House of Representatives

Budget Savings (Omnibus) Bill 2016

Second Reading Speech

Mr Morrison (Treasurer)

I move:

That this bill be now read a second time.

This bill containing 24 measures and totalling more than $6 billion in savings is part of the Turnbull government's $40 billion in budget improvement measures that the government will be seeking to legislate over the coming months, including some $25 billion in expenditure savings.

As a government we inherited, back in 2013, $240 billion in accumulated deficits and a debt of $317 billion projected to increase to $667 billion within 10 years.

Our gross debt is increasing by $6 billion a month or $1.4 billion per week in 2016-17, and in that year will increase by around $72 billion.

Since MYEFO 2013-14, the government has taken action and we have implemented measures to improve the budget bottom line which has reduced projected debt by $55 billion, however our debt today still stands at $430 billion.

The interest payments on our debt total some $16 billion this year, and it is one of the largest line items in the budget and it is still growing.

To arrest our debt-and that is our challenge: to arrest the debt-we must restore the budget to balance. The Turnbull government remains committed to this very important task.

Our attempts to return the budget to balance over recent years have proven very difficult and have faced significant opposition.

During the last parliament, while we were facing these deficits we inherited from the previous government, the Labor opposition engaged in budget sabotage, refusing to support the government on significant savings, measures such as abolishing the schoolkids bonus and to make fair and sustainable changes to the pension assets test. The opposition opposed these measures right up to the election campaign, giving the community the expectation that they would reverse these savings if they were elected over the entire course of that parliamentary term after those measures were introduced.

However during the campaign, we know, the opposition accepted that these measures were unaffordable and in a humiliating back down that exposed their cynical tactic of budget sabotage chose to support those measures at the eleventh hour.

It is clear that a stronger budget not only supports jobs and growth, but also instils confidence as our economy continues to transition.

Working towards balancing the budget will help restore the buffers that protect Australia against economic shocks and uncertainties, as well as safeguard against events that could threaten our future success. It is key to our economic resilience in these uncertain times.

Repairing the budget means we can begin to pay down the debt and reduce the debt burden, the fiscal burden, on future generations.

As we make crucial repairs to fix the budget, we will create headroom to further ease the tax burden to enable us to invest in new priorities.

You don't encourage growth by taxing it more as those opposite propose to do. That is why we have consistently rejected the opposition's tax-and-spend approach. In order to repair the budget and arrest growth in public debt, you must get expenditure under control.

Ratings agencies have all warned that they want to see budget measures passed or this will increase the risk of a ratings downgrade. They have expressed serious doubt about whether this parliament will be up to that task.

If this parliament fails to pass any budget savings and revenue measures, Treasury estimates our gross debt would exceed $1 trillion-one thousand billion dollars-in a decade. This is a worst-case scenario; this is the do-nothing scenario; it is a scenario that this parliament must ensure can never be realised.

This bill simply brings forward and outlays savings measures that were incorporated into Labor's fiscal projections at the last election. No more; no less.

We are strongly asking the opposition to vote for measures they promised to support at the last election, by including them in their own fiscal estimates that they presented at that election.

This bill is part of a concerted strategy to make immediate and tangible headway towards balancing the budget; the consequences for the budget and the nation's debt are stark. Indicative projections from Treasury indicate that if the $6.1 billion of savings over the forward estimates contained in this omnibus bill are not passed, then gross debt, as a direct result of that failure to pass these measures in particular, is projected to increase by more than $30 billion by 2026-27 compared to projections that are contained in the 2016-17 budget.

The opposition should honour their commitments in the election to support these savings measures that they included in their own budget costings during the election. The passage of this bill is a first step in implementing critical savings to repair the budget.

Let me now turn to each of the measures contained in this rather voluminous bill.

Higher education

On higher education, we are introducing a new minimum repayment threshold for all HELP debts from 1 July 2018.

We are replacing the Higher Education Grants Index (HEGI) with the Consumer Price Index (CPI) in order to streamline and simplify indexation rates for government programs.

And we will remove the HECS-HELP benefit from 1 July next year.

These measures were all included in Labor's forward estimates at the election.


Health is also an area of rapidly growing expenditure and an important area of service to our community.

In order to restrain spending growth we are extending the pause on indexing the income thresholds for the Medicare levy surcharge and private health insurance rebate for a further three years-from July 2018 to 30 June 2021.

