Reality bites Rudd (1)

Rudd did well out of airy rhetoric at first but the real decisions now have to be made and he is making odious ones

The reality of being a "fiscal conservative" in government has created the first real criticism and bad publicity for Kevin Rudd and his team in three months. Rudd ran television advertisements while in Opposition declaring he was a fiscal conservative. The ads were effective and worked. But rhetoric from Opposition is assuming an entirely different character in the cold light of government. The limits on any government's ability to keep down inflation, interest rates and living costs make it clear it's easier to be a fiscal conservative in Opposition. As Opposition leader, Rudd also used the fantasy of "Brutopia" to accuse John Howard of being mean and uncaring. Rudd was seen as the fiscal conservative with compassion.

But the razor gang, proposed to give substance to the claim for fiscal conservatism, has started to slash programs and it is Rudd's caring and compassionate image that is bleeding. Carers are set to lose payments in the short term, in the name of cost-cutting to reduce government spending and create an even bigger budget surplus to take pressure off inflation and interest rates in the long term. It's a tough call. The chronically ill, the dying and disabled cared for at home are not only in genuine need but also keep pressure off the health system. These decisions are obviously distressing Jenny Macklin. Justification for the payment cuts to some of the most stressed and distressed Australians based on them being a "one off" are exactly the grounds Labor in Opposition used to attack the Howard government over the ending of dental care programs.

This week there has also been government approval for rises in private health insurance premiums beyond the inflation rate despite Nicola Roxon's demands from opposition that the government not approve such increases. And the banks continued this week to raise interest rates for household mortgages beyond the Reserve Bank's official rate rises despite Government's calls for them to consider homebuyers.

Reality is mugging rhetoric, and the pressure is about to intensify on Rudd to maintain the line on economic management that helped him win the election.

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Reality bites Rudd (2)

LABOR will scrap a $500 seniors' bonus payment created by John Howard last year to help the over-65s deal with rising costs, despite a massive community backlash over plans to abolish the $1600 carers' payment in the May budget. But as welfare advocates and unions yesterday joined the Opposition in condemning the social spending cuts, the Treasury said spending under the Howard government was unsustainable and likened its profligacy to that of the Whitlam Labor government.

A Treasury report provided crucial support for Wayne Swan's insistence on the need for deep spending cuts in the 2008-09 budget to ease pressure on inflation and interest rates. "The recent growth in spending stands out, along with the growth in spending under Whitlam in 1974-75 and the increased spending following the recessions in 1982-83 and 1990-91," the Treasury report stated.

The Australian revealed yesterday that the Government planned to axe the $1600 carers' payment as part of its May budget savings. As the Treasurer refused to confirm the plans yesterday, other government sources said the $500 seniors' bonus, created last year, was also in the budget razor gang's sights. Sources said the Government maintained its determination to deliver all election promises, but that all Howard government programs faced a line-by-line search for spending cuts.

The carers' bonus was paid to 400,000 Australians for the past four years, providing up to $1600 each, while Mr Howard created the seniors' bonus last year at a cost of $1.3 billion. Both payments were said to be one-off - meaning they were funded out of budget surpluses and were not written into the budget forward estimates. News of the plan to axe the carers' bonus sparked widespread community anger yesterday, highlighting the political risks facing Mr Swan as he grapples with the need to reduce budget spending.

Carers Australia chief executive Joan Hughes said many family carers lived below the poverty line and used the $1600 to augment their living expenses. "It's going to be a very tough time for carers," she said. Mental Health Council of Australia spokesman Simon Tatz said carers needed the payment to help with medication, food, transport and accessing services. "The utilities allowance cannot substitute for what the carer bonus can buy," Mr Tatz said.

