Peter Costello has questioned the Abbott government’s claim that the intergenerational report proved its 2014 budget could have delivered ongoing budget surpluses, saying it was based on “very interesting” assumptions.
The long-serving former Liberal treasurer also said the Coalition had conflicting economic messages and dismissed treasurer Joe Hockey’s recent suggestion that homebuyers be allowed to access their super.
But he praised the government for attempting to use the long-term focus of the intergenerational report (IGR) to “reset” the economic debate.
“I think there’s a bit of a conflicting narrative there,” Costello said of the IGR, released last week, in an interview on the ABC’s 7.30 report.
He cited Hockey’s claim that the long-term ramifications of doing no more than currently legislated policy would knock Australians off their chairs and then said, “on the other hand he [Hockey] wants to tell us that if [the government’s] budget measures passed then the budget goes into surplus in 2020 and we enjoy uninterrupted surpluses for 35 years”.
“Now, I wish it would happen, I really, really wish it would happen – uninterrupted surpluses for 35 years. I don’t think it’s going to be as easy as that.
“You’ve got to look behind an IGR and you’ve got to look at its assumptions. It’s got some interesting assumptions on pensions, some interesting assumptions on public hospitals and some very interesting assumptions in relation to taxation, one of which, of course, is that there’s going to be bracket creep right through to 2020, which we haven’t heard before from the government and which frankly I don’t think would be in the interests of Australia. I’m not even sure it would be maintainable,” Costello said.
Bracket creep refers to a government allowing inflation to push taxpayers into higher tax brackets, without any change to tax policy.
On hospitals, the government factored in the 2014 budget decision to cease increasing spending on hospitals in line with the rising costs of running them and instead increasing spending only in line with population growth and inflation. At the time all state premiers said this decision was unsustainable, because the cost of hospitals continues to climb.
Costello said governments needed to remember the main aims of the superannuation system: to give people a reasonable retirement income and to save themselves the cost of paying everyone the full pension.
He said those goals would lead the current government to decide against allowing people to dip into their superannuation for a house deposit, just as he had decided against it when he considered the idea.
“Well look, this idea has been around for a long time. Every generation thinks it invented the wheel. We went through all of this back in the mid ‘90s. We had a look at it, we decided, because we thought superannuation should be for retirement savings, we decided not to allow superannuation to be available for housing.
“This government’s going to look at it again, fair enough, things may have changed. But I think they will come to the same conclusion as we did, that if you wanted to top up people’s retirement, if you wanted to save the government money and it has that dual purpose, then you probably won’t allow people to draw down on it for housing,” he said.
Tony Abbott said the idea of accessing super to buy a home was a “perfectly good and respectable idea”, but former Labor prime minister Paul Keating has argued it would destroy Australia’s system of universal retirement savings.
Costello said the IGR’s assumptions could start a useful public debate.
“I think the government has put on the table, and its intergenerational port is a very good thing, it’s put on the table pension indexation, put on the table very significant changes in relation to public hospital funding. It’s put on the table the fact that we’re going to have 12 years of bracket creep under current scenarios up until 2020.
“Now the public ought to sit back and have a discussion: is that what we really want? What can we do to improve our situation and I think the government’s now engaging in a very good conversation. This is the conversation Australia had to have. It’s been started off by the IGR. Let the conversation rip,” he said.
