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Feb 5, 2014

How the age of entitlement is being restored for the Liberals' friends

Declaring that the age of entitlement is over makes sense as long as voters believe it's fair. But the government is being anything but.


Treasurer Joe Hockey has emerged as the spine of a government that, a little like the Howard government, has arrived in office on the back of community unhappiness with its predecessor but unsure what it actually wants to achieve once it’s finished pulling down Labor’s work. Hockey’s resolute holding of the line on rent-seeking, after the disgrace of the GrainCorp decision, is welcome. But his salesmanship is letting him down. And, worse, so is his consistency.

Having tolled the bell yet again on “the age of entitlement”, Hockey has left the government open to allegations that entitlement is actually only over if the government wants to target the unions involved in your business. Otherwise, the spigot of taxpayer money is still open. No one in the government has been able to explain the difference between SPC Ardmona and the handout to Cadbury’s Hobart factory except Sharman Stone, who pointed out it was in a marginal seat, nor the difference between the SPC and another handout to a Tasmanian seafood processor (announced by rugged individualist Jamie Briggs). And that’s before you get into tax expenditures, which are a mishmash of generations of often conflicting policy objectives.

Governments — all governments — love to hand out taxpayers’ money for political benefit. Sometimes it doesn’t even have to be a marginal seat — the government promised to waste $10 million helping to redevelop Brookvale Oval for Abbott’s local footy club. Every time the government hands out a seven-figure amount from now on, Hockey’s words about the end of the age of entitlement will be used to belt the government.

But there are more substantial inconsistencies, because for the Liberal Party’s mates and supporters, the age of entitlement isn’t over at all; in fact, it is being restored.

First, there was the reversal of Labor’s decision to require better record-keeping and reporting for fringe benefits tax on novated leases. Note that this wasn’t a tax rise, as widely portrayed, but merely a requirement that people currently avoiding, or possibly in some circumstances evading, tax demonstrate they are doing so for the legitimate reasons they claimed. It was designed to end a straight-out tax rort perpetrated by the parasitic salary packaging industry, at the expense of every taxpayer without a novated lease. Hockey has reinstated the rort, at a cost to the rest of us of $1.4 billion over four years.

However, that’s as nothing compared to the government’s plans to reverse Labor’s Future of Financial Advice reforms, quietly revealed right before Christmas by Assistant Treasurer Arthur Sinodinos. Sinodinos proposes to dump the “opt-in” clause for financial advice fees that requires financial planners to actually get their clients’ permission to automatically skim off fees every year for advice clients have never sought and don’t want. Sinodinos also wants to get rid of requirements for advisers to reveal fees to existing clients and dramatically water down requirements designed to end the conflict of interest in which financial planners push clients into products planners stand to benefit from.

“… good treasurers don’t just take tough decisions, they skillfully explain them to voters and bring the electorate along with them.”

While much of the financial planning industry, large and small, is eager to move to a professional model for the financial advice that would turn away from the decades of self-interest and fee-gouging of clients, a rump of planners with close ties to the Liberals want to retain their ability to exploit the disengagement of most Australians about their superannuation in order to skim off a never-ending line of fees. The Liberals, in any event, strongly support the retail super sector of the industry, run by the big banks and AMP, which routinely underperforms the industry funds despised by the Liberals for trade union involvement.

Sinodinos’ changes may cost financial planning clients, i.e. ordinary consumers, $130 billion in lost retirement savings, which the age pension system of the future will have to help make up. It puts all other handouts by government in the shade.

At the same time, the government has also scrapped Labor’s plan to tax superannuation earnings over $100,000 a year for high-income retirees (i.e. Liberal voters) at 15% — while dumping assistance for low-income earners to increase their super contributions (i.e. Labor voters).

