The Age of Entitlement Election

It was rather excruciating yesterday watching the likely future treasurer, Joe Hockey, grimly supporting Tony Abbott’s paid parental leave scheme.

The title of his speech in April last year to the Institute of Economic Affairs in London – “The End of the Age of Entitlement” – would have been going over and over in his head to the tune of The Age of Aquarius. Or perhaps not; politicians need to have short memories.

The age of entitlement in Greece is over, that’s for sure (it’s got paid parental leave at 100 per cent of salary for 17 weeks, but not for long I presume). And in Poland (100 per cent for 24 weeks, no ceiling). And in Italy (80 per cent for 20 weeks).

In Australia, on the other hand, the age of entitlement is just getting warmed up.

In fact the 2013 election could well be called the Age of Entitlement Election: the campaign effectively began on January 30, when Julia Gillard announced the (wrong) date, and since then there has been a huge increase in both announced government spending, and the budget deficit.

A month after Joe Hockey’s excellent speech, Wayne Swan brought down the 2012-13 budget, showing a $2 billion surplus for 2013-14. This is now a deficit of $30.1 billion.

Despite that we are now having an election choc-full of entitlements, including yesterday’s bazooka from the Coalition of 26 weeks paid parental leave at 100 per cent of salary up to $150,000.

Joe Hockey won’t thank us for reminding him, but what he said in 2012 was: “The problem arises however when there is a belief that one person has a right to a good or service that someone else will pay for. It is this sense of entitlement that afflicts not only individuals but also entire societies. And governments are to blame for portraying taxpayer’s money as something removed from the labour of another person.”

Universal paid parental leave is a good idea. It levels the employment playing field between large and small businesses, encourages breastfeeding, improves child welfare and encourages women to remain attached to the workforce. Full pay is also, in theory, a good idea – like mining the moon.

The current scheme of the minimum wage for 18 weeks, introduced in 2011, was designed by the Productivity Commission in 2009, in a 585-page report that followed a long inquiry including public hearings and hundreds of submissions.

Tony Abbott has now made a ‘Captain’s Call’ – a phrase that means a totally unresearched and unsupported pronouncement – that the minimum wage is not enough money and that 18 weeks is not enough time. The Captain’s Call has further decreed that the increase will be funded by a levy on companies with taxable incomes over $5 million.

It looks like the levy will fall short by about $3 billion a year, although we have to wait till the end of the campaign to find out (and I doubt that we’ll really find out much then).

Yesterday’s policy announcement said: “the net additional cost of the scheme is $6.1 billion over the forward estimates period”. Since the scheme starts in two years’ time and the forward estimates are four years, that suggests it’s $3 billion a year.

Australia’s budget is now in large and growing structural deficit. Not only is neither party addressing this issue in the 2013 campaign, each party is, in its own way, making it worse.

The Gonski education reforms have turned into pure extra cash, especially since the Coalition pledged to scrap the part of the Australian Education Act 2013 that gives the federal education minister more power to improve accountability, while still giving the money to the states.

The Centre for Independent Studies says that the new DisabilityCare scheme will cost $22 billion a year after 2018-19 based on government figures, but that this underestimates the cost because the impact of scheduled pension increases between 2017 and 2023 are not included.

And then there’s the Northern Territory’s entitlement to a lower company tax rate, which could end up costing anything depending on how many firms decide to exploit it.

None of the big new schemes of the 2013 election is bad in itself; in fact they’re all good. But they add to a big increase in entitlement spending at exactly the wrong time. Joe Hockey was right, but wrong.