Video settings

Please Log in to update your video settings

Video will begin in 5 seconds.

Video settings

Please Log in to update your video settings

Abbott to keep carbon tax compo


PT2M27S 620 349

Tony Abbott has pledged to honour Julia Gillard's tax cuts, pension rises and family payments granted to households as compensation for the carbon price, despite dumping the carbon price itself, if elected.

The decision to back Labor's savings measures reflects a political and fiscal reality as the Coalition prepares to fight an election it believes it will win. 

But to help fund the package's annual cost of about $4 billion, he is prepared to adopt all of Labor's unpopular budget cuts, including slashing the Howard government's $5000 baby bonus, freezing family payment income limits, and tightening business tax arrangements.

Opposition Leader Tony Abbott delivers his Budget reply in the House of Representatives

Mr Abbott: Backing unpopular cuts. Photo: Alex Ellinghausen

Delivering his budget-in-reply speech on Thursday evening, the Opposition Leader promised to keep Ms Gillard's ''household assistance package'', in effect rebranding it as his own tax relief package, in a new government offering no more ''nasty surprises, and no lame excuses''.

''A Coalition government will keep the current income tax thresholds, and the current pension and benefit fortnightly rates while scrapping the carbon tax,'' he told Parliament. ''The carbon tax will go but no one's personal tax will go up, and no one's fortnightly pension or benefit will go down.''

Mr Abbott repeated his threat to renege on the federal-state school education funding plan recently agreed between the O'Farrell and federal governments. ''We won't back a so-called national education system that some states don't support, especially as this government has a history of spending more while schools' performance actually goes backwards.''

Labor victory: Wayne Swan and Julia Gillard liste to Tony Abbott delivering his budget reply.

Political victory for Labor: Wayne Swan and Julia Gillard listen to Tony Abbott agreeing to honour tax cuts. Photo: Getty Images

Mr Abbott repeatedly accused the government of ''dodgy'' economic promises and of delivering a succession of deficits despite promising a surplus by this year on 165 occasions.

Dismissing Labor's $17 billion revenue writedown as a fiction, he said next year Canberra would be better off by $80 billion than six years ago.

Among the savings announced were some measures already signalled, such as cutting 12,000 public service jobs and rescinding a rise in the humanitarian migration intake.

Unimpressed: Finance minister Penny Wong responds to Tony Abbott's proposals.

Unimpressed: Finance minister Penny Wong's reaction to Tony Abbott's proposals. Photo: Andrew Meares

Among the new proposals were scrapping the twice-yearly top-up payments to welfare recipients which now provide $210 to singles and $350 to couples on benefits ''because it's supposed to be from the mining tax, and the mining tax isn't raising any revenue''.

His government would also delay by two years the phased rise to 12 per cent of employer superannuation contributions, taking the date at which it would be achieved to 2022.

That would save more than $1 billion a year by 2016-17, according to the opposition. ''These measures alone will produce nearly $5 billion a year in savings which is more than enough for tax cuts without a carbon tax,'' he said.

On Friday morning shadow assistant treasurer Mathias Cormann told ABC radio that the Coalition would ''deliver a realistic and a credible pathway back to surplus'' but would give no further detail on where they would cut spending to fulfill that promise.

Superannuation Minister Bill Shorten called the two-year delay a ''retrograde step'' and said a 30-year-old on an average salary would have $20,000 less in their superannuation by the time they retire as a result of the Coalition's decision.

Senator Cormann described Mr Shorten's comments as ''hysterical'' and repeatedly avoided the question of whether he had calculated how much the Coalition's plan to delay the increase of superannuation contributions from 9 to 12 per cent would cost the average income earner.

''We know that of course there is going to be an impact,'' Senator Cormann finally told the ABC interviewer.

In her budget reply speech on Thursday night, Greens leader Christine Milne attacked both Labor and the Coalition. Treasurer Wayne Swan had offered Australians ''a finance plan without a broad vision'', while ''Mr Abbott's alternative is worse''.


Politically, it represents a victory for Labor because it means the opposition will agree to the cuts.

Mr Abbott's refusal to respond to the budget in detail contradicted his demands on the then opposition when he was a minister in the Howard government.

With the economy centre stage of the pre-election debate, the opposition's attack on the budget floundered in question time on Thursday when treasury spokesman, Joe Hockey, led a sustained attack using New Zealand as an example.

He praised New Zealand's superior economic performance for forecasting ''faster economic growth, falling unemployment, and a budget surplus one year earlier than Australia''.

The government described the comparison as laughable, pointing out that the NZ economy had grown by 4 per cent, since the global financial crisis while Australia's had grown by 13 per cent.

• The Minister for Finance, Penny Wong, accused Mr Abbott of targeting low and middle income earners in his budget reply.

''We've had a sneak peek tonight but he will keep the rest a secret until after the election,'' Senator Wong said.

She accused Mr Abbott of leaving 8.4 million people worse off as a result of his decision to defer the increased superannuation contributions and of looking to education to find further budget savings.

Senator Wong welcomed Mr Abbott's signal that he may be prepared to support the government's budget savings, noting that Mr Abbott had ''recognised the rigour in the government’s budget while railing against it''.

with Stephanie Peatling

Follow the National Times on Twitter