Yes, there were good bits, but as a social document based on fairness, the 2009 federal budget wasn’t crash hot. Those who were given more money were the presumably nice poor: a good rise for single pensioners (mainly female), and some for couple pensioners. The recipients included the aged, those on disability support pensions and carers. The less marketable groups were left out big time: those on Newstart and sole parents on parenting payments, now to be detached from pension rates.
The sole parenting payment omission is quite odd. Wayne Swan made an error at one point on TV last night, when he blamed the lack of a rise on the Harmer review not proposing one. Given that the brief for that report was retirement incomes, it obviously didn’t cover working age payments. These come under the main Henry review. Swan also claimed that the “generous” family payments meant sole parents didn’t need any more. Apparently children don’t cost much in his household.
The unemployed, young and older, will still have to manage on incomes well below the poverty line. As more people will come onto these payments, and presumably for longer periods, this omission is odd. The argument is that they should get a job but, hey, we are in a recession, Mr Swan!
So the poorest become poorer and only some of the rich will lose a little upper class welfare. For the 2% older high income earners who are using super as a tax shelter big time, some parts of their shelter have halved. So their tax avoidance, which often exceeded the value of the age pension, will be reduced a little bit. The top 5% of earners currently get 37% of the super tax expenditures, so there is much more they could give up. The savings are only about $600M a year, it could have been tripled and still left them ahead by some billions.
At the other end, the small benefits for the bottom 25% of income earners, who get 3% of super tax concessions and may have used the co-contribution scheme, have been cut by a third. This is not fair, even if for only three years.
Some future higher income pensioners will lose out, which doesn’t concern me because many of these are also on tax free superannuation. Under the new rules, the pension will be paid to new pensioners with private income of up to $38,693 for singles, and $59,228 for couples combined, down from $47,444 for singles and $72,423 for couples combined under current income test rules but it will be phased in so current pensioners won’t lose funding. Raising the pension age is a small gesture to the future but raising the age of access to super to the pension levels would be much more productive.
More soothing words for higher income retirement rip offs with the government’s decision not to proceed with proposed changes to include gross tax-free superannuation income in the income test for the Commonwealth Seniors Health Card. This was due to come into effect on 1 July this year but now continues another legal tax scam residue of Costello’s giveaways.
Why are well off older people so powerful? Is it because most decision makers know that is who they will be in a few years time?
There is a clear bias in the rhetoric and some payments against wealthier families, but since there are relatively few of these, the changes are more symbolic than effective. The government looks more redistributive than it is by harping on about “middle class welfare”. The cuts in the Health rebate will not really be felt by many families. However, penalising those higher income earners who opt out of private insurance is a bit bizarre when their policy is for a universal health care scheme, not a residual one for those who can’t afford the alternative.
Now to the better news: Paid Parental Leave is there with some initial spending in this year, presumably on the process. There is Medicare and new work rights for some asylum seekers who missed out before. There is more money for helping low income students into tertiary places and some extra for the arts. The extra money for local jobs in highly affected areas of unemployment is good. There is funding through Medicare for midwives and some crackdowns on a few high income rorts.
These good changes were small and buried and there are probably others not yet spotted that do increase fairness by recognising some past problems. However, these do not counter the basic problems of the continuing tax cuts needing to be abolished as they really only benefit those who are earning over $100,000. The cuts in family benefits are relatively small and make high savings because they go to many people. Again the small changes will hit the poorer families in some case.
The whole budget needed a fairness framework that really shared the load, as I think many people were ready to have their better angels engaged. However, the current initiatives did not promote the viewpoint that this is not the Government’s direction. The emphasis on shock horror and pain could have been better used to encourage a sense of shared responsibilities but instead tended to feed into the older mode of asking “what is in it for me?” that was the hallmark of Coalition budgets.