As Treasurer Joe Hockey prepares to hand down his much anticipated inaugural budget tomorrow, many of the ‘big ticket’, and potentially politically damaging items have been slowly released. These changes come on the back of a comprehensive, 1200-page report handed down by Tony Shepherd and the Commission of Audit, which made 86 wide-ranging recommendations to help solve the ‘budget emergency’, including lifting the age of the pension to 70, a $15 payment for GP visits, cutting public sector jobs, a complete restructure of Commonwealth agencies, and the abandonment of Tony Abbott’s signature Paid Parental Leave scheme. Whilst the recommendations will not be adopted in full, many of them form the structural basis of the Government’s first budget which promises to be tough.
The government has done its best to ‘soften the ground’ – including within its own nervous backbench. There has been a lot of focus on its key message that the budget pain will be shared by all Australians, and that all Australians have to do their bit – particularly those 16,000 public servants who will lose their jobs after the slashing of agencies and merging of departments.
Many assets will be privatised with ‘contestability’ introduced across the remaining federal government departments to ensure their projects meet private sector benchmarks.
Tony Abbott’s biggest risk is the introduction of the deeply unpopular ‘temporary deficit levy’, also known as the ‘immediate special effort’, which is being widely heralded as a great big new tax (the very effective signature catch slogan Tony Abbott used against Labor when in opposition). Whilst the Government might argue semantics about whether it is or isn’t a broken promise, this proposal has already been met with indignation from the electorate (and within the Coalition members). It is expected that this tax will affect Australians on the top two tax brackets, with an expected return of $2.5bn per year over the forward estimates.
Outside this controversial ‘debt tax’, the Government is expected to remain committed to the $4bn company tax cut promised at the last election. This is good news for business, with a recent Australian Industry Group survey finding that 70% of businesses surveyed ranked the reduction of company tax as one of their top priorities.
Petrol prices will rise with the scrapping of the 13-year-old fuel excise indexation freeze.
The government’s high profile ‘Operation Sovereign Borders’ campaign to actively discourage asylum seekers arriving on our shores (outside the official system) has been hailed a success with a reduction in numbers – and therefore reducing the enormous spending on detention centres allocated in past budgets.
Added to that, it was announced that ten centres would close, saving $300m. Also announced was a new super agency to look after border control, as well as the abolishment of the family reunion scheme for asylum seekers who arrive ‘irregularly’ by boat. (more details Tuesday night)
Environment & Climate Change
The government will introduce its contentious Direct Action Plan within the Appropriation bills, instead of offering them to the Parliament as their own legislative package. This is all but ensuring the passage of the bills, with $2.55bn to be allocated over the forward estimates for the Emissions reduction fund.
This looks to be the key spending within the Environment portfolio. The peak science body, the CSIRO expects its funding to decrease by 20%, representing a saving of $150m. It is also expected that there will be savings to come from the Department of Environment as it continues to be reorganised by the Coalition – with job losses a certainty.
The big news is the introduction of a $6 co-payment for visits to the local GP, with a capped maximum cost of $72, or 12 visits a year.
The PBS will not be spared from ‘sharing the pain’. Continuing a trend over previous budgets to find savings, the Government will no doubt take a hard leaving very little scope for flexibility within the scheme. This will ensure that the Pharmaceutical industry continues to feel the pain of tightening budgetary measures. Experts predict almost 300 of the country’s 5300 community pharmacies could close over the next two years.
The message from the government has been that the ‘age of entitlement’ is over. The budget will contain a comprehensive welfare reform package focusing on a restructure of the Family Tax Benefit scheme, changes in eligibility criteria for Newstart Allowance, the scrapping of the school kids and income support bonus, and the tightening of the rules surrounding the disability pension.
The government seems set on embarking on big reforms in University and Tertiary Education, with the deregulation of university fees. Education Minister Christopher Pyne, has given his support to the HECS system, also stating that Universities that raise their fees would need to offer scholarships for disadvantaged and poor students, which the Government hopes will lead to more philanthropic contributions (meaning more private investment in the University sector).
The research community will be happy with the continuation of the National Collaborative Research Infrastructure Scheme, funding for which will be included in the budget.
Infrastructure looks to be the silver lining of the very dark budgetary cloud. Expect $10bn over the forward estimates to ease some of the pain from the budget, and strengthen Tony Abbott’s claim as the ‘Infrastructure Prime Minister’. The majority of this $10bn will come directly from the debt levy imposed on high income earners.
$5bn will be allocated to the Treasurer’s Asset Recycling Scheme, which provides the states with a 15% bonus payment to infrastructure projects that are funded by the privatisation of state-owned assets. The other $5bn will be spent on a myriad of infrastructure projects across the country, including a $2bn loan to the NSW Government to fast-track the commencement of the WestConnex road project, additional funding for Melbourne’s East West Link and $1bn committed to the Badgerys Creek Airport infrastructure package.
Jacquelynne Willcox is Head of Public Affairs and Senior Strategic Counsel – JWillcox@webershandwick.com
Image credit: adapted from Eugene Regis