it.
If Margaret is a true fiscal conservative and, as such, a fan of last year’s slash-and-burn budget, then she may be less impressed with its sequel, which abandons some of the structural spending cuts that had stalled in the senate while splurging money on small businesses, farmers and families.
Responding to a slowing economy and its own political fortunes, the government has now switched from a mantra about saving to pay down debt to one of spending to go for growth.
The government’s dust-up with mothers started even before the budget, ironically on Mother’s Day.
Having ditched Abbott’s plans for a generous paid parental leave (PPL) scheme in February, the government revealed it would also scale back the existing modest regime by stripping people of government-funded leave, worth $11,500, if contributions from their employer exceed it.
The government payment, equivalent to 18 weeks at the minimum wage, would become a “safety net”.
This is a big departure from the current scheme, recommended by the Productivity Commission and introduced by Labor in 2011, which considers the government payment as a foundation that employers can top up with complementary contributions.
But instead of being pitched as a regrettable but necessary savings measure that would underwrite considerable improvements in childcare, the government’s budget measure was sold on a question of “fairness” and, by extension, the unfairness of the existing regime.
The government is not only proposing to slash payments from July 2016, it has also implied that those parents who legitimately access both government and employer schemes – overwhelmingly mothers – are rorters and fraudsters.
It fell to Hockey to lead the charge against “double dipping”. He agreed with Laurie Oakes last Sunday when the veteran journalist asked him if it was “basically fraud”.
Morrison then told Sky News on Monday: “We are getting rid of what is an inequity and frankly in many cases, I think, is a rort.”
Within days, the prime minister was insisting his ministers had never called it fraud but Morrison persisted on Wednesday with the pejorative language of “double dipping”, which is also used throughout the budget papers.
By Thursday, Morrison was backing off. “I was talking about the scheme,” he said. “I wasn’t talking about the people using the scheme.”
It has left Liberal MPs, who are thrilled by other popular budget measures, perplexed about the government’s messaging and hoping the brouhaha will blow over. “I think it was inadvertent,” says one male Liberal MP. “But it was indicative of a lack of empathy and an absence of female representation in the decision making.”
Labor sought to capitalise on it, raising cases of low-paid nurses, police and retail workers who would lose out. “I could have never have believed that this government could be so cynical, so ignorant – and it is ignorance – to say somehow it is a rort,” said Opposition Leader Bill Shorten.
It is a questionable tactic for the government to argue it is inequitable for some people to receive extra employer-sponsored parental leave, when Abbott had spent years defending a scheme that gave more public funding to those on higher incomes. But even accepting Abbott’s argument that the government has listened to parents who want more money for childcare instead, attacking working mothers is still a bizarre political strategy.
In the glossy brochures accompanying the budget, the “double-dipping” new mothers were grouped in with tax-dodging multinationals and welfare rorters as targets for a dose of fairness – also known as an “integrity measure” – that would, incidentally, also generate savings.
As the government reached for a narrative of “fairness”, it was almost as if it felt it needed to identify groups it could depict as “unfair” to establish its claims by comparison. Otherwise, the yardstick of “unfairness” might have been last year’s budget.
After Labor went on the attack over PPL in the first post-budget question time, Liberal MP Arthur Sinodinos conceded the sales job on this particular savings measure could have been better.
“It’s not a good look to be having a go at the young mothers or new mothers of Australia,” he told Sky News. “I think some of the language has been a bit unfortunate. We could be a bit more empathetic.”
Communications Minister Malcolm Turnbull endorsed the move to divert funds from paid parental leave to childcare but refrained from describing mothers as “double dippers”.
“I have the greatest of respect for all mothers, and people are entitled to apply for – receive – whatever benefits they are lawfully entitled to,” he said on Thursday. “I’m not going to get into any of that rhetoric.”
The bid to further slash PPL may also be a false economy, as employers were quick to warn that the projected savings of almost $1 billion could prove ambitious.
