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Abbott Government's Budget Cuts - 16/10/2014

GOLDIE, Dr Cassandra, Chief Executive Officer, Australian Council of Social Service (ACOSS)

PHILLIPS, Ms Jaqueline, Director of Public Policy, Australian Council of Social Service (ACOSS)

Committee met at 08:35.

CHAIR ( Senator Di Natale ): I declare open this first hearing of the Senate Select Committee into the Abbott Government's Budget Cuts and I welcome you all here today. This is a public hearing and a Hansard script of the proceedings is being made. We are also streaming live via the web, which can be found at www.aph.gov.au. Before the committee starts taking evidence, I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. The committee prefers all evidence to be given in public, but under the Senate's resolutions witnesses have the right to request to be heard in private session. It is important that witnesses give the committee notice if they intend to give evidence in camera.

On behalf the committee, I would like to thank all witnesses appearing today for their cooperation with this inquiry. I welcome Ms Jaqueline Phillips and Dr Cassandra Goldie from the Australian Council of Social Service. Information on parliamentary privilege and the protection of witnesses in giving evidence to Senate committees has been provided to you. I just want to remind you that the focus of today's hearing is in particular the impact of budget cuts on young people. That is the focus today. We are looking at the impact across the spectrum. I would ask you to keep your remarks focused, if you can, largely on that area. Do you have a short opening statement?

Dr Goldie : Yes, I do. Thank you. When the federal government budget was released back in May, certainly the Australian Council of Social Service—as the peak body for the committee sector and one of the national voices for people who experience poverty and inequality in Australia—was deeply disturbed by the framing of the budget. ACOSS had, in the lead-up to the federal budget, said that we agreed that over time we did need to be resetting the budget to try and pursue a more sustainable budget setting over time, particularly in order for us to be able to provide critical services on the ground and to have a sustainable welfare and income support system.

We summarise that the federal budget is, in our view, a highly divisive budget which would split the nation particularly between younger people and older people and also between people who are rich and those who are the poorest. We have persisted in our advocacy to try and prevent those measures in the budget which we believe, on all of the evidence, will disproportionately impact on people on the lowest income and in some cases we believe those measures are absolutely crushing in their effect.

I do want to highlight to the committee in particular some specific measures that have alarmed us, those particularly that affect young people. We are strongly opposed to any idea of cutting off income support for any specific period of time for young people who are not able to find employment. I think the idea of expecting that any person can get by without any income support at all, in a country like Australia, is absolutely unacceptable. The fact is that we have a challenge in terms of job opportunities generally in Australia with only one job available for every five people out there looking for paid work, and everybody has a clear understanding that young people are particularly affected when the labour market is tight. We have heard numerous anecdotes and also growing alarm across the community sector about how this particular measure would impact on young people. Of course you have to see this budget in an overall picture.

We are also very concerned about the range of measures that impact on single parent families. We know that overall child poverty is far higher in single parent families, and this idea that if you have a young person in your household who is unable to find employment then the family can step in and assist them is an absolute nonsense when it comes to households that are living on low incomes. Those households are already under serious financial pressure. I would alert the committee to the important report that was produced by Foodbank just today, which showed how chronic the situation now is across the country for people who are unable to afford their own food. We are also very concerned about the approach that the government has taken to indexation generally over the income support payments.

We are strongly opposed to any idea of moving overall in the income support system to indexation based on CPI. It is well established that that is one of the major structural problems and we have got to the point where income support for young people and for people who are unemployed generally is now so woefully inadequate; and the idea that we would now move all other payments onto that CPI flies in the face of all of the evidence. Alongside that, of course, we recognise that measures like the GP co-payment and the lack of investment in any serious strategy to improve housing affordability in Australia will have disproportionate impacts on people on the lowest incomes. With the youth unemployment figures that we all are very across, we know that they are seriously at risk.

