Signs low income and vulnerable to bear brunt of Budget repair

24 April 2014

The Australian Council of Social Service today said that those living on low incomes and vulnerable appear likely to bear the brunt of the Federal Government’s effort to steer the Budget back on a sustainable footing, following the Treasurer’s speech in Sydney last night.

“ACOSS agrees we face a significant fiscal challenge but all the signs are that people at the very bottom of the income and wealth scale are to be asked to carry the overwhelming burden of the Budget repair job,” said ACOSS CEO Dr Cassandra Goldie.

“Despite the rhetoric that the Government would prioritise spending for those who need assistance, measures proposed to date will disproportionately target those with the least in our community.

“The proposed 1.75% cap on growth in spending would freeze spending for a decade once growth in the population is taken into account. That means a ten year spending freeze in government benefits and services everyone relies upon, including basic health services, pensions and benefits, community services and schools.

“ACOSS urges the Government to deliver on its promise to target expenditure to people most in need. It should take a balanced approach to balancing the budget, which means that the burden of fiscal restraint should be shared equitably across society according to means.

“However, currently the Government is failing to meet urgent needs, including people on the intolerably low Newstart Allowance payment of $36 a day, and is providing generous assistance to those who don’t need it, such as those on high incomes benefitting from housing and superannuation tax concessions at enormous cost to the budget, and pensions and concessions for retired couples with a million dollars in financial assets.

“We are particularly concerned that focus to date by Government, including through the National Commission of Audit, has been exclusively on direct spending, ignoring the other side of the ledger – tax expenditures and the need to raise revenue.

“Restoring tax revenue to 24% of GDP would raise the equivalent of $30 billion a year in extra public revenue. This would go a long way to restoring the Budget and more could be done by closing tax shelters and loopholes, not by relying on income tax bracket creep alone.

“We welcome the Treasurer’s acknowledgement that the growing cost of superannuation tax concessions is unsustainable. These concessions now cost around the same as the age pension, at around $40 billion a year.

“As the Treasurer Joe Hockey said in his speech, we need structural reform to get our national Budget back in the black in the longer term. This cannot be achieved in a single Budget. And we simply cannot allow it to be achieved through hitting the most vulnerable members of our community. This will only accelerate growing inequality and poverty in Australia and cost us more as a nation in the longer term,” ,” Dr Goldie said.

“The majority of savings measures mooted to date have been targeted to social programs and supports, which will disproportionately affect those least able to manage with less – those on low incomes and vulnerable. This is clear when you look at who will pay for the proposals raised so far:

Who will pay?
• The introduction of a $6 GP co-payment will impact on low income people most and those with chronic illness and is likely to lead to reduced visits to doctors and greater pressure on hospital system;
• Proposed changes to eligibility for the Disability Support Pension will require more frequent medical assessments and shift many people onto Newstart Allowance which is $166 a week lower, without addressing barriers to work;
• Increasing the Age Pension eligibility age will force many older people to struggle on the $36 a day Newstart payment for longer;
• Proposed changes to indexation of pensions to prices instead of wages will cause payments to fall behind community living standards and lead to an increase in poverty amongst older people, people with disability and others relying on pensions;
• Abolishing Medicare Locals will reduce the access to primary health care services for those on low incomes;
• Abolishing the low income superannuation contribution will effectively penalise people on low incomes for saving for their retirement;
• Abolishing the Income Support Bonus Payment would reduce assistance to people on the below poverty line Newstart payment by $4 week;
• Cuts to Aboriginal and Torres Strait Islander organisations, including legal services and peak representative bodies and community legal services will all reduce access to essential services to some of the most disadvantaged members of our community.

Who should pay?
While the Government has signalled a reduction in ‘corporate welfare’, the Government has been reported as refusing to touch expensive tax expenditures or poorly targeted payments, which benefit those who are wealthier, driving greater inequality in Australian society, including:

• Superannuation tax concession, of which one third go the top 10% of wage earners, now cost the same as the age pension, around $40 billion per year;
• Housing tax concessions, which also largely benefit those on high incomes and contribute to house price and rent inflation which is locking many low and middle income households out of the market, at a cost of more than $8.3 billion a year;
• The assets test for eligibility for the part pension, by which people with investment assets of more than $1 million, in addition to the family home, are eligible to receive a part pension – causing rapid growth in uptake of the pension;
• The Seniors Supplement, which extends to those who are too wealthy to receive a pension;
• The Private Health Insurance Rebate for ancillary cover; and
• The tax treatment of private trusts which largely benefit those on high incomes.

Media Contact: Fernando de Freitas 0419 626 155