Budget hit hard in parliamentary negotiations

Labor says the coalition has failed to recognise the flaws in the two bills – charging students more for courses, stripping at least $2 billion in funding from universities and dealing harshly with vulnerable people seeking refuge.

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The bills and the state of the economy were the focus of the second-last day of parliament for the year.

Feeding into the debate was news the economy grew just 0.3 per cent in the September quarter, taking the 12 month figure to 2.7 per cent – well below the 3.1 per cent forecast.

Treasurer Joe Hockey said this showed the need for Labor to help the government deliver medium and long-term reform such as the universities overhaul.

“Our plan is on track,” he said.

However, the plan has been made harder by Education Minister Christopher Pyne foregoing $3.5 billion in savings in order to win over six crossbench senators he needs for his revamped universities bill to pass in the new year.

“I am not a quitter and I am not prepared to give up on this reform,” Mr Pyne said.

The higher education changes, due to start in 2016, will now only save $451 million over the period to 2017/18.

The new bill will establish government-funded scholarships specifically for poorer and rural students and a support package for regional universities.

It will also freeze interest on debts for new parents and ensure domestic fees can’t exceed what international students are charged.

The crossbench senators who voted with the government were Bob Day, John Madigan, David Leyonhjelm and Ricky Muir.

But the two Palmer United Party senators and independents Jacqui Lambie and Nick Xenophon voted against the bill.

Labor leader Bill Shorten told the caucus the government would never get the votes it needed.

“We shall fight them in the parliament. We shall fight them in the community. We shall fight for opportunity. We shall fight for a fair university system and we shall never surrender,” he said, paraphrasing Winston Churchill.

Immigration Minister Scott Morrison announced changes to his proposed migration laws in a bid to win Senate crossbench support.

The changes, which were before the Senate on Wednesday, mean families and children will come out of detention and the 25,000 asylum seekers now on bridging visas will be allowed work rights.

The government will also increase the refugee humanitarian intake by 7500 places over four years.

Labor seized on new figures showing that incomes shrank for the second quarter in a row – technically an “income recession”.

Shadow treasurer Chris Bowen said the coalition was living in a world of “delusion and denial”.

Mr Hockey declined to say whether his forecast of returning to balance in 2017/18 was still on track, but insisted he wouldn’t cut the budget further to counter a drop in revenue because it would harm the economy.

The government was standing by another controversial measure, the proposed GP co-payment, he said.