Bill Shorten has promised his government would introduce a A$2.3 billion four year package to slash cancer patients’ out-of-pocket costs, and has committed $1 billion to give extra tax relief for low income earners, above what they would get from Tuesday’s budget.
In his budget reply on Thursday night, the opposition leader pitched to voters on a Labor strength – health – declaring his cancer care plan would be the “most important investment in Medicare since Bob Hawke created it”.
Shorten rejected the government’s second and third tranches of tax cuts, due to start in 2022-23 and 2024-25 and worth about $143 billion of the $158 billion ten year package. The last stage was a “radical, right-wing, flat tax experiment”, far off in time and skewed disproportionately to a relative few, he said.
Stressing Labor’s economic responsibility, Shorten recommitted to delivering “stronger surpluses, paying down debt faster” than the government.
“What we need is a fighting fund for the country, a strong surplus to protect us from international shocks”, he said.
He attacked the government – which has a $7.1 billion surplus in its budget for next financial year – for “shortchanging the NDIS [National Disability Insurance Scheme] by $1.6 billion, to prop up a flimsy surplus forecast”.
Shorten – who in his speech referred to his late mother Ann’s battle with breast cancer – said the cancer care plan would provide for millions of free scans and consultations, and cheaper medicines.
Cancer “is frightening, it’s isolating, it’s exhausting”. And all too often, it was impoverishing, he said.
“For so many people, cancer makes you sick and then paying for the treatment makes you poor. And that’s a fact that I think a lot of Australians would be surprised to learn.
“Because if you haven’t been through it yourself, you might not realise that all those vital scans and tests and consultations with specialists aren’t fully covered by Medicare. Instead, they cost hundreds of dollars, adding up to thousands, out of your own pocket,” he said.
One in four women with breast cancer paid more than $10,000 for two years of scans and tests, he said. Some men with prostate cancer were paying more than $18,000. Most people with skin cancer – and Australia has the highest rates of this cancer in the world – paid more than $5000 for the first two years of treatment.
Each year 300,000 people who needed radiology did not get it, because they couldn’t afford it.
People needing treatment for cancer were often not well enough to work, so they were already under massive financial strain, Shorten said. Those living in regional areas had the extra costs of travel and accommodation.
invest $600 million towards eliminating all out-of-pocket costs for diagnostic imaging, with up to six million free cancer scans funded through Medicare – reducing out-of-pocket costs from hundreds of dollars to zero. This would include MRIs too. At present only half the MRI machines were covered by Medicare, and regional patients often had to drive for hours or pay thousands of dollars. “If we win the election, not only will we provide more MRI machines to communities where they are needed most, but Labor will guarantee that every single MRI machine in Australia that meets a national quality standard is covered by Medicare for cancer scans.”
invest $433 million to fund three million free consultations with oncologists and surgeons. Over four years this would mean an extra three million appointments were bulk billed, reducing costs of hundreds of dollars to nothing
guarantee that every drug recommended by independent experts would be listed on the Pharmaceutical Benefits Scheme.
On tax, Shorten said people earning between $48,000 and $126,000, no matter who they voted for in May, would get the same tax refund.
But the Liberal plan did not do enough for the 2.9 million people who earned less than $40,000 – about 57% of whom were women.
In Labor’s first budget Labor would provide a bigger tax refund for low earners than the Liberals proposed.
“6.4 million working people will pay the same amount of income tax under Labor as the Liberals – and another 3.6 million will pay less tax under Labor,” he said. “All told, an extra billion dollars, for low income earners”.
Under further details provided by Labor, it said workers earning up to $37,000 a year would receive a tax cut of up to $350. For workers earning between $37,000 and $48,000 the value of the tax offset would increase up to the maximum tax offset of $1,080.
A worker on $35,000 would get a tax cut of $255 a year under the Liberals, compared to $350 under Labor. A worker on $40,000 would receive a cut of $480 under the Liberals compared to $549 under Labor.
On TAFE Shorten promised to double the size of Labor’s rebuilding TAFE program – up to $200 million – to renovate campuses.
Labor is committed to paying the upfront fees for 100,000 TAFE places to get more Australians in high priority courses. “I am proud to announce that 20,000 of these places will be allocated to a new generation of aged care workers and paid carers for the NDIS,” Shorten said.
Finance minister Mathias Cormann said Shorten had put forward an agenda for $200 billion in higher taxes that would weaken the economy and bring higher unemployment.
A lot of the plan doesn’t take effect until 2024-25, so it’s easy to dismiss as tax cuts on the never-never. But given it’s a central plank of the government’s campaign for re-election, it deserves closer scrutiny.
The plan comes in three stages.
The major part of stage 1 is the Low and Middle Income Tax Offset – giving everyone earning less than $126,000 a cheque in the mail come July and then for the following three years. Stage 2 (2022-23) would lift the top threshold of the 19% and the 32.5% brackets. The biggest cuts would come in stage 3 (2024-25) when the government removed the 37% bracket and cut the 32.5% rate to 30%.
Everyone earning between $45,000 and $200,000 would face the same 30% marginal tax rate.
Unsurprisingly, in absolute terms the biggest beneficiaries would be high-income earners. More than half the benefit would go to the top 20% of earners, those with taxable income over $87,500 a year.
But to better understand what the plan would do to the progressivity of the system, we need to consider what would happen to rates without the plan.
Without change, the average tax rate would increase across the income distribution, as wage growth pushed people into higher tax brackets.
The plan would prevent some of that bracket creep by lowering future tax rates.
Most taxpayers would be better-off than without a change – but high-income earners would benefit the most.
It goes part-way to addressing bracket creep for low and middle income earners. Someone in the middle of the income distribution would pay 3.6% more tax in 2029-30 than today, instead of 6.1% more without the plan.
But Australia’s highest earners – the top 15% of taxpayers – would escape bracket creep entirely, paying the same average tax rate or less in 2029-30 than today.
This result would be a shift in the proportion of tax paid at different points in the income distribution.
Middle earners, those earning between the third to top and the third to bottom ten percents of the income distribution, would pay a larger share of tax in 2029-30 than they do today: 23% compared to 20%.
