The AFR’s Laura Tingle published an long article over the weekend analysing the politics surrounding the “Age of Entitlement”. Let’s take a look at the key arguments:
The Prime Minister and Treasurer have made it clear that when they talk about the need to reset individuals’ expectations of entitlement from government they are not talking about the usual beating up on the unemployed and welfare recipients…
The ultimate test will be just how the government defines “middle-class welfare”. Ministers insist, for example, that it does not include the Coalition’s planned paid parental leave scheme.
…“I have no doubt that most of the senior members of the government have the family tax benefits firmly in their sights,” one Coalition source says…
It is instructive that Hockey this week laid the blame for the entitlements mentality on the Labor government, and only more obscurely acknowledged the Coalition’s role in building up middle-class welfare.
“To a large extent, the budget that we inherited from the previous government reflects the entitlement mentality that has dominated government decision-making over recent years,” Hockey said.
“Too many taxpayer dollars have been spent on corporate and middle-class welfare and too often previous governments have been drawn into areas that are better left to the private sector.”
But does that mean Hockey and Abbott will, for example, start to close down a system which leaves anyone drawing a superannuation pension outside the tax system and eligible for the Seniors Health Card?..
Ending the age of entitlement is a worthy ambition, and one that will ultimately help determine the sustainability of Australia’s public finances. But it will be a difficult task for this Government, which will need to unwind much of the “middle class welfare” dolled-out by the Howard Government during the good times, and in the process risk alienating its supporter base.
Baby bonuses, family tax benefits, aged pensions, superannuation – these are all areas which received largesse under the Howard Government that will now need to be wound-back. And then there are other sacred cows like negative gearing, which no party seems willing to touch, despite its egregiousness.
The situation is particularly acute when it comes to aged pensions and superannuation tax breaks, where Australia finds itself in the unsustainable situation whereby benefits to households aged over 65 years of age have ballooned just as their incomes and wealth have grown, which will place undue pressure on the Federal Budget as the baby boomer generation retires and the share of workers in the economy shrinks.
As noted by Tingle, the highly inconsistent approach taken so far by the Government also makes it an easy target for attack.
While in opposition, we witnessed the Coalition oppose nearly every reform targeted at big business that would have improved the sustainability of the Budget, including opposing the mining tax and changing fringe benefits taxes on leased cars, as well the introduction of Abbott’s promised paid parental leave scheme, which will lavish taxpayer largesse on higher income families. And so far in Government, the Coalition has jettisoned the former Labor Government’s planned changes to superannuation, maintaining generous tax breaks for around 16,000 wealthier Australians whilst cutting tax concessions for 3.6 million workers on lower incomes – a decision that will worsen the equity and sustainability of the Budget. It has also provided politically motivated subsidies to Tasmanian firms – Huon and Cadbury – while denying SPC Ardmona similar assistance, and it has back-flipped from its car industry support, as well as shown reluctance to tackle the Aged Pension.
Ultimately, if the Coalition is to be successful in ending the age of entitlement, it must ensure that cutbacks are broad-based, with the burden shared by all segments of the economy and the methods that determine each decision should be transparent and comparable.
