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Community Affairs Legislation Committee

LAWRENCE, Mr Brian, Chairman, Australian Catholic Council for Employment Relations

STUPARICH, Mr Jeremy, Public Policy Director, Australian Catholic Bishops Conference

CHAIR: Welcome. Could you please confirm you have received information on parliamentary privilege and the protection of witnesses and evidence?

Mr Lawrence : I can confirm that.

CHAIR: Thank you. If you would like to make a short opening statement, I would invite you to now do so and then we will move to questions.

Mr Lawrence : The Australian Catholic Council for Employment Relations is an agency of the Australian Catholic Bishops Conference. I would like to thank the committee for inviting me to appear here today to speak about this important bill, a bill which, if enacted, will have a major impact on the living standards of low- and middle-income families. The submission filed on behalf of the Australian Catholic Council for Employment Relations is in opposition to the bill.

The government's financial impact statement for this legislation shows that the legislation is intended to save $4.84 billion over the first three years of its operation. These proposed cuts will fall on about 2½ million Australian families with children. All families with children would suffer substantial cuts in their incomes. All children would be worse off, save for those who are less than 12 months old. These cuts are planned to commence on 1 July 2016 and be fully implemented two years later on 1 July 2018. The two-year program will inflict an unjust burden on all families, but particularly those families who rely on a single income and have children in secondary schools. In broad terms, the cuts of $4.8 billion, borne by 2.5 million Australian families, would amount to an average loss of over $1,900 for each family with children in the first three years. Because the cuts would only be fully implemented in the third year, the future losses would be greater than that rate.

I would like to briefly outline the impact of these changes on various family groups. All families would feel a loss from 1 July 2016. By 1 July 2018, all families would feel the full brunt of these measures. By July 2018, family payments under the family tax benefit part A would be reduced by $9.08 per week per child. Over the first three years of the new scheme, all two-child families would suffer a loss of $2,081.50.

Much more damage would be done to the living standards of single income families through major changes to the eligibility for family tax benefit part B and the payments made and it. Family tax benefit part B is payable to the primary carer of children. In coupled parent families, it is usually the mother, sometimes the father, who is entitled to the payment. A sole parent is also entitled to the payment if he or she is the primary carer of the children. Special provisions are made for grandparents who are the primary carers of their grandchildren.

The bill proposes that from 1 July 2016, single breadwinner couple families will no longer be eligible for family tax benefit part B at the end of the year in which their youngest child turns 13. This would amount to a further loss of $60.20 per week and it would mean the loss of income by way of this payment from the end of the first of the second year of secondary school until the completion of secondary school. The loss of this payment would cost the family $13,924 over five years of secondary schooling. This loss is in addition to the loss of $9.08 per week per child, described earlier.

The bill proposes that from July 2016, sole parents and grandparents who are the primary carers of their grandchildren will cease to be eligible for family tax benefit part B at the end of the year in which their youngest child turns 16 and that they be paid at a lower rate for the three years prior to that time. The lower rate over the three years is less than a third of the full payment, with the result that they would lose $1,784.70 in each year at the reduced rate and $2,784.80 in each year thereafter. For those parents who continue to be eligible for family tax benefit part B, there would be a further loss of $6.79 per week as a result of the abolition of the associated annual supplement. In a single-breadwinner, two-child family who escapes the changes in eligibility for this payment, the weekly loss from 1 July 2018 would be $24.95.

These changes are proposed to take place without any reference to the needs or financial circumstances of the families concerned. They would apply to the many families who are already living in poverty. It is important to appreciate the personal and family consequences of what is proposed by the bill and how the lives of many children would be affected. For couple-parent and sole-parent families and for grandparents who have the care of a grandchild, the bill proposes withdrawal of support when their children are in the final and critically important years of their schooling. The bill would leave many without an adequate standard of living and without sufficient financial resources for parents to provide a decent standard of living for their children. Many more children will live in poverty if this bill is passed.

