Palmer scatter gun Swiss cheeses Budget

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By Leith van Onselen

Clive Palmer’s Palmer United Party (PUP) is proving to be a major thorn in the side of the Abbott Government.

After vowing to oppose virtually every significant measure in the Budget, including “the imposition of a debt tax, huge cuts to public sector jobs, increased health and education costs, [and] ripping the rug from underneath our most vulnerable with reduced welfare spending and increasing the pension age…”, PUP has now threatened to blow another $9 billion hole in the Budget by abolishing the schoolkids’ bonus, the low income super guarantee and welfare bonus, while maintaining Labor’s scheduled tax cuts. From The Guardian:

[Palmer] said that if the government did not remove the measures from its mining tax repeal bills, he would combine with Labor and the Greens to consider the measures separately and then vote them down…

The mining tax-related cuts he wants to keep include:

– The schoolkids’ bonus – which provides eligible families with $410 per primary school child and $820 per high school child. Retaining the bonus will cost the budget $3.9bn over four years.

– The low income superannuation guarantee – which provides a $500 top-up to the superannuation accounts of very low income earners to make up for the vastly higher tax advantage super savings offer higher income earners. Retaining the guarantee would cost $2.7bn over four years.

– The income support bonus – a top-up for government benefits – at a cost of $955m.

He also wants to keep the last of the former Labor government’s proposed tax cuts as compensation for the carbon price – costing $1.5bn.

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Of the above measures, I agree with retaining the low income superannuation guarantee, which would go some of the way to restoring the inherent tax penalty incurred by lower income earners under Australia’s perverse 15% flat tax on super contributions (see below table).

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Individual measures aside, Palmer’s ‘oppose everything’ stance towards the Budget, along with his pie-in-the-ski proposals to abolish HECS/HELP fees for Australian university students, lower income tax rates by 15%, increase the Aged Pension by 20%, inject $80 billion into the health system, and delay $70 billion of company tax payments by one year, do not add up. Even though PUP’s scatter gun approach has yielded a few eminently sensible policies, including opposing Abbott’s wasteful paid parental leave scheme and the retention of the low income superannuation guarantee above.

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Overall, however, PUP’s blanket opposition to almost every Budget measure, without providing workable alternatives, reeks of blatant populism, and ignores the very real structural pressures facing the Budget from falling commodity prices and an ageing population.

As I have argued ad nauseum, being an effective opposition party is about developing an alternative plan for the nation, not just saying “no” to each and every major reform, while offering up a grab bag of unworkable and unrealistic policies.

Under the current dysfunctional parliamentary make-up, it is difficult to see how any meaningful reform can be achieved, whether by the Coalition or Labor. And that’s bad news for the nation as a whole.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.