Perceptions of equity are the key here. When Hockey correctly talks about needing to explain to the community the need for a change in the way they view entitlements, whether it’s via the Business Council’s Commission of Audit or through refusing handouts to businesses, the message will only be politically effective if voters perceive that there will be equity in the reform process. If politicians tell voters they need to make a sacrifice, they need to make sure voters believe there will be equity in that sacrifice, that no one section of the community is getting a free ride while the rest of us are giving something up.

But financial planners are having their free ride restored. So too novated lease users and the salary packaging companies. So too high-income retirees.

Voters already believe — regardless of how they vote — that the Liberals look after the big end of town and are less interested in low-income earners. Labor is using that as a theme of its criticism over the government’s lack of support for manufacturing. Without careful management, the government will reinforce those perceptions, perceptions that it wants low- and middle-income earners to make sacrifices while it looks after its mates. It will not merely undermine support for its reform, it will undermine support for the government itself.

As Hockey should know, good treasurers don’t just take tough decisions, they skillfully explain them to voters and bring the electorate along with them. So far, Joe’s just been good at the former.


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40 thoughts on “How the age of entitlement is being restored for the Liberals’ friends

  1. Jimmy

    And this article didn’t even cover the winding back of means testing on the private health insurance rebate or the all to generous Paid parental leave scheme or the ambitions to get more money into private schools.

    Since months in and this govt is already living up the fears most had.

  2. Dez Paul

    I think you’re being too kind to Hockey, Keane, but at least you achieve some balance. I would urge Peter Hartcher from the SMH to read this after the huge steaming pile he excreted the other day:


  3. bluepoppy

    Perceptions are not always reality however the Liberals record and current behaviour indicate a real preference for governing for benefit of the rich and influential. In this aspect the perceptions reflect reality.

    Examples include an almost complete disregard for the environment and for applying pressure to get rid of the Super Profits Mining Tax. A tax that would ensure a fairer share of the benefits of our resources. It was politicised and took priority over good government. Coalition comments about workers and low income employees having to bear the burden of economic prosperity (so the rich can become richer) is all the evidence requird to see where this Party’s priorities lie.

    This Coalition government is not shaping up and the inconsistencies in decisions reflect a party about power and politics not about doing what’s best for the electorate. The lack of transparency around the TPP is another area of great concern, albeit the Labor government was also remiss in this area.

  4. Hamis Hill

    Treasurers “skilfully… bringing the electorate along with them”; in the face of a vandalistic media intent destroying those same treasurers?
    How’ll Joe go?

  5. Scott

    “fringe benefits tax on novated leases. Note that this wasn’t a tax rise, as widely portrayed, but merely a requirement that people currently avoiding, or possibly in some circumstances evading, tax demonstrate they are doing so for the legitimate reasons they claimed”

    Incorrect. And I thought Jimmy would have picked this one up.
    To go from a sliding scale based on km’s to a flat rate of 20% (when previously <15,000 got you 26%, 15,000-25,000 got you 20%, 25,000 to 40,0000 kms got you taxed at 11% and over 40,000 kms at 7%) is a tax increase for those travelling over 25,000 kms a year.

    FBT is about the value of the car the user receives. Obviously the more you drive a car, the less it's value so, in theory, the less you should pay in FBT. The changes were bad policy and pure environmentally rather than tax related.

  6. Jimmy

    Scott – The issue is that the FBT on cars is a complete rort – the sliding scale is completely abused because no one ever gets checked that they did the Kms and none of the KM have to relate to work.

  7. Jimmy

    Oh and technically Scott tha amounts you are talking about aren’t “tax” they are the employee contribution amount which is income in the hands of the employer.

  8. Honest Johnny

    The behaviour of the salary packaging industry and the L/NP opposition in response to the long overdue reform of the statutory formula method of car fringe benefits was an absolute shameful disgrace. God knows this government will need to raise every dollar of tax it can to fix the structural problem (not enough revenue) in the budget. Allowing the car FBT rort to continue will cost the budget $350 million per year.

