Tony's turn under the fiscal spotlight

Opposition leader Tony Abbott will have to provide some answers on how he plans to run the country in his Budget response tonight. Picture: Ray Strange Source: The Courier-Mail

WHEN Opposition Leader Tony Abbott rises to give his formal reply to the Budget tonight, he will feel a greater than usual weight of expectation.

Treasurer Wayne Swan has delivered what will almost certainly be his last Budget.

Unless Labor can pull off a miraculous last minute turnaround, Abbott  is almost guaranteed to be prime minister in a few months.

But there is a lot we do not know about how Abbott would run the country.

The Budget creates a number of questions the Opposition Leader will be forced to answer.

How will he repair the Government's finances? Which spending and saving measures will he keep? Which will he ditch or change? And what other cuts or tax hikes will he use if he rejects savings in the Budget?

Swan has embarked on this line of attack on the Opposition because, let's face it, he has little ammunition left.

But Swan has a point. To be fair to the voters who the polls suggest are soon to elect him to office, Abbott should provide more detail about his plans.

So far the Opposition Leader has kept his cards pretty close to his chest. He has cast doubt over the Government's forecasts and suggested he will wait until the pre-election Budget update before finalising his figures.

Abbott has vowed though to take his time assessing the information available to him before spelling out his decisions - which makes sense given his attacks on the Government for its changing forecasts and broken promises.

Opposition Leader Tony Abbott with Joe Hockey and Jamie Briggs with The Little Book of Big Labor Waste. Picture: Gary Ramage

He has foreshadowed a commission of audit to identify areas of waste that can be cut. This is a politically risky vow given the backlash over the Costello audit in Queensland, but it's one that gives a future Coalition government some scope to come up with new savings well into its first term.

Abbott has also accused Swan of laying "booby traps" in the Budget for the next government.

By including big ticket spending plans for several years ahead on school funding, disability insurance and infrastructure Labor has done its best to insert its own agenda into the next two terms of a likely Coalition government.

An Abbott government can of course change some of these. But given its support for a disability insurance scheme and suggestions it will keep the school funding deal if a majority of states sign up, the Coalition could find itself having to justify any changes it makes to ideas that were put up in the dying months of Labor's administration.

On infrastructure, Abbott has already pledged to spend more on some road works, such as the upgrades to Brisbane's Gateway Motorway but he has cast doubt on urban rail projects, such as the city's Cross River Rail.

The Opposition Leader has not yet said whether he would adopt or reject some of the $43 billion in Budget savings, such as hits on corporate tax and cuts to family payments and the Baby Bonus, but there have been some pretty inconsistent messages coming out of his own side on some of these measures.

This pressure seems to be increasing given the political confidence in Coalition ranks.

Some in the National Party oppose cuts to the Baby Bonus, along with Abbott's own generous paid parental leave scheme, because they see the measures as discriminating against stay-at-home mums.

Tony Abbott in question time, after earlier telling the Coalition party room that MPs must be disciplined in the months leading up to the election. Picture: Gary Ramage

Others in the Liberal party are angry about the company tax hike that Abbott will impose to fund paid parental leave.

Many within the Coalition believe it is time to dump the Howard government-era payments too.

Opposition treasury spokesman Joe Hockey's declaration of an end to the "age of entitlement" leaves little doubt about his views on middle class welfare.

"Despite an ageing population and a higher standard of living than that enjoyed by our children, western democracies in particular have been reluctant to wind back universal access to payments and entitlements from the state," Hockey said in the speech to the Institute Of Economic Affairs in London last year.

"Ultimately the fiscal impact of popular programs must be brought to account no matter what the political values of the government are or how popular a spending program may be."

Even if you accept his argument that the speech was a general assessment of the fiscal challenges facing developed countries, there are clear implications for Australia's own bulging family payments system.

Abbott will no doubt try to maximise his electoral appeal in the months leading up the September 14 poll but he also needs to be careful not to raise voters' expectations only to disappoint them later.

He says he wants to run a "government which is honest and competent and straight with people".

Voters should be entitled to some of this honesty now.

Steven Scott is The Courier-Mail's national political correspondent.

Email: steven.scott@news.com.au

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Rates could drop under Medicare levy

The Gillard government has confirmed workers will face a tax increase through the Medicare levy to fund the National Disability Insurance Scheme

The RBA could cut interest rates if the Medicare levy rises. Source: AP

The RBA could cut interest rates if the Medicare levy rises. Source: AP

ECONOMISTS and tax specialists have warned the RBA may have to cut rates to offset the impact of a Medicare levy hike and that governments may adopt levies to fund future promises.

University of NSW taxation professor Neil Warren said Australia had a history of levies and the latest proposed hike could set a precedent.

''We have a long history of this from a milk levy, a sugar levy, levies on guns, a flood levy,'' he said.

''What is different is this goes on forever, we get a little concerned about this because the history tells us from an economics point of view they have such good political consumption, people go 'oh well, it is going to a good cause', governments tend to over use them.''

He said the Medicare levy already only funded a fraction of the nation's medical costs.

AMP chief economist Shane Oliver said the levy proposal was a lesson that proposals such as the NDIS needed to be funded somehow and it was a ''community judgment'' that DisabilityCare was needed.