The move sparked a warning from the Australian Services Union that the Rudd Government's "social inclusion" agenda might be damaged before it had even started. The ASU covers non-government workers providing housing, counselling and other support services. National assistant secretary Linda White said the budget would have to be carefully thought through, and that taking money from programs that helped the people on the margins of society would be counter-productive. "Taking money out of programs in a circumstance where there is already some difficulty being experienced at the front line getting labour - there is already significant difficulty getting workers for the pay on offer - then the Government's social inclusion agenda could be in jeopardy before it starts," Ms White said. Community and Public Sector Union national secretary Stephen Jones said his union was concerned about job losses, but was also "concerned about the impact on the most vulnerable in the community".

Opposition Leader Brendan Nelson demanded that Mr Rudd intervene to protect carers. "Whoever it is in Mr Rudd's Government who dreamed this up needs to pick on someone their own size," Dr Nelson said. "Anyone who thinks that Australia's carers do not deserve the support they are getting just needs to walk a mile in their shoes." Liberal MP Chris Pearce became personal by questioning whether Mr Rudd, whose wife, Therese, is a successful businesswoman, had forgotten what life was like for non-millionaires.

Since Labor's victory in November, Mr Rudd and Mr Swan have gone to great lengths to warn about the need for spending cuts and to demonise the Howard government for reckless spending and pork-barrelling. The Treasury study released yesterday, prepared by Kirsty Laurie and Jason McDonald of the department's budget division, made similar observations. It said that, including spending since 2004-05 and budgeted through to 2010-11, the Howard government gained an additional $391billion as a result of increased tax revenue, resulting mainly from the resources boom. New spending decisions and tax cuts totalled $314billion. Most of the money had been consumed by increases in government spending, which had grown more rapidly in the past four years than at any time since the 1990 recession. Much of the money had gone on social welfare to the aged and families with dependent children.

There was a remarkable increase in the number of spending proposals announced in each of the Howard budgets, rising from 359 in the 1997-98 budget to 825 in the last election year. Most of the initiatives were small, with 90 per cent valued at less than $100 million over the forward estimates. However, the number worth between $100million and $250million grew from 16 to 49 in the past 10 years, while the number of $1billion-plus proposals jumped from one to nine.

Over the same period, the Howard government dropped the ball on savings. "In the 1997-98 budget, close to a third of all measures had a savings component whereas, more recently, savings measures have averaged around 1.5 per cent of total measures," the report says. There was also a rapid rise in spending on industry assistance, rising at an average rate of 6 per cent a year since the commodity boom began. Treasury warned this spending could distort the allocation of resources.

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Reality bites Rudd (3)

The Federal Government's $6 billion program for affordable housing is under a cloud before it has even begun because investors and developers publicly backing it privately warn it is flawed and will not work. The plan to tackle the national housing crisis by offering an annual subsidy of $8000 a dwelling in tax credits in return for investors providing discounted rents has been deemed not enough for investors in Brisbane, Melbourne and Sydney.

Although the Minister for Housing, Tanya Plibersek, remains confident she will be chasing away investors, property companies, superannuation funds and housing industry associations say the offer, made up of $6000 from the federal and $2000 from state governments, is far too low and will have to be increased or remodelled if it is to succeed. Lend Lease's spokesman on affordable housing, Guy Gibson, said other incentives such as access to public land or partial capital guarantees might have to be offered before investors are prepared to enter a risky and "emerging market". "We support the program but it's a very complex issue," he said. "Our work to date suggests there might need to be some other incentives. If the Government doesn't get the mix right then they probably won't get the scale of investment they are looking for to make this work."

The executive director of the Property Council of Australia, Peter Verwer, said the subsidy would have to be topped up to attract investment in major cities where affordable housing had to be tackled. "Housing affordability has to be addressed in those cities," he said. "I think $8000 a year is well on the way but it might fall short in some of the more expensive cities and won't provide the incentive required unless governments, perhaps local government, can top up the amount. "We're overwhelmingly positive about this measure and it's now up to the private sector to come back to the government city by city and locale by locale. In some places there won't be a shortfall, in others there will be."

