Andrew Leigh

THE ABBOTT-HOCKEY BUDGET AND THE FAIR GO

APPROPRIATIONS DEBATE

HOUSE OF REPRESENTATIVES
26 MAY 2014

Whether you ask parents, pensioners or conservative premiers, it is pretty clear that this budget is deeply unpopular—perhaps the most unpopular budget since polling began. One of the reasons for this is that it breaks so many promises: in it, pledges of no cuts to health, no cuts to education, no cuts to pensions, no cuts to the ABC and no new taxes are smashed like plates at a Greek wedding. Broken too is the pledge not to cut more than 12,000 public servants, a broken promise which falls particularly hard on my electorate, and the promise not to make further cuts to foreign aid: now Australia will see itself doing less vaccination and building fewer sanitary projects—saving fewer lives. It appears that, when Mr Abbott was sermonising for the previous three years about the need for politicians to keep their word, he was referring to everyone but himself.

The other reason that people are angry about this budget is that it does not reduce the deficit. Let us not compare Hockey 2013 with Hockey 2014. Let us make the only fair comparison. As the Charter of Budget Honesty sets out, the fair comparison is with today's budget and the Pre-Election Economic and Fiscal Outlook, independently prepared by the secretaries of Treasury and Finance during the caretaker period. By that comparison, this budget has a higher deficit this year, a higher deficit next year, and a higher deficit across the forwards. The PEFO had us returning to surplus in 2016-17; this budget has us returning to surplus in 2017-18.

The Treasurer's hyperbole about Australia's deficit levels are out of touch with the international reality, where Australia's debt levels are relatively low. But if the Treasurer were to care about the level of Australia's debt and deficits, he does himself no favours by bringing down a budget which increases them.

But the biggest reason that this budget sent shivers through the community is that it fails the fair go test. So many people in my community and other communities around Australia are asking about the budget, 'How will it make my life harder?' A single parent recently contacted me. She has worked hard all her life supporting herself and her two boys and was to be made redundant this year. As the redundancy date loomed closer she did her best to secure another job to guard against unemployment and to avoid disadvantaging her two boys, who rely on her income. But she struggled. 'I went for interview after interview,' she said. No-one was willing to give her a go. 'Our government is much the same,' she reflected. 'They look after those who are capable and successful and they leave the rest behind.

An age pensioner got in touch. She told me about her life of contribution to the nation, her four working children and her six grandchildren. Throughout her life she has done her best, paying her taxes and raising a family, but now she tells me she feels like a burden on society. She said: 'I am one of those pensioners whose sole income is the pension—no superannuation payments, nothing. I feel sad, depressed and scared for my ability to pay my way when all the cuts start.'

And yet this is a budget which, while it takes away from pensioners, gives to those at the top of the distribution. You heard nothing on budget night about the $50,000 for millionaires parental leave scheme. It is a scheme I know the member for Mitchell has commented on in the past, and he has very astutely pointed to the shortcomings in his speech. I certainly do not want to traduce your impartiality, Deputy Speaker, but when he is in the House the member for Mitchell is a brave speaker on the evident flaws in paid parental leave. I commend him for so doing.

While I am quoting members of the other side of the House it is apposite to mention that today was an opportunity for the Minister for Education to quote from an excellent book, if I do say so: Battlers and Billionaires! I am very happy to continue in the vein that the education minister pursued in question time in making very clear that this is a budget for billionaires, not a budget for battlers.

For six years the non-concessional superannuation cap has stayed at $150,000. In this budget it was raised to $180,000. Let's think for a moment about who benefits from the $40 million of new expenditure over the forwards. Who is putting more than $150,000 a year into superannuation? Say you put 15 per cent of your income into superannuation—a relatively high contribution. That would mean you would need to have more than $1 million income every year to benefit from this measure.

So the talk of heavy lifting rings hollow in a budget which puts aside $40 million for people with seven-figure incomes to benefit and spends $50,000 on the most affluent families to have children. We have, of course, some modelling that has been done on that. How good is the modelling, you would have to ask? I do not want to verify the authority of the modelling; let me go directly to the Prime Minister, who said on 17 August 2010 that NATSEM is 'the most reputable and authoritative modelling organisation in Australia.' So what does NATSEM, the Prime Minister's No. 1 modelling firm, say about this budget? The analysis carried out by Ben Phillips shows very clearly the impact on households in the budget. We will go to 2017-18 and the results of the STINMOD model in that year show that, for couples with children, those in the bottom quintile are losing 6.6 per cent of their disposable income—on average nearly a $3,000 annual hit—while those in the top quintile are getting a benefit of 0.3 per cent, or about $500. Let me also go to single parents. Single parents in the bottom quintile are losing 11 per cent of their income—nearly $4,000 a year.

Overall, the budget is clearly redistributive from the bottom to the top. Those in the bottom quintile in 2017-18 are losing 2.2 per cent of their income, and those in the top quintile are gaining 0.2 per cent of their income. So, on average, there is $991 taken away from the bottom quintile and $316 given to the top quintile. What is the context in which this is being done? It is being done at a time in which we have had an unprecedented rise in inequality.

