13 May 2014

Abbott Govt tightens Australian belts

10:18 pm on 13 May 2014

The Abbott Government's first "budget repair" job will tighten the belts of most Australians, with tax hikes, tighter welfare rules, new GP fees, and cuts to health and education spending.

Treasurer Joe Hockey's "contribute and build" budget will bring about deep changes - the "structural reform" he said the Coalition was elected to do.

Federal treasurer Joe Hockey holding his budget speech at Parliament House in Canberra.

Federal treasurer Joe Hockey holding his budget speech at Parliament House in Canberra. Photo: AFP

Handing down the budget in Parliament on Tuesday night, Mr Hockey foreshadowed more cuts to come, saying "the budget we announce tonight is the first word and not the last word on budget repair".

Emphasising the Government's aim to move people off welfare and into work, he told Australians: "We are a nation of lifters, not leaners".

Mr Hockey outlined an $A11.6 billion road, rail and port package to boost jobs, and detailed plans to crack down on the unemployed and get those on disability support pensions into work.

Billions of dollars worth of cuts and increased taxes have put the budget on a "clear track to surplus" - projected to be well over 1 percent of GDP in a decade.

This year's deficit of $A49.9 billion will fall to $A29.8 billion next year and is projected to drop to just $A2.8 billion in 2017-18.

The unemployment rate is expected to peak at 6.25 percent over the next two years.

But the path back to a budget in the black has come at a cost - funding for schools and hospitals has been slashed.

Cuts to funds for schools, hospitals

Over $A80 billion in Federal Government funding will be slashed from schools and hospitals over the next decade, moving agreements with the states and territories to "more realistic" deals.

Hospital funding deals agreed with the states and territories under former Labor prime minister Kevin Rudd, will also be wound back from 2017, saving a massive $A50 billion over eight years.

Health cuts will be used to build a new fund for medical research, expected to be worth $A20 billion by 2020.

The budget has detailed the loudly flagged $A7 patient fee for GP visits, which will also be charged for x-rays, scans and pathology services.

States and territories will also be able to charge the "co-payment" for GP-equivalent visits to hospital emergency departments.

Concession card holders and children under 16 will only have to pay the co-payment on their first 10 visits of the year.

Medicines on the pharmaceutical benefits scheme will also be more expensive, with patients paying a $5 fee - or 80 cents for those on concession cards.

Other health cuts include reducing the Medicare rebate for optometry, deferring a multi-million dollar dental program, and axing the national partnership agreement on preventive health.

Pensioners targeted

The government will also save $1.7 billion over five years by pausing the Medicare benefits schedule for two years from this July, and the income thresholds for the Medicare levy surcharge and the private health insurance rebate.

Pensioners will also be hit - but not until September 2017.

From then, rises will be tied to inflation, instead of the current link to the higher male average earnings. That will save $449 million over five years, but the Government will argue it is not a "cut" to pensions because the payment will still increase - just by not as much.

It will also argue it is not a broken promise, because the change is introduced after the next federal election.

The new indexation will also apply to single parent payments - but that change will kick in this July.

Some retirees will also be ineligible for Commonwealth seniors health card, because untaxed super will be included in the income test - which is required before people can claim an Australian state pension - for the first time.

Families receiving tax benefits may also have to tighten their household budgets, with payment rates frozen for two years and income thresholds lowered.

Those receiving Family Tax Benefit B - which is for families with one income - will lose out when their youngest child turns 6.

But low income single parents will receive extra $750 a year for each child between 6 and 12.

 Tony Abbott.

s Photo: AAP

Prime Minister Tony Abbott's "signature" policy - his $5 billion paid parental leave scheme - has been shunted into the budget's contingency reserve.

It is the only election promise not officially detailed in the budget books, along with the 1.5 per cent company tax cut that is meant to help pay for it.

Eligibility thresholds for all government payments will be frozen, including for the private health insurance rebate.

This will allow inflation to effectively do the cuts for the government by reducing the cut-off for benefits over time.

No unemployment benefits for under-25s

Those under 35 receiving the disability support pension will have their eligibility reviewed and, if kept on the DSP, will have to complete a "program of activities to build their work capacity".

"In welfare, it is not the end of the story, but it is the start," Mr Hockey told reporters foreshadowing further measures to come.

There will be no unemployment benefits for people aged under 25.

Under 25s will not be given unemployment benefits but will have to go onto the lower payment of Youth Allowance.

The tertiary education sector will be deregulated from July next year - a move the Government says will allow universities to compete globally.

Financial assistance for students will be opened up to TAFES and colleges, but students will have to pay more, pay their fees back sooner, and pay more interest.

Existing students will be saved from the changes until 2020.