  9. Jimmyhaz

    ‘Joe’s just been good at the former.’

    I’d argue heavily against this as well. None of the cuts that Hockey has made, and is going to make, are required, or even slightly beneficial, for Australia as a whole. They’re merely born out of an ideology that ignores reality.

    I do find it laughable that they claim that taxation won’t bring us into surplus though, even if that is correct (and it is), why have they increased the tax burden on the lower classes then?

  10. Malcolm Street

    Money for GMH – no
    Money for SPC – no
    Money for two Tassie producers – yes!

    Hockey has his work cut out when all we’re seeing is blatant pork-barrelling ahead of the Tassie state election.

  11. Wynn

    It’s not perception though, is it. The only line Hockey is holding is the party line.

  12. Kevin

    “Labor is using that as a theme of its criticism over the government’s lack of support for manufacturing”……..Realy? … Who is holding this loony mob of Tea Party wannabes to account for their actions? Where is Bill Shorten and the rest of the Labor party?…. is Shorten truly a faceless man? ( which I never realy believed but now have my doubts)….. Certainly not the Australian media ( including the ABC)……. The only person to lay a glove on this dispicable government is one of their own in the form of Sharmon Stone,but I am sure she will be dealt with soon, no doubt.

    I might as well just watch competitive cooking shows on the tele for the next 2 years…..makes more sense than trying to get Labor off their behinds and start giving Abbott and co a run for there money.

  13. tonyfunnywalker

    Hockey is running to an agenda paid for the Liberal party sponsors as they all stand in line for the handout to recover their investment.
    The Commission of Audit peopled by the has beens’ and cronies and the underhanded behaviour of Ministers and PPS working under the radar of public and parliamentary scrutiny to milk the electorate that elected them on behalf of their sponsors.
    The typical behaviour in a Dollarocracy of vote buying for their own self interest and gain.
    Wasn’t this what Labor and the Greens were accused of?
    Your article does not cover half the rorts built into the taxation system where expenditure on avoidance exceeds the benefits accrued by the avoiders and the legal cost of recovery. As the ACCC has found it is very expensive to recover payments – especially if you lose or the company claims bankruptcy and asset transfer.
    Its a game – keeps the accountants and lawyers on side and for many seriously damaged claimants a deterrent to challenge beyond a class action and that takes years – the ANZ is a case in point.
    It would have been more purposeful for Hockey to reform the Tax System and amend the Tax Act which is a confusing abomination of legalese and gobbledygook rulings on the most absurd and trivial and often outdated premise for claim.
    The bashing of the poor/ retired/ working families / is easy and where Swan was accused of starting a class war Hockey is returning Australia to a society of “unfettered privilege reserved for the privileged” and where the underprivileged are fair game to be ripped off — often with criminal intent. You don’t have to watch ” Wall Street” to understand that – and how many bankers are in jail!!!! Jimmy is right we all knew that this was the agenda – but the electorate was more concerned with scandal and beat-ups cheer-lead by the press.
    The advertorial nonsense sold as news or explanation to investors and shareholders is equally scandalous with the Block Vote of the vested interests; brought into play when remuneration and/or reduced dividends are questioned. Three strikes and out is too lenient for a self perpetuating oligarchy. Corporate Transparency Blah _ Blah Blah.
    Hockey has the job ahead of him and he has already fallen over thanks to Sinodinos, Abbott and Cormann ( beyond parroting 3 word slogans what is he good for – he is an embarrassment) and of course Abetz.
    The bashing of Labor Voters at every turn – forgetting there is an election in 2016 and it not all low paid workers / pensioners and working families voted Labor; many voted Liberal ( some for the first time ) and this is their reward – a cut to their living standards.
    Voter churn is already evident. Is not the Dollarocracy that will re elect Abbott irrespective of the dollar spend its the common voter who have been :duped once and never again”.
    The Liberals lost Indi at the last election, the “SPC lies” means the Murray will be lost especially if Ms Stone is pilloried and forced out of the Liberal party to the cross benches probably to be joined by other ‘river electorates” in SA and NSW as well as they see their political survival doomed.
    It does not end here- next river industry that is close to collapse is the wine industry. ( killed by the same factors as SPC- climate change, high dollar and its dependence on the WET tax rebate subsidy). An interesting fact Bernard to think about is the ” multiplier effect of a collapse” of the fruit and wine industries. In wine and I assume in fruit – for every person employed at a winery the expanded wine industry supports the employment or part employment of 5+ other people in packaging, logistics, retail, hospitality and now tourism. Mechanisation has not reduced employment as industry diversification into tourism and hospitality has increased employment dependence; rather than reduce it.
    A visit to the South of France and the EU generally, where over 1.5 million hectares of grape vines have been grubbed is a clear reminder what the River Region will look like when the orchards and vineyards have gone as well as the tourists —– deserts are not very attractive destinations.
    No wonder growers are committing or contemplating suicide.
    Abbott has a death wish of his own —to be a one term PM – assuming he keeps the leadership that long.