Over the past generation, earnings for the top 10 per cent have risen three times as fast as earnings for the bottom 10 per cent. The top one per cent income share has doubled. The top 0.1 per cent income share has tripled. The richest three Australians, who could fit in the back seat of a limousine, have more wealth than the poorest one million Australians, which is about the population of Adelaide. Yet this is a budget which seems apparently to have been framed in the expectation that inequality in Australia was falling rather than rising. It is the kind of budget you might expect from a Prime Minister of whom Peter Costello once wrote: ‘He used to tell me proudly that he had learned all of his economics at the feet of Bob Santamaria. I was horrified.’

I had the pleasure last week of visiting the youth and family centre in Devonport with Senator Urquhart and speaking to some of the youth workers there. We were speaking about the overall impact of the budget, but one of the measures that concerns them in particular is the impact on twentysomething young people in Tasmania who lose their job and have to wait six months to get unemployment benefits.

There is a deep concern among these youth workers, who had between them decades of experience, that this will lead to an exacerbation of mental illness and to people sleeping rough in their cars if they have them or on the streets if they do not. It could lead people to turn to crime as a way of simply feeding themselves. The philosophy that underpins the six-month waiting time to receive unemployment benefits is the notion that unemployment is a personal failing. It is not the fault of people in the north-west of Tasmania that jobs are scarce in that part of Australia.

The reason that one in 10 people who want a job cannot find one in north-west Tasmania is not that there has been an outpouring of laziness or a lack of willingness to work; it is the structural factors—the decline of the manufacturing and forestry sector in Tasmania, which has led to this situation. To punish Tasmanians for that is cruel and unnecessary in the extreme. Tasmania, having one of the lowest income levels in the country, will be particularly hard hit by this budget.

The burden of the budget will also fall heavily upon National Party electorates, whose incomes are on average lower than the rest of Australia. So it is quite surprising to me that members of the National Party are lining up to support a budget which is hurting their electors.

Of course, as you transfer resources from the poor to the rich, you effectively transfer resources from spenders to savers. We know this because, if we look at the spending rates by quintile, a recent Reserve Bank working paper estimated that low-income families spend all of their income while high income families save a quarter of their income. The effect of moving $10 billion from the bottom quintile to the top quintile is you are going to decrease spending by $2½ billion. That money is going to go into savings, and you would expect to see a hit on retail trade, and that is precisely what we have seen.

A report in the Australian Financial Review last Friday noted that retail sales fell 5.1 per cent in the seven days after the budget, following a 4.6 per cent drop in the week beforehand according to the Australian Retail Index. The ANZ-Roy Morgan consumer confidence indicator recorded a 3.2 per cent fall in the week ending 18 May, taking the decline in the measure to 14 per cent over the past four weeks. That is the most rapid drop in that index since the global financial crisis.

The Westpac-Melbourne Institute consumer confidence survey has dropped to 92.9, which is nearly a three-year low. Confidence has fallen among Labor voters, where the index is a lousy 74.9. I can tell you a secret, Deputy Speaker, retailers do not care whether the money is coming out of the wallets of Labor voters or coalition voters. So, if you tank the consumer confidence of Labor voters, you will hurt the economy.

We have a Treasurer - who is really a shadow Treasurer in drag - trash-talking the economy at every opportunity. It is showing up not just in the retail sales numbers, not just in the two consumer confidence indicators I have mentioned, but also in a survey of the Australian Institute of Company Directors. Fewer than one in three company directors now believes the federal government is having a positive impact on their business decisions and consumer confidence. As it turns out, only 8 per cent expressed support for the government's proposed unfair paid parental leave scheme at last year's election. The member for Mitchell is with 92 per cent of company directors—a better place to be than both the Treasurer and the Prime Minister, who are with just 8 per cent of company directors. The result of this is that we have a government which is not speaking proudly about the economy in the national stage. When the Prime Minister went to Davos he did not speak about the two decades of uninterrupted growth and the bipartisan reforms which have underpinned that. Instead he trash-talked his own nation on the world stage. As political scientist Judith Brett wrote recently, the government is behaving like 'a bunch of winners taking it out on the losers'. She said: 'It all feels a bit like student politics in its short term point scoring, its payback and its intense personal antagonisms.'

The Abbott-Hockey budget is not only breaks promises and fails to address the deficit; it is deeply unfair and, because of that, it is hurting consumer confidence. The impact of this will continue to be felt until the Prime Minister and the Treasurer step out of the role of attacking the economy and step into the role of supporting the economy—recognising that although, in government, they have made Australian debt levels worse, they remain relatively low by international standards. Maybe talking about a budget emergency is the member for North Sydney's way of boosting his numbers in the coalition party room, but it is having a detrimental effect on economic confidence. Unnecessary talk of emergencies is one of the factors that is driving down retail sales and hurting consumer confidence. This government should govern for all Australians, not pursue measures which in effect take from the most vulnerable to give to the most affluent. This is an unfair budget and Australia can do better.