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Issue #1822      May 16, 2018

Budget 2018-19

Poverty trap

Treasurer Scott Morrison’s budget is dishonestly presented as helping workers on “low and middle incomes”. It makes these claims at the same time as putting the boot yet again into the most disadvantaged and handing out millions more dollars to its big business mates.

By “low and middle incomes” Morrison means taxable incomes up to $200,000! That shows just how out of touch Morrison and his government are with the majority of the population and how little interest he has for the plight of people on low incomes.

That $200,000 of course does not take into account the many tax dodges and concessions that the rich have and will continue to access!

Social insecurity

The $50 a week increase in the NewStart allowance for the unemployed which had been widely forecast, was not delivered. Instead the three quarters of a million recipients of the allowance are expected to live on a punitive $278 a week – $39.71 a day.

Around 76 percent of NewStart recipients have received income support for 12 months or more. The benefit has not increased in real terms for 24 years.

Young people are chasing largely non-existent jobs, but the Youth Allowance for students and apprentices is likewise frozen at $278 affecting more than 145,000 recipients.

They will remain trapped in poverty – their punishment for not having a job or wealthy parents to support them.

Wages remain flat or falling for those on the lower end of the pay scale in casual work. The government refuses to restore the penalty rates that were cut last July. Another round of cuts is approaching in July.

There is no jobs plan, just more rhetoric. A decent pay rise for all low-income workers and social security recipients would not only go some way towards alleviating social hardship but generate jobs.

The first sentence under the cross-head “Welfare Spending” in Morrison’s speech states, “Lastly, in this year’s Budget, the Turnbull government will ensure that the government lives within its means.” This is code for turn the budget into surplus at the expense of the most disadvantaged.

Over the past four budgets, the government has cut $15 billion from social security and community services and this budget continues the trend with billions more in cuts.

The budget offers a few crumbs for aged care: “We will also provide $83 million for increased support for mental health services in residential aged care facilities, especially to combat depression and loneliness,” says Morrison.

“To support the choice of older Australians who wish to stay at home and avoid going into residential aged care the government will be increasing the number of home care places by 14,000 over 4 years at a cost of $1.6 billion.” That is an average of 3,500 a year – a sick joke in context of a backlog of 100,000.

Fabricated budget deficit

“Budgets should be a time when governments outline a practical vision of the future in which we share our commonwealth for a just, prosperous and equitable future. In a wealthy country such as ours, it should be a time of hope,” said John Falzon, CEO of St Vincent de Paul Society National Council of Australia.

“Instead, we have a government that is pandering to greed and short-term gain by offering tax cuts that will lead inevitably to further cuts in services. They even want to lock the tax to GDP ratio in at the irrational figure of 23.9 percent.

“As a result, they have served up dollops of despair to those who are unemployed or underemployed, homeless or experiencing housing stress,” Falzon said.

It is simple arithmetic, if you keep slashing your income you have less to spend and so must cut spending. In a few years time, when this latest promise for a budget surplus fails to materialise, the government will argue the need to make further cuts to essential services.

The government is handing out $140 billion in tax cuts over 10 years, building in failure. This is compounded by the fact that its predictions are not based on reality. Its predictions for growth in the Gross Domestic Product and wages are pie in the sky.

The Department of Human Services is already stretched beyond human limits due to previous job cuts, with 55 million unanswered calls last year. So what does the government do? It cuts another 1,280 jobs!

There is nothing in the budget for social security recipients, not a cent. Rather, the government keeps driving people off benefits by tightening the rules, extending qualifying periods and the use of its robo-debt collection which will continue.

Housing misses out completely. Migrants are hit with a sledge-hammer as they will now have to wait four years to access Medicare.

Funding for education, health and Indigenous services remains far below what is required. The private schools still get the majority of funds to the detriment of public education.

Regressive personal tax cuts

True to form for the Coalition, the higher your taxable income, the larger the tax cut. Or to put it the other way around, the lower your taxable income, the smaller the tax cut. A few crumbs are thrown to workers whose incomes are below $37,000 – up to $4 a week paid at the end of the financial year. At most, an insulting bribe.

If their income is too low to pay tax, then they receive nothing.

The plan is for a new Low and Middle Income Tax Offset (LMITO) replacing the existing Low Income Tax Offset to commence in 2018-19. The payment is up to a maximum of $530 a year with the full $530 for those on taxable incomes between $37,000 and $90,000.

The LMITO is paid following assessment of your tax return for that financial year. It is not a PAYG reduction deducted by your employer like the other tax cuts.

A series of changes over seven years widen the tax brackets, increasing thresholds at which higher marginal rates.

If implemented, this seven-year plan would result in up to $200 in tax cuts for those on the lowest incomes through to a tax cut of $7,225 for someone declaring a taxable income of $200,000.

Research carried out for Anglicare by the Per Capita think tank prior to this budget found that tax concessions for the wealthiest fifth of households cost the federal budget more than the four main welfare payments – the aged pension, family assistance payments, disability benefits and NewStart combined.

These concessions include rorting the superannuation system, negative gearing of investment properties, income splitting, trusts and capital gains tax concession on the family home.

Total tax concessions (family) cost the budget around $135 billion a year in lost revenue – about six times as much as NewStart. This certainly illustrates where the priorities of the Turnbull government lie.

Flat tax

These proposals would be a huge leap backwards in the direction of a flat, regressive taxation system where everyone is taxed at the same rate in the dollar regardless of their taxable income.

Australia used to have a relatively progressive taxation system with tax contributions to central revenue based on size of income – the rich paying more and the poor paying less or none.

The government and media played down the $68 billion package of corporate tax cuts that remain in the budget. They remain high on the agenda and only need a Senator or two to be bought off to pass the Senate.

They also remained silent about the trillion dollars quarantined for military spending over coming years.

These funds diverted from meeting people’s needs would contribute much to overcoming many social problems and result in a stronger economy with job growth.

Environment and energy

The Budget pays scant attention to climate change and environmental questions.

“The National Energy Security Board estimates annual power bills will fall by $400 on average for every Australian household from 2020, following the introduction of our national energy guarantee,” asserts Morrison.

He continues with more of the same, “All energy sources and technologies should support themselves without taxpayer subsidies. The current subsidy scheme will be phased out from 2020.

“And we will keep the pressure on the big energy companies to give you a better deal. Already this has led to households saving several hundred dollars a year.” The Guardian would like to hear from any household that has saved several hundred dollars on their energy bill!

The budget is a class question, and nowhere is this clearer than in this budget where there is little pretence of meeting people’s needs while handing out billions of dollars to the wealthy and big corporations.

Next article – Editorial – Victory Day

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