Some positive directions, but budget locks in harsh cuts – with more likely to come

3 May 2016

In responding to the Budget, Dr Cassandra Goldie, ACOSS CEO said:

“The tightening of super tax concessions and changes to youth employment programs are welcome, but harsh cuts affecting people on low incomes remain locked in, with more announced and more likely to come. The failure to strengthen revenue is a major problem, and this Budget reveals the ongoing consequences to essential services and the social safety net.”

“The Budget locks in $13 billion in cuts from family payments, income support for young people and paid parental leave, and adds a further $3 billion in cuts to payments and essential services. This includes cuts to Medicare and dental health and income support for people with disability.”

“Alarmingly, the budget delivers a real cut to new recipients of the Newstart Allowance through removing the compensation for carbon pricing, while the related tax cuts remain in place. For people surviving on just $38 a day, this is unconscionable.”

“We are very pleased to see the new approach to helping young people into paid work. This Budget recognises the failure of work for the dole, and has instead provided an opportunity for young people to get work experience in real jobs with a wage subsidy, something we have urged for some time and should be used more widely.”

“We also welcome the action on superannuation and multinational tax avoidance. The superannuation reforms take us in the right direction, tackling unfair concessions for people on higher incomes, and providing assistance to people who struggle to secure adequate retirement savings. However, the tax treatment of super remains biased towards higher income earners, and the door for future reform must remain open.”

“The personal and company tax cuts costing $8.8 billion are only partly offset by the $3.3 billion in integrity measures, most of which are assumed to come from more resourcing of the ATO. By failing to act on shelters and loopholes such as negative gearing, capital gains discounts, private companies and trusts and work-related deductions, our revenue base is at real risk of further erosion. We must be able to afford to properly fund health, education and social security to invest in our capabilities and protect people who are vulnerable.”

ACOSS is concerned that all of the reduction in the deficit over the next four years ($1.7 billion) from this Budget comes on the spending side ($3.3 billion), with revenue declining by $1.3 billion.

“The Budget has failed to take any action to address housing affordability in Australia, nor to lift the unemployment payment. Serious gaps remain in essential services including legal assistance, early childhood and homelessness services.”

“We cannot support further cuts to Centrelink staffing, at a time when the system is already under severe strain.”

“This Budget must be the beginning, not the end of tax reform. Any tax cuts – personal or corporate – should wait until enough revenue has been raised to pay for them and restore essential services. Most people are still paying less tax overall than a decade and a half ago, before eight annual tax cuts were given. The proposed personal tax cut will only benefit the top 20% of income taxpayers.”

Welcome measures:

  • Restrictions on retirement tax breaks for people with high incomes and wealth
  • Lowering of the superannuation contributions cap and reintroduction of a scheme to prevent low income earners from being penalised when they contribute to their retirement
  • Curbs on tax avoidance by multinational corporations
  • Shift from the failed Work for the Dole scheme towards work experience in regular jobs for young people

Concerning measures:

  • Harsh cuts from previous budgets carried over to the 2016-17 budget, including cuts to family payments for low income families, reductions in PBS concessions, higher age pension eligibility age, one month waiting period for young people to access income support and lower payments for many young unemployed people
  • The vast majority of the cuts to state health and schools funding remain in place
  • The risk of further harmful spending cuts due to the failure to fully fund personal and company tax cuts, especially over the next four years
  • An effective cut to dental health programs
  • Reassessment of 90,000 people currently receiving the Disability Support Pension, putting them at risk of a $170 per week cut to payments
  • Some increases in superannuation tax breaks for contributions for people on higher incomes who don’t need them (the new tax deduction and carrying forward of the concessional cap)
  • More reductions in Centrelink resources, when the system is already under strain

Missing in action

  • A long overdue increase to the unemployment payment
  • Investment in affordable housing programs and supply, and certainty for homelessness services into the future
  • Changes to the child care package to ensure vulnerable children have 2 days per week of quality education and care
  • Additional funding for struggling community services, including Aboriginal and Torres Strait Islander and legal services.

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