I do also want to highlight the impact of the budget on services on the ground. Before this budget we had, as the peak body for the community sector, been increasingly concerned about the freezing or lack of further investment in social support services on the ground, and we now know that a raft of cuts are being implemented. I particularly want to highlight as an example the Youth Connections program. If we as a country were ever to be true to the idea of developing policy based on evidence, the Youth Connections program—which supports vulnerable young people transitioning out of school into the workplace—has been a stunning success. It is extraordinary to us that any government would simply cease a program which has so obviously provided long-term benefits for young people who are disadvantaged in any labour market environment and at risk of long term unemployment. That is just one example of what we are seeing across the community sector now—which is, in the best case, a freezing of indexation on payments to services. I am sure the committee is well aware that whilst indexation is not necessarily an interesting story in the media it is certainly a very important story when it comes to the adequacy of the ability to keep up even existing levels of service delivery. It is an effective cut and that is just for those services that are not taking a further cut.

I want to particularly highlight our deep concerns about what is going on in the Indigenous Advancement Strategy. We know that overall the government in the federal budget decided to take a full half a billion dollars out of investment in Aboriginal and Torres Strait Islander services. In light of the evidence that continues to be presented to us, we could see that for this to be a place to go for budget sustainability measures is an extraordinary position to take and fails to match any of the rhetoric from the government about commitment to improving the life circumstances of Aboriginal and Torres Strait Islander communities.

Finally, I want to particularly express our deep concern about the trends that we are seeing in the reduction of funding or complete cuts to funding or constraints on the use of funding for the purposes of advocacy and policy across the community sector. There are a number of stark examples: the Refugee Council of Australia; National Congress; and the Australian Youth Affairs Council, which is the peak body for the voice of young people in Australia and has lost all of its funding. These are vital mechanisms of civil society in a democracy. Any idea that, at a time when we are importantly having a public debate about budget sustainability and the future of the country in the face of what seems to be a shared concern about the level of youth unemployment, for us to take out and completely incapacitate one of the most vital voices for young people is, we believe, deeply concerning. It also has the likelihood of having a destabilising effect more generally on the level of comfort across the community sector for community organisations to do their job responsibly, which is to be working on the ground, providing vital services, and drawing from their deep expertise of that experience to be able to speak up and participate in the important debates of the country.

I have some specific recommendations that I would like to highlight to this committee. I am happy to do that now or possibly be given some time towards the end of our discussion to make sure that those recommendations are put before the committee. Thank you.

CHAIR: I will give you opportunity to do that now. We are running a little behind schedule, so perhaps we can do that as quickly as we can.

Dr Goldie : Thank you, Senator. It goes without saying that we are strongly opposed to all of the measures that we have highlighted in our budget analysis, which is called A budget that divides the nation. I believe the senators have access to that report. I would simply refer you to that for the specific recommendations of those measures in the budget that we strongly oppose and the measures that we do support, where we believe that the pre-existing policy was poorly targeted and not a good use of the government funds at this time. Finally, on that front we should make clear that, in terms of budget sustainability, our far bigger challenge is our revenue base. The government is committed to tax reform. We will certainly be very actively participating in that, but, once again, it is vital that the government approaches tax reform on the basis of ensuring that we have sufficient revenue to have a genuinely sustainable income support system and universal services, particularly in health and education, both of which are so vital to the wellbeing of young people, and also for us to finally tackle some of the inappropriate tax arrangements around housing, which we believe are undermining our efforts to achieve housing affordability.

This hearing is importantly being held in Anti-Poverty Week. On Sunday, the Australian Council of Social Services released our second Poverty in Australia report, which is a rigorous and responsible analysis of the nature and extent of poverty in Australia based on the statistics available by the Australian Bureau of Statistics. I would refer you to hat report. It tells the story as of 2012 and makes it clear that we are trending upwards in terms of relative poverty in Australia. At a time when we continue to have economic growth, it is the starkest case of saying that you cannot just rely on GDP growth in order to reduce poverty in Australia, including amongst young people. What this report highlights is the best knowledge that we have about the rise of poverty in Australia, but it also highlights the inadequacy of our national datasets. I want to take the opportunity to support the role of the Australian Bureau of Statistics in providing us with the confidence as a country that we know what we are working with so that we can have good policy development.

