By Leith van Onselen

The opposition parties continue to follow Tony Abbott’s “Dr No” example in opposition and oppose nearly all attempts at Budget reform.

Today, Fairfax has revealed that the Australian Labor Party (ALP) will join the Greens in opposing 20 of 32 Budget savings measures, including:

…the restoration of the federal fuel excise. …scrapping of the $800 Seniors Supplement for self-funded retirees, which was meant to recover $1059 million over five years from July. …a government plan to freeze the rates of Family Tax Benefit payments for two years at a saving of more than $2.5 billion over four years. Another change to limit the eligibility to FTB (B) payments to those with with children under six is also to be blocked, denying the Abbott budget repair task another $1.9 billion. …plans to introduce a $7 GP co-payment, the delayed pension eligibility age to 70 by 2035, and new work-for-the-dole requirements on young people slated to save $1.2 billion.

However, the ALP has at least agreed to support “about $2.8 billion worth of savings including the calculation of superannuation income in eligibility for the Commonwealth Seniors Health Card and the lowering of the income cut-off for Family Tax Benefits (B) from $150,000 a year to $100,000”.

It is estimated that killing the above Budget measures would blow a combined hole of at least $11 billion over the four year forward estimates, and much more thereafter.

While some Budget’s measures in isolation are undoubtedly highly questionable, such as tougher requirements on young unemployed, changes to university fees and funding, and of course Abbott’s flawed paid parental leave scheme, the Budget at least acknowledges that the nation’s finances are unsustainable in their current form and need fixing.

Opposition to fuel excise is especially odd and politically opportunistic. Freezing fuel excise indexation in 2001 was one of the biggest blunders of the Howard Government, and now costs the Budget some $5 billion per year in lost revenue, with this figure growing over time with inflation. It has also narrowed the tax base and increased the tax burden on less efficient income taxes – precisely what you don’t want with an ageing population and a shrinking worker share.

Labor and the Greens opposition to raising fuel excise is also highly hypocritical in light of their previous support for emissions trading and/or a carbon tax. As noted yesterday, fuel excise is a defacto pollution tax. Opposing an increase in fuel excise, whilst lamenting climate change, is incoherent.

As noted by The AFR’s Laura Tingle today, it also appears that the ALP has shot itself in the foot on this issue, wrongly assuming that the Greens would pass the excise measure:

In what was a too-clever-by-half punt, Labor thought it could get the best of both worlds by counting on the Greens to support the Coalition on the indexation move, thus avoiding any political fallout but gaining the revenue whenever it eventually gets back to government, despite never having had the courage to make the move on fuel excise itself when it was in government The cynical ploy therefore dished up just what Labor deserved. But the budget will be $1.8 billion worse off over the next four years.

Opposing changes to pensions and seniors entitlements is equally irresponsible. Like it or not, the proportion of workers supporting retirees is set to plummet over coming decades, making the pension and aged-related spending a growing strain on the Budget, and working-aged Australians in particular (see next chart).

More broadly, it is fine to oppose Budget savings if you can provide an alternative plan to cut expenditure and/or raise taxes. But simply opposing measures without providing alternatives, as has been done by the opposition parties, ignores the very real structural pressures facing the Budget from falling commodity prices and an ageing population.

Some low hanging fruit that could be targeted by the opposition parties as alternatives to budgetary reform could include closing Australia’s more egregious tax expenditures – including overly generous superannuation concessions (which mostly benefit the wealthy), quarantining negative gearing so that losses from an asset can only be claimed against income from that same asset, removing the capital gains discount on investments, and removing tax concessions on company cars – as well as abolishing Abbott’s paid parental leave scheme.

Reforms to these areas alone would save many billions of dollars and improve equity in the process.

If the opposition parties were credible, they would also be championing broad-based tax reform, with a focus on both broadening the tax base and shifting it towards more efficient sources – namely away from productive enterprise and onto consumption, land and resources.

Being in opposition is about developing an alternative plan for the nation, not just saying “no” to each and every major reform.

Unfortunately, both Labor and the Green’s positions are not totally unexpected, given they are merely following Abbott’s “Dr No” script when he was in opposition. It proved to be clever politics, even if it is precisely the opposite of what Australia needs if it is to successfully navigate the challenges ahead.

It also means that the prospect of achieving genuine reform of any kind is diminished, in favour of pandering to vocal sectoral interests.

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