It's a heartless budget that maintains the rich-poor divide

Anglicare Victoria CEO Paul McDonald on the federal budget

By Paul McDonald

May 5 2016A society will be judged on the basis of how it treats its weakest members. So said Pope John Paul 11 and similar words have been spoken by great thinkers including Churchill, Dostoyevsky and Gandhi. Scott Morrison and Malcolm Turnbull are clearly not in that category.

Budget 2016 largely ignores Australia’s most vulnerable people. Nothing for the homeless, nothing to reduce housing affordability when millions of low-income Australians are not just shut out of the housing market but also priced out of the private rental market.

There is $750 million of new spending over four years for internships for young unemployed. This is welcome and appears to be a big improvement on previous work-for-the-dole schemes.  But the Budget papers offer no hope that unemployment will fall below 500,000 over the next four years.

The Budget ignores the growing consensus that the Newstart allowance is manifestly inadequate at $38 a day and has fallen behind other welfare payments such as the age and disability pensions. Even the Business Council of Australia and the accountancy firm KPMG say Newstart must rise. But instead this Budget makes it even worse by depriving new people coming on to Newstart of the carbon tax compensation.

The lowest 70 per cent of income earners get nothing from the Budget’s two tax cuts which address bracket creep for those on $80,000 or more and remove the deficit levy for high income earners (even though big deficits remain for the next four years).

Notwithstanding the economic challenges facing Australia, we remain one of the wealthiest, luckiest countries in the world.  Australia has enjoyed the longest period of economic growth in its history. But it is a national disgrace that during this period, the gap between the rich and the poor has widened, not narrowed.

French economist Thomas Piketty has argued that countries like Australia are headed for the rich-poor divide of the 18th and 19th centuries if the accumulation of wealth by the top few per cent is not stopped. Piketty and others including The Financial Times have argued that the answer is to tax wealth.

Our government attacks this historic challenge with a limp feather by reducing the superannuation tax rorts for the wealthiest 4 per cent.

Remember just a few months ago when everything was on the table? Well, showing great agility and innovation, our Government did a disappearing act on real reform like crackdowns on negative hearing and capital gains discounts, rorts in trusts and a clamp on work-related deductions.

There are two ways governments can help the poorest people – with higher income or better basic services. This Budget fails on both counts.

Aside from proving nothing on the income side, this Budget locks in huge cuts from previous budgets into this financial year, including cuts to family payments for low income families, reductions in PBS concessions, higher age pension eligibility age, one-month waiting period for young people to access income support and lower payments for many young unemployed people.

Most of the cuts to state health and schools funding remain in place, there is an effective cut to dental health programs and more reductions in Centrelink resources. And there is a $1.2 billion cut in the aged care funding mechanism over four years, with offsetting increases in aged care services filling only half that funding gap.

Finally we see the Commonwealth recognizing it has a role to play for the 3000 18-year-olds who leave state care, though it is a puny $1 million a year for four years to help the 3000 young people who transition from out-of-home care to the community each year. If followed through in future Budgets, this initiative could be the start of a sorely-need Commonwealth-State partnership to help some of the nation’s most vulnerable children, including extending out-of-home care to age 21.

Despite a very small number of positive signs, this is not just an underwhelming Budget. It is a mean and heartless Budget that ignores the weak and lashes the richest few with a damp and wilted romaine.

Paul McDonald is CEO of Anglicare Victoria