Hockey doesn't want to frighten the horses

The Conversation

If Joe Hockey’s first budget runs into problems, it won’t be for want of effort to construct a dramatic narrative about pain, personal responsibility and Australia’s fiscal health.

The Treasurer believes in laying it on thick, whether he’s talking about the frightening state of the nation’s overall finances or the need for individuals to carry heavier loads.

It was a "sobering observation" that Australia wasn’t doing as well on repairing its budget as many other developed countries, he told a function hosted by the Spectator.

And to anyone who might gripe about co-payments or other nasties needed to curb spending there was the stricture: "It is appropriate that those who use government services should contribute towards their cost."

All treasurers engage in pre-budget massage -- usually of the remedial kind -- but Hockey, with his end of the "age of entitlement" philosophical framework, is going to great lengths. His Wednesday night pitch was backed by details on projected spending growth from the Audit Commission’s report, which will be released next Thursday.

British journalist Andrew Neil, interlocutor at the Spectator function, gave him a bit of curry for exaggerating Australia’s troubles when one looked at those of other countries.

The question is whether the Australian public will buy the story about how seriously broken the budget is, requiring drastic actions -- including "winding back some spending that people have come to take for granted" -- before it’s too late.

Take the expected increase (in the long term) of the pension age to 70. Polling by Essential released on Wednesday found 20 per cent approve and 71 per cent disapprove. Asked at what age people should be able to receive the pension, 58 per cent favoured the present 65.

This indicates that change will be a big selling challenge, but doesn’t necessarily suggest it is an impossible one. Labor encountered much flack when it announced the age would rise to 67 by 2023 but eventually the issue settled down.

Click to enlarge

Hockey in his speech dwelt extensively on the burden of the age pension bill, which is nearly $40 billion -- 10 per cent of outlays -- rising to $72 billion by 2023-24 -- an average annual growth rate of 6.2 per cent.

He pointed out that four out of five Australians over 65 receive a full or part pension, and if concessionary card holders are taken into account, only 14 per cent of older people receive no government payments.

While many pensioners are obviously very needy, a lot of these recipients are getting help from the government because politicians (such as John Howard) threw out sweeteners to attract or keep the support of older voters. With the ageing population the situation is indeed unsustainable over the long haul.

Also unsustainable, in another way, is the argument Hockey tried to make for the quarantining of Tony Abbott’s paid parental leave scheme from the slashing and burning.

Leaving aside the planned national disability insurance scheme (46.2 per cent projected annual average growth over the coming decade), the area with the largest estimated average annual growth rate in the period is child care and paid parental leave (11.5 per cent).

Hockey told his audience the PPL scheme (believed to be considered extravagant by the Audit Commission) would help women remain engaged with their employer, lift female workforce participation, and provide a boost to women’s retirement savings.

It was also a "huge benefit" for many small and medium sized businesses which would be able to match the PPL offered by larger companies and the public service.

Even if it does all the things claimed, which experts believe unlikely, the introduction of such a scheme (providing wealthier women up to $75,000 over six months) does not fit the budget narrative of the need for spending restraint over the medium term.

Hockey always knew this plan was over the top and presumably hates having to pretend otherwise. He’ll be quietly clapping if and when the Senate trims it back.

The PPL plan was one of Abbott’s most flamboyant promises and he’s determined to keep it (to the extent the parliament will let him).

Now he is making another, pre-budget promise that seems, on the face of it, to defy all that is being signalled in the Hockey story.

"We are going to keep our [election] commitments," Abbott said again on Wednesday.

There was just a slight wrinkle. Asked if he meant no election promises would be broken he said: "Now, I’m not going to say, well you know there was 27 and a half commitments and you know 26 and three-quarters are going to be kept. We will keep our commitments.

"I’m sure lots of people will argue and say, 'Well what about this and what about that?' We will keep our commitments, because the point I keep making, if there is one thing that we learnt from the fate of the former government, you cannot say one thing before an election and do the opposite immediately afterwards."

Make of this what you will. Presumably a lot of creative timing in implementing measures and some redefinitions will have to be employed to avoid a budget that might get away with being seen as mean but can’t afford to look tricky as well.

Michelle Grattan does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published on The Conversation. Read the original article.