Paul Fletcher (Bradfield, Liberal Party, Parliamentary Secretary to the Minister for Communications) Share this | Hansard source

I am very pleased to speak on the Social Services and Other Legislation Amendment (2014 Budget Measures No. 1) Bill 2014 and Social Services and Other Legislation Amendment (2014 Budget Measures No. 2) Bill 2014. These bills introduce an important package of measures in the 2014 budget in the social services portfolio. The measures in these bills take their effect while supporting the most vulnerable and, at the same time, taking significant steps to ensure that the government can live within its means—something which is of fundamental importance if we are to continue to deliver the support which is so important for those who are vulnerable in our community and who need that support.

In the time that is available to me this evening, I would like to cover three points. Firstly, I would like to make the point that if there is an imperative on this government to get spending under control, then, as a matter of logic, it follows that you need, amongst other things, to focus on the areas of largest spending within the Commonwealth's budget. The second thing that I would like to highlight is that these are decisions that all governments need to make, and, notwithstanding some of the claims we have heard from the other side of the parliament this evening, similar measures have been introduced by Labor in the past. I would like thirdly to focus on the importance of indexation and measures which adjust the rate of indexation as a particular policy tool for taking decisions now which will assist us in getting spending under control over the longer term.

Let's turn firstly to the proposition that we have a task that faces this government on behalf of the Australian people to get the growth in spending under control. Let's remind ourselves of the legacy which this government has inherited from the wanton and irresponsible approach of the previous Rudd-Gillard-Rudd government. Over the period 2012-18 the previous government had planned a spending increase of 16 per cent in real terms. That puts us right ahead of the pack. Countries like the Netherlands at one per cent, Belgium at two per cent, Japan at three per cent and many other countries with which we would ordinarily compared ourselves have planned a growth of spending which is well below the profligate increase in spending which the Rudd-Gillard-Rudd government had been pursuing during its time and which it had baked into the forward estimates in the budgetary settings which we inherited.

It is no coincidence that, as a consequence, the previous government racked up deficit after deficit, and it is also no coincidence that therefore, as a consequence, government debt was on track to reach a gross figure of $667 billion by 2023-24 had no corrective action been taken. Of course, the key point is that this government—the Abbott government—is acting responsibly to take corrective action.

If you are going to take corrective action in relation to a budget which in 2014-15 involves total expenditure of around $415 billion then the logical thing to do is to look first to the big items of expenditure. Of that $415 billion, where are the programs and line items where the largest amount of spending is occurring? Of course it is a number of programs within the social security portfolio. If we look at table 3.1 in the budget, we see that, of that $415 billion to be spent in 2014-15, $42 billion is income support for seniors, $19.3 billion is in the family tax benefit, $16.9 billion is income support for people with a disability, $10.2 billion is job seeker income support, $9.5 billion is residential and flexible care and $7.6 billion is income support for carers. I am simply making the point that, if you have imposed upon you by the incompetence of the previous government a need to get spending under control—if the national interest dictates that you must take action to get spending under control—then as a matter of logic it follows that you must make sure that you go to the largest spending programs and that you have actions and initiatives that go to the largest spending programs. As I have indicated, a significant number of the largest programs fall within the social security and welfare area.

Indeed, social security and welfare in total in 2014-15 makes up $146 billion of the $415 billion in total. Therefore, it is of the first importance that there are policy measures being pursued in the social security portfolio—as indeed there are in portfolios across government—to get spending under control. This government is not shirking its responsibility in the area of social security. We have a task to get spending under control and, what is more, we have a significant structural challenge and a challenge that is simply going to get worse if we do nothing about it.

We have an ageing population. We all know the figures. We all know how the dependency ratio is going to change so that the number of people in the workforce as a proportion of the number of people who are not in the workforce and who are, in the main, drawing on income support funded by those taxpayers who are in the workforce. That ratio is moving against us and will continue to move against us over time, creating an additional structural pressure. Therefore, a responsible government must identify that pressure and must act to respond to it. Indeed, one manifestation of the changes and the trends that we are facing and of the critical importance of the social security and welfare budget within our broader budgetary task is the simple quantitative fact that, for each month that the government's budget measures, including the measures contained in the bill before us this evening, are delayed, it will cost Australian taxpayers over $117 million.

