Submission to Senate Economics Committee on Budget Savings (Omnibus) Bill 2016
CPSA welcomes the opportunity to comment on the Budget Savings (Omnibus) Bill 2016 and notes that this submission has been prepared in consultation with Carers NSW.
As an organisation representing the interests of pensioners of all ages and low income retirees, CPSA has a keen interest in economic policy, particularly as it relates to social security. CPSA is however disappointed that the Australian Government has opted to pack such an extensive range of proposed economic reform policies into one Bill, as this has severely limited the opportunity for open debate and scrutinous review of each of the 24 measures.
If passed, the Omnibus Bill will produce savings to the Australian Budget of more than $6 billion over four years. However, these savings are largely derived from the pockets of Australia’s most vulnerable people and are contextualised against a backdrop of growing economic inequality. Accordingly, CPSA has serious reservations regarding the Bill’s social and economic impacts and urges the Government to drop the proposed changes in favour of more equitable economic reform. At the very least, the Government should separate the measures into individual or thematic bills to enable proper scrutiny. CPSA calls on the Government to investigate a fairer approach to economic reform which includes both revenue-raising measures and savings measures targeted at cracking down on tax evasion and tax avoidance and rolling back concessions for high income earners. In particular, CPSA calls on the Government to dismantle negative gearing and the capital gains tax exemption on property; restore the corporate tax rate; further wind back superannuation tax concessions available to high income earners; and retain/reinstate the Budget repair levy for very high income earners.
A significant proportion of savings contained in the Omnibus Bill would be obtained through the tightening of Australia’s social security system, which acts as a safety net for those experiencing poverty and/or disadvantage. The vast majority of social security payments and transfers are means tested, making Australia’s system one of the most progressive and efficient in the world. Further, the Australian population’s reliance on social security has been declining steadily over time. CPSA is concerned that Budget savings derived from the tightening of the social security system would have a serious and ongoing effect on Australia’s lowest income earners, which in turn risks undermining Australia’s future economic prosperity by embedding structural poverty and unemployment.
The remainder of this submission deals specifically with Measure 16 and Measure 21 of the Budget Savings (Omnibus) Bill 2016. CPSA views the revocation of these measures as critical.
Measure 16: Carer Allowance
Informal carers provide essential care and support to the millions of Australians experiencing illness and/or disability at any given time. The provision of this unpaid care is a critical foundation on which Australia’s economic prosperity and growth relies. Deloitte Access Economics estimated that informal carers provide at least 1.9 billion hours of care annually, with a total replacement cost of over $60 billion each year. Yet informal carers have the lowest collective wellbeing of any group in society, experience higher rates of mental and physical illness and are more likely to live in households with lower than average incomes. Further, an estimated 23% of primary carers report a decrease in their income as a result of their caring role and 30% report that their caring responsibilities incur additional expenses. The Department of Social Services is currently developing an Integrated Plan for Carer Support Services, which principally recognises the need for additional resources to support carers to sustain their caring role. CPSA is concerned that Measure 16 will undermine the work of the Department of Social Services in the area of carer support.
Measure 16 of the Omnibus Bill will achieve savings of $108.6 million over four years by removing the provision which allows Carer Allowance payments to be backdated for up to twelve weeks, where care needs were caused by an acute event. Currently, this provision is only available following an unexpected illness or injury in recognition that these sorts of events place significant strain on carers, which in turn diminishes their capacity to apply for Government support at that time. The provision, in its current form, allows carers to focus on the provision of care immediately following an acute incident (when care needs are likely to be greatest), with the knowledge that they will be able to seek financial support retrospectively. This provides a minimal level of surety to carers during a particularly uncertain and stressful period of time. CPSA calls on the Australian Government to retain the provision which allows the Carer Allowance to be backdated for up to twelve weeks where care needs were the result of an acute incident, on the basis that such a measure diminishes the capacity of informal carers to sustain their caring role. The longer term costs of withdrawing support for informal carers, in terms of a reduced capacity to care, far outweigh the potential short-term Budget savings produced through Measure 16 of the Omnibus Bill. Accordingly, this measure must be discarded.
Measure 21: Closing carbon tax compensation to new welfare recipients
Measure 21 achieves Budget savings of almost $1.3 billion over four years by cutting the payment of the Energy Supplement to new recipients of social security payments from 20 September 2016. Given that the payment will continue to be available to current recipients, CPSA highlights that the Government is intentionally creating a two-class pension system, with a reduced rate of payment for those coming into the system after 20 September 2016. The Energy Supplement was originally intended to compensate low income households for the increased cost of electricity following the introduction of the Gillard Government’s carbon Emissions Trading Scheme (ETS), also known as the carbon tax. The supplement also constituted the first real increase to the rate of payment for Newstart Allowance recipients since 1994. For recipients of the Newstart Allowance who receive the equivalent of $38 per day, the removal of the Energy Supplement will result in a cut of $4.40 per week. For Disability Support Pensioners, Age Pensioners and those in receipt of the Carer Payment who receive the equivalent of $62 per day, the removal of the Energy Supplement will result in a cut of at least $7.05 per week, depending on household composition. Family payment recipients with young children are set to lose $10.90 per week.