But high-income earners, those in the top fifth of the income distribution, would pay a smaller share of tax: 65% in 2029-30 compared to 68% today.
It’s more a tax cut than tax reform
The government has been keen to sell the tax package as a “huge reform” because it removes an entire tax bracket.
It says flattening the tax scale would create a greater incentive for higher-income earners to work. But unlike earlier tax reform packages, there has been little in the way of clear articulation or modelling to demonstrate that this would be the case. And there are reasons to doubt that it would be the case.
The people who would benefit most from the tax reform would be in the top 6% of the income distribution in 2024-25. Barring major changes to gender work patterns in the next five years, they would be disproportionately men, working full time. But as the Henry Tax Review pointed out, the people who are the most responsive to changes in effective tax rates are second-earners (mainly women) working part-time.
Proper reform of the income tax system would lower the economic barriers to second-earners working more: the increase in tax, the cuts in family and childcare benefits and higher childcare costs that accompany working more.
And it might not be affordable
The budget numbers point to a decade of surpluses, exceeding 1% of GDP by 2026-27, even with the tax cuts. But the surpluses rely on payments as a share of gross domestic product falling steadily over the decade, from 24.9% of GDP today to 23.6% by 2029-30.
Achieving such a reduction would require significant cuts in spending growth across almost every major spending area, during a period when we know that an ageing population will increase spending pressures, particularly on health and welfare. The Parliamentary Budget Office says ageing will add 0.3% of GDP a year to spending by 2028-29.
The approach marks a change since the 2016-17 budget, when the government forecast that payments would grow as a share of GDP over the decade because of the ageing population. There have not been enough significant savings measures in the past three budgets to explain the turnaround. It appears to be more driven by assumption than by reality.
If we were to make the still-conservative assumption that spending remained merely constant as a share of GDP at 24.9%, the third stage of the tax cuts would push the budget back into deficit in 2024-25.
The bottom line
The pre-election tax package finally does something about bracket creep – but solves it only for the highest of earners.
It passes up the opportunity for more comprehensive reform. And most disconcertingly, it punches a sizeable hole in government revenue just at the time an ageing population will start to demand that more money be spent.
Another federal budget, and yet more tinkering to superannuation tax breaks. But the latest changes will only help older wealthier Australians. The losers are younger workers and taxpayers.
What’s the plan?
From July 1 2020, Australians aged 65 and 66 will be able to make voluntary pre- and post-tax superannuation contributions without having to pass the Work Test, under which they are required to work a minimum of 40 hours over a 30-day period.
About 55,000 Australians aged 65 and 66 will benefit from these changes at a cost of A$75 million over the next four years.
It’s another boost for tax planning
Treasurer Josh Frydenberg says the changes will help Australians save for their retirement.
But most 65- and 66-year-olds still working to top up their superannuation are already eligible to make voluntary super contributions, because they satisfy the Work Test. Working 40 hours over a 30-day period – or little more than one day each week – is hardly onerous.
For every dollar contributed to super that genuinely helps Australians save more for their retirement as a result of these changes, there will be many more dollars funnelled into super to make extra use of superannuation tax concessions.
The biggest winners will be wealthier retired 65- and 66-year-olds with other sources of income, such as from shares or property, which they will now be able to recycle through superannuation.
They will be able to put up to $25,000 into super from their pre-tax income and then – because super withdrawals are tax-free – take the money back out immediately. Their contributions to super are taxed at only 15%, whereas ordinary dividends or bank interest is taxed at their marginal tax rate. The tax savings can be as high as $5,000 a year.
Such strategies aren’t costless: other taxpayers must pay more, or accept fewer services, to make up the difference.
It will mean larger inheritances
The government is also allowing 65- and 66-year-olds to make three years’ worth of post-tax super contributions, or up to $300,000, in a single year.
These changes will mainly boost inheritances.
Most people who make after-tax contributions already have large super balances and typically contribute from existing pools of savings to minimise their tax.
Grattan Institute’s 2016 report, A Better Super System, found that only about 1% of taxpayers have total super account balances of more than $1 million, yet this tiny cohort makes almost one-third of all post-tax contributions.
These changes will turbo-charge so-called “recontribution strategies” that minimise the tax paid on superannuation fund balances passed on as inheritances. When inherited, super fund balances originally funded by pre-tax contributions can be taxed at 17% (including the Medicare levy), depending on the age of the deceased and the beneficiary.
To avoid this tax on their estate, individuals can withdraw superannuation funds tax-free and contribute them back as a post-tax contribution, up to the annual post-tax contributions cap of $100,000 each year.
It fails the government’s own test
In 2016, the government tried – but failed – to define the purpose of superannuation as providing “income in retirement to supplement or substitute the Age Pension”.
The proposed objective rightly implied that super should not aim to provide limitless support for savings that increase retirement incomes.
The benefits of super changes should always be balanced against the costs of achieving them. The government’s latest changes fail that test.
This year’s budget includes $448.5 to modernise Australia’s Medicare system, by encouraging people with diabetes to sign up to a GP clinic for their care. The clinic will receive a lump sum payment to care for the person over time, rather than a fee each time they see their GP.
The indexation freeze on all GP services on the Medicare Benefits Schedule (MBS) will lift from July 1, 2019, at a cost of $187.2 million. The freeze will be lifted on various X-ray and ultrasound MBS rebates from July 1, 2020.
The budget announces $461 million for youth mental health, including 30 new headspace centres, some of which will be in regional areas. But it does little to address the underlying structural reforms that make it difficult for Australians to access quality and timely mental health care.
In aged care, the government will fund 10,000 home care packages, which have been previously announced, at a cost of $282 million over five years, and will allocate $84 million for carer respite. But long wait times for home care packages remain.
