Wednesday, 14 May 2014

Heavy Lifting

So now it's official, Joe Hockey's first budget is a shocker.

His metaphorical language has taken a new turn.  Along with the task of "budget repair" we now now have the image of lifting.  Australians, he says, are "lifters not leaners" and this budget is about doing "heavy lifting" to get rid of government debt and move us back into surplus.

It is highly debatable whether getting back into surplus is as important as Hockey wants us to think, but this morning I'm worried about less esoteric questions.  Like, who exactly is doing all this lifting?  Joe himself and his parliamentary colleagues are symbolically doing a little, accepting a 12-month pay freeze.  Meanwhile, 16,500 lower-ranking public servants will do a lot more, losing their jobs and having to look elsewhere, perhaps ending up doing real lifting as labourers on one of the many road building projects flagged in this budget.

However, by far the heaviest lifting will be done by the poorest members of our community - older people on pensions, people with disabilities, young unemployed people, and Aboriginal communities.  Not to mention people in other communities altogether.

There's been a lot of talk about the "temporary deficit levy" to be paid by higher income earners for the next few years.  In principle, as I have said before, this is a good idea - a progressive tax aimed at the rich to help shore up government revenue.  However, in practice it's a bit of a fizzer.  People whose incomes are over $180,000 per year will pay 2% of the amount by which they exceed this figure.  In other words, a person with an income of $200,000 will pay 2% of $20,000, or $400.  The tax will be scrapped after three years.

Meanwhile, a single pensioner will immediately lose their seniors supplement, worth $876 per year.  This alone represents a loss (effectively a tax) of just under 4% of the single pension which currently sits at around $22,000 per year.  This is 4% of their entire income, with no threshold amount.  In addition, pensioners will now have to pay $7 each for their first ten doctors visits per year - another $70 per year if they go that often.

Unlike high income earners, who will be able to lift a little less in three years' time, pensioners will have to gradually build up their muscles over time.  Not only are the scrapping of the seniors supplement and the Medicare co-payment permanent, indexation of the pension has been de-linked from average incomes and instead linked to the CPI, meaning pensions will rise more slowly than other incomes, while more assets will be included in the assets test and the income thresholds for pensions will not be indexed at all, so many pensioners will lose eligibility over time.

Other poor people will have it even worse.  If you are unemployed and under 30, look out!  Under 30s will only be able to get Newstart Allowance for six months at a time, while under 25s will not get it at all - they will only get Youth Allowance and will have to be studying - study they will have to pay for, later if not now.
There is an even more insidious trap in store for younger people with disabilities.  Stricter assessment regimes will apply to people on disability support payments.  This will mean that some people whose disability is less severe - say, people with a mild intellectual disability or a chronic mental illness - will be assessed as able to work and shifted to Newstart allowance.  These people will then be obliged to "earn or learn" but will find themselves still hugely disadvantaged in the workforce and in education and at risk of having no source of income whatsoever.  This is certainly a heavy burden for highly disadvantaged people to bear!

Direct payments are only the tip of the iceberg.  The government is cutting over $1.3b of support for State pensioner discounts - this funds things like concessions on public transport and Council rates, so daily life will become more expensive.  The indexation of fuel excise will hit everyone (unless they drive diesel vehicles), so of course its impact will be greatest on those on low incomes who have less capacity to pay.  Cuts to hospital and school funding fall most heavily on the public system which poorer people rely on.  Over $500m will be cut from Aboriginal community programs over the next four years - funds for the provision of services to the nation's poorest people.  As for foreign aid, cut by $7b over four years, we obviously don't care a scrap for the poverty of people in "countries other than Australia" as Shaun Micallef would put it.

Meanwhile, high income earners pay a little more tax, companies pay the same and mining companies pay less courtesy of the scrapping of the Resource Rent Tax, not to mention the Carbon Tax.  When Mr Hockey talks about a nation of lifters, he clearly has in mind coolies carrying the luggage and supplies while their wealthy employers stroll along swinging their stick and whistling a happy tune.

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