Who will really pay for Budget repair? ACOSS analysis

The Australian Council of Social Service has released new analysis revealing that people on low and middle incomes will carry the overwhelming burden of repairing the federal Budget.

“Our analysis brings home the harsh truth that the heavy focus on spending cuts will be socially harmful and cost our nation more in the long run,” said ACOSS CEO Dr Cassandra Goldie.

“The burden of restoring the Budget will not be fairly shared. Over the next four years, people and families living on low incomes will be expected to contribute over half the savings in the Budget (52%), compared with less than one sixth coming from people on high incomes.

“More than $19 billion out of $37 billion (52%) in budget savings in key programs and services over the next four years will come from reductions in spending on programs that mainly assist low and middle income earners. Only $5.7 billion (15%) billion are tax increases or savings in programs mainly benefiting people on high incomes.

“The people that will particularly be affected are those under 30 looking for work, people with disabilities, carers, single parents and struggling low income pensioners and families. The income losses sustained by many people relying income support and family payments are large and crippling.

“Lowering indexation for pensions and freezing family payments for two years will affect families living on low incomes the most and increase poverty and inequality. A single parent on a low income with one child over 6 years stands to lose $50 a week from the changes to Family Tax Benefits alone. We estimate that over a decade, changes to indexation will mean that single people relying on most pensions will be $80 a week worse off.

“New rules will deny income support to young people up to 29 years for six months of every year, unless exempted, resulting in income losses of $207 to $255 a week. Changes to eligibility for the Disability Support Pension are likely to result in more young people currently on this Pension being moved to the much lower Newstart or Youth Allowance, an income loss of at least $166 per week.

“The same people will also be hardest hit by the move to introduce $7 co-payments for doctor’s visits and other services. It will deter patients with severely constrained incomes, particularly those with complex health conditions, from seeking necessary help, leading to more costly hospitalisations down the track.

“In contrast, people with high wealth and incomes will scarcely feel any pain, and much of it will be temporary. There are some efforts to remove or tighten access to a number of poorly targeted entitlements, such as abolishing the Seniors Supplement, capping Family Tax Benefit part B payment at $100,000, and the introduction of a temporary deficit levy. However, measures impacting disproportionately on those with high incomes represent just 15% of the overall savings and revenue measures considered in ACOSS’ analysis.

“Everyone is expected to contribute to repair the Government Budget but more is expected of those with the least ability to pay.

“To be fair and sustainable this budget should have restored public revenue as well as reducing waste on the expenditure side. Three fifths of the decline in the Budget bottom line since the Global Financial Crisis was caused by a loss of revenue, yet the Budget has not begun the process of major structural reform of the tax system. The Budget instead left generous tax concessions that mainly benefit people on higher incomes in the too-hard-basket: superannuation, the treatment of private and company trusts and generous housing tax concessions. It is vital that these are front and centre in the Government’s tax review.

“We urge the government to withdraw the harshest of the spending cuts and start an open dialogue on budget reform to design and build support for the structural change that’s needed on both the revenue and expenditure side. ” Dr Goldie.

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