Other announcements include:
$62.2 million over five years to train new rural GPs
$309 million for diagnostic imaging services, including 23 new MRI licences
$331 million over five years for new pharmaceuticals, including high-cost cancer treatments
$107.8 million over seven years for hospitals and facilities including Redland Hospital, Bowen Hospital, Bass Coast Health and Ronald McDonald House
$70.8 million over seven years for regional cancer diagnosis, treatment and therapy centres
$114.5 million from 2020-21 to trial eight mental health facilities for adults
$43.9 million for mental health services for expectant and new parents
$35.7 million over five years for increased dementia and veterans’ home care supplements
$320 million this year as a one-off increase to the basic subsidy for residential aged-care recipients.
Here’s what our health policy experts thought of tonight’s budget announcements.
A hesitant step forward for Medicare
Stephen Duckett, Director, Health Program, Grattan Institute
Medicare funding is slowly creeping into the 21st century. The 19th-century model of individual fees for individual services – suitable for an era when medicine was essentially dealing with episodic conditions – is being supplemented with a new fee to better manage the care of people with diabetes.
The precise details of the new fee – including the annual amount and any descriptors – have not yet been released. But it should encourage practices to move towards a more prevention-oriented approach to chronic disease management, including using practice nurses to call patients to check up on their condition, and using remote monitoring technology.
The budget announcement contained no evaluation strategy for the initiative. The government should produce such a strategy soon.
Support for aged and disability care
Hal Swerissen, Emeritus Professor, La Trobe University, and Fellow, Health Program, Grattan Institute
The budget has short-term measures to address major issues in aged care and disability while we wait for the royal commissions to fix the long-term problems.
The National Disability Insurance Agency (NDIA) is struggling with the huge task of putting the National Disability Insurance Scheme (NDIS) in place.
There has been a major under-spend on the on the scheme. Price caps for services such as therapy and personal care are too low and nearly one-third of services are operating at a loss. The under-spend would have been more if there hadn’t been a last-minute budget decision to significantly increase service caps, at a cost of $850 million.
$528 million dollars has also been announced for a royal commission to look at violence, neglect and abuse of people with disabilities – the most expensive royal commission to date.
There is more funding for aged care. Currently, 130,000 older people are waiting for home care packages – often for a year or more. Nearly half of residential care services are losing money and there are major concerns about quality of care.
The short-term fix is to give residential care $320 million to try to prevent services going under. The budget includes 10,000 previously announced home care packages, at a cost of $282 million, but that still leaves more than 100,000 people waiting.
Little for prevention, Indigenous health and to address disparities
Lesley Russell, Adjunct Associate Professor, Menzies Centre for Health Policy, University of Sydney
Preventable diseases and conditions are a key factor in health inequalities and rising health-care costs. The two issues looming large are obesity and its consequences, and the health impacts of climate change.
There is $5.5 million for 2018-19 and 2019-20 for mental health services in areas affected by natural disasters, and $1.1 million over two years for the Health Star rating system – otherwise nothing for primary prevention.
The Treasurer did not mention Closing the Gap in his budget speech, and there is little in the budget for Indigenous health.
Just $5 million over four years is provided in the budget for suicide-prevention initiatives. And the Lowitja Institute receives $10 million for health and medical research.
$6.3 million to continue the development of the Health Data Portal for services funded under the Indigenous Australians Health Program.
Inequalities and disparities
Disadvantaged rural and remote communities will (ultimately) benefit from efforts to boost National Rural Generalist Training Pathway, with $62.2 million provided over four years. This was a 2016 election commitment.
Peter Sivey, Associate Professor, School of Economics, Finance and Marketing, RMIT University
There are no major changes to public hospital funding arrangements in this year’s budget.
Funding for public hospitals is predicted to increase at between 3.7% and 5.6% over the forward estimates. However, these figures are contingent on the new COAG agreement on health funding between the Commonwealth and states, which is due to be finalised before the end of 2019.
The states will be hoping to wring some more dollars from the federal government given their soaring public hospital admissions and pressure on waiting times.
Government spending on the private health insurance rebate is projected to increase more slowly than premiums at between 1.8% and 3.2% because of indexation arrangements which are gradually reducing the rebate over time.
Smaller targets for mental health
Ian Hickie, Co-Director, Brain and Mind Institute, University of Sydney
Numerous reports and accounts from within the community have noted the flaws in Australia’s mental health system: poor access to quality services, the uneven roll-out of the NDIS, and the lack of accountability for reforming the system.
The next federal government faces major structural challenges in mental health and suicide prevention.
Not surprisingly, this pre-election budget does not directly address these issues. Instead, it focuses on less challenging but worthy targets such as:
continued support for expansion of headspace services for young people ($263m over the next seven years) and additional support for early psychosis services ($110m over four years)
support for workplace-based mental health programs ($15m)
support for new residential care centres for eating disorders ($63m).
A more challenging experiment is the $114.5 committed to eight new walk-in community mental health centres, recognising that access to coordinated, high-quality care that delivers better outcomes remains a national challenge.
Despite the commitment of health minister Greg Hunt to enhanced mental health investments, the total increased spend on these initiatives ($736.6m) is dwarfed by the big new expenditures in Medicare ($6b), improved access to medicines ($40b), public hospitals ($5b) and aged care ($7b).
It will be interesting to see whether mental health reform now receives greater attention during the election campaign. At this stage, neither of the major parties has made it clear that it is ready to deal directly with the complex challenges in mental health and suicide prevention that are unresolved.
New funding for research, but who decides the priorities?
Philip Clarke, Professor of Health Economics, University of Melbourne
The budget contains several funding announcements for research.
The government will establish a Health and Medical Research Office, to help allocate money from the Medical Research Future Fund (MRFF). This will be needed, as the budget papers commit to a further $931 million from the MRFF for:
Clinical trials for rare cancers and rare diseases
Emerging priorities and consumer-driven research
Global health research to tackle antimicrobial resistance and drug-resistant tuberculosis.
In addition, the budget includes:
$70 million for research into type 1 diabetes
a large investment for genomics (although that is a re-announcement of $500 million promised in last year’s budget)
a series of infrastructure grants to individual universities and institutions, such as $10 million to establish the Curtin University Dementia Centre of Excellence.
The government appears to be moving away from allocating medical research funding through existing funding bodies, such as the National Health and Medical Research Council (NHMRC), towards allocating research funds to specific disease areas, and even to individual institutions.