The strategic importance of the measures in this bill cannot be overstated. If you are going to reinstate spending discipline—if you are going to take action to deal with the challenges that we face—then you need to address measures in the social security and welfare portfolio just as you need to address such measures across all portfolios.

The second proposition that I would like to put to the House this evening is that all governments need to make necessary and difficult decisions in the social security portfolio from time to time. That is again simply a logical and inevitable corollary of the fact that such a very large proportion of total Commonwealth spending falls into this portfolio. Again, it is an absolute incident of a civilised society that we provide support to those who need it; but, if we are to do that, to continue to afford to do that and to do that sustainably, we must make sure we manage this spending in a disciplined and strategic fashion.

In listening to our opponents on the other side of the chamber you would think that these kinds of measures were ones they would never have contemplated taking during their time in government, but I was interested to read a recent article in the Australian Journal of Labour Economics, which had this to say:

In the 2009-10 Budget the government held the thresholds for income-testing the lower rate of Family Tax Benefit Part B and the Baby Bonus fixed in nominal terms, and changed from wage to price indexation for FTBA.

So some of the policy measures and techniques that are being used in this budget, that being given effect to in the legislation before the House this evening, are policy measures of a kind which the previous Labor government also employed from time to time. It is a matter for regret that perhaps they did not show more discipline and application in the use of these kinds of measures.

Another example I could point to is the decision that the then Labor government made to increase the eligibility age for Newstart from 21 to 22. From the shrieks of indignation that we hear from the other side of the chamber you would think that these kinds of measures had never been contemplated by Labor. But, in fact, under the previous Rudd-Gillard-Rudd government the decision was taken to increase the eligibility age from 21 to 22. Similarly, in January 2013 it was the Gillard government's decision to switch recipients of Centrelink's single parent payment to the Newstart allowance. That had the impact at the time of moving a substantial number of sole parents onto Newstart.

Nobody says these decisions are easy—they are not easy decisions—and this government absolutely recognises and understands that millions of Australians depend upon social security in its various forms. Therefore, these decisions must be made in a careful and conscientious fashion. But at the same time we need to take decisions which cause the system to be sustainable and affordable. Manifestly, in the main, in the approach that the Rudd-Gillard-Rudd government took for over six years there was a failure to take decisions that maintained the financial sustainability of the system.

I want to turn thirdly, therefore, to the fact that there are a number of techniques that are used in relation to this budget and that are contained in the measures in the bill this evening which involve, for example, a pause to an indexation or deal with matters such as the thresholds for eligibility for particular benefits. It is important to note that these are decisions which, if we take them now and if we stay the course with them, will deliver increasing structural savings for the budget over a number of years without needing to reduce the payments that any individual is receiving. I want to quote a recent article by Ross Gittins in the Sydney Morning Heraldnot, it might be said, an unqualified friend of the Abbott government; that might be an understatement, but he is, nevertheless, a respected economic journalist. He had this to say:

The thing about the indexation solution is that the initials that is a small, but they compound with each year that passes.

I want to make another point about the importance of the measures that we are taking in this area—the measures contained in the bill before the House this evening. I want to refer to some remarks recently made in a speech to the Sydney Institute by the Treasurer Hockey, who highlighted the fact that under the welfare system some half of all households receive a taxpayer funded payment of some sort. Again, that goes to the point that it is so important that we focus on the totality of the expenditure in this area if we are to achieve our aggregate objectives in terms of budget but also, and therefore very importantly, maintain and preserve our capacity to provide the vital support to those who need it. Because if we lose control of our budget, if we lose control of our financial position, then ultimately the risk we face is that we are not in a position to provide the financial support that those who are unable to provide for themselves need, the financial support that is expected as an element of life in a civilised society.

The measures in this bill will have a significant impact on expenditure across a range of programs in the social security portfolio. They are measures which are part of our overall approach to getting spending under control to a sustainable path to reducing the deficit each year and to addressing the very significant structural challenges that the Commonwealth budget faces and that reflect in turn underlying demographic factors. It is very important that we take necessary if difficult decisions now so that we can preserve our capacity to provide support to those who need it and that we can preserve that capacity over the long term. The alternative is the approach that the previous government took: putting off necessary decisions year after year; continuing to spend in a profligate, undisciplined, poorly managed way; racking up ever-growing debt and deficit; and putting off necessary decisions, failing to take the decisions that are in the interests of Australians—and, ultimately, that will disadvantage all Australians, including those who are the ones who most need the support of government.

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