''If you want something you have got to pay for it. It is a community judgment if we want the NDIS, we have got to pay for it,'' he said.

He said the levy rise was an effective income tax hike at a time when the economy was sluggish.

For a person earning $100,000 with a $250,000 he said the hit was the equivalent of a 0.25 per cent rate hike and the impact on household spending could prompt the RBA to drop rates.

Mr Oliver said hopes household spending would rise to stem the affects of the slowing mining boom could be ''jeopardised to some degree''.

University of Technology tax lecturer Adrian Raftery said raising the Medicare levy from 1.5 to 2 per cent to cover the National Disability Insurance Scheme could set a precedent.

''What is going to happen in five years time or ten years time when you have five new policies are you going to continue to put half a per cent on the Medicare levy?'' he said.

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Medicare costing $250 more under Labor

There is speculation the Labor Government will increase the Medicare levy by 2 per cent in the May budget. Source: News Limited

THE average Medicare levy has grown by nearly $250 to $1120 under Labor - and much faster than during the Coalition's reign.

Amid speculation the levy will be increased to 2 per cent, the Australian Taxation Office published new statistics yesterday showing 8.66 million people were charged a combined $8.47 billion for Medicare - an average of $978 - in 2010-11.

Treasury has estimated the Medicare levy will reap $9.7 billion this financial year, pushing the average contribution to $1120.

This assumes the number paying the levy remains steady - it has risen and fallen slightly in previous years.

In 2007-08 - the financial year Kevin Rudd won government - the average was $872.

That means the average Medicare levy has increased by $248 since Labor came to power five and a half years ago.

Under the 11 years of the previous Coalition government, the average rose by $360 - just 45 per cent more for double the length of time.

Treasury forecasts the Medicare levy will raise $10.4 billion next financial year - $700 million more than 2012-13.

It upgraded its estimate by $150 million in November 2012.

Data from the Government's Australian Institute of Health and Welfare (AIHW) shows out-of-pocket expenses have increased considerably under Labor.In 2007-08, payments by individuals accounted for 16.8 per cent of all health expenditure.

In 2010-11 - the latest available figures - the figure was 18.3 per cent, higher than at any time under John Howard, according to AIHW figures.

Under Labor, health costs have risen 31 per cent, according to the Australian Bureau of Statistics, while medical and hospital services have become 41 per cent more expensive.

In the preceding 11 and a half years of Coalition rule, health costs rose 50 per cent.

Medical and hospital services became 57 per cent more expensive.

And while private health premiums have been rising at twice the pace of inflation recently, the office of Health Minister Tanya Plibersek said: ''This year's average increase of 5.6 per cent remained well below rises when Tony Abbott was minister for health, which peaked at 7.96 per cent and averaged 6.44 per cent.''

However, it was Labor that removed the private health insurance rebate for more than two million Australians last year.

Ms Plibersek's spokesman said bulk-billing rates for GP services were at an equal record high, with 82 per cent of consultations free in the final three months of 2012.

''This is in stark contrast to when Tony Abbott was health minister when bulk billing rates hit rock bottom at just 67 per cent,'' Ms Plibersek's spokesman said.

The government is considering raising the medicare levy to pay for the NDIS.

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Free-range claims under ACCC scrutiny

The ACCC is troubled that the definition of "free range" is in the hands of producers. Source: News Limited

THE ACCC will today declare open season on "free range" and other claims made by premium food makers.

In a major speech in Sydney, Australian Competition and Consumer Commission chairman Rod Sims will announce the ACCC's seven priority areas for 2013.

Many are the same as last year, but Mr Sims will say that "new to our priorities is an interest in credence claims, particularly those in the food industry".

Notes for his speech to the Committee for Economic Development of Australia say: "Consumers are increasingly placing weight on premium claims made by producers that a consumer cannot test or validate.

"They are in the hands of the producer, leading to a particular vulnerability."

Mr Sims will highlight the ACCC's ongoing concerns about "free range" eggs, country of origin claims and the labelling of olive oil.

In November, the ACCC said it planned to reject a trademark certifcation application by the Australian Egg Corporation because the proposed rules would have allowed eggs to be called "free range" even though chicken densities would be "very significantly higher than those in existing standards" and that beak trimming would have been "routinely practised".

The ACCC's other priority areas are:

ONLINE consumer issues, particularly fake testimonials and problems with group-buying sites;

DODGY tactics by door-to-door sellers representing energy retailers;

FALSE claims by telecommunications and IT companies;

FURTHER building awareness of consumer guarantees such as statutory warranties;

PROTECTING vulnerable indigenous consumers;

UNFAIR contract terms, with a special focus on telcos, airlines, hire-car companies and online traders; as well as

UNJUSTIFIABLE price hikes blamed on the carbon tax.

Last night, Mr Sims told News Limited that success in each of these areas would be one of the two yardsticks by which the ACCC should be measured in 2013.

The other mark would be whether the ACCC doubled to six the number of major legal actions for alleged misuse of market power, cartel behaviour or anti-competitive agreements.

The two most high-profile of 20-30 investigations the ACCC currently has open both concern the big supermarket chains. One relates to alleged misuse of market power to the detriment of suppliers and the other is probing the competitive impact of expanded shopper docket petrol discount schemes.

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