  14. Jimmy

    Kevin – The big problem for shorten is that the media don’t really want to hear from him, any issue that he could possibly exploit get’s a short run on page 8 and then editorials are run ad nauseum stating why Tony is actually right.

    All things considered the ALP having a 48-52 lead (which after the SPC/attack on penalties should get bigger) is quite a good result. If Abbott got treated like Gillard did (especially as I can’t recall any ALP MP’s calling her a L-*r) the ALP would be up 40-60.

  15. DiddyWrote

    Is Hockey going to eat that puppy?

  16. Sharkie

    I was gobsmacked at Tony Abbott’s defence of the $16 million gift to Cadbury. He claimed it was all for tourism and reopening the factory tours. What a load of b*ll*cks. It was part of a $66 million dollar upgrade of the factory.
    The factory “tours” have terrible reviews on trip advisor and it’s hard to imagine a more inefficient way of attracting tourism to Tasmania. I can’t think of any other direct subsidy to a “tourism” business like this $16mil payment. When you do the maths, this payment simply doesn’t stack up. EG If the tour gets 50 people a day for a year, it’s still a $876 per person subsidy. Tours would have a staff of maybe 10 people. That’s 1.6 million per job created. It’s either Crazy economics or Abbott was talking garbage?
    Leigh Sales could have grilled Abbott on this point by drilling down a little further.Questions she should have asked include: when are the tours restarting? What is the ROI on the $16mil? Did the Tasmania tourism authorities request the subsidy? Did the Tasmania tourism authorities question this absurd payment? Pity Sales dropped the ball on this one?

  17. Jimmy

    Sharkie – She could of used his actual quotes from the announcement of the $16m – where he didn’t mention tourism at all but instead emphasised the upgrade of the plant.

  18. Ronson Dalby

    The argument that a rich company like Coca-Cola Amatil can pay for SPC pales into insignificance when you find out that Cadbury’s is owned by Kraft (the corporation side is now called Mondelez).

  19. Mark from Melbourne

    Your whole article suggests that Hockey hasn’t been good at taking tough decisions i.e. ones where his natural support base is hit, yet you conclude that he has been good a making them.

    Make up your mind.

    p.s. As far as I can see he has only gone after soft targets.

    pps Saying that SPC’s parent company can afford it implying that Cadbury’s parent can’t is rank hypocrisy.

  20. Jimmyhaz


    It seem’s to me that we have an opposition that only knows how to govern, and a government that only knows how to oppose.

    Should make for an interesting three years at the very least.