The proposal in the bill to limit the eligibility of single-breadwinner couple families is contrary to long-established provisions in Australian taxation and social security laws, which have provided financial support to families where one of the parents stays out of the paid workforce in order to care for their children. Our submission refers to several speeches concerning the importance of this principle. The submission includes extracts from speeches given by Prime Minister Keating and Prime Minister Howard on the need to recognise the value of work performed by parents who stay out of the workforce to care for their children. These speeches also stress the importance of providing parents with some financial support so that they are assisted in making the choice between paid employment and in-home care for their children. On this issue, the two Prime Ministers and their governments were united.

Our submission also refers to the report of the Parliamentary Joint Committee on Human Rights of 10 November 2015. The report includes a consideration of whether the terms of the bill are consistent with several provisions of the International Covenant on Economic, Social and Cultural Rights—in particular, the right to social security, the right to an adequate standard of living, and the right to nondiscrimination in the provision of social security measures. It is our submission that the legislation fails these test because of at least the unjust way in which it impacts on low-income families.

Our submission also refers to the Convention on the Rights of the Child and argues that the bill fails to meet the requirements in articles 2, 26 and 27 of that instrument. It is clear, we submit, that the bill fails to comply with the standards of protection required by the convention, because of the very deleterious effects it would have on children in low-income families across Australia. Legislation that causes large numbers of children to fall into poverty or deeper into poverty cannot be consistent with the convention. I would be happy to answer any questions the committee may have.

Senator SIEWERT: You make a lot of important points in your submission, but one of the areas that you particularly cover is the cost to couple families, in addition to single parents and grandparent carers. I am just wondering whether you could expand on that a little bit. You talk about the bill threatening to increase poverty among low-income families. If we were looking at changes that are fairer, what approach would you take, instead of this approach that particularly hits low-income families?

Mr Lawrence : In regard to the question of family tax benefit part B, a point we make in the submission is that when you look at the history of that provision and its predecessors and the comments that were made by the two Prime Ministers—and others, including the poverty commission back in the 1970s—you see a recognition of the value to the lives of children, to families and to society as a whole of the care for children in the way the parents regard as best for the children. That is, they have the option of one of the parents staying at home and caring for the children but the option, equally, of going to work. So, we made the point that, in principle, the value of the care for children does not depend on income levels. In principle, it does not, and it does not matter if you are a high-income family or a low-income family; there is still value there. But we recognise—and we mentioned this in the submission—that if the question of providing an effective choice to parents is the guiding operational principle, then there is a basis on which you might means test it.

There is an issue as to whether the cut-off point of $100,000 at the moment is an appropriate cut-off point or not. Our preference in the design of any system would be to ensure that the people who are most needy, the families who are in poverty or closest to poverty, are the most protected, and we would not exclude single-income couple families from that; they need to be accommodated as well as other families who are in that low-income area where they are living in poverty or close to poverty. That would be our emphasis—on looking at the outcomes of the legislation.

Senator SIEWERT: You make the point, at paragraph 85 in your submission, about the impact of families in poverty. You say:

In contemporary Australia, full time work is not necessarily a path out of poverty; but it should be.

Can you expand a little bit on what you mean there? I think I understand—in fact, I am probably sure I do understand—but I just think we should expand that a little bit.

Mr Lawrence : There has been material produced over the past few years, in particular by bodies such as ACOSS, on the extent of poverty in Australia. It is usually done by reference to the relative poverty line—60 per cent of median relative poverty. Sometimes it is done by reference to the 50 per cent line. From that it is apparent that the numbers are increasing. Certainly poverty has not been reduced over a period of time, even though we have had the best of economic times for a large part of the past 15 years. In our wage claim in 2014 we picked up information from the 2011 census and we identified the number of families with two children, whether couple-parent or sole-parent, who were living in poverty, and we found, as paragraph 85 says, that there were 106,223 families living in poverty. That is from the census. That was over 400,000 people living in poverty, and half of them were children. That is where our emphasis is. We are trying to support policies that will alleviate poverty through higher wages and through a better social safety net.

Senator MOORE: Thank your for you detailed submission. I enjoyed reading the historical perspective. I had not seen a lot of that stuff put together like that. You have provided more information in your impact statement on families than we have had so far from the department. We will be asking some questions of them later about the kind of detailed impact statement that you have put in your submission, about how a family with two children would be impacted. I have been asking all the witnesses who have come today to tell me what their understanding of the intent of the bill in front of us is.

Mr Lawrence : We would agree with what has been said before; it is to reduce expenditure.

