Budget week was predicted to be a tough time for the Government, but it’s the Coalition’s momentum that’s taken a hit.
In his budget reply last Thursday evening, Coalition leader Tony Abbott ventured out of his small-target cave.
His speech and announcements were, at first blush, deemed competent and assured.
The Australian’s Paul Kelly was perhaps the most effusive, describing as “brilliant moves” Abbott’s declaration that he may appropriate the Government’s budget savings in the forward estimates and would maintain Labor’s carbon tax compensation measures even though he would abolish the tax.
But by the weekend, Abbott’s speech and announcements generated a flurry of negative GST, superannuation and power prices headlines in both the Murdoch and Fairfax press.
Just minutes into his speech, Abbott seemed to promise lower power and gas prices.
“The carbon tax will go but no-one’s personal tax will go up and no-one’s fortnightly pension or benefit will go down. So with a change of government your weekly and fortnightly budgets will be under less pressure as electricity prices fall and gas prices fall and the carbon tax no longer cascades through our economy,” Abbott said.
The promise was unnecessary. It is loaded with risk.
Retail power prices, according to the Australian Bureau of Statistics, rose 72 per cent in the five years to June 2012 (before the carbon tax was introduced last July). Retail costs of gas and other household fuels rose by 45 per cent in the same period.
Abbott cannot guarantee a fall in power prices in a carbon tax-free electricity market.
The promise may haunt him from now until the election and, should he win the September election, beyond.
Just two days after his speech it was causing him problems. In Saturday’s Herald Sun, power companies Energy Australia, Origin and Australian Power and Gas, and the Energy Supply Association of Australia, all refused to confirm that Abbott’s policy to abolish the carbon tax would lower power prices.
Energy Supply Association chief executive Matthew Warren said: “If the carbon tax is scrapped, it’s not certain all of that money will come off power bills. That’s because it will increase other costs, such as renewables schemes.”
Energy Australia spokeswoman Emma Tyner said: “Any changes to electricity prices will be dependent on the full suite of policy and regulatory measures.”
Quizzed on the issue, Abbott told ABC News24: “I am confident they (prices) will go down. Obviously, the ACCC will be out there policing the removal of the carbon tax.”
He then said: “Can I say that the power price will go down by 10 per cent on 1 January 2014? I can’t say that, but I can say that the carbon tax currently adds 10 per cent to the price of power and the carbon tax will be gone under the Coalition.”
Over the past year Abbott said there would be no unexpected adverse changes to superannuation under a Coalition Government. That position was seemingly swept aside last Thursday when he announced that an Abbott-led Government would delay by two years the increase from 9 per cent to 12 per cent in the compulsory contribution to superannuation.
“Pensions industry says workers will lose $21,000” the sub heading said.
There were similar critical stories in The Australian, The Age, the Sydney Morning Herald and the Daily Telegraph.
Industry Super Network chief executive David Whiteley said the policy was likely to reduce a typical 30-year-old worker’s retirement earnings by $21,472 and reduce national savings by $45 billion over the next seven years. He said Abbott’s plan to remove the tax cut for low-income super would cost another $10 billion.
“The super policies foreshadowed by the Coalition would mean $55 billion less for super funds to invest,” Mr Whiteley was quoted as saying in The Australian.
In his media release of May 17, Mr Whiteley said: “Given the enormous cost to individual’s (sic) retirement incomes and the economy ISN (Industry Super Network) urges the Coalition to reconsider its plans.”
The GST hasn’t been a serious election issue since former Prime Minister John Howard promised it at the 1998 election. Howard won the election, just. The policy cost him many votes and seats.
But the tax was back in the headlines at the weekend after Abbott’s budget reply committed a Coalition Government to a “comprehensive white paper on tax reform” in its first two years.
“We’ll finish the job that the Henry Review started and this government squibbed,” Abbott said.
Liberal frontbencher Michael Keenan fanned the GST flames, saying it would be “odd” if the tax wasn’t part of the white paper’s brief.
Senior Coalition members Christopher Pyne and Joe Hockey did their best over the weekend to extinguish the flames. Pyne said: “The Coalition has absolutely no plans to change the GST. It’s a matter for the states and territories if they want to argue for it. It’s not a matter for the Coalition.”
Liberal NSW premier Barry O’Farrell wasted no time in taking up Pyne’s challenge.
“People know the current tax system is failing,” O’Farrell told Sky News on Sunday.
“There are regressive taxes that we can only eliminate if we are compensated and the best way to do that is through the GST. All options should be on the table, broadening the base, looking at the rate and also the rebates back to the states.” Disaster. The GST was back on the agenda.
Abbott, in his budget reply, also seemed to create a vulnerability for himself and the Coalition by saying he would keep Labor’s carbon tax compensation measures even though he would abolish the tax.
As Michael Gordon in The Age pointed out, Abbott’s treasury spokesman Joe Hockey, just weeks ago, said “if there is no carbon tax, there is no need for compensation”.
Abbott says there is a budget “emergency”. If so, why compensate people for a tax that will no longer exist?
The Saturday Age editorial zeroed in on this point. “There is simply no logic in this, and none was offered,” it said.
Budget week was predicted to be a tough time for the Government. Ironically, it’s the Coalition that’s taking a hit.
Laurie Oakes in his Saturday column nailed it. “Tony’s reply lifts Labor.”
First published ABC 20 May 2013. Author Mike Smith. Photo: ABC/aap – Alan Porritt