Video settings

Please Log in to update your video settings

Video will begin in 5 seconds.

Video settings

Please Log in to update your video settings

Paid parental leave 'a scheme we can't afford'

Tony Abbott is facing renewed pressure over his paid parental leave scheme. Nationals Senator John 'Wacka' Williams agrees with Labor's Louise Pratt that it's too generous.

PT2M23S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-37f0i 620 349

Prime Minister Tony Abbott is being urged by Coalition MPs to follow his own advice by scaling down his signature $5.5 billion paid parental leave scheme in the interests of sharing the burden in the budget.

The call came as the government refused to hose down speculation of a special deficit levy and actively ramped up talk of big changes to reduce the welfare bill through cuts to the growth rates of a slew of pensions and the introduction of a harsher means test for family payments.

"There should be changes to indexation arrangements and eligibility thresholds": Tony Abbott.

"There should be changes to indexation arrangements and eligibility thresholds": Tony Abbott. Photo: Alex Ellinghausen

It has also signalled the widespread introduction of co-payments, especially in health, with Mr Abbott arguing that price signals are needed in the health system to remind Australians that "free services to patients are certainly not free to taxpayers". 

In an interview with Fairfax Media on Tuesday, NSW Nationals senator John Williams questioned whether such messages about belt tightening could sit alongside a generous paid parental leave scheme. 

"I've made no secret about whether we can afford the paid parental leave scheme proposed by the Prime Minister. I have serious concerns about it," he said.

Tony Abbott.

Tony Abbott. Photo: Alex Ellinghausen

"The economy, I believe, is not strong enough, unemployment is too high and it is a scheme that I believe we cannot afford at this stage." 

Liberal MPs contacted on Monday said the government was setting up "an unwinnable argument with voters" if it proceeded with a temporary deficit levy to help balance the budget, while also sticking to a paid parental leave scheme that would give mothers full pay for six months, capped at earnings of $150,000 per year.

"I think that's an argument we cannot win," one MP said.

Another Liberal said he was encouraged that voters had understood the messages about sharing the burden but the government could not expect people to hear that message and then turn a blind eye to such a generous parental leave scheme.

"They're saying yes its tough out there, and the budget needs to be tough, but then they say 'what's he [Mr Abbott] going to do about his parental leave scheme?'," he said.

One MP said: "I think it's very very difficult to imagine doing both [deficit levy and PPL] and there's a real sense that the PM needs to be also sharing in the budget pain by dropping his beloved PPL scheme."

Mr Abbott told reporters in Melbourne on Tuesday that he knew that there were "mixed views" in the community about his PPL scheme.

He added that he was working with people in the community who had a "very traditional mind set" but was confident that their thinking could evolve, because his own had on the subject.

"There are one or two of my colleagues in Canberra who have already shifted a little on this and I am pleased about that," he said.

Greens leader Christine Milne, whose party will be key to the Coalition passing the PPL in the Senate, reaffirmed that there were no negotiations between the Greens and the government on the issue.

"The Greens have had no contact whatsoever with Tony Abbott on paid parental leave. It makes you wonder whether he is serious about it and it is quite obvious now that he has a mutiny on his hands in his own party," she told reporters in Hobart.

The electoral reality check underscores the difficult balancing act being attempted by the government with Mr Abbott using a speech last night to the Sydney Institute to signal widespread changes, including an admission that pensions will be changed in just three years with lower indexation and an older eligibility threshold.

"To keep to our commitments, there will be no changes to the pension during this term of Parliament but there should be changes to indexation arrangements and eligibility thresholds in three years' time," he said.

"There are other social security benefits where indexation arrangements and eligibility thresholds should be adjusted now so that our social safety net is more sustainable for the long-term.

"Such benefits won't be less tomorrow than they are today but the rate of increase will be slower and needs to be slower if a comprehensive social safety nest is to be preserved for everyone's future."

The comments represent the clearest indication from the most senior level of government that pensions for the aged and the incapacitated will be progressively cut as a proportion of male average weekly earnings.

With the government's first budget just a fortnight away, Mr Abbott signalled serious inroads would be made into the burgeoning family payments system used by previous governments to buy votes in middle Australia.

In the gun are family tax benefits, with a sharp reduction of $50,000 in the allowable income threshold taking eligibility from the current $150,000 per year for families to $100,000.

"Not for a second would I label families as 'rich' just because they are earning $100,000 a year," he said.

"But the best way to help families in $100,000 a year is long-term tax relief and more business and job opportunities, not social security handouts."

He said he expected people would grumble but promised that everyone would be called on to make a sacrifice, "including high-income earners such as members of Parliament".

The opposition, which suffered a relentless attack from Mr Abbott during the Rudd-Gillard years over broken promises, slammed the suggestion of tax increases and pension changes, branding the proposed deficit levy as a "deceit tax" by a government with such "twisted priorities" it would take money from pensions and the disabled while funding millionaires to have babies.