Senator MOORE: As you know very well, this is the second or third time a families package has been produced and brought for consideration. In that process, has your organisation been involved in talking with the department or with government about the processes that are going on and the impact on the people that you support? Have you been involved in discussions about the kinds of impacts that you have described in your submission, directly with the department or with the government?

Mr Lawrence : No, we have not; we have not sought it and have not been asked. I do not make any adverse judgement about that, because our organisation is primarily concerned with employment relations within the Catholic church, and we act as a public advocate, particularly in relation to minimum wages. Catholic Social Services Australia would be a more relevant body in regard to consultation. But what I will say, in relation to the broader issues that I have raised about wages and the tax transfer system, is that we have been raising these issues in wage cases for years.

Senator MOORE: Forever!

Mr Lawrence : We have never had any response from government, and I include governments over the years—

Senator MOORE: All governments, sure.

Mr Lawrence : that is in any way constructive. We have been saying through the years that we need a better measure of need. We need more work done on relative poverty lines. We need to better understand how relative poverty lines can be used to inform public policy, and we need to look at, for example, the equivalence scales that are used in the relative poverty lines. The Australian Bureau of Statistics is very good on this. It has a lot of expertise, but it does not come to us or to the wage-fixing process unless somebody in government takes the initiative to bring it. One of the problems that we have had—I was thinking about this earlier during the discussion which you had in the previous session—is that if you look at the equivalence scales that are used for the construction of a relative poverty line and then look at the income of different groups, you find that, prima facie, a sole parent with two children who is on the national minimum wage is 17 per cent above the poverty line.

Senator MOORE: Yes, I saw that in your submission.

Mr Lawrence : A similar figure—not always 17 per cent—has been published every year since 2007. Every year since 2008, I think, we have complained about it, because we have said: 'Look, this is misleading. You are telling the public that a sole parent is doing all right—they are 17 per cent above the poverty line, if only they could get a minimum wage job—and they should get out there and get a job.' We have pointed out that it is misleading because the equivalence scale that underpins that does not take into account the costs of child care. We also point out that, for one reason or another, many sole parents cannot work 38 hours a week, which is the basis upon which the national minimum wage is set.

We have been asking the tribunals and government to look at this but we do not get any progress. That is our complaint about the government—it is in relation to the setting of wages and better understanding living standards, how transfer payments and wages contribute to adequate living standards. We would say in relation to that that we are really concerned that the transfer payments would reduce under this bill and would put more pressure on wages without giving us any confidence that we could recover the lost ground through wage increases. So it is a very difficult situation.

Senator MOORE: Yes. I feel certain one of our previous witnesses has been joining you in the battle to have those figures looked at. They do give a misleading picture. You would have heard some of the evidence about the individual stories of people who are sole parents and the struggles they have. They do not feel they are 17 per cent better off than the poverty line.

Mr Lawrence : Yes. One thing we did just on that—the book I refer to, Working Australia, which all senators should have got a couple of months ago.

Senator MOORE: Yes, I got one. I presume it went to everyone.

Mr Lawrence : We have a table in there which looks at sole parents—table 33. It shows that when you look at the 60 per cent poverty line for sole parents in the 2011 census data, you would find that only 10 per cent of the sole parents and their families who are living in poverty are employed full time, and there is the problem. There is not enough support for parents who cannot work full time and that is another reason why this figure of 17 per cent above poverty for sole parents on the national minimum wage is misleading.

Senator MOORE: Yes. It is also the number of appropriate jobs available, Mr Lawrence?

Mr Lawrence : Yes.

Senator MOORE: One of the things also is, because of the work you have done, you draw the link with employment and the childcare component. One of the concerns we have in this committee is that we do not get an overall look at everything that is impacting on families. So in this bill we are looking at family payments and reductions to them, but we are reassured by government that that is going to be offset by the increased child care and that is going to come up with a better all round result for families. Do you have any information that gives you that confidence?