We have highlighted in our poverty report the inadequacy of the current data available so that we can responsibly have an informed debate about inequality and poverty in this country. For example, right now it is not possible for us to disaggregate the knowledge between the Northern Territory and the ACT, which of course makes a very mixed picture when it comes to having good knowledge of what is going on in the Northern Territory where we know there are very high levels of disadvantage, particularly amongst Aboriginal and Torres Strait Islander communities. Secondly, you will note from this report that the current datasets do not make it possible for us to do this poverty analysis for Aboriginal and Torres Strait Islander communities. Given what we know from other sources about the circumstances of that particular part of Australian society, it is extraordinary, once again, that we are not able to do this. So I urge the committee to formulate clear recommendations about the responsibility of the Australian government to monitor poverty and inequality over time and to make sure that the Australian Bureau of Statistics is able to perform its functions in order for that work to be done.

Senator LINES: Yesterday, as you said, Foodbank put out their report, and certainly for Western Australia it said that they were supplying food to families which included more than 4,000 children per month. That is a shocking statistic in a not heavily populated state. Given that statistic, what impact do you say these harsh budget cuts will have on those sorts of figures?

Dr Goldie : There is absolutely no doubt that, if the proposals contained in the federal budget proceed, we will see not only a trend of increase in that experience but it will be stark and accelerated. As I made clear, the poverty report that we released on Sunday tells a story from the 2012 set of data and that, therefore, does not reflect, for example, the changes that were made under the Labor government to move more single parents onto the much lower unemployment payment—a measure which we strongly opposed, and the Leader of the Opposition has now recognised it was a mistake. As we see the effects of that, we will see a further increase in families with children who are not able to put food on the table. If this federal budget goes ahead in its current form, it will clearly be further exacerbated by the changes that are proposed to family payments, the changes that are proposed in terms of the so-called youth measure and the impact of the GP co-payment. Every single dollar in these households is so vital. Whether you call it a $5 or a $7 co-payment, that is a lot of money and it will mean the difference in the extent to which those households are able to feed their kids.

Senator LINES: What about comments in relation to youth who are facing unemployment? We have had comments by members of the government that they will not be able to eat their Cheezels or watch their Xbox, and there were further comments that young people somehow need this kind of incentive—that is, six months living on nothing but air—to get them into the job market. Does that value-add to the debate? What do you think about comments such as that?

Dr Goldie : I think that these kinds of comments from members of parliament are entirely not useful at a time when we are wanting a very responsible approach to how we provide the support needed for current generations and future generations of our nation. I want to congratulate the important work of the Parliamentary Joint Committee on Human Rights, and I am aware that the chair of the committee is a member of this committee also.

Senator SMITH: And the parliamentary committee has received more than its fair share of public attention, thank you very much to ACOSS.

Dr Goldie : And it is there for reason. As you know, we had a very important debate in Australia a number of years ago about whether we needed legislated human rights protections in this country and we were not successful in securing that and therefore the human rights committee of the parliament is now our most vital mechanism for the monitoring of our core obligations to meet the minimum requirements of the Australian community. I think that the fact that human rights committee was, based on its own evidence, drawn to the view that the cuts for young people on income support breached our international obligations adds to the important debate about where we need to be putting the budget. I do want to highlight that that is a very particular finding. Often you have debates about 'will this policy work' and you can have those important debates, but human rights are about the absolute minimum standards beyond which no country is allowed to go. So, Senator Lines, I would obviously welcome this committee reinforcing the important role of the human rights committee and the obligation of the government of the day to comply with those recommendations. This is not a question of choice. In our view, once that committee makes those findings the government is under an obligation not to proceed in terms of the international obligations that we do have.

