Federal Politics

Baby bonus cut under significant budget compromise between Coalition and Labor

The Coalition and Labor have agreed to cut back a baby bonus payment worth $367 million as part of the deal to pass the $6.3 billion omnibus savings bill, which will also water down proposed cuts to renewable energy funding and preserve the clean energy supplement for "vulnerable" recipients.

As the Coalition party room continued to grapple with the details of the same-sex marriage plebiscite, Labor was first to announce the compromised legislation, with shadow treasurer Chris Bowen saying both sides had worked together in the national interest.

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The baby bonus payment, which formed a key element of the Coalition power-sharing agreement struck by Prime Minister Malcolm Turnbull and Nationals leader Barnaby Joyce in September 2015, would have given eligible families with a youngest child under one year an extra $1000 a year through an increase to their Family Tax Benefit part B payment.

The clean energy supplement will not be abolished - which would have saved $1.3 billion - for most new recipients of welfare payments. There had been intense pressure from welfare groups and internally from Labor's left faction to block this cut.

Minister for Finance Mathias Cormann, Prime Minister Malcolm Turnbull and Treasurer Scott Morrison announce the ...
Minister for Finance Mathias Cormann, Prime Minister Malcolm Turnbull and Treasurer Scott Morrison announce the compromise on Tuesday. Photo: Alex Ellinghausen

The payment will now be kept for people on Newstart and pensions but ended for recipients of Family Tax Benefits, saving $208 million.

Instead, access to Family Tax Benefit Part A supplement payments to families will be limited to families earning less than $80,000 per year, delivering the largest single saving in the package, of $1.7 billion over four years.

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The Greens said the revised cut to renewable energy agency ARENA – now $460 million instead of $1 billion, with $800 million allocated to the agency over five years – had exposed Labor as "clean energy charlatans" that had rolled over.

The omnibus bill is now worth $6.3 billion in savings over four years, more than the original value after Labor adopted 20 of the 24 measures and backed the family payment cut. This is roughly 0.4 per cent of annual government spending. 

Shadow treasurer Chris Bowen, Opposition Leader Bill Shorten and opposition spokesman Jim Chalmers explain their support ...
Shadow treasurer Chris Bowen, Opposition Leader Bill Shorten and opposition spokesman Jim Chalmers explain their support for the compromise savings bill on Tuesday. Photo: Alex Ellinghausen

"Today is a win for families on low incomes, today is a win for Australians committed to real action on climate change," Opposition Leader Bill Shorten said.

The estimated saving from not proceeding with the baby bonus payment is $367 million over four years, or $1.4 billion over 10 years.

Deputy Prime Minister Barnaby Joyce, Treasurer Scott Morrison and Prime Minister Malcolm Turnbull.
Deputy Prime Minister Barnaby Joyce, Treasurer Scott Morrison and Prime Minister Malcolm Turnbull. Photo: Alex Ellinghausen

The cut could anger sections of the Nationals partyroom, with at least one MP expressing surprise at the proposed trade when contacted by Fairfax Media on Tuesday.

Mr Bowen said Labor had forced the government to capitulate on the matter, describing it as "unsustainable" and unfair.

Illustration: Ron Tandberg.
Illustration: Ron Tandberg. 

Mr Shorten said it was a "hard choice" to move away from protecting Family Tax Benefits but that "we've got to look after the most vulnerable in our society as a priority".

Days of lengthy negotiations have taken place between Treasurer Scott Morrison, Finance Minister Mathias Cormann and Labor's Mr Bowen and finance spokesman Jim Chalmers.

The Prime Minister said there had been "frank, constructive negotiations" in good faith and that the new omnibus bill "demonstrates that we are delivering on our economic plan" by reducing spending.

Treasurer Scott Morrison said the decision on ARENA funding was final but foreshadowed that the government would continue to pursue the cuts not adopted in this legislation as there "is so much more that needs to be done".

"There is so much more that needs to be done and our budget measures remain our budget measures and we will continue to pursue those," he said, adding the Coalition would also consider Labor proposals on private health insurance and the Child Dental Benefits Scheme. 

Senator Cormann said that because Labor had agreed to cut the clean energy supplement for only three of 19 welfare payments, the government would pursue the rest separately.

The entire supplement cut had been factored into Labor's pre-election costings.

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