Mr Lawrence : No, that is, we do not have any reason to believe that a dollar saved here will be an extra dollar spent in relation to child care. But even if that could be shown, we would be opposed to it because we do not think that the costs of child care should come out of the pockets of the low paid. This is the very clear point that is made from time to time by the supporters of the bill . There was a comment on this by Paul Kelly in The Australia on 13 May this year when he said :

Yet the economic credentials of the extra $3.5bn childcare package are dubious. It is far too generous at the top end and the minister, Scott Morrison, faces a major task in negotiating the childcare package through the Senate by seeking savings from family tax benefits. The problem is the former rewards well-off women and the latter punishes low-income women.

One might argue about that or want to quantify it, but it is a case where, on one view of it, the money that is to be taken out of the pockets of low-income families will go somewhere else. Our view is that child care is a responsibility of the community as a whole and it should come out of the general tax system. Employers have to pay something towards it; the whole community has to pay something towards it—it is a community responsibility and not the responsibility of low-paid people who are struggling to look after their kids and give them a decent standard of living.

Senator MOORE: There is also the issue that children over 13 do not have access to child care.

Mr Lawrence : Yes.

Senator MOORE: So it is a kind of mishmash.

Mr Lawrence : We are particularly concerned about that.

Senator MOORE: I think you did mention in the first part of your submission concerns about children over 13 being left alone. If family payments are reduced and people are expected to seek alternative care, you do not get child care, and you talked about the impact on adolescent children—I should rephrase that: adolescent people. I think they do not like being called adolescent children.

Mr Lawrence : We really do not know what would be the impact of this bill if it was implemented. In the poverty commission report, which we set out in the submission, the problem they identify is that, if families are living in poverty, it causes the principal breadwinner—the male, normally—to work overtime or get another job. It might not lead the second parent, who is normally caring for the children, to go out and work. Then, even if you did force, by economic pressure, previously stay-at-home mums and dads out into the workforce, the government is going to have to pay them Newstart allowance until they get a job. If they do get a job, then somebody else probably does not have a job, which means the Newstart allowance will continue to apply there. You can imagine, given that the Newstart allowance at the low-income levels is $100-plus for the second parent—I think it works out at about $105 or $110 a week if your partner is on the national minimum wage—

Senator MOORE: Subject to the means test, yes.

Mr Lawrence : It is more than double the family tax benefit part B. So there are a number of consequences and you cannot assume that all the savings as a result of family tax benefit part B are going to be realised, because the knock-on effect is that you will economically coerce parents into the workforce, but you will have to pay Newstart. If they do get a job, someone else is going to miss out on a job, so Newstart will have to be paid there. The social consequences and the economic analysis and the budgetary implications are just not addressed.

CHAIR: Can I pick you up on that point. You seem to be suggesting almost a zero-sum game in the economy where, if one person participates in the workforce, that immediately displaces another person and forces them onto welfare. That seems a fairly simplistic analysis of how the economy works.

Mr Lawrence : I would not say it is a one-for-one relationship.

CHAIR: That seemed to be the way you were suggesting it—that it would force someone onto Newstart.

Mr Lawrence : If you have a situation where a job becomes available in the local shopping centre and a person who was previously staying at home looking after the children gets that job, then obviously it is a one-for-one because someone else in the local area has missed out on the job. The overall economic impact of forcing people out has to be more nuanced than that—I accept that.

CHAIR: It is far more nuanced, isn't it? There are jobs that remain unfilled in some areas, even relatively low skilled jobs. In previous inquiries we have heard from employers in low-skilled areas where many of them cannot fill jobs, so it is not always the case that all of those jobs do get filled. Of course, some of those people might go and start a business and create jobs. Isn't that something we should be encouraging?

In your submission, you talk about the history of the family tax benefit and FTB B in particular. I just want to go to that, because there are some aspects I agree with you on. You say:

FTB B is a payment, in the nature of a wage, made to those who care for their own children in their own homes. It was intended, and is, paid in recognition of the value of the work that they do.

I would broadly agree with that proposition, whether it is expressed in the 1993 terms or whether it is family tax benefit dealing with some of those tax penalties that single-income families face. I agree with that as a principle, but I guess that where things have moved on, and this is one of the things we grapple with, is that once that was means-tested—it was first means-tested, I think, under the former government at $150,000 and then it was brought down to $100,000—it changed the nature of it fundamentally. As soon as you means-test it, you are effectively putting it in the welfare space rather than the family tax space or dealing with a tax penalty or indeed, in the words you use, a type of wage. Wouldn't you agree that, once you started means-testing that, you were not simply looking at the value of that work but actually looking at how it fits into the overall welfare system? Whether we agree with that or not, that is where we have gotten to.