I also am very concerned that the government does appear to be ignoring the very important work that the Australian Council of Social Services is doing in collaboration with the Business Council of Australia and other parts of Australian community about what policies will work to help young people into employment. None of these organisations agrees that the way to help a young person in a very tight labour market is to blame them and allow them to have this perception that 'you are just lazy and sitting on the couch' when anybody who understands how the income support system works will know that those young people are required to be out applying for a job every single day that they are receiving that income support.

Senator LINES: Just one last question before I hand over to my colleague. In relation to the Indigenous policy, I am very concerned as a Western Australian senator that WA has the highest rate of Aboriginal incarceration across the country and there are significant numbers of young people. We have young people sitting in jail waiting to go to court, who have not yet been sentenced. Just a couple of weeks ago we had another shocking death of a young person in custody on a warrant of commitment. I know you express very grave concerns about the government's intentions with this new policy; what do you say will be the downsides of the government's approach?

Dr Goldie : There are a number of sources of concern. I highlighted the reduction in funding. Obviously that will have a negative impact. We can always learn more about how to use the resources that are available to address disadvantage in the community. There is a wealth of evidence about what is working and that draws me to my second deep concern from ACOSS, which is that the current procurement process by PM&C does not adequately, in our view, give preference to Aboriginal and Torres Strait Islander led work in this area. We are very concerned that, as an open tender process, there is in the documentation available to us so far, no appropriate recognition of the evidence that demonstrates that where work is led by Aboriginal controlled or Aboriginal and Torres Strait Islander community leaders the likelihood of success is far stronger.

So I would encourage this committee to particularly monitor the outcome of the PM&C tender process because we do predict at this moment that we may well see a further shifting of resources away form Aboriginal and Torres Strait Islander led work when all the evidence shows—and this is the position of the Aboriginal and Torres Strait Islander Social Justice Commissioner and successive social justice commissioners, I might add—that we must invest in community controlled community development work in this area like no other. Obviously we do not have the outcome of a procurement process at this time. Obviously we hope that that is not the outcome but certainly we believe that end result will be if our predictions are correct that we will see a further increase in incarceration amongst Aboriginal and Torres Strait Islander communities. There is excellent work being done through the Community Justice Coalition. It does constant advocacy about investing in justice reinvestment approaches to reducing incarceration rates and we have yet to see the federal government take up this kind of approach in terms of Aboriginal and Torres Strait Islander policy.

Senator URQUHART: Thanks Dr Goldie. In your opening statement you used terms like 'deeply disturbed', 'highly divisive', 'crashing in effect', ' unacceptable' and a range of other very strong adjectives. I wonder if you could describe in a bit more detail to the committee what the negative effects are of increased inequality in society. So what are the types of costs—social, health and economic?

Dr Goldie : In my role as deputy chair of the C20, I would draw the committee's attention to the body of evidence that has now been developed through the OECD and the IMF about the importance of economic growth being inclusive. What that means is that you cannot simply reply on an agenda of growth without having policies in place to ensure that we do not have a rise in inequality and poverty if you are wanting to see both strong economic and social outcomes over time. There is an economic imperative to us having a more equal and balanced community. The IMF has highlighted that, where you have a growing concentration of wealth amongst fewer people in any economic system, it undermines real economic growth, real investment in economic activity and obviously that has a deep impact on jobs growth and a slowing of the economy. We are strongly supportive of economic growth that produces more employment opportunities. We are known as the 'welfare lobby' and, yes, our responsibility is to monitor what happens with the income support system, but it is also important that we have a strong voice about what needs to be done in terms of more employment opportunities.

