Tony Abbott's signature paid parental leave scheme is inconsistent with government claims that the "age of entitlement" is over and the country faces a "debt crisis", the Liberal National party dissident Ian Macdonald has told the Senate as he sharpened his criticism of key government policies.



Macdonald – one of two Coalition senators who declared on Monday they could not support the government's deficit levy legislation – engaged in a public debate with the finance minister, Mathias Cormann, during the Senate’s in-depth consideration of the bill on Tuesday.

Macdonald, who raised paid parental leave despite it not being the subject of the legislation before the parliament, bluntly told Cormann the minister's arguments had failed to win him over and did not "make sense".

A short time later the Senate passed the Temporary Budget Repair Levy Bill without a division being called, denying Macdonald and the fellow critic, Cory Bernardi, the opportunity to be recording abstaining or crossing the floor.

The legislation – which ensures people pay 2% extra tax on income above $180,000 a year for three years – was assured to pass given Labor's support.

Abbott had earlier told colleagues at the Coalition party room meeting of the need to be firm and strong, to "stick together and stay the course" in pursuing policies and budget measures.

Macdonald's central argument against the deficit levy was its design because it was applying only to individuals and did not extend to major companies.

Cormann told Macdonald the suggestion could adversely affect economic growth and job creation: "If we were to increase company tax it would make it harder for us to grow, to get out of the situation that we inherited where the economy is growing below trend."

Macdonald said the minister could "not have it both ways". Macdonald said he accepted there was a debt crisis – requiring people to contribute to budget repair – but he pointed out the Coalition was planning to fund its generous paid parental leave scheme through a 1.5% levy on 3,000 big businesses with taxable income above $5m.

"I'm not suggesting we should increase company tax beyond 30% … but if we're doing that why then are we introducing what many people say is a very generous paid parental leave scheme at a time where we're having a debt crisis?" Macdonald said.

He suggested the revenue from this paid parental leave levy could be redirected to debt reduction, potentially sparing other Australians from having to face a deficit levy or reduction in other government assistance.

Macdonald said he applauded the treasurer, Joe Hockey, for declaring the "age of entitlement" was finished but many people had told him it did not look like that was occurring in light of the paid parental leave scheme.

"So wouldn't this be an appropriate time, with the support of the commission of audit, to say, ‘yes the paid parental leave scheme is a good goal … it's something that a wealthy, prosperous Australia could and should enter into, but perhaps now is not the appropriate time’?"

Cormann, responding during the Senate debate, said the scheme was designed to increase women's workforce participation. He said the other area needed to achieve this goal – childcare policy – was subject to a Productivity Commission review.

"When it comes to paid parental leave I know that it is easy to look at paid parental leave as if it is another welfare entitlement. In our view it is not that," Cormann said.

He said women should be able to access their full replacement wage "up to an appropriate level" while they were on parental leave, just as workers received full wages when they took annual, long-service and sick leave.

Macdonald rebuffed Cormann's argument that an increase to company tax could "detract from growth", pointing out that the government was reducing company tax by 1.5% before imposing a 1.5% levy on big business for paid parental leave.

"Minister, I thank you for your answers, although they haven't convinced me," Macdonald said.

The Labor senator Sam Dastyari seized on the dissent: "If you can't even convince your own backbench, your own MPs, to support your budget measures, why on earth should the rest of us support them?"

Cormann replied that although he had not been able to persuade his "good friend and valued colleague" Macdonald he had indeed been able to convince Labor to support the deficit levy.

In parliamentary question time, Abbott dismissed Labor’s call to scrap his "unfair and unaffordable" scheme.

The prime minister said the scheme was fair and affordable because it was funded by a levy on the 3,000 most profitable businesses. He signalled his strong determination to push ahead with the planned scheme, saying it would ensure "one rule for all".

Abbott said: "Why should public servants have access to paid parental leave at their wage and not the rest of Australia? Why should the leader of the opposition's staff have access to paid parental leave at their wage and not the rest of Australia?

"Under this government they will get paid parental leave at their wage – that's fair, that's just, that's modern and it's social reform and it's economic reform and it will be delivered by this government."

Macdonald, a former minister in the Howard government, has become increasingly active in speaking out against government policies. He has previously revealed his anger at being relegated to the backbench after the September election, and publicly criticised the level of control exercised by the prime minister's office.

Several other Coalition MPs have publicly spoken out against the paid parental leave scheme and flagged their intention to cross the floor when it comes to a vote.