Budget could mark switch to fairness


Budget SpeechThere is much to be celebrated in the Rudd Government's first Budget, but also many questions left to be answered.

The Budget papers are densely packed with references to 'Working Families'. In many cases these references relate to initiatives that are aimed squarely at low and middle income earners, such as direct assistance in the form of tax breaks and child care, but also indirect programs to increase training and other opportunities for the future.

'Working Families' means different things to different people. Some 'working families' are made up of single parents on low incomes and their children. They will benefit from changes to taxation arrangements and the child care rebate, but will still be under pressure to return to work quickly rather than provide direct care for their children or undertake significant re-training to improve their long-term employment prospects.

Some working families comprise two working parents on high incomes. These families, too, will benefit from tax cuts and the child care rebate, but will also continue to enjoy the massive taxation and superannuation benefits that are available to high income earners, but not to low income earners.

Tax cuts look set to deliver the greatest benefits to people on the lowest incomes. This is an important first step in sharing Australia's wealth more equitably. In order to pay for some of these programs we have seen a new focus on means testing. Family tax benefits will be withdrawn from high income households. This is a welcome shift in policy.

If government spending must be constrained in order to defend against inflationary pressures in the economy, then it makes sense for spending to be better targeted. Targeting households earning less than $150,000 still covers a very large proportion of the voting population.

We need means testing, to ensure we are not spending resources where they are not needed. But during such buoyant times, we must also do more needs testing — ensuring those on low income and benefits have the resources they need to provide food, shelter and dignity for themselves and their families.

For those 400,000 or more Australians who are unemployed, tax cuts are of little value. While the cuts may provide increased incentive for some to return to work, they are of little use to those who lack the skills and capacity to re-enter the workforce without substantial assistance.

For this group we see an emphasis on an overhauled Job Network system, with a focus on education and training in addition to job placement.

This is an important measure. For some years now Catholic Social Services Australia has been advocating changes to the Job Network that deliver greater emphasis on assistance to the most disadvantaged, greater flexibility in how services are delivered, greater flexibility in how resources can be spent by agencies to buy services or supports for job seekers, and decreased administration. In principle at least, this budget makes claim to deliver on all these fronts.

The current range of employment services will be combined in a single integrated service, provided under a single contract. Job seekers will be divided immediately into four streams depending on their level of disadvantage, and a greater proportion of the total funding pool will be spent on those considered most disadvantaged (although this total pool will be considerably smaller due to a decrease in overall expenditure).

Better education and training opportunities will help many Australians to escape poverty traps. Time will tell whether these opportunities can be taken up by those with the greatest need.

There remains a question, however, about where Australia's most vulnerable citizens will find their place in this new order. For a range of complex reasons, some Australians will always remain outside the workforce, or will participate only at its fringes. For others their caring duties or their temporary incapacity will mean dependence on a welfare payment of some kind for a considerable period of time.

The budget papers reveal very little about this group. There are no substantial increases to entitlements, even though it is widely acknowledged that those living on such payments in Australia today are living a life of poverty.

Little light is shed on the nature of any programs that will be developed under the 'Social Inclusion' banner. The government has released some very encouraging policy in this area and delivered some very encouraging speeches on the subject, but policy and speeches will only be converted to action once substantial funding is allocated to the task of engaging with Australia's most marginalised groups.

This budget may mark a turning point. It may mark a shift towards a fairer more inclusive Australia. If we are to ensure that all Australians can live a fairer, more dignified life there is still much to be done, and not all of it is funded by this budget. This budget does represent a substantial change in direction. Time will tell whether that new momentum can be sustained.

Budget online

Frank QuinlanFrank Quinlan is the Director of Catholic Social Services Australia, the Canberra-based umbrella organisation representing social welfare works of the Catholic Church.





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Existing comments

Excellent review. Succinct and measured.
My concern is for the aged and aging ... those of us who have no possibility of employment and with meagre resources. I see nothing in the budget to give hope to the poverty stricken in this bracket.
Judy George | 15 May 2008

Okay but sniping about "massive taxation and superannuation benefits" and "high income earners" dilutes the message. Similarly, how much will means testing cost versus how much will be saved? My preference is to seek the common good not to dissuade others from coming or staying here because of an uncompetitive taxation regime.
Kim Chen | 15 May 2008

My problem with the means testing of any benefit is that it diminishes inclusivity. For mine, I’d like to see a uniform rate of income taxation on every earned dollar, coupled with a universal allowance. There’d be no dole, no Family tax Benefit B or any other little bribe with which a Con-servative politician could stroke the greed of any particular demographic group.

There’d be no welfare trap, no disincentive to seeking work, and no looking down noses toward those on benefits; all Australians would be on the same benefit.

Instead of taxing high incomes at a higher rate, I’d discourage companies from paying excessively high amounts to individuals by limiting the tax deductibility of excessively large salary packages. The component of salaries in excess of, say, three times the median pay rate for that company would not be tax-deductible for the company, so that it would effectively be paid for out of shareholder profit.
Such a change would transform the relationships between executives, management and labour, between executives and shareholders.
David Arthur | 16 May 2008

The aid budget rarely makes front page news, but it's a pretty good
indication of the state of Australia's soul. Increasing aid to $3.66
billion is a small step in the right direction.

But after 17 years of economic growth and record budget surpluses, we still give only 32c out of every $100 of our national income in aid to the poor.

Not only is this less than what most other wealthy donors manage to give (averaging 45c in every $100), it's less than half of the 70c in every $100 we promised to provide in aid in 1970.

Australia shows where its priorities lie. $2.3 billion for climate
change programs in Australia to reduce our emissions and adapt to the
impact of climate change. But we're giving just $35 million in the aid
program to support the poorest communities who will be most affected,
in their efforts to adapt to climate change.

Increases to the aid budget are not inflationary. I'm glad to see a small rise this year. I look forward to seeing Australia doing even more to help our poor neighbours next year.
Charles Boy | 16 May 2008


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