Bust the budget 4: Low wages over welfare state

This is the fourth part of a series arguing against the Abbott government’s first budget. Part 1 summarizes the overall unfairness and debunks the justification offered for this agenda. Part 2 examines how the budget affects climate, environment, fossil fuel subsidies, business, and science. Part 3 examines how it affects the federation, education, and health. This part examines how it affects welfare, industrial relations, and the size of government.

Unless otherwise hyperlinked, budget facts are sourced from either Joe Hockey’s budget speech or Sally McManus’s “Tracking Abbott’s Wreckage”.

Neglecting the needy

There are massive cuts to welfare.

Eligibility thresholds for the following welfare payments will be frozen from either this year or 2017: Family Tax Benefit, Child Care Benefit, Child Care Rebate, Newstart Allowance, Parenting Payments, Youth Allowance, Aged Pension, Carer Payment, Disability Support Pension, and Veterans’ Service Pension.

Australians under 30 must wait up to 6 months before getting the (already unliveable) Newstart unemployment benefit, then participate in 25 hours a week of work-for-the-dole activities to be eligible for benefits for 6 months, then be cut off for another 6 months, and so on until they get a job. The eligibility age for Newstart and the Sickness Allowance will be raised to 25, with unemployed Australians under 25 having to apply for the even smaller Youth Allowance. Oh, and indexation of these payments will be frozen for three years.

Meanwhile the budget makes it harder for young people to get jobs, cutting programs to help connect young people with businesses, paying up to $10,000 to businesses who employ unemployed people over 50, and reducing the maximum redundancy payment.

Family benefits will be frozen for several years. The budget removes Family Tax Benefit B for children over 6, and reduces its eligibility threshold to $100,000, as well as reducing FTB end-of-year supplements, restricting the Large Family Supplement, and removing the FTB Part A per child add-on. Hockey says these cuts will incentivize parents to get back into the workforce, another indication the government does not value anything outside the economy. Yet he is also cutting a careers advice program for parents re-entering the workforce, and freezing indexation and tightening eligibility rules for childcare support payments. (Strangely Abbott’s famous paid parental leave scheme is not mentioned in the budget, supposedly because arrangements with the states are being finalized.)

From 2017, indexation of age, disabled, carers, and veterans pensions will be linked to inflation instead of the higher average male earnings. Parenting Payment Single indexation will be immediately linked to inflation. Links to inflation mean the payments will effectively reduce over time.

The pension eligibility age increases to 70 by 2035 (sooner than even the Commission of Audit recommended). Several concessions for retirees are being abolished, including the Seniors Supplement, Dependent Spouse Tax Offset, Housing Help for Seniors, and Pensioner Education Supplement. Also gone is a low-income superannuation concession associated with the mining tax. The income test for new recipients of the seniors’ health care card now includes superannuation. Hockey is also cutting $1.7 billion from home-based aged-care services and removing a tax break for nursing homes.

Eligibility criteria for the disability support pension are tightened for those under 35. The government will constantly review the eligibility of each person on the payment, moving some onto Newstart, cutting off support for anyone who leaves Australia for more than 4 weeks, and requiring those who remain on the payment to complete a “program of activities to build their work capacity”, with unspecified sanctions for non-compliance. Yet Hockey is also cutting bodies that employ and provide services to disabled people, and abolishing the Disability Discrimination Commissioner.

The budget consolidates 150 Indigenous programs into five, including large cuts to Indigenous health and language support, abolishes the National Congress of Australia’s First Peoples, and fails to provide the states with promised funding for Indigenous childhood development centres. The government has yet to specify exactly which programs will be cut, leaving people in limbo. Perhaps Hockey is concerned his cuts might force Indigenous people into crime, because he has found new funding for police stations in Indigenous communities.

It’s not only Australians who will suffer. Hockey has dramatically slashed Australia’s planned growth in foreign aid by tying it to inflation instead of a set percentage of Gross National Income, breaking not only a promise to the Australian people but also Australia’s international commitment to the Millennium Development Goals. However, Papua New Guinea will receive extra aid to thank them for the use of Manus Island.

Weakening the workers

The welfare cuts laid out above contain a recurring apparent contradiction: Abbott is forcing everyone without a job to get one while simultaneously cutting off job opportunities. This baffled me until I remembered reading an article arguing Abbott is trying to drive up demand for jobs so that people will settle for lower wages. If true, then the pressure that Abbott’s budget places on the jobless is deliberate. After all, we know Abbott’s top business advisor Maurice Newman believes Australian wages are too high. And Abbott’s investigations into unions are transparently intended to finish them off so employers can do whatever they want.

I mentioned in Part 1 that Abbott wants to complete the neoliberal reform agenda. The graph below shows what happened in the US, where the initial wave of neoliberalism in the late 1970s and early 1980s was implemented by right-wing politicians who crushed trade unions. Employee incomes stagnated while employers and their shareholders reaped record profits from ever higher productivity. This might be Australia’s future if Abbott gets his way:

By comparison, so far Australian wages have fared better (despite a temporary decline under the Hawke government and slower rise during the mining boom):

Abbott’s welfare cuts will not only enable the exploitation of workers, but also force people into homelessness. Abbott presumably isn’t concerned about this, having said in 2010: “we just can’t stop people from being homeless if that’s their choice”.

Gutting the government

Over 300 government programs and 70 bodies are for the chop. Miscellaneous examples include the National People with Disability and Carers Council, COAG Reform Council, Australian Youth Affairs Coalition, National ICT Australia, several grant programs for innovation and new businesses, Women in Leadership, First Home Saver Accounts, and National Rental Affordability Scheme. Customs and Immigration offices will be merged into a single Australian Border Force which will prioritize national security, further cementing a militaristic approach to refugee policy. Several bodies that review government decisions are to be merged, perhaps because a single review body is easier to control.

In Domestic Violence Prevention Month, the budget cuts funding for the National Plan to Prevent Domestic Violence (has Abbott thrown out his enormous white ribbon?). A quarter of funding to Community Legal Centres is gone, as is $1 billion from local councils, which will hit rural communities hardest.

Hockey is cutting ABC and SBS funding by 1%, outright abolishing the ABC’s international arm and an ABC disability website, with larger ABC cuts to be advised by an ongoing “efficiency review”. Abbott has criticized the ABC as lacking “affection for the home team” because it reported allegations against the government.The arts are also hit by the abolition of the Australian Interactive Games Fund and funding cuts to the Australia Council and Screen Australia grants programs.

All this will result in 16,500 public service job losses over three years (partly due to the previous government’s efficiency target), including 3,000 from the Australian Taxation Office (perhaps to impede them in their attempts to crack down on tax avoidance?). The government-wide efficiency target will be temporarily increased by 0.25%.

The budget sets up reviews into privatization of the Defence Housing Authority, Royal Australian Mint, Australian Hearing, and even the registry of the corporate regulator, the Australian Securities and Investments Commission (which also had its funding cut).

The only department that will grow is Defence, with a total funding increase of 6% and $24 billion for new fighter jets. Defence is also the only department allowed to reinvest any money saved through efficiencies.

In Part 5, I will discuss the government’s lies, the outraged reaction to the budget, and how it might be defeated.

1 ping

  1. […] Wright,J. (2014, May 23). Bust the budget 4: Low wages over welfare state. Retrieved from http://precariousclimate.com/2014/05/23/bust-the-budget-welfare-wages-government/ […]

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