Hockey prepares to slay entitlement

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Treasurer Joe Hockey has grabbed the MSM by the scruff of the neck today. The AFR is typical:

Treasurer Joe Hockey has warned that no group will be safe from cuts in the May budget as he extended his warnings about age pension changes to ­possible pension rate cuts and explicit warnings of tighter assets tests.

…In a dire warning about the ­economic task facing not just the government but the country, if it wished to stay competitive, Mr Hockey warned that real wages may fall in coming years and that pension rates could also fall, noting that 60 per cent of male workers in the US “have had a real cut in their incomes” in the past 40 years.

“We’ve been the beneficiaries of having real income increases. Now the pension is attached to male total average weekly earnings, which is a higher rate but it’s not always going to remain a higher rate. So we have to look at how sustainable pension increases are.”

…Mr Hockey signalled the pension age may be raised to 70…Cuts to the ABC’s budget of about ­$20 million…The CSIRO announced a further 300 job losses on Friday. The Australian Workplace and Productivity Agency is going to be “reabsorbed” into the Industry Department while 500 jobs are going in the Environment Department.

Australia needed to have a discussion “about the sustainability of our entire quality of life”, Mr Hockey said.

“It’s not just pensions and the sustainability of pensions, but it’s our healthcare, the quality of our education; it’s right across the board that we now need to have a sensible discussion about the quality of life that we want to have into the future.”

And from The Australian:

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Mr Hockey said it was probably the case, as in Britain, that one in every three children born today would live to 100.

“So, quite frankly, we need to redesign our systems to manage the fact, and celebrate the fact, that we’re all living long and we want to maintain a good quality of life along the way.’’

Asked about the fact that 80 per cent of people aged over 65 with $1 million in assets were collecting an age pension, Mr Hockey said: “Well, it’s something we need to discuss and we are discussing with the nation.’’

And we already have the shape of the ensuing politics with Labor and its press cheerleaders readying the “broken promise” label and positioning themselves to fight national interest policy by defending special interests, in a rerun of Tony Abbott’s anti-carbon tax crusade. Opposition finance spokesman Tony Burke is out with:

“The day before the 2013 election, Tony Abbott made a number of ­promises: no cuts to health, no cuts to education, no changes to pensions, no cuts to the ABC and SBS”.

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And the Fairfax metros are full of sectional interest defenses with no reference to overall policy goals.

I recommend Joe Hockey considerably ramp up the framework about competitiveness and standards of living. The Government has done a good job of softening us all up for Budget cuts but not so good a job of explaining the economic linkages beyond the ethereal need for a public surplus.

Anyways, go Joe!

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.