Without the government taking seriously the implementation of an inclusive growth agenda in Australia, we do not believe that we will see the kind of employment growth that we should be seeing and we run a deep risk of further dislocation within Australian society where we have increasing accumulation of wealth amongst fewer households and we have a growing number of households do not have enough. Obviously there is the individual impact on the ability for low-income households to be able to purchase what they need to meet their essentials, but I also think that we run the risk of further undermining a shared sense of values, a shared sense of purpose and a culture of the pursuit of the common good.

Senator URQUHART: I want to take you to your Poverty in Australia report that was released on Sunday. Can you provide a very brief overview of what that report stated. In it you provided some proposals for savings that would not have an effect on increasing of equality and further entrenching poverty or restricting social mobility. So could you just outline some details around that?

Dr Goldie : Our poverty analysis showed that as of 2012 we have 2.5 million people now living below the conservative OECD measure of relative poverty, which is—in the Australian context at that time—$400 per week for an individual. It also very disturbingly found that we, at that time, had 603,000 children who were living under the poverty line. From our point of view, obviously the overall numbers are very concerning, as is the fact that on the trend it represents an increase of about one per cent. One per cent might in other contexts not sound particularly significant; but when you are talking about individual people who are going without, every single person matters and every single child certainly does.

We believe there is quite clear consensus about the basic elements of how you pursue inclusive growth at the national level. It requires first all for you to ensure that you essentially pursue the raising of revenue through a progressive tax system and that you ensure that you have in place the policies and the resources to prevent base erosion and profit shifting. Australia has its problems in this area, like any other nation. Secondly, you need to have a strong and sustainable income support system. We do not believe that the federal budget has delivered on that in any shape or form. We think it has skewed the income support system once again. That is essentially along the lines that those population groups who are often not seen are so popular—young people, single-parent households and people who are unemployed—have been hit the hardest out of this budget. Thirdly, it is vital that you have active policies around the labour market to ensure that job opportunities are created and also that the resources are provided to ensure that people who are known to be disadvantaged in the labour market are not further disadvantaged and in fact are given a genuine, equal opportunity to employment.

That is why the reforms in the employment services system in Australia are so important. That is why we are so concerned about the cuts to, for example, the Youth Connections program. We urge the committee to again back our proposals in this area, which I believe have broad consensus from the business community. That is that we need to provide incentives for employers to provide job opportunities into real workplaces for people disadvantaged in the labour market. We do not believe that Work for the Dole is the appropriate strategy. We believe that the evidence shows that that does not deliver in terms of sustainable employment outcomes. It stigmatises and stereotypes people who are long-term unemployed at a time but we recognise that is the problem. That is, that long-term unemployed people are see perceived as not being employable in the first place.

Finally, we strongly support the country investing in decent infrastructure. There is no doubt that we have a challenge in that area like other countries, but we believe that we run a risk unless we get the governance arrangements on our infrastructure agenda correct. That involves participation in decision making at the front end in terms of the setting of priorities around infrastructure build, around the procurement processes and then around the project management, delivery and implementation. But civil society must have a seat at the table there.

Whilst Australia does not have the levels of problems of corruption in terms of infrastructure build, we certainly have our challenges in making sure that we are getting value for money, have good transparency about where those dollars are going and have shared sense of benefit to the community. We would particularly refer the committee to the learnings from Canada, where there has been significant work done historically to invest in what are called community benefit agreements, which are associated with major infrastructure build. That is where civil society organisations, unions and the private sector are at the table with the government negotiating the outcomes in terms of the build itself, employment and associated community infrastructure and making sure that we do not have a detrimental effects in local communities in terms of social and environmental outcomes.

Senator URQUHART: Just in reference to those proposals that you have talked about—the progressive tax system policies, the resources profit shifting and those types of proposals—do you have an estimate of the amount of savings that could be generated out of those proposals?

