Hockey's Second Budget Still Targets The Poorest

The Abbott government has worked hard to present its 2015 budget as much fairer than last year’s. It’s not.

We know this for a range of reasons, many of them obvious on budget night.

This government gives wealthy investors and superannuants tens of billions of dollars in tax breaks each year, while it cuts family tax benefits for the lower and middle classes. $80 billion in cuts to the health and education for the states are baked into the budget assumptions. There are spending cuts that will clearly harm the vulnerable: to preventative health, to dental care, to foreign aid, to homelessness and affordable housing.

And now we have the first round of economic modelling of how the budget will affect ordinary households. The modelling says this budget is unfair, too.

In recent days, both the National Centre for Social and Economic Modelling (NATSEM) and the Australian Council of Social Service (ACOSS) have released analyses that examine the budget’s impact on various types of families.

If you believe in fairness, as the government keeps insisting it does, then the results are dismal. As these budget measures start to flow through (and remember that some are stalled in the Senate), Australia will become a more unequal place.

In part, the pain of this budget is cumulative. While the 2015 budget was milder than its predecessor, it still retained many of the unfair measures announced last year. The austerity adds up.

According to ACOSS, “the two budgets strip approximately $15 billion over four years from basic services and supports affecting low and middle income households.”

According the National Centre for Social and Economic Modelling, by 2018-19, low income families could be as much as $6,100 a year worse off. In the case of a single parent family with two school-age children, the loss will total a whopping 8 per cent of their income. For a low-income couple with kids, it will be a 7.1 per cent decline.

That’s real pain. For a family on a low income, losing $100 a week in family payments constitutes a major hit. Some families are going to be pushed into poverty by these measures.

In contrast, households with high incomes are relatively unaffected by the cuts. Some may even gain slightly.

Why is the pain concentrated among low-income families with children? The answer, in a nutshell, is Family Tax Benefit B.

Family Tax Benefits were created by John Howard. They were a cherished achievement of his family-friendly prime ministership. The payments obviously go only to parents with children, but they have made a real difference in the lives of many citizens. While often derided by the right wing as “middle class welfare”, family tax benefits are in fact tightly targeted. They cut out quickly as families move up the income scale.

This is why the 2014 budget cuts to family payments hurt low-income families most.

Family Tax Benefit B is now scheduled to end when the youngest child in a family turns six. This will cost a single parent with an eight-year-old $48.50 a week, once FTB B and end-of-year supplement cuts are taken into account.

A couple with two school-age children will lose $65 a week.

Economic modelling is often accused of bias and unreality, but the methodology for calculations like this is relatively simple. The government is saving billions by cutting back on family payments. That will inevitably hurt the poorest families, who depend on those payments the most.

The debate about the budget’s fairness has been muddied to some degree by the government’s attempts to spin the issue. Prime Minister Tony Abbott and Treasurer Joe Hockey accused Labor of holding back the full modelling data from NATSEM during yesterday’s question time.

It was a curious accusation, given the government itself has access to the full resources of Treasury and could easily have modelled its budget changes on a range of representative households.

In fact, when the Treasury did so last year, the results were so bad that government refused to release the data.

Eventually, a freedom of information request from Fairfax Media revealed that the entire cabinet had seen Treasury data that showed that the 2014 budget hit the poorest the hardest.

If the government knew last year, then it obviously knows now. But it again held back the household modelling, presumably because it looked as bad this year as last year.

Instead, the budget papers presented a range of misleading tables, predicated on open class warfare against the poor. The new tables compared taxes paid to welfare payments received, suggesting that some households required more than a “full-time taxpayer” to fund their welfare payments.

It was bad enough that the intent of this table was manifestly about comparing virtuous taxpayers to mendicant welfare recipients. But the table also got its sums wrong in crucial areas, for instance by including child care assistance paid to families, but not including the costs to families of child care attendance.

Worse, “government assistance” was calculated as cash payments only, conveniently excluding the tens of billions of dollars of assistance that flows to rich households each year in tax breaks for negative gearing and superannuation tax concessions.

These are the sort of petty lies we’ve come to expect from the Abbott government, where evidence and truth are politically malleable and often calibrated to weave a mean-spirited and divisive narrative.

But perhaps the worst aspect of the budget is what it doesn’t do. It does nothing to rein in the vast concessions handed to rich households, especially those that own houses and have lots of superannuation.

You can see the upward redistribution most acutely in housing.

Australia is in the grips of a housing affordability crisis. It is becoming more and more difficult for an Australian on minimum wage to rent a house or apartment in a capital city. Poorer people are paying half and more of their income for a roof over their head. 100,000 Australians are homeless. Skyrocketing Sydney and Melbourne property prices are pushing rents ever further out of reach.  

The 2015 budget does nothing for housing affordability or homelessness. It continues the multi-billion price stimulus of negative gearing, and continues to pretend that the family home is not an asset worth means-testing. Cuts to homelessness funding announced last year are not reversed.

It all adds up to meaner, nastier and more unequal Australia. Meanwhile, Treasurer Joe Hockey continues to enjoy a Parliamentary allowance for his accommodation in Canberra, which he pays to his landlord, who happens to be his wife.