Joe Hockey says he wants “to start a conversation … on every street corner and in every town hall” with “friends and family” (oh, and with Labor and the Greens) about how we can tighten our belts and pay for the services we really need as the population ages.
Apart from the “start a conversation” phrase, which seems to follow a recent spate of business babble from the Coalition including Sussan Ley’s “values signal”, aka Medicare copayment, and Malcolm Turnbull’s “open kimono” approach to Australia Post, this is positive.
Climbing out from the debris of last year’s budget car crash and looking for policies the community and the parliament might accept is really not a bad thought.
But it will only work if the treasurer actually listens to alternatives. It won’t work if he mocks anyone in the town hall who puts up their hand with an idea. It certainly won’t work if the government just pushes the same old policy priorities in softer, less hectoring voices. And it can’t work if the government is too scared to consider choices that will cause political pain.
How genuinely Hockey is considering alternatives is called into question by two recent responses.
Earlier this week Labor finally announced a savings policy, having stayed so resolutely small target for such a long time. Not a big policy, but a savings policy all the same. It suggested $1.9bn could be saved over four years from multinational companies avoiding Australian tax by loading debt into their Australian operations. Instead of being able to choose between a number of ways to make their tax calculations, companies would be forced to calculate their debt to equity ratio as an average of their global operations.
The Business Council, not surprisingly, wasn’t keen, but was cautious in its rejection – saying recent changes to the rules needed to be given a chance to work and warning that the Labor plan could deter investment, but conceding it was a plan discussed by the Organisation for Economic Cooperation and Development (OECD).
The government, despite having spent months condemning Labor for not presenting alternative savings, and despite its loud protestations about global tax avoidance at the G20, and despite its desire for a sensible bipartisan “conversation”, responded with ridicule.
“I embrace this newfound commitment to tax reform from Labor, having got the mining tax wrong, having got the carbon tax wrong, and having got thin-capitalisation rules wrong previously,” Hockey mocked during question time.
“Please give us all the working papers on this proposal, because I asked the Treasury, before I came here, ‘What does this mean?’ And the advice of Treasury was that the proposal in relation to thin capitalisation will cost jobs … because if you make it more expensive for international businesses to operate in Australia, they will simply reduce their operations, as we have seen with car manufacturing companies.”
He reacted similarly last week when the Greens suggested $3.5bn could be saved by changing the flat tax rate on superannuation contributions to a sliding scale.
Any government in its right mind approaches superannuation changes cautiously. People get upset when they start contemplating a baked beans diet in their retirement. But as the Grattan Institute and the Australia Institute have pointed out, the enormous revenue forgone by very generous tax arrangements which deliver the vast majority of benefits to the highest income earners is an obvious place to start the search for structural savings. It will have to be part of the discussion after the government receives its tax review.
But again, Hockey refused to give the idea even a glance because the Greens had voted against his move to reindex fuel excise.
“Well, the Greens are obviously welcome to put forward proposals. But I mean, it’s very hard … to take them seriously when they’re the only green party in the world that actually votes against an increase in fuel excise,” he said.
And then there was another report, released on the same day as Hockey’s intergenerational report, but with a lot less fanfare.
Late Thursday, the Australian National Audit Office’s report on the agreement between the government and the Pharmacy Guild was tabled without much comment. That deal covers the $15bn the government spent over the past five years on subsidised medicines and paying pharmaceutical wholesalers to deliver medicines to pharmacies.
That $15bn deal, like the four five-year deals signed by successive governments before it, was a result of one of the cosiest, most anti-competitive, least transparent arrangements in Australian politics. The guild – widely seen as the most powerful lobby group in Canberra – has been allowed to negotiate exclusive financial agreements behind closed-doors for billions of dollars of government funding under highly restrictive arrangements that lock out supermarkets and dictate where pharmacies can be located. Any time a government has tried to make significant changes they have buckled under the onslaught of a community chemists’ campaign. At every election the guild demands written assurances from both sides of politics.
But the audit office raises questions about the arrangement – including that the Health Department kept no records of its negotiations over handing out the $15bn or of meetings with the guild and that money was shifted around for different purposes. The Greens and the Consumer Health Forum are demanding, not unreasonably, that the next five-year agreement – due to take effect mid-year – be delayed while the whole thing is properly scrutinised.
That scrutiny is highly relevant to Hockey’s desired “conversation” because of the size of the spending at stake and the fact that pharmaceuticals are one of the things behind increasing government health outlays. Savings could help offset the costs of new medicines and of an ageing population taking more medicine.
The question is whether the government has the guts to have a frank and open discussion with the guild, and wear the political consequences, as part of its new “conversation”.
You have to wonder, since it couldn’t weather the campaign by the doctors against its Medicare copayment, even though it continues to insist that pushing higher income earners to pay for GP services is a good idea.
If Hockey is serious about his “conversation” and braver than traditional political tactics would suggest he should be, given the current state of the Coalition’s polling, he really could preside over a more constructive budget process.
If he just wants to deliver a slightly more friendly monologue to the folk on the street corners and in the town halls in the hope that they will accept revised versions of the policies he dished out last year, his second budget will go the same way as his first one.