Australian Chamber of Commerce and Industry CEO Kate Carnell says companies would ditch their schemes so employees could access the government payments and could instead offer other incentives, such as return-to-work bonuses, reducing the government’s projected savings.
The government argues its main target is public-sector employees, who benefit from union-negotiated schemes that are often generous and come from government coffers. But thousands of women in the private sector, and their families, would also be affected.
Forty-seven per cent of eligible new mothers would lose out under the change, with 34,000 expected to lose the government payment entirely because their existing employer schemes exceed it and another 45,000 receiving only a partial payment from the government, meaning their employer contributions would count towards a total of $11,500, rather than complementing the government’s scheme. Another 90,000 working mothers, who receive no employer PPL, would be unaffected.
While financial services firms and some bureaucracies have the most generous schemes, the Productivity Commission reported that even retailers and fast-food chains, such as Woolworths, Myer and McDonald’s, offer up to eight weeks’ pay.
Their low-paid staff stand to lose thousands of dollars.
The net effect is that the goal, long-championed by Abbott, of new mothers spending at least six months at home breastfeeding their baby, will become less achievable for many.
The extent of the dramatic about-face on paid parental leave was highlighted by a claim buried in the budget papers: ditching Abbott’s “signature” six-month wage replacement scheme would yield the budget’s biggest saving, $10.4 billion over five years.
Previously, the government had hidden the cost of the scheme in the contingency reserve and even claimed there could be savings from implementing it. Without booking the
$10 billion savings from ditching it now, its claim to be on a “credible path to surplus” would have been laughable.
This policy reversal on paid parental leave and the ham-fisted attempt to justify it blighted the release of a deftly constructed $3.5 billion childcare package that would, from 2017, simplify complex subsidies and increase support to most families, except stay-at-home mothers.
This package is broadly supported across the parliament but may never eventuate if it is tied to family tax benefits cuts – which are opposed by Labor and the Greens – and to the PPL changes.
There are also concerns in parts of the Coalition, particularly the Nationals, that the focus on childcare comes at the expense of single-income families, who stand to lose family tax benefits as well as childcare subsidies.
The budget maintains spending at 25.9 per cent of gross domestic product next year, a level that is higher than was ever the case in the Howard government and is comparable to the years when Labor was trying to stimulate the economy and buffer it from the global financial crisis.
Last year’s stick has shrunk and, in some places, been replaced with a carrot. The spectre of a “debt and deficit disaster” that was invoked to justify harsh cuts has been replaced with a spendathon, gobbling up nearly all of the budget’s new savings and leaving a projected deficit for 2015-16 of $35.1 billion.
The elusive balanced budget has been pushed back another year, to 2019-20, and achieving it will depend on favourable global conditions and a pick-up in economic growth. On this, Hockey urges us to “look at the glass half full”, predicting growing export opportunities to China and India, underpinned by new free trade deals.
This, and Hockey’s expressions of “absolute confidence” in the economic forecasts, were reminiscent of the scene in The Sound of Music when Maria, trying to sing up some courage, belts out: “I have confidence in confidence alone. Besides which you can see, I have confidence in me!”
“Australia is getting better,” an upbeat Hockey declared on Wednesday. “The economy is getting stronger, the budget is going to be better, there are going to be more jobs, there’s going to be more exports, greater prosperity, asset values are going up … It is a positive story and now, as I’ve said last night, is a time for Australians to have a go. To have a go, as the PM said, for a fair go, have a go.”
The “have a go” budget of 2015 offers tax cuts and incentives for small business and sole traders that the prime minister said would appeal to a group he dubbed “Tony’s tradies”.
In a budget that generated much of its revenue through bracket creep, when rising incomes push people into higher tax brackets, the government did manage to cut the company tax rate for small businesses by 1.5 per cent and offer equivalent deductions to sole traders.
The offer of instant 100 per cent tax writeoffs on multiple purchases of items up to $20,000, such as photocopiers, cars, fridges or ride-on mowers, saw shares in JB Hi-Fi and Harvey Norman surge.
