ACCI plan: turn Age Pension into loan, recoup from sale of home
The nation’s peak business chamber has urged the government to use the May budget to curb spending to avoid a “crippled” economy relegating Australia’s next generation to the painful adjustments needed in Spain and Greece.
As Malcolm Turnbull and Scott Morrison shun radical tax reform, The Australiancan reveal new calls for the government to find extra spending cuts, including by tightening the means tests on several social-welfare programs that cost billions of dollars a year.
The Australian Chamber of Commerce and Industry’s pre-budget submission, to be released today, says unless public spending “is brought under control, the Australian economy will gradually be crippled by increasing taxes and growing public debt, both of which are unsustainable”.
“If Australia waits until the system breaks, we will consign the next generation to painful readjustments similar to those taking place in southern Europe,” the submission says.
The chamber’s focus on spending comes as business faces waiting years for a significant cut in the company tax rate, with the Treasurer having revealed that phased cuts to the 30c-in-the-dollar rate were an option.
The government has repeatedly indicated it wants to offer income tax cuts at the next election to boost economic growth, after warning of the hit to workers from “bracket creep”, as inflation pushes them into higher tax brackets.
The submission is the first of this year’s pre-budget submissions from a major business group. While ACCI still wants tax reform, including an increased reliance on consumption taxes, the emphasis on spending restraint shows a shift in the business community’s focus following the government’s retreat on lifting the GST.
The Business Council of Australia, which has vowed to push for “transformational tax reform”, is yet to release its pre-budget submission.
ACCI’s chief executive, Kate Carnell, said budget repair had to be accompanied by broad economic reforms, including changes to workplace relations, infrastructure, trade and education. On savings, she pointed to welfare and social security, which account for a big share of government spending.
Changes to the Age Pension could encourage “innovative financing solutions that guarantee that pensioners can remain in their homes and still save billions of dollars from spending”, she said.
This year, $44 billion will be spent on the Age Pension. The chamber wants the government to consider converting pension payments to elderly homeowners into a loan that is repaid when the property is sold.
The chamber also says abolishing Family Tax Benefit Part B could save $13.9bn across four years, while means-testing the Child Care Rebate could save $250 million a year.
Cuts to social-security payments would almost certainly face a backlash from Labor and welfare groups, with Labor last year rejecting changes to family tax benefits to fund a new childcare system.
The Weekend Australian revealed the government is trying to cut waste in the tax and transfer system, targeting the 3.6 million working households who get more in benefits than they pay in tax.
The government is also considering scaling back negative gearing, workplace tax deductions and superannuation tax breaks.
Ms Carnell said that “doing nothing is not an option”.