Mr Lawrence : Yes. I said before—at least I tried to say before—that as a matter of principle we would say that the value of the work should be recognised without regard to the income of the family; it has value in itself. But, if the operational principle is that you give enough to people by way of a transfer payment to give them an effective or reasonable choice between staying at home and going to work, on that basis you could look at a cut-off point. Then there might be a question about availability of funds which might inform what the cut-off point should be, but the operational principle would be to set it at a rate that would be able to give a reasonable choice to families. I think that is apparent in what Prime Minister Keating and Prime Minister Howard said. They were trying to identify an amount that would enable choice to be exercised. Perhaps the two of them came at it from a different point of view, but they finished on common ground.

CHAIR: I think that is probably right, but I would put it to you—and I do not want to labour the point—that, once it was means-tested, we took it somewhat out of either the John Howard view of the world, which is that it is fixing a tax penalty for single-income families, or what you are saying is the Keating view of the world, which is that it is akin to a wage because it is simply recognising the work that is done primarily by stay-at-home mothers—I think that was the language that Keating used—so that, once you means-test it, you are fundamentally changing the nature of that payment, because as soon as you means-test it it takes on more of the nature of a welfare payment than either a wage or a tax benefit.

I will move on. In another part of your submission—and it probably goes back to the first question I asked you, about participation—you say:

If implemented, the proposal in the Bill would place economic pressure on couple parent families to abandon plans to have one of them stay at home to care for their children.

I think that is probably true and a reasonable assessment of what is happening here when you drop it to 13, but I would put to you: if you look at the overall nature of why we have some of these benefits in terms of people staying at home while their kids are very young, when your youngest is at high school, isn't that qualitatively different from when you have a two-year-old at home and you are the primary carer of that child? Wouldn't you say that there is somewhat of a difference? In public policy, we are looking to get a balance here and say, 'Yes, when the kids are young we're going to give you more support and make it a little bit easier for you to stay at home and not necessarily go back into the workforce.' Isn't it reasonable for a government, as the kids get older and particularly as the youngest one is at high school, to encourage people to start to transition back into the workforce rather than rely on those payments?

Mr Lawrence : Different families have different views as to whether it can be accommodated or not. The principle is that they should be able to exercise the choice through high school. There are provisions in the legislation that enable parents to take up work opportunities. They can work. There is an income-free area of just over $5,000 so there is an incentive there. If they want to, they can do that and they lose only 20c in every dollar of their benefit beyond that. But parents will make different decisions about this. In some cases, they will take the view that, particularly as the children get older, it really is important for a parent to be home in the morning when they leave for school and be there when they come home from school or that the parent be there to drive them to school and drive them home and this can be critically important in the last couple of years of school, and it can be particularly important for low-income families to have that stability and that support. Some families will not need to have that kind of facility or the ability to support their children but that is a choice that they should make and the policy that is framed should be neutral in the sense that it would allow the parents to make the decision.

CHAIR: I absolutely support parental choice but here we are talking about the taxpayer to some degree assisting or subsidising that choice. I am very sympathetic to the idea of looking after families who choose to stay at home because I think it is very important. But what I am asking you in a really specific way is given it is not unlimited—it does not go forever—do you not think that there is a qualitative difference and therefore a reasonable public policy rationale for the government to say: yes we will give support but there will be less support for that choice the older your kids get, and in this case the choice has been made at around high school age. Is that not qualitatively different than say the choice when the child is one or two or three?

Mr Lawrence : No

CHAIR: Do you think that is exactly the same?

Mr Lawrence : I think it is the same.

CHAIR: And the cut-off therefore is 18?

Mr Lawrence : The end of secondary school or 18 are generally about the same.

CHAIR: What is it about the end of secondary school that is the magic point?

Mr Stuparich : It was a COAG decision that governments should prioritise people getting through to the end of secondary school or to an equivalent type TAFE qualification so that helps to assist that.

