Election 2016: Private health, welfare and higher ed hit by $16bn in Labor cuts

Opposition Leader Bill Shorten addresses the media during a press conference on Friday.
Opposition Leader Bill Shorten addresses the media during a press conference on Friday. Alex Ellinghausen

Labor has announced new cuts and compromises worth $16 billion over a decade, putting a dent in its campaign of fairness, but helping it meet its aim to balance the budget in five years and bolster its economic credentials just three weeks from election day.

While the welfare lobby accepted the changes, arguing they still left families better off than they would be under the Coalition, the Greens moved swiftly to exploit the situation, arguing it now was the party that protected families.

The new measures announced Friday predominantly target family welfare, higher education, the private health insurance rebate and business tax cuts. Labor claims that on an overall basis, all its policies now announced will improve the budget bottom line by about $8.9 billion over four years and $105 billion over a decade. Regardless, the deficits over four yeas will still be larger than those under the Coalition's policies.

Shadow treasurer Chris Bowen said more cuts would be announced before the election.

From left: Opposition Leader Bill Shorten with manager of Opposition Business Tony Burke and Shadow Treasurer Chris Bowen.
From left: Opposition Leader Bill Shorten with manager of Opposition Business Tony Burke and Shadow Treasurer Chris Bowen. Alex Ellinghausen

Family welfare cut

The $16 billion in new cuts is comprised of 11 new savings measures worth $1 billion over four years and $6.1 billion over the decade. These include freezing the private health insurance rebate and the Medicare Levy Surcharge thresholds for another five years to 2026-27, saving $2.3 billion over the decade, and ceasing the rebate for natural therapies, saving another $704 million.

Also Labor accepted $5 billion in cuts to higher education and R&D; tax concessions that have been stuck in the Senate since the 2014 budget.

It has agreed to now support four measures. These are the reduction in the R&D; concession, worth $860 million over four years and $2.8 billion over a decade; lowering the indexation rate of funding for higher education grants to that of inflation, saving $119 million over four years and $3.7 billion over a decade; lowering from $54,126 to $50,638 the income threshhold at which graduates must start repaying their HECs debt, saving $9 million over four years and $129 million over a decade, and: ceasing student loan scheme assistance for some courses, saving $24 million over four years and $159 million over a decade.

The remainder of the $16 billion comes from cuts to family welfare which do not go as far as those proposed by the government. Under Labor, a $750 end-of-year supplement paid to families eligible for family tax benefit A will be halved for those 137,000 eligible families earning a combined income over $100,000 and the threshold freezes for these supplements will be extended until 2019-20. Families will still be better off under this change than the Coalition proposals to end the supplements altogether for Family Tax Benefit  A and B. That would affect 1.9 million families.

It will also save $262 million over a decade by scaling back the Coalition's new Colombo plan, which is establishing study links with Asian Universities. Labor will  instead establish "better targeted programs that support deepening Australia's relationship in the Asian region".

Fairer cuts

Mr Shorten and Mr Bowen acknowledged the cuts would cause angst in some quarters but were still much fairer than what the government was proposing. They are still refusing to support measures from the 2014 budget worth more than $5 billion over four years and $23 billion over a decade.

"The Treasurer [Scott Morrison] said in our debate at the National Press Club there would be more cuts after the election but he will not tell you what they are," Mr Bowen said.

"The approach Bill Shorten, I and Tony Burke have taken for two years is to be completely up-front about our decisions, to announce them well in advance of this election and we're continuing with that. We will have further announcements to make in relation to savings during the course of the coming period. 

Mr Morrison claimed Labor's net saving over the four years would only be $2.4 billion.

 On Saturday, Mr Shorten will promise $88 million over two years in a new Safe Housing program, to improve transitional housing options for women and children escaping domestic and family violence by filling the gap between crisis housing and longer term arrangements.