Dr Goldie : We do not, but I have a level of comfort because I believe the tax commissioner also has the view that it is as yet difficult to measure exactly the nature and extent of that. Obviously, what you need is a good framework in place first. We support the initiative for the G20 to introduce standardised reporting across nations' tax system so that there can be good transparency about profit-making entities, loss-making entities and their relationship to each other in terms of the tax bills that are being levied at the national level across the globe. I also think that—once again, similar to my comments about the Australian Bureau of statistics—we must make sure that the Australian Tax Office is adequately resourced so that it can pursue this agenda. That is because it is one thing to have policies, but it is another thing to have the capacity to conduct the audits and to pursue making sure that every entity—both human beings and corporations—are paying their fair share.

Senator URQUHART: So removing workers out of the Australian Tax Office would not be a good proposal?

Dr Goldie : This is at a time when we recognise as a country that a sustainable revenue base is a major part of our challenge and there is a global recognition that base erosion and profit shifting is a shared problem. We are concerned that we would not be providing adequate resources to the Australian Tax Office to support that work.

Senator CANAVAN: In your submission, you made the claim that pensioners will be $80 per week worse off in 10 years under changes in the budget. Can you just explain the methodology behind those estimates?

Dr Goldie : What we have endeavoured to do with the resources that we have got at ACOSS is to track the impact of the change on indexation on the pension from MTAWE down to CPI. Obviously, that is an incremental change over time and the $80 figure is our best assessment of the impact of that. Obviously, the Treasury and Department of Finance have the modelling capacity that we do not in being able to properly track the trajectory of what we believe is effectively a real devaluing of the pension. But I do not think we can have any contention that the MTAWE is an indexation measure that will over time make sure that the pension retains a more adequate value compared to CPI.

Senator CANAVAN: In these estimates you have calculated, what was your assumption for MTAWE and what was your assumption for CPI over the next 10 years?

Dr Goldie : I will take that on notice. The colleague who did the modelling is not with me at the moment, but I am happy to provide that information to the committee.

Senator CANAVAN: Is that figure of $80 per week a nominal value? Is it in today's dollars or does include inflation?

Dr Goldie : I will take that on notice and I will provide you with the detailed modelling work and the assumptions that underpin it.

Senator CANAVAN: You mentioned in your comments to us that you think that there is not enough focus on the revenue side of the budget and that should be fixed. What taxes do you think should go up?

Dr Goldie : What we have proposed in our federal budget submission is that we should first of all look at the arrangements around negative gearing. We have made a particular recommendation in that area, which would be a grandfathering arrangement for the existing system. But we would then do some quarantining around the asset classes that can be subject to negative gearing.

We have also highlighted arrangements around the treatment of income for the purposes of the eligibility for the age pension. We also believe that we could do some reform to the way the tax treatment of private discretionary trusts and capital gains arrangements associated with that. I would refer you to our federal budget submission and also our submission to the Commission of Audit.

Senator CANAVAN: What specific asset classes do you want to quarantine or restrict negative gearing to?

Dr Goldie : What we are proposing is you can only gear against passive assets and that you are not able to take the benefit of losses across into other income sources.

Senator CANAVAN: How do you define passive assets?

Dr Goldie : Obviously that would include property, shares—

Senator CANAVAN: So you would be able to negatively gear property?

Dr Goldie : Yes. What we are proposing is a modest proposal; I appreciate that. But we also know that any time you mention negative gearing, it is very difficult for us to start to get some reform in this area. We believe our proposal is a modest one that would start to help the bottom-line and, we believe, also help us to address some of the inflation in the housing market, which is driven by the tax effectiveness of property investment.

Senator CANAVAN: Your comments about the human rights of social security are broad, I suppose. How does that actually translate in practice when we have to deal with specific budgets and changes? In your view, how much money or welfare does someone deserve per week for their human right to be fulfilled?

Dr Goldie : The international human rights obligation is founded in the international covenant on economic, social and cultural rights, particularly article 9, which is the right to an adequate standard of living. I want to be clear, as the committee itself highlighted, that is not an absolute right. The right is qualified to the extent that the government is under an obligation to pursue the enjoyment of that right to the maximum of its available resources.

