The GST debate
Politicians shouldn't rule things in or out but participate in a mature debate says Nationals MP Andrew Broad.
New analysis from the National Centre for Social and Economic Modelling (NATSEM) has crystallised how heavily the burden of budget consolidation has fallen on those less well-off, especially if they have school-age children.
NATSEM divides the community into five segments, or quintiles, each with a little over 2,500,000 families. It finds the poorest 20 per cent - those with $35,000 or less in disposable annual income - will forgo $2.9 billion over four years, thanks to a raft of changes to family benefits, pensions and other payments.
By contrast, the wealthiest 20 per cent of households -
earning $88,000 or more after tax and benefits - will suffer a $1.78
billion hit, some 40 per cent less than the lowest income families.Overall, those in the lowest sector see incomes fall by an average of almost 2.2 per cent while it is only a 0.2 per cent decline for those in the highest quintile.
The government has defended the budget cuts, saying it has spread the burden by imposing a budget repair levy on people earning more than $180,000. But its impact on household finances is minimal, costing someone on a $200,000 annual salary only about $400 per year. Moreover, the levy only lasts three years.
The budget papers of Treasurer Joe Hockey dropped the tables of how families are affected, which have been a constant since 2005.
According to NATSEM, in 2017-18, the year the levy will expire, the richest quintile of households will be better off by $825 million, the only cohort ahead at any time, thanks to the budget.
The NATSEM analysis calculates the impact of the budget changes on household finances over four years, incorporating reforms to welfare, pensions and taxation, including abolishing the carbon and mining taxes.
It does not include, however, the cost of the $7 Medicare co-payment to families, roughly estimated at between $200 and $300 per household each year.
Illustration: Matt Golding
The study also finds:■ More than one third of the budget cuts - $6 billion - fall on the middle quintile of households, earning $45,000 to $63,000.
■ Families with school-age children are the hardest hit. Across all income groups, they will lose $15.9 billion over four years, more than 90 per cent of the total.
■ Low and middle-income sole parents suffer worst of all, losing between 10 and 15 per cent of their annual income - $4000 to $6250 - on family earnings of less than $60,000 by the time the changes to welfare take full effect in 2017-18.
■ The burden rises sharply for families with children over the four years of the budget. For example, a sole parent earning $60,000 with children aged eight and 12 will lose $1808 in annual income in 2014-15 and $6278 in 2017-18.
Low- and middle-income earners, especially those with school-age children, are hit hardest as the family tax benefit for single-income families is abolished and indexation is curbed.
Peter Whiteford, of the Australian National University's Crawford School of Public Policy, said there had not been a budget that hit the poor so hard, at least since the Fraser government.
NATSEM was commissioned by the ALP to do the modelling, but is an independent organisation that has done work for a variety of groups, including the Coalition, in the past.
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