CHAIR: Sure, but no-one is arguing that if a mother goes back into the workforce when her youngest is 15 or 16 that that is going to stop them getting through secondary school.

Mr Stuparich : It would assist. A part of the policy rationale for 18 is that policy priority to get the kids through to the end. We heard from the single parents association earlier how children are offering to go to work early and finish school early to help alleviate the financial pressures. I think that is an important consideration.

Senator SIEWERT: I want to go back to the issue of consultation. Subsequent to the release of the legislation, have you had any discussions with government about your concerns?

Mr Lawrence : No, we have not.

Senator SIEWERT: Have you been approached by government?

Mr Lawrence : No, my organisation has not approached the government. I cannot speak for Catholic Social Services Australia, which have a particular interest in this matter of course.

Senator SIEWERT: We have got their submission as well. It covered a lot of the same ground that you went into although you went into a lot of detail which is extremely useful. But you do not know if they have been?

Mr Lawrence : I know that Catholic Social Services Australia were talking to the government prior to the announcement but I do not know since.

Senator CAROL BROWN: I would just like to ask a general question about the impact of poverty on an individual's ability to get work. If we are looking to reduce the benefit for a single parent family and reduce their income, have you done any work on people's ability to go out and access work if they are living in poverty or living just above the poverty line?

Mr Lawrence : We have not done any work on that, but I would accept that that is correct. Our experience of life, I think the experience of life for all people, would support the view that if you are in poverty—if you are out of work and if you have not got enough money to present yourself well, you have not got enough money to attend interviews, you have not got enough money to prepare CVs or whatever might be needed—then you are at a disadvantage. I have no doubt that that is true. I think that is just the experience of life that tells you that. I am sure there is research on that, which I cannot recall at the moment.

Senator CAROL BROWN: The other question I want to ask—I hope it has not been already been asked, but if it has I will read the Hansard—is about the proposition by the government to exclude grandparents who care for their grandchildren. Do you have a view about why foster carers and other kinship carers have not been included?

Mr Lawrence : No, I do not know the rationale for that, and I cannot think of a rationale at this stage.

Senator CAROL BROWN: Would your organisation look to see that they were exempted as well?

Mr Lawrence : We would want all carers of children to be included in the benefits and to have the full benefits. We think it is wrong to discriminate against children by reference to the status of their carer or, to put it another way, to discriminate against carers by reference to their relationship with the children. That is one of the points we make in the submission—that is, the separation out of sole parents, grandparents, coupled parents, of course the leaving aside of other carers, is discriminatory. We think they all should be treated equally.

Senator MOORE: Do either of you have any comment on the bonus situation? Your submission goes into a lot of detail, but you do not say much about the bonus, where the supplements will be removed, over two years, on the basis that the taxation system will be simpler and easier to access for people. I am wondering if that is an issue that you would like to comment on.

Mr Lawrence : Yes, I would like to say something about that. In the second reading speech, I think it was—I do not think it was the explanatory memorandum—there was some passage that I cannot recall the detail of at the moment that suggested that in the past the reason for the supplements was for administrative convenience and that was why the supplements were granted—for administrative convenience. We were aware of that when the submission was prepared, and that is part of the reason why you will see the budget speech from 2004 and the policy speech of September 2004 included, as well as former Minister Patterson's speech and statement of early 2005. When you look at the substance of it, the substance was that they were giving a benefit of $600. Everyone would get $600; it would be done by way of an end-of-year supplement, but that was incidental. So what was in the headlines of the newspaper the day after would have been about the $600, not 'new system for administering family tax benefits'. That was the point of it. When you come to the policy speech, Prime Minister Howard said there will be extra money, $300, for single-breadwinner families, single-income families. Then it was only the following year that Senator Patterson announced that it would be done by way of a lump sum. She pointed out that some people like the lump sum because it comes at a convenient time, but obviously it also had some administrative convenience.

So, if you are looking at the merit of the matter, it is pretty clear from those events that it was intended to be of real value to people. Even if you could have a system now that would do away with the need for end-of-year supplements, there is no reason to deprive people of the benefit that was given to them back then, in 2004, because it was meant to be a real benefit of continuing value.

Senator MOORE: I just wanted to get that on record. That is very useful. Thank you.

CHAIR: We will leave that there. Thank you for your time.