This is a much more direct approach to research funding, but it raises a few important questions. On what basis are these funding decisions being made? And why are some diseases considered priorities to receive funding? There is very little detail to answer these questions.
Australia’s allocation of research funding through the MRFF is diverging from long-held traditions in other countries, such as the United Kingdom, which apply the “Haldane principle”. This involves researchers deciding where research funding is spent, rather than politicians.
* This article has been updated since publication to clarify the 10,000 home care packages have been previously announced.
The government has extended the energy payment to people on Newstart – after excluding them only days ago.
Treasurer Josh Frydenberg said the decision was made at a meeting on Tuesday night of Scott Morrison, Finance Minister Mathias Cormann and himself. He indicated it was about smoothing the passage of the measure through the parliament.
There was widespread criticism of the exclusion of Newstart recipients from the payment, which will be A$75 for a single person and $125 for a couple.
The money is due to go out very soon and the government needed the legislation to pass immediately. While Labor had flagged it would support the one-off payment, the legislation could have been amended, because the government is in a minority in the House of Representatives.
The payment was originally set to be confined to those on the age pension, disability support pension, carers payment, parenting payment single recipients, and veterans and their dependants receiving payments.
The extension, which will also cover those on Youth Allowance and other working age payments, bringing the number of recipients to five million, will add some $80 million to the original cost of $284.4 million.
Labor seized on the backdown, seeking to suspend standing orders to move a motion in the House saying the government’s backflip “has already blown an $80 million hole in the budget”, and showed the budget was “unravelling less than 24 hours after it was delivered”.
The motion condemned the government for “only looking after the top end of town and treating vulnerable Australians as an afterthought”. The attempt to suspend standing orders failed.
Frydenberg, speaking to the National Press Club, explained the original exclusion by saying three-quarters of people on Newstart moved off it within 12 months, and 99% of people on it received another payment.
“They get a parenting payment or they get a family tax benefit payment, whereas when you’re on the Disability Support Pension or on the aged pension, you tend to be on it for longer, and that seems to be – that is your principal form of payment”.
Frydenberg said the change “will secure the passage of the piece of legislation through the parliament”.
Appearing on the ABC Q&A on Monday, Liberal senator Arthur Sinodinos could not say why Newstart recipients had been excluded from the payment. “The short answer is I don’t know why,” he said. He also said he thought Newstart was too low.
The Morrison government’s pre-election budget has not been the bonanza some predicted. It is a fairly modest affair.
But calculations by the the National Centre for Social and Economic Modelling, based at the University of Canberra, show the budget will widen the gap between rich and poor. This is because changes to the tax and welfare system most benefit those paying tax. Those who don’t earn enough income to pay tax benefit least.
The centre has calculated the impact of the the federal budget’s tax and welfare transfer changes by families, age groups and Commonwealth Electoral Division.
The most significant tax changes are the two stages of tax cuts in 2022-23 and 2024-25. In 2022-23 the point at which the marginal tax rate increases from 19% to 32.5% will lift from A$41,000 to A$45,000. In 2024-25 the marginal tax rate on incomes between A$45,000 and A$200,000 will be reduced to 30%. The top tax rate of 45% (which now kicks in at A$180,000) will apply to any income above A$200,000.
The threshold on which no income tax is paid remains the same, at A$18,200.
Other tax changes involve increases to the Low Income Tax Offset (LITO) and the Low and Middle Income Tax Offset (LMITO). The LMITO (available for those earning more than A$48,000) will increase from A$530 to A$1,090 from this financial year, while the LITO will increase from A$645 to A$700 in 2022-23.
More income, more benefit
The benefit of the 2024/25 tax cuts on high-income families will be dramatic, as seen in Figure 1, which shows the effect of the changes over three years (2019-20, 2022-23 and 2024-25) by income.
The important point to note is that changes to marginal tax rates and the income tax offsets affect anyone paying tax. There is absolutely no benefit to anyone not paying tax. Which is why there is very little gain for those on incomes below $40,000 (the top of the second income quintile in Figure 1). The gain for those in the first income quintile (who mostly earn no private income) is even lower.
Figure 2 shows that the cohort that would gain the most in 2019-20 are those aged 26–35, by an average by A$245 a year for men and A$213 a year for women. This is mainly due to the change in the Low and Middle Income Tax Offset.
By 2024-25, the cohort gaining most are men aged 46–55, by A$795 a year, and women aged 46-55, by A$759 a year. This is mainly because the tax changes in 2024-25 provide greatest advantage to high-income earners, as shown above.
Figure 3 breaks down the impact by family type and income quintile. Couples with children gain the most for all years. By 2024-25, couples with children in the highest-income quintile gain an extra A$4,573 a year, while those in the lowest quintile get just A$114.
The main reason for this is that couples with children commonly have both parents working and paying tax, therefore tax changes benefit these families more.
In the first year (2019-20), the Low Income Tax Offset and Low and Middle Income Tax Offset mean middle-income earners gain the most (although it is still Quintile 4 gaining the most in this first year). By 2022-23 the tax cuts benefit higher-income households more.
When it comes to the impact by Commonwealth Electoral Division (Figure 4), we can see that by 2024-25 urban areas gain the most, and regional areas the least.
This is because households in urban areas tend to have higher incomes, and the tax cuts in 2024-25 mean electoral divisions with higher income households will benefit the most.
Effect on poverty rate
The budget’s effect on the poverty rate – the proportion of households living on less than 50% of median income – is to reduce it by 0.2 percentage points by 2024-25. This is a fairly small reduction. But due to the tax cuts in 2024-25 raising the net incomes for high-income households, this means income inequality will be higher.
The 0.2 percentage point decrease compares to an 0.8% percentage point reduction that NATSEM’s modelling estimates would result from raising the Newstart allowance by A$75 a week from what it is now.
The message from this analysis is that the changes to the tax and welfare system in this budget benefits those with higher incomes and who are paying tax, with little to no gains in future years to some of those low income earners who aren’t paying tax.
An Easter weekend in an election campaign might be a bit of a challenge for a pair of leaders who were atheists. But fortunately for Scott Morrison and Bill Shorten, declared believers, it wasn’t a problem.
