Senate backlash set to sink a hole in budget

Prime Minister Tony Abbott and Treasurer Joe Hockey during question time at Parliament House. Photo: Andrew Meares
Prime Minister Tony Abbott and Treasurer Joe Hockey during question time at Parliament House. Photo: Andrew Meares

The Abbott government is facing an early budget shortfall because current senators as well as members of the future Senate, starting on July 1, say they will not support key measures in it.

As expected, Labor's finance spokeswoman Senator Penny Wong confirmed Labor will wave through one of the most contentious ''broken promises'' of the budget, the 2 per cent temporary deficit levy on high-income earners, which will rake in $600 million in 2014-15. But other budget measures, many of which are due to take effect on July 1, could be held up.

This means savings will be lower than stated or that changes will have to be legislated retrospectively to claw money back.

And that would open up a major fight with the Palmer United Party, whose leader Clive Palmer slammed the idea of retrospectivity for increasing taxes and charges, and promised to block measures in the new Senate, post-June.

Mr Palmer said the scale of broken promises was worse than the Julia Gillard backflip on the carbon price. ''I guess what's astounding is that there is a whole raft of things which are repugnant to the Australian people,'' he said. ''The magnitude is wholly different … we're not passing any of them.''

Items such as the two-year freeze on indexation of family payments and lower indexation of some pensions have already been booked as delivering savings of $400 million in 2014-15 alone but appear to have no chance of passing before July, due to stiff opposition from Labor and the Greens.

The emergence of a budget hole comes as private polling commissioned by Labor and seen by Fairfax Media confirmed voters are overwhelmingly offside after what they see as an unfair economic formula based on broken promises.

The polling by market research company UMR of 1000 voters shows 76 per cent of respondents disapprove of federal cuts to public hospitals and that six in 10 voters disapprove or strongly disapprove of four other contentious areas: higher costs for prescriptions (63 per cent); petrol excise indexation (61 per cent); a delayed pension age to 70 (60 per cent); and a proposed paid parental leave scheme paying up to $50,000 in six months (58 per cent).

A spokesman for the government's leader in the Senate, Eric Abetz, said: ''One would have to expect that negotiations with the new Senate would be a lot more sensible than with the current Senate. The Greens and Labor have blocked everything.''

But the spokesman admitted: ''It will not be an easy road at all.''

An analysis by progressive think tank the Australia Institute said cuts expected in the coming year include a three-year freeze on private income thresholds affecting allowances such as the Parenting Payment Single, Youth Allowance (student), Austudy, Abstudy, Newstart Allowance, Widow Allowance and Childcare Benefit. Also likely to be frustrated or delayed are the pausing of indexation of some Medicare Benefits schedule fees, the Medicare levy surcharge and Private Health Insurance Rebate thresholds, all of which it says amount to increasing out of pocket expenses for patients.

The main appropriations bills will be debated in the House of Representatives this week.

This story Senate backlash set to sink a hole in budget first appeared on The Sydney Morning Herald.