We are abolishing the National Health Performance Authority.

We are replacing the Child Dental Benefits Schedule with the Child and Adult Public Dental Scheme.

A measure to improve compliance in aged-care providers will amend the Aged Care Act 1997 to strengthen compliance powers and implement deregulation measures.

These measures were all included in Labor's forward estimates that they took to the election.

The government will continue to provide record levels of investment in Medicare and hospitals, whilst targeting health expenditure to where it is needed and most effective.


One of the most difficult challenges facing the budget is reining in the growth in welfare expenditure. Welfare makes up a third of outlays in the budget. So the largest share of these savings measures is also in welfare spending.

We are removing the grandfathering arrangements for student payment recipients of the student start-up scholarship, from 1 July 2017.

We are removing the family member exemptions to the newly arrived residents waiting period for access to social security payments and concession cards.

We will cease the job commitment bonus for long-term unemployed youth.

We are introducing an interest charge on the debts of former recipients of social welfare payments who are unwilling to enter repayment arrangements.

We are bringing in departure prohibition orders for people who are not in repayment arrangements for their social welfare debts, and removing the six-year limitation on debt recovery for all social welfare debt.

We will include income from parental leave pay and dad and partner pay when calculating income support payments for children born or adopted from 1 October this year.

We are changing the way fringe benefits are treated under income tests for family assistance and youth income support payments.

These measures will help ensure that the welfare system is fair and people in similar financial circumstances receive similar welfare benefits.

From January next year, new claims for carer allowance will not be backdated up to 12 weeks.

We are maintaining the higher income free threshold of family tax benefit part A for a further two years to make sure family payments are targeted and sustainable.

We will align the pension means testing arrangements with residential aged-care arrangements. This measure removes poorly targeted exemptions that are associated with the pensioner's former home, and are only available to pensioners who pay their aged-care accommodation costs in periodic payments.

We will remove current income test exemptions for parents in employment nil-rate periods. This makes the payments system fairer and more sustainable.

Social security payments will no longer be paid to certain people who are in psychiatric confinement because they have been charged with a serious offence.

Carbon tax compensation will be closed to new welfare recipients as we will no longer compensate people for a tax that no longer exists and that this government abolished. People who enter the welfare system before 20 September 2016 will be grandfathered and continue to receive the compensation. There will be a transition arrangement in place, which will mean that people who enter the welfare system between 20 September 2016 and 20 March 2017 will temporarily receive the compensation until 20 March 2017. The government will ensure that those impacted by the transition are aware that they will only receive the compensation temporarily until 20 March 2017.

All of these welfare measures were included in Labor's forward estimates, which they took to the election.

The government remains committed to ensuring the welfare system continues to provide a welfare safety net for Australia's most vulnerable people and families.

Other measures

Finally, the other measures include savings from the Australian Renewable Energy Agency; and reducing the rates of tax offsets-refundable and non-refundable-for research and development, intended to incentivise research in Australia that would not otherwise be conducted.

The single-touch payroll reporting measure creates a new modern regime for reporting payroll and superannuation information to the ATO. Employers will automatically report PAYG withholding and superannuation guarantee contributions at the time these amounts are paid through SBR-enabled software.

Under the Military Rehabilitation and Compensation Act 2004 we are creating a single appeal path that will simplify and streamline the appeal process.

Again, all of these measures were included in Labor's forward estimates, which they took to the election.

Concluding remarks

Of course, there is more work to be done than what is contained in this bill. This is just the first step, in this new parliament, to demonstrate our collective resolve to arrest the debt.

That is why the government is continuing to implement the measures that improve the bottom line that it took to the election-around $40 billion in this bill and in other measures; $25 billion of those specifically in payment savings.

I cannot make this clearer: the government is committed to securing the passage of these measures. As I indicated earlier the consequences for the budget and the nation's debt are stark. Indicative projections from Treasury indicate that if the $6.1 billion of savings over the forward estimates in the omnibus bill are not passed, gross debt is projected to increase by more than $30 billion by 2026-27 compared to projections at the 2016-17 budget.

We therefore call on the opposition-who included all of these measures in the handshake deal they made with the Australian people when they included these measures in their promise of how they would conduct fiscal policy-to honour their commitments at the election to support these savings measures.

Full details of the measures are contained in the explanatory memorandum.