Both attended church services during the so-called campaign cease-fire that the main parties had proclaimed for two of the four days.
Morrison on Sunday was pictured in full voice with raised arm at his Horizon Pentacostal church in The Shire, where the media were invited in. On Friday he’d been at a Maronite Catholic service in Sydney.
Sunday morning saw Shorten at an Anglican service in Brisbane, his family including mother-in-law Quentin Bryce, former governor-general.
Neither leader was hiding his light under a bushel.
Church, chocolate and penalty rates
Sunday was an opportunity to wheel out the kids, chasing Easter eggs (Shorten) or on the Rock Star ride at Sydney’s Royal Easter Show (Morrison). This was campaigning when you’re not (exactly) campaigning.
The minor players weren’t into the pretend game. For them, the relative restraint on the part of the majors presented rare opportunity. Usually Centre Alliance senator Rex Patrick would have little chance of being the feature interview on the ABC’s Insiders.
But while Friday and Sunday were lay days for the major parties Saturday was not (and Monday won’t be either).
For Labor, Easter has meshed nicely with one of the key planks of its wages policy – restoration of penalty rate cuts by the Fair Work Commission. Even on Sunday, Shorten pointedly thanked “everyone who’s working this weekend”.
It was the start of Labor’s campaign focus turning from health to wages this week, when it will cast the election as a “referendum on wages”.
Turnbull resurrects the NEG
The weekend standout, however, was the intervention of Malcolm Turnbull, who launched a series of pointed tweets about the National Energy Guarantee (NEG).
Turnbull was set off by a reference from journalist David Speers to “Malcolm Turnbull’s NEG”.
“In fact the NEG had the support of the entire Cabinet, including and especially the current PM and Treasurer. It was approved by the Party Room on several occasions”, the former prime minister tweeted.
“It had the support of the business community and energy sector in a way that no previous energy policy had. However a right wing minority in the Party Room refused to accept the majority position and threatened to cross the floor and defeat their own government”.
“That is the only reason it has been abandoned by the Government. The consequence is no integration of energy and climate policy, uncertainty continues to discourage investment with the consequence, as I have often warned, of both higher emissions and higher electricity prices.”
He wasn’t finished.
“And before anyone suggests the previous tweet is some kind of revelation – all of the economic ministers, including myself, @ScottMorrisonMP, @JoshFrydenberg spent months arguing for the NEG on the basis that it would reduce electricity prices and enable us to lower our emissions.”
“I see the @australian has already described the tweets above as attacking the Coalition. That’s rubbish. I am simply stating the truth: the NEG was designed & demonstrated to reduce electricity prices. So dumping it means prices will be higher than if it had been retained. QED”
“The @australian claims I ‘dropped the NEG’. False. When it was clear a number of LNP MPs were going to cross the floor the Cabinet resolved to not present the Bill at that time but maintain the policy as @ScottMorrisonMP, @JoshFrydenberg& I confirmed on 20 August.”
(Frydenberg, incidentally, has lost out every which way on the NEG. As energy minister he tried his hardest to get it up, only to see it fall over. Now he is subject to a big campaign against him in Kooyong on climate change, including from high-profile candidates and GetUp.)
Turnbull might justify the intervention as just reminding people of the history. But it is damaging for the government and an Easter gift for Labor – which is under pressure over how much its ambitious emissions reduction policy would cost the economy. It also feeds into Labor’s constant referencing of the coup against Turnbull.
Turnbull’s Easter tweets are a reminder
the Coalition sacrificed a coherent policy on energy and climate for a hotchpotch with adverse consequences for prices;
it dumped that policy simply because of internal bloodymindedness, and
the now-PM and treasurer were backers of the NEG, which had wide support from business.
Shorten has strengthened his commitment on the NEG, indicating on Saturday he’d pursue it in government even without bipartisan support.
“We’ll use some of the Turnbull, Morrison, Frydenberg architecture, and we will work with that structure,” he said.
Given the hole it has left in the government’s energy policy, pressing Morrison on the economic cost of walking away from the NEG is as legitimate as asking Shorten about the economic impact of his policy.
This article is part of a series examining the Coalition government’s record on key issues while in power and what Labor is promising if it wins the 2019 federal election.
Politicians often invoke the word “reform” to convey the significance, or gravitas, of a particular policy change they are proposing.
However, the tax policies implemented over the six years of the Abbott-Turnbull-Morrison government should be more aptly described as: no reform, lots of tinkering, two blunders and some lost opportunities.
To be fair to the leaders of the Coalition, both Abbott and Turnbull began their prime ministerships professing a large appetite for tax reform.
In opposition Abbott and his treasury spokesman Joe Hockey had promised a major inquiry. Hockey said it would pick up where Labor’s Henry Tax Review left off:
We thought the Henry Tax Review was going to be a proper process. Now, that has obviously been an abject failure. We’ve said – Tony Abbott announced
in Budget and reply speech – we will have a proper process for proper tax reform, and whatever comes out of that process, which will be a white paper, we will take to a subsequent election, seeking the mandate of the
Australian people – their approval.
Marginal changes to superannuation tax further added to the complexity of the tax system as a whole. The current superannuation system disproportionately rewards higher income earners because most contributions are taxed at the same low rate (15%) regardless of the taxpayers’ income tax rate.
The Coalition’s response was to apply a 30% tax on contributions for those earning $250,000 or more (down from the previous threshold of $300,000) and to cut the cap on concessional contributions from $30,000 ($35,000 for those aged 49 and over) to $25,000. And it capped at $1.6 million the amount that could be transferred into the “retirement phase” where fund earnings in retirement were exempt from tax.
Alongside these marginal changes, there was also a failed attempt to cut the company tax rate (only the tax rates for small companies were cut) and a muddled discussion about the progressivity of the income tax system.
All in all, many a tinker, but no reform.
Human-induced climate change is compromising the sustainability of our planet. The only way to solve it is by changing incentives using the economic toolkit at our disposal. The Carbon Tax was a good tax. It shifted the costs of pollution onto those who created it, instead of subsidising processes that damaged the environment.
