Labor must swallow some budget medicine

The biggest secret in last week’s federal budget was that it contained a number of good ideas. Unfortunately, a sledgehammer approach to policy has rewarded Labor and the Palmer United Party with a populist agenda -- an agenda that will do little to address our medium- and long-term budget issues.

It’d be a fair understatement to say that the federal budget was poorly received. Widespread criticism across the mainstream media -- from both left and right-leaning publications -- has created the sense that this is a budget that bereft of good ideas; a budget that achieves nothing more than undermining Australia’s social democracy.

With a little compromise -- and an opposition that was more interested in policy than politics -- many of the measures in the budget could be adjusted modestly to be more palatable to the Australian public.

This would certainly be preferable to the opposition parties taking the opportunistic Tony Abbott approach to opposition and simply saying no to everything.

Opposition leader Bill Shorten has effectively said that he will oppose almost every significant measure contained in the budget. This includes both the deficit tax and the fuel excise tax, which would normally be policies that a left-leaning party would support. He even flagged that he would say no to changes to the superannuation system which overwhelmingly favour the wealthy.

Clive Palmer has taken the populist position on every notable issue. After bringing some sense to an increasingly hysterical debate about government debt, he compromised his legitimacy by simultaneously advocating for free university, lower taxes and raising the pension.

Palmer is everything to everyone but in doing so he’s made a range of suggestions that wouldn’t pass grade three maths. A little like Tony Abbott at the last election.

For months -- ever since I started at Business Spectator -- I have advocated for a range of reforms to the age pension, healthcare spending and taxes. These were the three areas that were poised to blow out the budget over the next few decades; areas that had to be addressed if the government was serious about creating a sustainable budget in the long term.

With the exception of tax reform, the Abbott government has proposed a range of reforms to both the age pension and healthcare spending. Some of these proposals are quite sensible and shouldn’t be so easily discarded by an opportunistic opposition or a frustrated public.

Let’s take the age pension, for example. We know that we have an ageing population problem -- that is beyond dispute -- and that spending on the age pension and aged care will rise significantly. The Productivity Commission believes that without reform, spending on the age pension and aged care will rise by around 2.8 percentage points of nominal GDP by 2059-60.

Raising the retirement age will boost participation in the labour force, while simultaneously increasing superannuation balances and reducing spending on pensions. The truth is the retirement age should have been raised decades ago -- around the time that Australia started the shift from manual labour towards easier service roles.

There was also no good reason why the pension was typically indexed to male total average weekly earnings rather than inflation. It is particularly hard to justify as we begin to rely on an increasingly small share of the population to support the elderly.

How about health policy? The main problem with the proposal to introduce a Medicare co-payment is that it does a poor job of protecting the vulnerable -- regardless of whether they are old or young or chronically ill.

The policy would also work better if it didn’t apply to all procedures or consultations. For example, I don’t think it is a particularly good idea to give parents a disincentive to have their children immunised.

The main justification for scrapping the idea completely is that people arguably lack the sophistication to distinguish between the times they have a legitimate health concern and the times they would be wasting medical resources.

But these are issues that could be ironed out via rigorous public debate. Improving the efficiency of the sector, while maintaining health outcomes, is paramount to not only creating a long-term sustainable budget but also a vibrant economy.

As for the fuel excise tax, are we really debating that a modest tax rise that gets swamped by daily volatility at the gas pump is a bad thing? Particularly a tax that in the long term would help to combat traffic congestion and pollution.

The Coalition has proposed a range of policies that are poorly conceived -- such as their paid parental leave scheme and cuts to welfare benefits while youth unemployment remains elevated -- but we should not ignore that they have also proposed some measures that will help to create a long-term sustainable budget.

Even the poorly conceived policy recommendations could be moderated to be more palatable for the Australian public.

Reforming healthcare, the age pension and the tax system is unavoidable and any politician telling you otherwise is lying. The nature of this reform is the great question that will plague politicians over the next half century.

By focusing on politics rather than policy and ignoring these issues outright, the opposition is doing the Australian people a disservice. Australia needs rigorous debate and compromise among the major political parties but unfortunately there’s no political leadership in sight.