Industry superannuation funds have similar concerns. John Sutton, the secretary of the Construction, Forestry, Mining and Energy Union and director of the industry fund CBUS, said there was not enough detail to make an investment decision. "It's early days and we'll just have to suck it and see, but the program may not exactly achieve everything the Government wants," said Mr Sutton, a longtime advocate for affordable housing. "I'm sure the Government is capable of making some adjustments. I don't think the detail has been put before the super funds yet but there is a willingness on our part if those mechanics can be ironed out."

Ms Plibersek dismissed industry concerns and said the Government would not be increasing or remodelling its offer: "I'm confident that it does add up and I have spoken to plenty of institutional investors who say they're interested," she said. "I am sure private companies who are in the business of maximising their profits would prefer to have a larger government subsidy but the proof will be in the pudding. I have a queue of people from a cross-section of investors who are ready to proceed."

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Rudd backdown (1)

Kevin Rudd has backed away from a sweeping pledge that the Kokoda Track should remain untouched, paving the way for a compromise deal on mining in the area. Mr Rudd emerged yesterday from talks in Port Moresby with Papua New Guinea counterpart Michael Somare to declare that PNG would decide its future.

The announcement is a major boost for the Australian mining company which wants to build a controversial copper mine, even though it cuts across the existing track. In PNG there is overwhelming support for the venture.

Mr Rudd late last year criticised the proposed mine and said the Kokoda Track should be preserved "as it is", but he has now toned down his rhetoric. A compromise deal is likely to be announced next month involving World Heritage listing. But it's almost certain there will have to be diversions from the current track on to other "parallel" paths to go around the mine.

The controversy over the Track dominated Mr Rudd's talks with Sir Michael but there was agreement between the two nations on working together on climate change. Mr Rudd also released the "Port Moresby Pledge" that he said signalled a "new era" of relations between Australia and the Pacific.

On Kokoda, both men agreed for officials to discuss options and for a major ministerial meeting next month in PNG to find a solution. He said there were a lot of challenges "but above all . . . this sovereign state Papua New Guinea will be making its own decisions about the future".

Sir Michael said the PNG Government would back World Heritage listing but indicated some areas would be excluded for development. "Definitely it will be listed . . . but there will be areas that we have to take into account the interest of our people," Sir Michael said.

Mr Rudd said the Kokoda Track was of great historical and emotional attachment to Australians but it was a different language to last year. "If any of you have walked the track, been up there and seen the sacrifice of all those Australians who pushed back the Japanese invasion which was heading towards Australia, we should honour them by preserving the track as it is," he said in November.

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Rudd backdown (2)

Federal Parliament's controversial Friday sitting will be scrapped with the Government blaming the Coalition's behaviour for its decision. Leader of the House Anthony Albanese today announced the parliamentary reform introduced by the incoming Rudd Government, which resulted in uproarious scenes on the first Friday sitting last month, will be abandoned. The day had been set aside for private members' business, but Mr Albanese said this would now be contracted and moved to Mondays.

"On the last Friday sitting of the parliament we saw a disgraceful performance of the Opposition searching for relevance," Mr Albanese said. "We saw a deliberate and premeditated attack on our parliamentary processes by the opposition." Mr Albanese said he would not allow the Parliament to be brought into disrepute, as Opposition members had pledged to continue being deliberately disruptive.

He also released a letter that has been sent to Liberal Leader Brendan Nelson explaining the changes. "Private members' business will be moved ... outside of the current hours scheduled, replacing the opportunity that MPs were to be given on Fridays," the letter says. "This will mean Parliament sitting later on Monday evening."

A cardboard cut-out of Prime Minister Kevin Rudd was brought into the chamber during the Friday sitting day two weeks ago, as Opposition members complained that Mr Rudd was having a "rostered day off''. Four opposition MPs were expelled from the House of Representatives, including one who had to be escorted from the chamber, as the five-hour sitting descended into farce. "What occurred on Friday with that, as you put it, childish behaviour would have been unacceptable in my son's year two class,'' Mr Albanese said. "A political party led by John Howard would not have behaved in that way on the floor of the House of Representatives.''

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