No solution to climate change is possible without corrective taxes.
At some point we’ll have to climb that mountain again, assuming the mountain is not underwater before politicians come to their senses.
The repeal of the Minerals Resource Rent Tax was also a step backwards. By taxing rents (excess profits) instead of profits, it avoided the disincentives created by traditional company taxes. And, it was a good example of the kind of taxes that could eventually replace or supplement company tax.
…and lost opportunities
Changing the GST could have ensured at least one significant contribution to overall tax reform. At 10%, the rate is relatively low by international standards and applies to a shrinking share of spending, as more and more of our money is spent in places or on goods that aren’t taxed.
These factors, combined with the fact that GST is difficult to evade and less costly to administer, suggest that broadening the base is low hanging fruit on the tax reform tree, ripe for picking.
Instead, it may as well be forbidden fruit from the Garden of Eden. We’ve gone in the wrong direction by adding even more exemptions and cutting short talk of increasing the rate.
All up, the government’s approach over the past six years has largely been piecemeal. It also managed to dismantle two of the most significant tax reforms that could have contributed to a more sustainable tax base in the long run.
Would Labor be better?
It remains to be seen whether a Labor government will be able to achieve more. Some of the party’s proposed changes, such as the treatment of capital gains, head in the right direction, but what it is offering falls short of comprehensive reform.
At the same time, many of its proposed changes will add additional complexity, fail to account for interactions within the entire tax system and use tax exemptions to reach goals that could be better achieved with payments.
Many an international tax reform was engendered by crisis, so there’s hope, of a sort. The opportunity still remains to get in early before weaknesses inherent in the current system become grossly apparent.
What we’ve got is unfair and its complexity rewards those with the resources to pay to understand and exploit it. It is overly reliant on income and company tax in place of indirect taxes, like consumption tax, and it tries to achieve too many disparate objectives, without consideration for the workings of the family and social security payments system.
There is much scope to improve things. What we need most are fearless leaders, from all sides of the political spectrum, who treat comprehensive tax reform as important and can work together to achieve it.
Our “state of the states” series takes stock of the key issues, seats and policies affecting the vote in each of Australia’s states.
We’ll check in with our expert political analysts around the country every week of the campaign for updates on how it is playing out.
Nick Economou, Senior Lecturer in the School of Political and Social Inquiry at Monash University
The first week of the 2019 election campaign is complete. So far the contest is looking like a dour football match between two defensive teams. Both Opposition Leader Bill Shorten and Prime Minister Scott Morrison have campaigned in marginal seats in the famed “western Sydney”, where – according to legend – national elections are won or lost.
By midweek, both leaders had made it to Victoria, where there might not be many genuinely marginal seats, but the Victorian Liberal party is really anxious about the number of mid-range seats like Deakin, Flinders and even Higgins, which might be lost if an anti-Liberal swing commensurate with the state election should be repeated on May 18.
The two major party leaders have sought to reinforce the themes that underpinned the budget and budget-in-reply. The government hopes swinging voters will be enticed to vote Liberal with promises of tax cuts and warnings about Labor’s fiscal profligacy. Labor seeks to appeal to voters on health policy with grand commitments to addressing the challenges of cancer. These policy espousals occur against a backdrop of visits to marginal electorates where traps await for even the most experienced politicians.
In the seat of Reid, with its significant Chinese community, Morrison greets someone in Mandarin only to discover they are Korean. Shorten, meanwhile, meets someone suffering from cancer and who wants to know (for the benefit of the television crews, no doubt) why state Labor has done so little after promising to boost health funding at the last two state elections.
The early loss of some major party candidates has been the only really interesting thing to happen so far. Labor has lost its candidate for Curtin, Melissa Parke, following revelations that she had criticised Israel in a speech she had previously made on Middle Eastern politics. Criticising Israel is hardly the thing Labor wants to be known for when it is seeking to defend marginal seats such as Macnamara in Victoria.
The Liberal party has lost two candidates as well. In a reminder of the ongoing section 44 debacle, Liberal candidates for the Labor-held seats of Lalor and Wills, Kate Oski and Vaishali Gosch, have had to withdraw. Apparently doubts about their citizenship status arose from questionnaires they filled in for the Australian Electoral Commission as part of the nomination process.
Given that the parliamentary Joint Standing Committee on Electoral Matters figured that up to 50% of Australians have been potentially disqualified from being candidates thanks to the High Court, something like this was bound to happen.
New South Wales
Chris Aulich, Adjunct Professor at the University of Canberra
At this stage of the campaign, Labor appears likely to hold about the same number of NSW seats as it did in 2016. A possible Labor loss in the city seat of Lindsay, where Labor’s Emma Husar isn’t recontesting, could be offset by wins in Gilmore or Reid, where sitting Liberal members Ann Sudmalis and Craig Laundy aren’t recontesting either. A small swing of less than 2.5% against the Coalition is needed for Labor to win Robertson, Banks and Page, but currently, the swing isn’t anticipated to be enough for the seats to change hands.
The Coalition has the advantage of the recent strong win at state level in NSW, although its win was marred by a backlash against the Nationals in many regional seats. The Coalition now faces the risk of losing regional seats to several strong independent candidates, such as Rob Oakeshott in Cowper and, less likely, Kevin Mack in Farrer.
In the city seat of Warringah, Liberal Party polling reveals a swing of about 12% against Tony Abbott, who is facing a serious challenge from independent Zali Steggall. If that swing were realised at the election, Steggall would win the seat from Abbott. While Steggall will gain some advantage from GetUp’s targeting of Abbott, the former prime minister has support from the Advance Australia lobby, which has already claimed that Steggall is a “fake” independent.
The battlelines are drawn between traditional and modern conservatives in this seat, with the focus on issues like climate change adaptation, refugee policy and foreign aid. After a feisty first candidates’ debate last month, and recent complaints by Steggall that Advance Australia has “sexualised” her advertising hoardings, this seat promises a close and bare-knuckle contest.
The loss of any of these seats would make Scott Morrison’s task of winning government more difficult. With redistributions since the 2016 elections, the Coalition notionally holds 73 seats in the new 151-member house and cannot afford to lose any seats.