The most clear examples of where a country will breach that obligation is where it cuts existing income support with a group that is already, on the evidence, clearly not at the present time enjoying an adequate standard of living. For example, in the area of the amount that is currently received on youth allowance and Newstart, the earlier work of the human rights committee drew on the evidence base from the community affairs parliamentary inquiry into the adequacy of Newstart where, based on a range of data sources, it was highlighted that both from the use of the OECD poverty measure and also from deprivation analysis, which shows where a person is not receiving enough income to be able to me what is communally accepted as essential needs. Food, a roof over your head and the ability to access health care to respond to health needs are those attributes of what would be considered a minimum adequate standard of living.

Senator CANAVAN: On the same topic, correct me if I am wrong, what I took away was: the changes to when people 29 and under can access social security after becoming unemployed, you thought were a breach of our human rights obligations. Do you think Work for the Dole is a breach of our human rights obligations?

Dr Goldie : We have been critical of the Work for the Dole scheme because on the evidence we do not believe that it pursues a legitimate purpose. A part of the human rights test and the right to social security is that that right can be made conditional where the conditionality is seen to be pursuing a legitimate purpose based on the evidence. As I understand the findings of the human rights committee about the youth measure, on the evidence produced to them they were not satisfied that cutting a young person from income support for six months would be effective in pursuing what is a legitimate purpose of helping young people to get better employment outcomes. On the one hand, we have the same concern about the Work for the Dole measure, where, on the evidence, it has not been demonstrated that Work for the Dole, which obviously places can significant conditionality on somebody being able to receive the income support, is legitimate in getting better employment outcomes for people.

On the other hand, the scheme we have been heavily promoting with the Business Council of Australia is the work subsidy scheme. The government still has that in place, where a person who is a long-term unemployed continues to receive income support and the employer tops up that income to something more akin to a real wage. The person is placed in a real workplace. There is an incentive to the employer to take the person on because they are not having to pay their full wage bill—the government is contributing to that. There is also some wraparound service support for someone who may have been locked out of the labour market for a long time and who might need some in-work support so the employer can have confidence. What is often a problem is that a person who is long-term unemployed is perceived as a risk in taking them on. The success on that has been overwhelming. It is a very popular scheme amongst employers, and we would like to see that expanded. We would like to work with the government on how we can convert the current budget allocation to the Work for the Dole scheme into real work experience.

Senator CANAVAN: In your view, for human rights and for people's security and welfare, what is the difference between Work for the Dole scheme, what the government has announced in the budget and what we are talking about here, which seems to be effectively a train for the dole scheme—you can still receive benefits in the six-month period if you are training.

Dr Goldie : Because the income support is the basic support the somebody needs in order to meet their basic requirements. The government itself has recognised that even with the exceptions it has proposed, which would mean you did not lose your six months of income support. It has allocated in the order of $230 million to additional emergency relief because the government itself knows that not everybody will be able to qualify for those exceptions.

Also, the human rights committee was equally not satisfied that there would not be significant exemptions. Our estimate is that about 112,000 young people at any given time would not for a range of reasons be able to meet those exemptions. So this is not one or two people; it is over 100,000 young people who would not be able to do that.

Senator CANAVAN: That is a very important point. It is something that has come up in a lot of regional Queensland areas. What extra exemptions do you think we need to cover those people?

Dr Goldie : We do not support that the presumption should be that anybody should be cut off from their income support for six months at a time.

Senator SMITH: I want to be clear whether or not ACOSS does think that there is a budget problem that needs redressing? Is there a budget problem that needs redressing?

Dr Goldie : Yes there is.

Senator SMITH: My question then is: are the most vulnerable protected by our lack of action now or are they better protected in the future by taking action now?