CPSA has serious concerns regarding the impact of these cuts to Australia’s lowest income households. For these households, every dollar counts and any reduction in the rate of payment will limit their capacity to meet basic needs. In 2014 ACOSS reported that 40.1% of people on social security payments were living in poverty. The removal of the Energy Supplement for new recipients of social security payments is likely to drive this figure up. Further, CPSA notes the ongoing calls from a broad range of experts, including the Henry Tax Review, the Business Council of Australia, the National Reform Summit, KPMG and more, to increase the rate of payment of the Newstart Allowance.
While the Gillard Government’s ETS was abolished under the Abbott Government, the Turnbull Government has essentially reintroduced a modified ETS under its Direct Action Plan for climate change. The new scheme operates in a similar fashion to the previous one, with companies trading Australian Carbon Credit Units based on emissions. This essentially constitutes the reintroduction of the original carbon tax, meaning that it is unlikely electricity prices will fall moving forward. Accordingly, CPSA rejects the Government’s reasoning that ‘as the carbon tax was repealed from 1 July 2014, there is no longer a need to provide this compensation’. This is clearly not an honest or realistic representation of current energy market regulations or trends in energy prices.
Further, CPSA rejects the claim that these savings are necessary to support the National Disability Insurance Scheme Savings Fund. Redirecting funds away from some of Australia’s most vulnerable low income households for any reason is unacceptable. The Government’s attempts to make an unfair cut more palatable by tying the savings to a scheme for which there is broad public support is underhanded, distasteful and a clear case of robbing Peter to pay Paul. It is both unacceptable and short sighted to introduce a scheme such as the National Disability Insurance Scheme (NDIS) without a long term funding model in place to cover the ongoing costs. It is completely unconscionable for the Government to avoid implementing the revenue-raising measures necessary to fund the NDIS in favour of gouging the required funds out of the pockets of vulnerable social security recipients. Accordingly, this measure must be discarded.
- ACOSS (2015) ‘Inequality in a Australia: a Nation Divided’ Available: http://www.acoss.org.au/wp-content/uploads/2015/06/Inequality_in_Australia_FINAL.pdf pp.10 [accessed 5 September 2016]\
- OECD (2014) Social Expenditure Database: http://www.oecd.org/social/expenditure.htm [accessed 5 September 2016].
- Wilkins, R. (2016) ‘The Household, Income and Labour Dynamics in Australia Survey: Selected Findings of Waves 1 to 14’ Funded by the Australian Department of Social Services. Available: https://www.melbourneinstitute.com/downloads/hilda/Stat_Report/statreport_2016.pdf figure 3.6 & figure 3.7 [accessed 5 September 2016].
- Cummins, R. Hughes, J. Tomyn, A. Gibson, A. Woerner, J. Lai, L. (2007) ‘The Wellbeing of Australians – Carer Health and Wellbeing’ Australian Unity Wellbeing Index, Survey 17.1. Available: http://www.carersaustralia.com.au/storage/Wellbeing-Index-Special-Report-October-2007.pdf pp.VI [accessed 5 September 2016].
- Deloitte Access Economics (2015) ‘The Economic Value of Informal Care in Australia in 2015’ Research report commissioned by Carers Australia. Available: http://www.carersaustralia.com.au/storage/Access%20Economics%20Report.pdf pp.8 [accessed 5 September 2016].
- Deloitte Access Economics (2015) ‘The Economic Value of Informal Care in Australia in 2015’ Research report commissioned by Carers Australia. Available: http://www.carersaustralia.com.au/storage/Access%20Economics%20Report.pdf pp.10 [accessed 5 September 2016].
- Department of Social Services (2016) ‘Integrated Plan for Carer Support Services’ Available: https://www.dss.gov.au/disability-and-carers/programmes-services/for-carers/integrated-plan-for-carer-support-services [accessed 5 September 2016].
- Department of Social Services (2016) ‘Designing the New Integrated Carer Support Service: A draft service concept for the delivery of interventions to improve outcomes for carers’ Available: https://engage.dss.gov.au/wp-content/uploads/2016/04/Draft-Service-Concept-3.pdf pp.4 [accessed 5 September 2016].
- ACOSS (2014) ‘Poverty in Australia in 2014’ Available: http://www.acoss.org.au/images/uploads/ACOSS_Poverty_in_Australia_2014.pdf pp.8 [accessed 5 September 2016].
- Explanatory Memorandum, Budget Savings (Omnibus) Bill 2016 (Cmth) Available: http://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r5707_ems_09829908-eec8-4210-b967-aacc6567463c/upload_pdf/490556.pdf;fileType=application%2Fpdf pp.285 [accessed 5 September 2016]