This week we also include seats in the ACT. Redistribution has added a third seat to the ACT, and all seats now have new boundaries. The notional swings needed by the Coalition vary from 9% to 13%, suggesting comfortable wins to Labor. But the Greens are hopeful their candidate in central Canberra, environmentalist and musician Tim Hollo, may be able to capture sufficient votes from the young, urban dwellers in the electorate to win.
In the Senate, the status quo of one seat for Labor and one for the Coalition is likely to remain with Labor’s Katy Gallagher, who is expected to be returned after losing her seat over dual citizenship. Liberal Zed Seselja only needs 33% of the two-party preferred vote to secure a quota and hold his seat.
Maxine Newlands, Senior Lecturer in Political Science at James Cook University
The federal government’s final go-ahead for Adani’s groundwater management plan has sparked a large scale grassroots campaign pushing back against the two major parties in Herbert.
The LNP, ALP, and Katter’s Australia Party all support the mega mine. Herbert incumbent ALP’s Cathy O’Toole is on record saying:
If this project has gone through the processes and the regulatory requirements and it’s passed, as it appears it has, it will go ahead, and it will be good for jobs in this city.
The Greens are running on a Stop Adani ticket. Millennials and the undecided voters will play an important role in this election as climate change and mining jobs become key election issues.
An Australia Institute report this week shows that 68% of Queenslanders want strong government action on climate change, 50% want no new coal mines, and 64% are looking for a rapid transition to 100% renewable energy. Leichhardt in far north Queensland, one of the eight LNP electorates on a majority of less than 4%, sees climate change as a major issue.
Last federal election, preference votes from minor parties – mainly One Nation – helped get Labor over the line in Herbert. With One Nation yet to declare a candidate in Herbert, Labor’s early seeming rejection of a preference deal with Palmer’s United Australia Party (UAP) could backfire.
Labor assumed that Palmer would still owe A$70 million dollars to the Herbert community. That all changed on Monday with Palmer’s announcement he will repay wages owed to Queensland Nickel workers.
Palmer has announced he will run for the Senate, and he has nominated local rugby league star Greg Dowling as his candidate for Herbert. With no sign of a One Nation putting up candidates in Herbert, it could come down to a tight race between LNP, ALP, the Greens and the minor parties of UAP and Katter’s Australia Party. Rejecting a preference deal with UAP could be harmful to Labor, if Palmer’s payback bounce and recruiting of local sports star wins him votes come May 18.
Down south and Liberal incumbent Peter Dutton is facing a different challenge. Dutton’s role in Malcolm Turnbull’s undoing is still fresh in the minds of Dickson voters. As Michelle Grattan has pointed out:
Nationally, Peter Dutton will have a big footprint in the campaign. It won’t be a helpful one for Morrison.
Dickson is one of the eight marginal LNP seats with a majority of less than 4%. The campaigning there is already getting down to personality politics. Labor has taken the lead with a social media campaign weaponising Dutton’s role in the spill. Comments Dutton made about Labor candidate’s Ali France’s disability will not help shore up support.
Ian Cook, Senior Lecturer of Australian Politics at Murdoch University
Scott Morrison has his work cut out for him when it comes to convincing West Australians to accept his core message to voters: that they should reelect the Liberal-National Coalition government because they’re better economic managers than Labor.
He has two main problems. First, voters in Western Australia threw Colin Barnett’s Liberal-National Coalition government out in 2017, in part, because of its economic record. Second, many West Australians felt that their quality of life declined during the mining boom, so they know that lots of good economic data doesn’t necessarily mean that everyone’s lives will improve.
Economic management wasn’t the only issue that resulted in the Barnett government’s loss. Tension between the Coalition parties and the preference deal with One Nation didn’t help. But Labor focused part of their campaign on the Coalition government’s economic mismanagement during that election. And voters responded.
The evidence that conservative governments are just naturally better at managing an economy is thin, and there is just as much evidence that the reverse it true, as economics professor James Morley has pointed out. But the idea won’t go away as long as the economic orthodoxy is that governments shouldn’t interfere in the economy. And Australians believes that Coalition governments don’t interfere. Both views are open to question.
While other Australians may not question these assumptions about economic management, their recent experience with a Coalition government means that many West Australians will question them, and they’ll need convincing that they shouldn’t.
We had a two-speed economy shoved in our faces and one takeaway from this was that everyone doing well is not just about the economy doing well. The prime minister will get a chance to explain how I’ve gotten things terribly wrong when he appears in the first of the Leaders’ Debate in Perth on April 29.
Rob Manwaring, Senior Lecturer in Politics and Public Policy at Flinders University
Political memories can be short. At the last federal election, perhaps the single biggest factor shaping voting patterns was the impact of Nick Xenophon’s Centre Alliance. For many years, Xenophon was a mainstay of South Australian politics, with a canny knack for finding appeal. The ubiquitous politician was both a longstanding member of the SA parliament, first elected in 1997, and then a federal senator from 2008 to 2017. Xenophon, at one stage touted as a future premier for South Australia, left Canberra to try and make a splash at the 2018 state election.
Three years ago, at the national level, the Centre Alliance were poised to become a third force in South Australian politics, and a key disruptor to the major parties. In 2013, Xenophon’s team picked up a remarkable 24.9% of the vote, and in 2016 this was a still an impressive 21.3% of the vote. Last time out, the Centre Alliance had one member of the House of Representatives – Rebekha Sharkie picking off Liberal Jamie Briggs in Mayo, and three Senate positions. In terms of vote share, just over 250,000 South Australians voted for the the Centre Alliance.
But what now? With the charismatic Xenophon off the stage, it remains unclear what will happen to their vote share. While Sharkie is likely to hold off the challenge from Georgina Downer again, and it’s unclear how much impact the Centre Alliance will have. They are running three candidates, including Sharkie, for the lower house. Skye Kakoschke-Moore will be their lead Senate candidate.
