Opinion

Paul Bongiorno
Disconnect on Joe Hockey’s budget rhetoric

Remember Comical Ali? He was Saddam Hussein’s information minister who in April 2003 told the world’s TV news networks that there were no American tanks in Baghdad. Behind him, US armoured vehicles could be seen rumbling past. Treasurer Joe Hockey this week took on a similar mien.

The ABC’s Chris Uhlmann asked Hockey if he was about to beat a budget retreat. “No, the story is wrong,” Hockey replied. “The bottom line is: if you can win a battle, you take that victory, but you never give up on the war.” The finance minister was more upfront. Measures that are in doubt will be shelved according to their timeline. “The government,” Mathias Cormann said, “understands it hasn’t got a majority in the senate.”

So the Medicare co-payment – the so-called doctors’ tax – will be brought into the parliament closer to its intended start-up date of July 2015. A similar retreat will be beaten for other contentious “nasties” such as the reintroduction of fuel excise indexation. But, as the Americans say, the government is whistling Dixie. Its last best hope of getting anywhere near its hoped-for savings was torpedoed by Clive Palmer.

The leader of the Palmer United Party bloc is confident those four senators will stick together, joining Labor and the Greens in shooting down the government’s proposal to deny the dole to under-30s for six months. Nor will they budge on the co-payment or indexing the pension to the consumer price index rather than average male weekly earnings. That should blow a $20 billion hole in the budget bottom line.

Palmer is unapologetic: “We see that Australia has only got 12 per cent of its GDP (gross domestic product) as debt, as you know the OECD (average) is 73 per cent. We’ve got a triple A credit rating. We simply don’t need to be attacking the least fortunate people in our society.” The billionaire politician wasn’t the only player undermining the credibility and fairness of the budget strategy.

The senate’s all-party human rights committee, chaired by a Liberal, unanimously found that the proposed tough medicine for the young unemployed was in breach of Australia’s United Nations Charter obligations. The committee reached its conclusion after it rejected submissions from the social services minister, Kevin Andrews.

The prime minister’s tin ear to these sensibilities came out in question time bravado. “I am all in favour of rights,” he said. “I am also in favour of the rights of taxpayers not to have their money abused. I am in favour of the rights of taxpayers to say that young people should be doing the right thing by themselves and by our society.”

He relied on Labor’s former failed leader Mark Latham for support. Latham, the prime minister said, was also in favour of “earning or learning” for the unemployed. Never mind that Latham’s prescriptions were rejected in the 2004 federal election. His policy in this area certainly was not as punitive. There was no proposal to leave the unemployed without support by withholding the dole. 

Former Liberal leader and economist John Hewson says the budget lacks coherent argument. It certainly does not spread the burden fairly. He recently wrote: “The disposable income of lower-income earners was cut by some 12 to 15 per cent, while the income of those at the top was cut by less than 1 per cent.”

Dramatically reinforcing that point is a 90-page report documenting how almost one-third of our largest companies are paying less than 10 cents in the dollar in corporate tax. The report, “Who Pays for Our Common Wealth?” was produced by the Tax Justice Network and the United Voice union. It burst through the huge distraction of the latest war on terror and the endless discussion on when our military will actually be mobilised in Iraq.

Veteran Liberal senator Bill Heffernan is not surprised by the report’s findings. He says that corporate tax avoidance and the repatriation of profits overseas is the greatest financial challenge facing Australia: “If it’s not addressed, it could redefine sovereignty in the Western world.” It would also threaten the government’s ability to provide the services demanded by the community. The evidence is that is already happening.

Multinational companies such as Rupert Murdoch’s 21st Century Fox spent $US19 million in tax advice from Ernst and Young to utilise tax havens and pay 1 per cent tax. The manipulation by these corporations is estimated to be costing the budget $8 billion a year. More than enough to save the Hockey bottom line.

But here’s the rub. Another report by the inspector-general of taxation has raised concerns that the Australian Taxation Office is losing the ability to catch these high-flying tax avoiders. And it’s completely due to an exodus of experienced staff. Fairfax papers reported many specialists in tracking international profits have now taken lucrative jobs advising some of Australia’s biggest companies how to minimise their tax. The irony is they were among the 3000 ATO staff on the chopping block thanks to the budget.

The government’s holy grail of returning the budget to surplus has also been further compromised by Tony Abbott’s pink batts crusade. Not content with a $20 million royal commission, he has now appointed the 10th inquiry into Rudd Labor’s $2.8 billion home insulation debacle. But wait, there’s more: he will pay compensation to the four families who lost their sons working for unscrupulous bosses in the scheme and up to 250 businesses that may have suffered losses.

The bill will run into millions, all on borrowed money that the government was unwilling to spend on continuing the Schoolkids Bonus. It also sets an expensive precedent for any winding back of the renewable energy target as proposed by its hired assassin, Dick Warburton. 

Not to be underestimated in undermining the Hockey vision of a budget in the black is the unforeseen cost of the new terror threat. This despite Foreign Minister Julie Bishop’s claims the Liberals have long been concerned about the potential for violent extremism to raise its ugly head and accusing Labor in government of thinking the threat was over. Yet the Liberals set about short-changing security agencies and programs by $630 million in their first budget. They so squeezed Parliament House for funds earlier in the year that security staff were culled and screening at the entrances loosened. 

The “cheap political pointscoring”, as Bill Shorten called it, doesn’t come cheaply and the treasurer has flagged more cuts. “There have been a number of initiatives [since the budget] already announced which are very important,” Hockey said, “such as increased funding for security. We need to identify the savings that help to pay for those.” Top of the list is finding the $500 million a year for our Middle East deployment. And that may not be all, one member of cabinet’s National Security Committee frankly admits: “We don’t know how big this thing is going to get.”

But Hockey refuses to say the midyear review in December will amount to a mini-budget. What it will be is a retreat from the planned $30 billion deficit originally forecast, unless he gets very lucky with revenue. That’s unlikely with lower commodity prices and Chinese demand for coal falling, which means he will have to wield a very big axe again or raise taxes. 

Labor has no doubts the cuts will be savage. “If you thought this budget was a shocker, you ain’t seen nothing yet,” Shorten proclaimed. “This budget is in chaos, it is in disarray. It’s because this budget is fundamentally unfair and it’s bad policy. Hurting people is not the answer.”

Labor is already counting a victory of sorts. The government has had to come cap in hand after it failed to get enough crossbench support for its plans to hack at the pension, unemployment benefits and family payments. The opposition played hardball, forcing the Coalition to split the bills itself. Jenny Macklin refused point-blank to move amendments and was surprised it took social services minister Andrews so long to get the message. “Sheer incompetence,” Macklin said.

Life is certainly not going to get any easier for the treasurer. Whatever is left undone this year will only make next year’s budget so much harder, especially if Abbott continues to defy gravity: “We’re not walking away from anything. We support all the budget measures.”

The government insists it will deal with the unravelling situation calmly, methodically and competently. Comical Ali couldn’t have put it better.

This article was first published in the print edition of The Saturday Paper on Oct 4, 2014 as "Nothing to see here". Subscribe here.

Paul Bongiorno
is a columnist for The Saturday Paper and a regular commentator on ABC Radio National Breakfast.

Continue reading your one free article for the week