2UE Mornings with Stuart Bocking
STUART BOCKING:
Well, some new modelling done in terms of what’s been described as the nation’s ticking welfare bomb. Christian Porter is the Minister for Social Services and I am pleased to say is on the line. Minister, good morning.
MINISTER PORTER:
Morning, how are you?
STUART BOCKING:
I’m well. Thank you for your time. So, with this modelling it says that our annual welfare bill will balloon by more than $120 billion over the next decade to $277 billion a year. How much of that would come via the aged pension, for instance?
MINISTER PORTER:
That’s certainly a significant portion with an aging population, that’s one of the challenges we face in terms of expenditure growth. But, Stuart basically in almost every area of welfare expenditure, the growth is significantly and in substantial terms above the inflation rate. So when you consider all of the welfare spending in government we are looking at around, about we think, a decade ahead where if we don’t exercise some restraint then you are looking at 3.4 percent growth above inflation. Now, that’s a pretty good marker to suggest that you need to engage in some considered expenditure restraint because if something is growing at 3.4 percent above inflation that’s going to put very significant pressure on the taxpayer. And just to give you and your listeners an idea – last year the welfare bill was $149 billion but this financial year 15/16 it will be $154 billion. So, $154 billion, the income tax take in the same year is $196 billion. So, 80 percent of every single cent that is paid in income tax is, if you can picture, is applied to the welfare bill.
STUART BOCKING:
Yeah, it’s incredible.
MINISTER PORTER:
It’s very significant.
STUART BOCKING:
I mean, you’ve got 20 percent of taxpayers who are footing the bill for 80 per cent of the income tax rate – it shows you 20 per cent providing the bulk of the money for that huge welfare bill that you talk about. The reason I ask about the aged pension is because we’ve got this ongoing debate about tax around superannuation and everything else, it seems to me the best thing that we can do is try and ensure that the nest eggs of individuals, particularly middle income earners, are as large as they can be upon retirement to hopefully reduce their reliance on either a full pension or a part pension. What does the modelling show us – at what point are we going to start to see some of the benefits of these tax concessions we have provided along the way in terms of more and more people being more self sufficient in their retirement?
MINISTER PORTER:
Well, it is a very good point. So, I would relate it back to the policy measure that we took at the last budget, which was to change the rules around the liquid asset test on the pension which in effect required a range of people who were previously receiving part pensions to look at their own asset base outside, of course, of their family home. And that is a method that we have used to slow down the growth in the age pension but it is a difficult and challenging decision to make. But what it says is that wealthier pensioners who of course, may have owned their own home which can be of unlimited value in terms of the asset test, are going to now find themselves having to look at drawing down in a modest way their own liquid assets which might be in superannuation or other assets. Because of course, superannuation and other liquid assets that people develop during the course of their working life aren’t for the purposes necessary of estate planning and handing on…
STUART BOCKING:
No. That’s right they are to be spent…
MINISTER PORTER:
Indeed.
STUART BOCKING:
(inaudible)…for the provision of their living. Tell me, we have seen figures before – Scott Morrison when he was the Minister prior to you, he has produced the figures. What can we do about it because we saw efforts in that first budget went down very poorly the moment you talk about trying to remove some of these family tax benefits, there are squeals from ACOSS, interest groups, you name it. It’s a significant challenge to make inroads in any of these spending areas – how do you try and wean some people off the public teat?
MINISTER PORTER:
I think it’s very important, Stuart that we have conversations like the one that we are having because when, as is the case now, I am dealing in negotiations with the crossbench about expenditure restraint in the area of paid parental leave or in a four week wait for the dole or indeed in family tax benefits. I mean those expenditure restraint decisions have to be considered in context and the context is that the overall growth in welfare is at a level that absolutely requires any reasonable government to exercise some kind of expenditure restraint pertaining to growth. So, I think that the problem has to be understood and so when a solution is offered by a government it has to be considered in the context of the problem. What often, when it happens, is that expenditure restraint policy is devised, it is difficult to garner support amongst the crossbench because in isolation expenditure restraint is not always the most popular thing to be able to do.
STUART BOCKING:
Well, this is the difficulty, I mean. We saw one of the key platforms that I think Tony Abbott and Joe Hockey were elected on was the whole debt and deficit but the moment they tried to tackle some of these areas, notwithstanding some people felt blindsided, lied to by some of the approaches taken. People suddenly figure ‘I am all for fixing the debt and deficit as long as it doesn’t affect me’.
MINISTER PORTER:
Well, correct, but I think we probably adjusted our position a bit since the 14/15 Budget. So, if I use the example of family tax benefits, the first iteration of that policy designed to restrain expenditure growth had a very large savings attached to it. We’ve come back with Plan B on that and the savings attached to that are around about $4.7 billion. We are willing to reinvest $3.5 billion of that money into sweeping reforms for child care, some of the extra savings will of course contribute to that path back to surplus…
STUART BOCKING:
Look, I tell you what, I don’t want to be rude, we’ve got our news coming up. Now I would be happy to discuss this further after the news or if we can organise another time so I will just put you back to our switch, but we have to take our 11 o’clock news and then we will try and make arrangements so that we can thrash it out in some more detail with the Minister, Christian Porter.