This deduction started budget night and will remain available to June 2017, at a projected cost of $1.8 billion. Spruiking the measure, Hockey said it would be a fantastic result if it were so popular that it exceeded that cost.
Unlike the parental leave changes, the $5.5 billion small business package has Labor’s support. Indeed, the asset depreciation measure is like a bigger, bolder version of a scheme that Labor used to stimulate the economy during the GFC but which was opposed by the Coalition.
If there was one central message to Hockey’s budget night speech on Tuesday, it was that the government, despite challenges including plummeting iron ore prices, was sticking to its plan for budget repair. “I say to you, the economic plan laid down by this government more than a year ago is in place and it is helping us to deal with these challenges,” said Hockey.
Yet the budget papers sent a more conflicted message, confirming the government had dumped cuts to pension indexation and the GP co-payment, but preserved plans to cut $80 billion over a decade for state governments to run schools and hospitals and to charge more for medicines.
The “earn or learn” measure that stood out last year as the harshest in a tough budget has been significantly softened this year, in a change that costs the government $1.8 billion over five years. No longer would jobless under-30s need to wait six months for the dole. Instead, a waiting period of one month will apply to under-25s and the government will spend $330 million to help them look for work, with extra wage subsidies and unpaid work experience places.
St Vincent de Paul Society CEO John Falzon was unconvinced. “The drop from six months to one month for the young unemployed is an admission of the cruelty of this measure, without actually abandoning it,” he said.
The government’s reluctance to offend its voter base was evident in its contortions to keep older people happy. It dumped unpopular cuts to pension indexation but has agreed that, as a savings measure, some 91,000 wealthy retirees, who own their own home and substantial nest eggs, would lose their part pensions. They still keep their Seniors Health Card, offering cheaper medicines and electricity bills.
Generous superannuation tax breaks, which have been the target of policy proposals from both Labor and the Greens, will not be touched.
Some cuts were buried deep in budget papers, or not detailed there at all. The breakdown in foreign aid spending is often profiled in a ministerial statement released with the budget papers. Not so this year.
A separate statement released without fanfare that night revealed which countries had taken the biggest hit from the $1 billion cuts that were announced late last year, with a 40 per cent reduction in aid to Indonesia – down to about $360 million next year – and an average of more than 70 per cent cuts to funds for African countries.
Cambodia and Nauru, which are supporting Australia in enforcing its tough asylum-seeker policy, are among countries that have been spared cuts in aid funds.
Farmers were winners, securing drought assistance and tax deductions, and the government has made a down payment on its plans to develop northern Australia, borrowing funds to offer concessional loans from a $5 billion pool for major infrastructure projects.
National security was, unsurprisingly, also a focus, attracting $1.2 billion in new spending, that included $131 million to cover half the cost of telcos storing customers’ metadata and $23 million for spy agencies to oversee this data retention.
Australian of the Year Rosie Batty lamented that hundreds of millions of dollars were earmarked for combating foreign terrorism, while a campaign against domestic violence received just $17 million, to be matched by the states.
“Let’s start talking about family terrorism,” she said. “Maybe then, with that context and that kind of language we will start to get a real sense of urgency.”
Shorten used his budget-in-reply speech on Thursday night to criticise the government for continuing to pursue cuts from last year’s budget.
Claiming he was not just an obstructionist, Shorten also offered to work with the Coalition towards an even more generous 5 per cent tax cut for small business, but outlined no new savings options.
“This budget is not an economic piece of paper,” said Shorten. “It is just a political piece of paper.”
Across the parliament, the budget’s bid to shore up Coalition voters has fuelled speculation that an early election is likely if Abbott wants to avoid another confrontation over his leadership.
For one thing, there’s not much scope left for handouts in a pre-election budget next year.
But Abbott will have his work cut out for him to persuade those double-dipping mothers, who may have been wowed by his parental leave offerings last time, to support the Coalition again.
This article was first published in the print edition of The Saturday Paper on May 16, 2015 as "Joe’s mother of contention". Subscribe here.