Significant elements of the budget may be blocked in the Senate as their hidden and long-term impacts become clearer, despite its generally positive reception.
The initially well-received pension changes – which save $2.4bn over four years – are under serious threat because the government has now ruled out any reform to costly superannuation tax breaks.
The plan to force under 25-year-olds to wait four weeks for unemployment benefits appears certain to be voted down and the $5.5bn in cuts to single income family payments remain in doubt despite the Coalition’s insistence that they are necessary to pay for its generous new childcare package. The plan to save almost $1bn by ending so-called “double-dipping” for paid parental leave seems almost certain to be defeated.
The budget, which abandoned many of last year’s cuts and delivered $5bn in small business tax breaks, has delivered a quick boost in both consumer confidence and the Coalition’s standing in the opinion polls.
But as parliament prepares to return for four weeks of sittings before the long winter recess, details are emerging about the impact of some of its central policies.
Both peak lobby groups in the aged care sector – the Council on the Ageing and National Seniors – initially welcomed social services minister Scott Morrison’s new pension plan to reduce or remove the pension for wealthier retirees while increasing it for poorer pensioners.
But both now say the changes should not proceed without a comprehensive review of retirement incomes looking at the interaction between pensions and superannuation. The government has, since the budget, ruled out any review or changes to superannuation taxation in order to mount the political argument that only a Labor government would raise taxes.
New research commissioned by Industry Super Australia from Rice Warner actuaries shows the pension changes, without any change to superannuation, would over time squeeze middle income earners the hardest because they would have saved just enough in super to lose the pension.
It found the number of new retirees losing pension payments would rise from one in three retirees initially, to about seven in 10 by 2055 and that for couples due to retire in a decade, the largest impacts would be felt just below average earnings of $62,000. They would stand to lose $4,300 a year or $112,000 each over their retirement. For those 20 years from retirement (aged 45-50 today) the biggest impacts are felt by a couple earning as little as $45,000 who would lose $1600 a year each.
“If the government wants to significantly scale back the age pension, then it must offset the impact by making serious reforms to super to fill the retirement income gap,” said the chief executive of Industry Super Australia, David Whiteley.
The revelations are increasing concerns among crossbench Senators, whose votes will be essential since Labor and the Greens are opposed to the pension plan.
Meanwhile the government appears to be making little headway in negotiations with the crossbench over the $5.5bn it wants to cut from family tax benefit B, which is paid to single parents and single income families earning up to $150,000, to fund its $3.5bn childcare plan.
The savings come from freezing the level of payments for two years as well as cutting payments once the youngest child turns six.
Victorian senator Ricky Muir has requested modelling from the government about the impact of a plan initially floated by the Australian Council for Social Service, to maintain payments until the youngest child turns 12, instead of the current cut-off of 16, and also to test the impact of gradually removing payments from the time a child turns six, rather than immediately cutting them off.
South Australian Family First senator Bob Day has said he only supports cutting the benefit once the youngest child turned 12, if the government also backed “income splitting” for single income families, a demand which is unlikely to be met.
Other crossbench senators remain deeply sceptical about the planned cuts, which are also opposed by Labor and the Greens. And the same single income families are among the biggest losers from the new childcare plan, which aims to encourage parents back into the workforce.
The government is also unlikely to be able to legislate the new plan to force under 25-year-olds to wait four weeks for the dole, a replacement for the now-abandoned policy from last year’s budget to make under 30 year olds wait for six months.
With Labor and the Greens opposed, the Coalition needs six out of eight crossbench votes. But most of the crossbench opposes the plan, and during the last sitting weeks four of them voted for a motion moved by Greens senator Rachel Siewert saying it should be blocked.
