Labor savings will hit middle and rich classes

Published 30 January 2013 00:05, Updated 31 January 2013 00:39

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Labor savings will hit middle and rich classes

Prime Minister Julia Gillard Photo: NZN Image

Prime Minister Julia Gillard will flag “substantial’’ structural savings to the federal budget today, putting in the spotlight more cuts to middle-class welfare and superannuation concessions for high-income earners.

In a keynote address to the National Press Club to kickstart the election year, Ms Gillard will warn that the high dollar may well persist for some time yet and the economy will have to adapt by boosting competitiveness and productivity.

According to extracts of Ms Gillard’s speech, she will build on warnings given late last year that to put the budget on a sustainable footing and to find the billions needed over the long term to fund the Gonski education reforms and the National Disability Insurance Scheme, further structural savings are needed.

“In the lead-up to and in the [May] budget, we will announce substantial new structural savings that will maintain the sustainability of the budget and make room for key Labor priorities,’’ she will say.

Ms Gillard will say Labor has a strong record on this front and will cite previous budget decisions including the means testing of the 30 per cent private health insurance rebate, abolishing the dependent spouse tax offset and reducing super concessions for high-income earners.

“This year we will make the tough, necessary decisions to ensure our medium-term fiscal strategy is delivered and our centrepiece plans for Australian children and Australians with disability are funded in this new, low revenue environment,’’ she will say.

She will describe her education push as “the crusade which defines this term of my prime ministership’’.

With the federal election due between August and November, and the government needing to come from behind to win, Ms Gillard will devote a large element of today’s speech to portraying herself as somebody with a plan and vision. The impending budget cuts were alluded to by Treasurer Wayne Swan after the Mid-Year Economic and Fiscal Outlook was released in October. Citing measures in that document which pared back the baby bonus and made further inroads on the health insurance rebate, Mr Swan said Labor had “a long history of this’’.

Labor argues that the structural savings will multiply over time, proving the money for its big-ticket items.

The NDIS, trials for which will begin on July 1, will cost the budget an estimated extra $8 billion a year by 2018.

Superannuation remains one of the most lucrative areas for savings.

In November, Treasury estimated that the budget forgoes more than $30 billion a year in tax revenue, a figure it expects to reach $45 billion by 2015-16.

The Opposition Leader, Tony Abbott, promised on the weekend that, if elected, there would be no “negative unexpected changes” to the superannuation policy he takes to the election.

Ms Gillard will reiterate her plans to boost economic competitiveness, saying the pressures Australia faces due to the dollar and the mining boom “may well persist even though the economic orthodoxy would predict their lessening’’.

Many factors which kept the dollar strong were beyond the government’s control, she will say, but it could alleviate the impact by focusing on skills, innovation, infrastructure, deregulation and maximising opportunities with Asia.

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