  21. MJPC

    Kevin, I am with you in that I hope the Labour Party hammers the LNP when Parliament recommences, the Libs have a big target on their backsides waiting to be kicked.
    Now they are attacking workplace conditions; Workchoices Mk 2 is starting by stealth.
    As for subsidies (outlined in the SMH this AM) 7 billion in tax breaks and direct grants to the mining industry (so Gina Reinhardt can push for miners to get paid East African wage rates); $1,078 billion to the elctricity, gas and water providors (who now admit that there is no way prices can drop by 9%- oops isn’t that almost the carbon tax rate) and financial services $915m (GHUA, we pay the parasites to bite us mercilessly).
    Jimmy, the ABC is punch drunk over the burned hands beat up, they have been cowed to be careful what they say.

  22. tonyfunnywalker

    Jimmy, I agree and you will note that the ABC have employed a former Murdoch media editor as a means to get a fair hearing although that is never assured. The Media have a great method creating ” noise” when it appears that Labor had the high ground.
    It destroyed the Rudd/ Gillard government driven by beat-ups, muck raking, personal insult and triggerng Rudd’s short fuse. Abbott also has a short fuse as well as saying the first thing that comes into his head irrespective of the facts and that’s why Peta Credlin keeps him on a short leash and his media appearances are scripted by his minders.
    His use of Fox News evasive answers — a training that has expanded to include Abetz, Turnbull, Briggs ones that she can trust – while loose cannons are unavailable or quarantined to short scripted dorothy dix questioning the sort of thing that Abbott enjoys in his sessions with Alan Jones and Ray Hanley where Abbott actually says nothing at all.
    The ABC outburst was scripted and revved up by Hanley and the SPC gaff was Abbott trying to score points ( the old Abbott) without reading the brief properly and it went horribly wrong. If Gillard on Q&A had suggested that ” retribution” would lead to a ‘house being burnt down’ the tabloids would have been in ‘melt down’ but as it was Barnaby Joyce – it was allowed to pass through to keeper. Communique’s which is now the practice of the PM’s Office can go wrong too; as Hunt who really has little ideas what he is talking about most of the time today praised the Carbon Tax. This was picked up in glee by the Greens who sent it viral before the mistake was picked up.
    In Blogs like this one — the Liberals have a team of attack- dogs with interesting names monitoring and responding to anti Abbott Government comments. Again they are briefed to be on message and are becoming a focus of fun as they try and defend the daily disasters, lies, contradictions that appear. News Ltd censorship is still tight ( Putin would be proud of them) but the ones they allow and their speed of publication suggests that junior staffers are manning the laptops with spurious names and addresses or tame blogers who are rewarded with a free subscription for supportive comments when they occur.
    The Conversation is very ‘ho hum’with little contribution from what might have been a better informed source – but their articles and blogs are no better or worst than that found in the lesser tabloids.
    It is more difficult to create noise with blogs but absurdity still prevails even with Crikey with the interminable vilification of Flannery as a result of a charlatan who got under the Fairfax radar as an authority of climate change or rather its denial but the discussion went on and on — of pointless point scoring.
    The shift to the ALP is the fact that people voted for Abbott because they were disgusted with the Leadership circus only to find that they are now saddled with electing a PM whose sole purpose in life is to punish anyone he does not like or he thinks did not vote for him and to reward the people who “bought” his election and now are standing in line to collect.
    The thing that galls most is that Abbott has totally abdicated the function and debate of government — around 40 groups of cronies, lackeys and “hangers on” make his decisions for him.
    He has farmed out government to failed retired generals and CEO’s and anyone else where can ensure that vested interests of the sponsors are protected irrespective of the damage that this will create not only to the individual elector but to some of our proud institutions such as education whose curriculum is being returned to the time and doctrinaire of BA Santamaria and his ilk or by adopting the already failed education policies of Gove in the UK.
    In other-words the Abbott Government is a lazy, clueless bunch of Muppets driven by the sponsors of self serving, self perpetuating of greed and unfettered but unelected power.
    If Abbott totally falls apart they will just walk away – and they suspect it will – hence the rush to “collect” before the whole pack of cards collapses as Abbott was never up to the job they wanted him to do in the first place and they have just found out just how poor and unprepared this government really is.

