By Michelle Grattan, University of Canberra
When a government has to negotiate with crossbenchers there is often an element of humiliation involved, especially if that government suffers from a touch of “born to rule”.
Governments think of themselves as having the right to get on with what they want to do, only to often find they need to kowtow to those who received just a fraction of the vote.
With so much of this year’s budget up for grabs and the Senate crossbench packed with players enjoying both profile and power, the wheeling and dealing is a circus for the public and a high-wire act for Treasurer Joe Hockey.
How ministers must (in private) curse having to go as supplicants to Clive Palmer. Hockey turned up for dinner with the PUP leader on Tuesday. Education Minister Christopher Pyne had lunch on Wednesday. Health Minister Peter Dutton will see him on Thursday.
Is progress being made? Reading the Palmer signals doesn’t get any easier over time. He seemed to be hinting at some flexibility over the Medicare co-payment plan on Wednesday; on other occasions he’d said the Palmer United Party senators would not vote for it under any circumstances.
Hockey – coming to the task late and figuratively speaking holding his nose much of the time – has, in begging mode, done his rounds of the crossbenchers, travelling the length and breadth of the country. There’ll be more work ahead. In a few weeks, the results can be audited.
But on Wednesday the Treasurer was in trouble with a clanger as he tried to mount an argument for the proposed restoration of the indexation of fuel excise in equity terms.
“The people that actually pay the most are higher-income people,” he said. “Yet the Labor Party and the Greens are opposing it. They say you’ve got to have wealthier people or middle-income people pay more. Well, change to the fuel excise does exactly that. The poorest people either don’t have cars or actually don’t drive very far in many cases. But they are opposing what is meant to be, according to the Treasury, a progressive tax.”
This was dismissive politics; an inaccurate description of the tax; and a use of numbers that doesn’t reflect the full picture.
After howls of outrage Hockey put out a note to back his argument. It showed average weekly household expenditure on petrol in absolute terms increasing with household income thus: lowest quintile, $16.36; second $27.60; third $38.55; fourth $47, and highest $53.87.
“Based on census data, households in relatively disadvantaged areas are less likely to own motor vehicles than those in relatively advantaged areas. Where motor vehicles are owned, households in relatively disadvantaged areas are most likely to own only one car whereas households in relatively advantaged areas are more likely to have two or more motor vehicles,” the note said.
But these figures don’t tell us the relative burden of petrol costs, and Hockey was quickly challenged on Twitter by more relevant figures.
News Corp’s national economics editor Jessica Irvine tweeted the numbers for spending on petrol as a percentage of household income, by quintile, showing that poor households spent more of their income on it than those better off: Q1- 4.5%; Q2-3.5%; Q3-2.9%; Q4-2.3%; Q5-1.3%.
Greg Jericho, who writes for Guardian Australia, tweeted a graph showing the percentage of annual household expenditure spent on petrol: it was higher for the poor than for the top income bracket. Also, and significantly, the second-lowest income quintile (that is, relatively modest earners) had the highest percentage.
In its submission to the Senate inquiry on the legislation the Australian Automobile Association said: “Research indicates that the people who use their cars most frequently are in the outer metropolitan areas and rural and regional areas where there are lower incomes, less jobs and little or no access to public transport.
“The AAA is concerned that individuals in these areas will bear the highest cost increases of indexation changes.”
There are sound arguments for restoring the indexation of fuel excise, not least environmental ones, as well as the need for a source of revenue that grows. Also, the slugs to households will be small, although mounting up over time.
It will be unfortunate if the Senate refuses to pass the measure. Indexation was abolished only because John Howard was politically embattled in 2001.
For all that, there is no getting away from the fact that it is a regressive tax, and Hockey’s blunt-edged defence was just another misstep in a budget sales job that has been full of them.
Michelle Grattan does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.