ACOSS welcomes Garnaut review but wants household assistance to be fair and equitable

The Australian Council of Social Service today welcomed Professor Ross Garnaut’s continuing support for the introduction of a price on carbon pollution but maintained its view about the importance of household assistance being delivered in a fair and equitable manner.

As the peak body for the community welfare sector ACOSS is primarily concerned with low income, disadvantaged and vulnerable households. “These households are exposed to the impacts of climate change and will be affected first and worst. And these households are impacted by even small increases in the prices of essential goods and services,” said CEO, Dr Cassandra Goldie.

“While we welcome the general approach taken by Professor Garnaut we have significant concerns regarding his proposals for household assistance and tax reform. He proposes that household assistance for those on the lowest incomes be reduced to pay for unrelated tax reforms. It is vital that social security recipients are assured that the average impact of a carbon price on their living costs is more than compensated by increases in their payments. We are confident the Government’s package will provide that guarantee but Professor Garnaut’s proposals, if adopted, would weaken it.

“Professor Garnaut suggests several changes to the personal taxation system. While ACOSS welcomes reform of the taxation system to make it more effective, efficient and equitable, his proposals are only part of the reforms needed and alone would not deliver equitable outcomes.

“More than a year ago the extensive Henry Review proposed a range of reforms. The forthcoming tax forum may advance this project. We hope that any reform is coherent, comprehensive and has a focus on workforce participation. But the design of assistance for households in response to a carbon price should address the immediate and continuing impacts of the price on carbon through the existing tax and transfer system.

“Professor Garnaut observes that there have been ‘substantial increases’ in benefit payments since the CPRS detail was settled. We welcomed the increase in the Age and Disability pensions by about $32 per week but at $365 is hardly generous. However the unemployment benefit, Newstart and the Sole Parent payments, have not been increased substantially. The difference between Newstart and the Age pension rates is now about $128 per week.

“Newstart is currently paid at $237 per week. A 2.5% increase would equate to $5.90 per week; a 1.1% increase would be $2.61. The modelled increase in cost of living for an average household, from a carbon price of $25/t was about $10 per week. It is grossly unfair to assess cost of living impacts on the basis of income let alone to provide assistance on the same basis and perpetuate inequities in our social security system.

“We therefore propose that assistance to households on social security be set at a flat dollar rate (adjusted for household characteristics) rather than a percentage of the payment they receive. This would be fairer and simpler and would deliver at least the same level of assistance to pensioners as the CPRS proposals.

“ACOSS has argued for increases to pensions, allowances and family tax benefits to be higher than modelled cost impacts so that no group is worse off, be reviewed annually and then assessed at the time of transition to a market mechanism.

“We support Professor Garnaut’s suggestion that $400 million over four years be invested in improving end-use efficiency in low income households. Our view is that the carbon price should continue to fund investment in improving energy efficiency for as long as the mechanism operates. This is a sensible, practical measure that clearly addresses a market failure while supporting the intent of the scheme,” Dr Goldie said.

Latest ACOSS releases and papers:
ACOSS Carbon Price and Low Income Household Position Paper
Necessary foundations for Australia’s transition to a low-carbon economy