  23. Honest Johnny

    Jimmy, I have always felt that the word “L-*r” is something one commonly hears coming from the mouths of those on the conservative side of politics, but rarely from the other side. It is a sharp, unpleasant word of last resort, but they and their shock jocks use it all the time.

  24. Smaug

    [The argument that a rich company like Coca-Cola Amatil can pay for SPC pales into insignificance when you find out that Cadbury’s is owned by Kraft (the corporation side is now called Mondelez).]
    It gets worse. Kraft is owned by Philip Morris. A tobacco company that donates to…. The Liberal party. Stinks worse than a dead rat in a cheese factory during an extended blackout.

  25. klewso

    Good ol’ Clueless Joe?
    Rhetoric will only get you so far, then you have to learn to walk the walk.
    “Throw the fruit away, lump of “Marvellous Creationism” anyone?”
    The there’s that little dividend, paying interest on Murdoch’s “investment”?

  26. drmick

    They are not a government. They are the accounting firm for big business. They do not represent their constituents, their state or their obligation as politicians. They are below contempt.

  27. Le Hazurier

    Exellent article Bernard. The Government’s hypocrisy is so clearly shown when it’s all brought together like this.

  28. klewso

    After (as Toady might say) “White Sox and Black Sox”?

  29. Julia

    Oh come on, nothing has changed: Hockey is still a buffoon. He sees more merit in an $8 billion plus hand out to the Reserve Bank than $25M co-investment in jobs (and just watch the dividends become wasted as some type of middle-class welfare vote buying exercise just prior to the next election). Talk him up all you want, but just remember when you put lipstick on a pig, it’s still a pig. Cynical much, you bet.

  30. leon knight

    Loved your comment Julia – Lipstick on a pig is still a pig.
    Suits Big Joe perfectly – wish I could share some of Bernard’s enthusiasm for him.
    Useless lying buffoon with a death wish (politically speaking of course, I don’t wish the man much harm physically…)

  31. David Edmunds

    Where does the $130 billion come from?

  32. Yclept

    Yep, the Lieberal Party in full flight. What a sight!

  33. MJPC

    Smaug, very interesting (and concerning) your analysis of the Cadbury deal. Such is the state of (non) investigative journalism that this Phillip Morris gem has not been mentioned anywhere but here (Oh the tangled web we weave…).
    A journalist with some credo could really make hay with this inrformation but, alas, there are few in Australia (ABC included).

  34. Ronson Dalby

    Smaug & MJPC,

    I think what I’m reading is correct, it’s kind of confusing all the sales and mergers:

    “As of 2007, Philip Morris (now Altria Inc.) had sold its stake in Kraft foods and the two companies are no longer affiliated.”


  35. zut alors

    Smaug, thanks for this pertinent information about the parent company, Philip Morris. There are still a few business journalists employed in the media but we failed to hear a peep out of any of them – they would be fully aware of the parent company link.

    To any journalist worth their salt this would normally be a plum story.
    ‘Labor’s $16M gift to tobacco giant’ – that’s the headline News Corp would’ve used if the Rudd/Gillard govt had allocated the $16M.

  36. Ronson Dalby

    It doesn’t look as though my earlier comment with a link is ever going to come out of moderation, so here’s the info without it:

    “As of 2007, Philip Morris (now Altria Inc.) had sold its stake in Kraft foods and the two companies are no longer affiliated.”

    So perhaps we can dispense with the Philip Morris angle.

  37. tonyfunnywalker

    Funding Cadbury could be a more than a little embarrassing for the Abbott Government in more ways than one?


  38. zut alors

    Thanks, Ronson Dalby, for the clarification.

    Kraft is a multinational so the $16M still stacks up as scandalous & worth reporting.

  39. The Goat

    If the ‘Age of entitlement’ is over, let’s start with politician’s entitlements.

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