Prime Minister Malcolm Turnbull has won the election but his budget plans are in disarray with a brewing internal revolt over superannuation savings measures worth up to $2.5 billion, and a growing acceptance that the 10-year plan to cut the company tax rate will be severely curtailed by the new Senate.
Mr Turnbull claimed victory on Sunday after Opposition Leader Bill Shorten conceded defeat but the Prime Minister must now brace for what is shaping as an explosive party room meeting on Monday next week where grievances, including those over the budget changes to super, will be aired.
Cabinet secretary Arthur Sinodinos said on Sunday that just because the government’s victory was slight, it still had a mandate and that included for its budget.
Angry conservative Liberals are blaming some of the changes to superannuation concessions, announced five days before the election was called, for costing the Coalition support, both direct and indirect, and alienating its base.
Senior sources said the party room would fight hardest to overturn the impost of a $500,000 lifetime cap on non-concessional contributions backdated to 2007, on the basis it was retrospective. This measure is worth $550 million in savings to the budget over four years.
Also to be discussed is the proposal to drop from $30,000 to $25,000 – or from $35,000 to $25,000 for those aged 50 and over – the annual limit on contributions that are taxed at the concessional rate of 15 per cent. This measure is worth about $2 billion over four years.
Some are also arguing about the proposal to cap at $1.6 million the total amount in a retirement account. But there is less support to change this.
Senator Sinodinos, whose views are in lock-step with the Prime Minister and Treasurer Scott Morrison, said he did not believe the super changes “had the impact in the election that some people seek to assert”.
“Questions about what happens about the budget, ultimately will be a matter for cabinet and the government. But what I’m saying is we have a mandate and I believe we should put up the budget as it is,” he told the ABC’s Insiders program.
“Every part of the community has to play its role when it comes to budget repair. We can’t look fair if we say that the burden should fall on those who are most vulnerable. Those who are in a better position to contribute, including those who are taking advantage of tax concessions, have a role to play in budget repair.”
This stance is at odds with mostly conservative ministers and backbenchers. At the weekend, Immigration Minister Peter Dutton said there would have to be changes while another senior conservative, who asked not to be identified, said the push for change would be “large”.
The looming fight comes despite ratings agency Standard & Poor’s putting the nation on negative watch and warning the government would have to stick to its trajectory of returning the budget to balance by 2020-21. This included not just offsetting new spending with cuts, but chasing revenue declines beyond the government’s control, such as those caused by falling commodity process, with either more cuts or tax increases.
The budget contained $6 billion in cuts to super tax concessions of which $3 billion was to be churned back into bolstering the super savings of those on low incomes. The other big budget measure was the 10-year plan to cut the company tax rate to 25 per cent.
With a Senate of up to 10 crossbenchers, the Greens opposed to all cuts and Labor supportive of just a small cut for businesses with turnovers up to $2 million, most in the government now concede there is little hope of legislating the 10-year plan. At best, it will receive support for the first phase, which would grant a rate of 27.5 per cent to those with turnovers up to $10 million.
As of the latest count, the Coalition still had a confirmed 74 seats, Labor 66, the crossbench five and another five undecided. Of these latter five, Hindmarsh and Cowan are tipped to fall to Labor, Capricornia and Flynn are leaning towards the Coalition, which would give it an absolute majority of 76. The final seat, Herbert, is line ball. It is likely the government will have it own majority, as Mr Turnbull predicted on election night.
Mr Turnbull, who also faces a ministerial reshuffle, cannot swear in his government until next week because Governor-General Peter Cosgrove is in France for Bastille Day celebrations. The Nationals party room will meet on Tuesday this week to discuss the demands they will put to Mr Turnbull under what will be a new Coalition agreement.
Mr Turnbull remained hopeful he could pass in a joint sitting of Parliament the two industrial relations measures that triggered the double dissolution election, but it would be hard to predict until the final Senate was known.
In conceding defeat Sunday, Mr Shorten pledged to work with the government in areas of common agreement and make what will be a difficult Parliament work effectively. This is in contrast to Tony Abbott’s approach after 2010 when he adopted a strategy of trying to paralyse the Parliament to collapse the minority Labor government.
“The Australian people expect all sides of politics to act in the national interest,” Mr Shorten said.
“We need to make this Parliament function and we will be up for that.
Mr Shorten said he expected Mr Turnbull to forge ahead with the policies the Coalition took to the election but said he should dump planned cuts to Medicare and reconsider some of his superannuation proposals.
“I expect them to do nothing less than keep their promises to the Australian people,” he said.
“But we also have a mandate to stand up for Medicare, to make sure schools are properly funded and to make sure we prioritise Australian jobs.”
Senator Sinodinos said that if the government were to spend more on Medicare to offset voter anger, those savings would have to be found elsewhere.
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