At best, they seem to be angling to play a key kingmaker role in the Senate, making noises about limiting a potential Labor government’s franking credits and negative gearing policies. Yet, this seems a reactive campaign, and lacks Xenophon’s ability to pick key outlier issues. Moreover, where will moderate liberal and conservative voters find their voice?
Richard Eccleston, Professor of Political Science and Director of the Institute for the Study of Social Change at the University of Tasmania
Labor now holds four of the five House of Representatives seats on the Apple Isle. With popular independent Andrew Wilkie’s vice-like grip on Tasmania’s fifth seat, the recently renamed electorate of Clark (formerly Denison), the chance of a Coalition upset next month seems remote.
But Tasmanian voters have ignored national trends, and delivered more than their fair share of upsets in recent elections, so there must be an outside chance that the Coalition could claw back a seat against the national tide.
Labor’s Ross Hart holds Bass, which takes in Launceston and much of North East Tasmania, by a reasonably comfortable 5.4%. But history suggests Labor shouldn’t be complacent given the electorate has been a graveyard for political careers in recent years. The last time a sitting member was returned for a second term was back in 2001, with the last five elections delivering big swings and unprecedented volatility.
The Liberals will be pinning their hopes on Bridget Archer, the mayor of the working class town of George Town, near Launceston. Archer may be the circuit breaker the Liberals need. She has a high profile in a community traditionally dominated by Labor, and, unlike the vocal conservative Andrew Nikolic who lost the seat in 2016, she won’t have to run the gauntlet of a national GetUp! campaign.
Scott Morrison has visited Bass twice in recent weeks, and a new poll commissioned by a forest industry group put the Liberals in front on a two-party preferred basis. But this result may have been skewed by the design of the poll and its focus on the future of forestry, an industry long championed by the Liberals in Tasmania.
On the other side of the ledger, Labor’s commitment to more funding for health and education, and greater tax relief for lower income households, is more likely to resonate with the electors of Bass than the Coalition’s emphasis on smaller government, and retaining concessions for property investors and self-funded retirees.
While the smart money is on Labor’s Ross Hart holding Bass, history suggests that we shouldn’t rule out an upset on election night.
Once again, the public servants are trying to force the politicians to do things by the book. But the government would prefer to cut the inconvenient corner.
The heads of the Treasury and Finance departments on Wednesday warned the government that the first round of its tax cuts – due to be paid within weeks of the election – must be legislated before they can go out.
PEFO is presented by Treasury secretary Phil Gaetjens and Finance secretary Rosemary Huxtable and doesn’t have any political input. It’s a rare dose of spin-less numbers in the campaign.
Morrison argues the Australian Taxation Office can act before the tax legislation passes. He said on Wednesday that “what happens traditionally with the Tax Office, is where there is a bipartisan commitment to matters, they can often go ahead and administer the tax arrangements on that basis”.
But in PEFO the officials said that while many of the budget’s tax measures can be legislated later without affecting the estimates, “the immediate relief […] requires the relevant legislation to be passed before the increase to the low and middle income tax offset (LMITO) can be provided for the 2018-19 financial year.
“If not legislated prior to 1 July 2019 the revenue cost of this measure would need to be reassessed,” PEFO says.
Officials have been clear about how they see things since immediately after the budget, when the Australian Taxation Office told The New Daily: “The ATO requires law in order to deliver the measure as announced, and, as such, it cannot be delivered administratively”.
It isn’t the first time this issue over the process of implementing tax cuts has arisen. Morrison would remember that well – he was treasurer when it happened in 2016.
That year saw a prolonged face-off between the Turnbull government and the ATO, as the government pressed for income tax cuts to be delivered ahead of parliament passing them.
It was the same story. The measure (for those earning $80,000 to $87,000) was in the May budget, to come in July 1. There was no time to legislate before the July 2 election.
Turnbull said the tax cuts would be delivered “administratively”. But the PEFO of that year said “the [Taxation] Commissioner has indicated that the […] targeted personal income tax relief measure requires the relevant legislation to be passed before the change will be incorporated into the income tax withholding schedules”.
In the end, delivery was delayed, but it came before the legislation’s passage, when the Tax Office was (sort of) persuaded the cuts had bipartisan support.
The first round of the 2019 tax relief does have bipartisan support in the broad, but there are a couple of twists. Labor proposes more relief for low income earners, and the government’s tax plan is a long term package, with Labor rejecting the later stages.
It is more likely than not the 2019 tax cuts will end up delivered on time. “It’s certainly our intention to legislate them,” Morrison said. Whichever side wins, parliament is expected to sit at the end of June to deal with them. The PEFO stand is just making sure of that.
Unsurprisingly, the PEFO validated the numbers in the budget brought down early this month, including the forecast $7.1 billion surplus next financial year.
A minor adjustment was made in this year’s forecast deficit, from $4.2 billion to $4.3 billion, because of the extension immediately after the budget of the energy payment to those on Newstart and a number of other payments.
In what was in general a groundhog day in the campaign, Bill Shorten on Wednesday said he had used the wrong words when on Tuesday he claimed Labor would not increase tax on superannuation – overlooking the $34 billion of proposed changes the opposition has announced.
His gaffe, leapt on by the government, received wide coverage, marring his first week in the campaign.
“I thought I was being asked, have we got any unannounced changes to superannuation,” Shorten said.
“But obviously we have changes which we outlined three years ago, and of course I should have picked the words better, no question. We have no proposals other than what we’ve already announced previously.”
He also argued that ALP policies closing down concessions and loopholes in superannuation “is not some massive increase in taxation”.
Meanwhile the treasurers of Victoria, Queensland, Western Australia, the ACT and the Northern Territory have written to Treasurer Josh Frydenberg asking him “to confirm that there will be no further funding cuts to hospitals, schools, infrastructure and other essential services.”
This follows analysis undertaken by the Grattan Institute arguing the government’s budget projections would need a cut to spending of about $40 billion a year by 2029-30.
“As we are in the process of finalising our respective budgets, it is imperative that you are transparent about any planned cuts in payments to states and territories,” the Treasurers say.
“States and territories should not be forced to fill funding gaps created by cuts by the Commonwealth Government across our respective hospitals, schools and transport networks.”