Dr Goldie : We do not think that the action taken in the federal budget has been taken in the right places when it comes to budget sustainability. We have a strong interest in securing the revenue we need for the spending that we need in the medium- to long-term. Like any other part of the Australian community, we would be deeply concerned if we did not secure budget sustainability over time. We put to the federal government a range of areas where we could be retargeting expenditure. For example, we support changes to the assets test for the part age pension because we do not believe that at this time, if we are to get the budget back onto a sustainable footing, that a person should be eligible for a part pension and the associated concessions that go with that when, for example, as a couple, you can both own a principle home of any value and also have up to a million dollars in investment assets.

If you look at where there is real growth in the budget, the retirement income system is a major part of that. We would once again urge the parliament and the government to be prepared to work with us and with the retirement income system, with industry and with business on what should be a package of reforms to make sure that where we have almost $40 billion in tax concessions that tax concessions are delivering on the core purpose of superannuation—we do believe that they are at the moment—and that the changes in the age pension area are well targeted.

Senator SMITH: The point of balancing tax rises with cuts to expenditure is one that the OECD Secretary-General has made. The Secretary-General said that in Australia we have got it right, effectively.

You [Australia] went for 80 per cent cuts, one-fifth tax increase. We're always saying you should at least keep it balanced, this is a more sustainable, more durable type of solution. Once you cut the expenses it stays low, with taxes there are certain temptations.

What is your response to the Secretary-General, no less, of the OECD?

Dr Goldie : Firstly, it is important to see that in the scale of change that Australia is one of the lowest taxing countries and one of the lowest spending countries in the OECD. Secondly, the government has particularly targeted its cuts to the working age payment system of social security when that is not the area of real growth. In fact, the proportion of people of working age on income support is lower than it was a decade ago. The area of growth in the overall income support system is in the retirement income area.

We have put on the table to government a range of areas where we do think that spending can be reduced. The part pension is one of those areas. Another is the private health insurance area. We have supported the rolling back of the private health insurance rebate for ancillaries. We have also recommended a number of tax measures. So we have also taken a balanced approach to both looking at the revenue side and at the spending side. There is an overall picture of balance and then it is about which particular groups are going to be hit the hardest.

As NATSEM has demonstrated in its most recent work, it is patent that within the overall effort to reduce spending, the wrong groups have been hit.

CHAIR: Just to wrap up: Dr Goldie, you mentioned Youth Connections a couple of times. What is it about Youth Connections that is so important? Tell me what they do and why you think it is important to retain them.

Dr Goldie : The core element of Youth Connections is that it is an investment with young people; it is mentoring and relationship building with a young person, with a view to building links with local employers.

CHAIR: What sorts of kids are we talking about?

Dr Goldie : We are talking about kids who are disaffected from education, at risk of dropping out, the school is struggling to keep them in school, and there is an obvious important question for them about whether or not they should continue to go on to year 12. These are critical decisions for young people to make. The Youth Connections program works with the young person and with the school to help them to make a good call about where they see their future going, and then to be able to link them up with the resources that are available. This varies around the country in terms of TAFE and other educational opportunities. They are working with people who understand what it might be like to come from a very disadvantaged background, to possibly not have mentors around you in your ordinary life, to be at real risk of taking one path or the other at a critical stage in your early life.

CHAIR: There was also an announcement that there would be cuts to the relocation scholarships for students who are moving from a large centre, say, Geelong or Newcastle, to study in a capital city. Do you have anything to say on that? It looks like a budget measure that may in fact pass. Do you have anything to say about that specific proposal?

Dr Goldie : I can take it on notice, because we have not done the detailed work on that particular proposal. I know there are concerns from other places, and I will refer you to those organisations who may be appearing before you who have particularly detailed expertise in that area.

CHAIR: Dr Goldie and Ms Phillips, thank you very much for your time. I am sorry that we have kept you a little longer than planned. Again, we thank you for your evidence.

Dr Goldie : Thank you very much.