While Canberra, and a lot of journalists who should know better, talk about the benefits of (inaptly named) “free trade deals”, it pays to remember that the biggest wins from trade agreements almost always arise from the barriers we ourselves remove in our own economy, rather than the barriers the other party removes.
Similarly, while we might focus on what the Richard Di Natale-led Greens extracted from the government to support its age pension changes (hint: basically nothing), the real issue is the broader benefit it will achieve. As the government itself is happy to admit, the changes reverse the ridiculously generous adjustments to taper rates for part-pensioners, introduced by a desperate Howard government in 2007 as part of its Rudd-induced strategy to buy another term in office. It was bad policy then, and reversing it is good policy now.
Wealthy part-pensioners will therefore go back to the pre-2007 tapering arrangements, based on lower asset thresholds.
Sadly, it’s a replacement for another piece of good policy, the “age of entitlement” era decision to reduce age pension indexation to a lower level, a gutsy decision for a party that relies heavily on pensioners as the core of its public support. Both measures are justified, as is the dumping of seniors’ supplement that Labor has agreed to — another piece of Howard-era largesse long past its use-by date.
The objection of Labor and some seniors’ groups to the asset test and taper rate changes is that it is fiscal discipline (around $3 billion a year in total) at the expense of middle-income pensioners, i.e. those too wealthy to be on the full pension but who weren’t wealthy enough to fully fund their own retirement. This of course is true, though not an excuse to oppose the government’s changes. Yes, the government is being unfair and fiscally irresponsible in failing to address the extensive handouts it provides via the tax concession system to wealthy superannuants. Just because they’re retirees doesn’t mean they shouldn’t pay at least some fraction of the level of tax on their earnings that the rest of us face. As Crikey has demonstrated before, super tax concessions are the least sustainable expenditure in the budget, far bigger and growing far more quickly than various other “unsustainable” expenditures.
The problem isn’t merely that a desperate Tony Abbott is resistant to super tax changes because he wants to portray Labor as the party of higher taxes (despite massively increasing the amount of tax he’s taking from us as a proportion of GDP); it’s that self-funded retirees are the inner sanctum of the Liberal Party base, more so than pensioners, and the big banks are key supporters of the Coalition. Both banks and self-funded retirees will look askance at any proposal that would have them rolling in less untaxed cash than they do currently.
But this is perfect-is-the-enemy-of-the-good stuff, of which the Greens are frequently accused. Rather than allow the government’s stupidity on super tax handouts to prevent them from supporting policy that is sensible in itself, they’ve allowed it through.
With any luck, the Greens will now have a change of heart on the government’s efforts to reverse another appalling and costly Howard decision, to dump fuel excise indexation. That has cost the budget tens of billions in lost revenue since 2001. The Greens would prefer the revenue go toward public transport, rather than into a notional road-building hypothecation fund that the government thought would provide a political fig leaf for the tax rise. It’s an argument over a fiction, and no basis on which to oppose a sensible measure.
Crikey is committed to hosting lively discussions. Help us keep the conversation useful, interesting and welcoming. We aim to publish comments quickly in the interest of promoting robust conversation, but we’re a small team and we deploy filters to protect against legal risk. Occasionally your comment may be held up while we review, but we’re working as fast as we can to keep the conversation rolling.
The Crikey comment section is members-only content. Please subscribe to leave a comment.
The Crikey comment section is members-only content. Please login to leave a comment.